What is an amended tax return?
What is an amended tax return?
An amended return is a form that can be filed to correct errors in a tax return for a previous year. An amended return can be used to correct errors or claim a refund. An amended return can be filed in cases of misreported earnings, tax credits. However, amendments are not required for mathematical errors. The IRS will automatically correct such errors in processing tax returns. 1
KEY TAKEAWAYS
- An amended return is a form that's filed to correct a tax return for a previous year.
- The form 1040-X is available online at the IRS. This form can be used to file amended returns.
- Individual taxpayers may file an amended return if they have changed their filing status, their dependents, or incorrectly claimed tax credits, deductions, or income.
- The statute of limitations for tax refund checks is three years.
Who should file an amended tax return?
Taxpayers are required to file taxes for the preceding tax year every year. The government may accept a tax return submitted by taxpayers. Taxpayers might realize they made mistakes in filling out their tax returns. The Internal Revenue Service provides a way for individuals to redo their taxes. This is done by posting an amended return form Form 1040X on the IRS website. 2
Even after the tax filing deadline has passed, an amended tax return may be filed.
Some errors do not require that the form be amended. The IRS will correct any mathematical errors when the initial tax returns are submitted for processing. The IRS will adjust any refund due and bill any additional tax liability to the taxpayer when the original tax return is submitted for processing. 1 If an individual does not include the required schedule or form in their tax return, the IRS will send them a letter asking them to mail the missing information to one of their offices.
When is it appropriate to file an amended return
If:
- The taxpayer's filing situation for that tax year was changed or incorrectly entered. If an individual files as a single, but gets married on the last day, they will need to amend their returns by filing taxes under the appropriate status - married filing jointly or married filing separately.
- It is incorrect to claim dependents. If a taxpayer has to add or remove dependents, an amended return is required. A couple might have included a baby born in January before taxes were filed in April for the previous year's tax returns. Because they were not born before the end of the calendar year, the baby cannot be included in the previous year's tax returns.
- Tax credits or deductions weren't claimed correctly. The taxpayer might have realized they are eligible for a credit/deduction and will want to amend their return to reflect this.
- Incorrect income was reported for the tax year. To report additional income, a taxpayer may file an amended return if they receive additional tax documents (e.g. Form 1099 or K-1) after the tax deadline.
- Legislation changes can affect the deductibility of some expenses. Sometimes legislation may be passed after a taxpayer files a return that changes the deduction of certain expenses. The Tax Cuts and Jobs Act 2017 made it possible to extend the deduction for private Mortgage Insurance (PMI). This was the reason why the deduction expired on December 31, 2017. In December 2019, the Further Consolidated Appropriations Act was signed into law, extending the deduction to Dec. 31, 2020. The Further Consolidated Appropriations Act, signed into law in December 2019, extended the deduction through Dec. 31, 2020.
- A natural disaster can result in tax relief that reduces the taxpayer's tax liabilities. This is a common problem for taxpayers that have been affected by natural disasters, particularly in the latter part of the tax year. Although the government offers tax relief to those who are affected by natural catastrophes, it may take longer for legislation to be completed than the usual tax season window. Taxpayers are responsible for paying their entire tax liability when it is due. 4
- A taxpayer discovers they owe more tax than they have paid. The taxpayer realizes that they owe more taxes than they paid. They can file an amended tax return with the IRS to avoid being penalized. 5
How to amend a tax return
The three columns of Form 1040-X are A, B, and C. Column A records the tax return number that was filed in the original or most recent amended tax form. The adjusted or correct number will be entered by the taxpayer in column C. 6 Tax returns can have adjustments that result in a refund, balance due, or no tax change. 7
Advantages and Disadvantages to an Amended Tax Return
However, an amended tax return cannot be filed electronically for every tax year. The IRS recently began accepting e-filed amended tax returns for 2019. 89 Taxpayers must mail the completed form to the IRS Service Center. The IRS processes amended returns manually. This can take up to 16 weeks 10 or longer if the taxpayer isn't signed the form, is incomplete, has mistakes, requires additional information, has needed clearance by the IRS bankruptcy department, or has been routed in another specialized area.
However, there is a 3-year statute that limits the ability to issue tax refund checks. Tax refund checks can only be issued if the taxpayer files amended returns within the three-year statute of limitations.
Pros
- Corrections can be made to an amended tax return.
- Even if you haven't filed for it, you can still claim the refund.
- Correct any circumstances that have changed since your original filing.
Cons
- For all tax years, Form 1040-X can't be electronically filed.
- The processing of an amended return may take up to 16 weeks.
- For tax refunds, there is a three-year statute of limitations.
Tips for How and When to File an Amendment Tax Return
Everyone makes mistakes. Sometimes, you don't realize the errors until long after they are made. What if you suddenly discover a mistake in a tax return you filed years ago? What if a new development changes the amount of tax that you should have paid on your previous return? What should you do? You can file an amended tax return, regardless of whether the development or mistake is in your favor.
Although amending a return is not difficult, there are some things you need to know before you begin. You should also be familiar with the most common reasons that could trigger an amended return. This will help you to know how to review your previously filed returns if they occur. Every taxpayer should be able to understand what it takes to amend their tax return after it has been filed. Here are 11 tips to help you file an amended tax return.
If the filing deadline has not passed, you can file a superseding return
What happens if you have just filed your tax return, and find out that you made a mistake the next day? You don't need to file an amended tax return if the deadline for filing, including extensions, has not passed. You can instead file what's known as a "superseding" return. You can file a second return before the deadline and it will be treated the same as the original.
Superseding returns must be filed on Form 1040. E-filing is prohibited. It is also a good idea to write "Superseding Return” at the top of your form.
2019 tax returns won't be due until July 15, 2020, or October 15, if extended, so you still have time to file a superseding form this year. For example, let's say you filed your 2019 tax return in February. Instead of getting a refund for the overpayment, you elected to use it against your 2020 tax liability. The coronavirus pandemic caused you to lose your job in April and you now wish you could get a refund. You can receive a refund if you file a superseding tax return by July 15. Although it might take some time for the IRS to process your superseding returns because they are behind in tackling paper returns. However, you will not have to wait until the next fiscal year to receive the overpayment.
The IRS can correct certain errors
Use Form 1040X
You will need to submit IRS form 1040X if you need to amend your personal income tax return. This is required to:
- Correct Forms 1040A, 1040EZ, or 1040NR (some forms are no more in use).
- Ensure that elections are held after the deadline.
- Change amounts that were previously adjusted by IRS (except IRS interest-penalty changes);
- Claim a loss or an unused credit carryback.
You can now file an electronic Form 1040X using commercial tax-filing software starting in August 2020 to amend your 2019 tax return. For other tax years, you will still need to file an amended paper return.
In limited circumstances, Form1045 can be used instead of Form 1040X. If you have to repay income previously taxed, or if you are carrying back losses or tax credits, Form 1045 may be an option. If you are requesting a refund or addition to taxes, is the best option. If you don't have Form 1040X, then use it.
Make sure you submit a separate Form 1040X each year. You should also submit them separately. To indicate the tax year that the return is being amended, make sure you check the box at top of the form if you are filing a separate return. If the box isn't marked for the year you are looking for, enter the year in the provided space.
Sign the amended return. You should also attach any schedules or forms that are required. You should attach any schedules or forms relating to the changes that you are making. If you are changing an itemized deduction, attach Schedule A. You will find instructions on how to attach other attachments.
Do not wait to file your amended return
However, don't submit your amended return too soon. Wait until you get your refund for the original tax year before you file an amended return.
