Here we are in May. The tax deadline is in the rearview … and we’re still here for our friends. Ready to rock on your behalf.
Today I’m talking about second chances.
Ctrl + Z. Ever used that keyboard shortcut? It’s also known as the “undo” button – a do-over if you will.
Let me tell you, I use the “undo” button a lot. Making typing mistakes or pressing the wrong button is just too easy, and that little do-over option has saved my rear on a number of occasions. I really don’t know how I’d ever manage without it.
Sometimes I wish there was an undo button for the world. Worldwide virus shifts economies and disrupts supply chains? Undo. Russia invades Ukraine? Undo. The cost of gas and other goods rises? Undo.
That would be nice, right?
Well, maybe there isn’t a keyboard tool for undoing and redoing all of that (or even for your own life choices), but there is a re-do option when it comes to tax filing.
It’s called an amended tax return. While you don’t have to worry about filing an amended return for little errors, the good news is that you can file one if you’ve discovered some larger issues that need correcting.
So, let’s jump into the why and how of amending a tax return.
When Amending a Tax Return Is Right for Taxpayers
“To improve is to change; to be perfect is to change often.” – Winston Churchill
The regular tax filing season is past. Refunds have rolled in. Taxes have been paid. Time to stuff the forms and the paperwork into a folder in the filing cabinet (or the back of the closet) with dear wishes to never have to look at them again.
But, what if the job isn’t over? What if you think it’s a good idea to take one more crack at your 2021 federal tax return because there’s something important you missed or the math was really wrong somewhere or you claimed a deduction you shouldn’t have? It’s not an uncommon occurrence. The tax code is tricky as is filing a return that complies with it.
But you might also have realized you missed some deduction opportunities in your filing. And you can resubmit your return to adjust for that.
The good news is the IRS’s do-over option (amending a tax return) might be a good idea, especially if you want to avoid an audit or want to get the money that’s coming to you.
Generally, you can amend a tax return going back up to three years, and millions of people file an amended federal tax return after the tax deadline every year.
The IRS will probably just correct your original return for simple goofs in math or other minor clerical errors; no need to amend a return for those. But if you had changes in your filing status or if something changed regarding your reported income, deductions, credits, or tax liability, amending a tax return could be smart.
If the total amount of tax you owe after amending is smaller than your original return, the IRS will refund you the difference. If your amended return results in you owing more tax, amending is also a good move as it can result in a gentler slap on the wrist.
So, why exactly should you amend your federal tax return?
Income. Let’s say that after you file your taxes, you discover that income got left off your return – a Form W-2 or Form 1099 arrives late, for example, or you finally find it under that pile of papers on your kitchen table. Or you get a corrected information statement with different income or withholding amounts – it’s not uncommon for those who issue W-2s or 1099s to send one out to beat their own IRS deadline and then send a corrected copy later.
Whether reporting this is in your favor or not, you should file an amended return to make sure you match IRS records. (If it doesn’t match the government’s information on you, they’ll mail you an IRS CP2000 notice. This isn’t a tax bill, but if you get one, tell us immediately.)
Filing status. The most common of these are Single, Married Filing Jointly, Married Filing Separately, and Head of Household. Depending on your circumstances (and we can help with this), a different filing status may help your tax situation and be a good reason to file an amended return.
Missed deductions. If you incorrectly claimed certain expenses, forgot to claim them, or accidentally included or left out a dependent, you should amend. The same holds true for tax credits (and there are a lot of them right now) that you missed.
Changes in tax law. The ever-busy IRS sometimes clarifies a rule or a court ruling down the road – possibly creating a tax break for you. Check with us on this one anytime.
What you’ll need
You amend your return using IRS Form 1040-X. You will need to pull information from lines on the Form 1040 you’re revising to match line items on the 1040-X, with corrections, additions, or anything else you’re including in your amendments.
In many of its sections, the 1040-X gives you three columns: your original figures, the net change, and the “correct number.” In one section you can explain why you’re filing the 1040-X. It’s pretty simple (we’re happy to help you through), but there are a couple of things you’ll want to know:
- The 1040-X will become your new tax return for the year you’re amending.
- Include all schedules that you’re adding or revising. Give the IRS as complete and clear a picture as possible.
- Generally, to claim a refund, you must file your 1040-X within three years after the date you filed your original return or within two years after the date you paid the tax, whichever is later.
- You can now submit some 1040-X forms electronically using tax software. Only tax year 2019 and 2020 Forms 1040 and 1040-SR returns that were originally e-filed can be amended electronically, according to the IRS.
- Your amended federal tax return could affect your state return. If you’re not sure about this, you’ll want to check with us.
Once you file your amended return, you can check its progress using the Where’s My Amended Return? IRS online tool or by calling (866) 464-2050 three weeks after you file. Although, be forewarned that right now, the beleaguered IRS needs up to 20 weeks to process an amended return.
By the way, amending your federal tax return does not increase your risk of being audited (but it does help with preventing one).
Amending a tax return is something we’re happy to do for you. We can do this stuff in our sleep. If you think you need to do this for a previous year, let’s chat about that:
And of course, we can talk tax planning moves for 2022 or any other tax and finance-related matter as well.
Helping taxpayers like you be on good terms with the IRS and get all that you should is a priority for us.
In your corner,
Emelia Mensa EA