Most folks assume that work for tax professionals tapers off after Tax Day, but for many of us, the pace actually picks up. This is often the time when the tough questions begin. And chief among them: What happens if you discover a mistake on your tax return?
My answer is almost always the same: Mistakes are totally fixable. Here’s what you need to know:
1. The Internal Revenue Service (IRS) may fix the mistake for you. Most of the time, you’ll want to fix your own mistakes. But every now and again, it might make sense to let the IRS do it. The IRS will correct math errors and may even figure a capitulation for you (bringing a total from a schedule that you forgot to bring forward). In some cases, the agency may apply that estimated payment that you forgot that you made. These are the sorts of relatively harmless errors that you can happily let IRS correct for you. If the IRS does correct a mistake, you’ll receive a letter explaining the adjustment and advising what steps, if any, you need to take.
2. You can fix most mistakes by filing an amended return. If IRS doesn’t correct your mistake or if it’s a huge mistake or if you forgot to report something important (like being married), you’ll want to fix your own mistakes. You’ll do this by amending your previously filed tax return with a federal form 1040X, Amended U.S. Individual Income Tax Return (downloads as a pdf). You can use form 1040X to correct a previously filed form 1040, form 1040A, form 1040EZ, form 1040NR, form 1040NR-EZ, or to change amounts previously adjusted by the IRS.
3. Pay attention to the instructions. Form 1040X is short (just two pages long), but it can be confusing if you don’t follow the instructions. Most important? Form 1040X is the ONLY tax form you’ll use to correct your mistakes. You don’t need to file another form 1040 (or other 1040 series form) because the front page of the amended return is an abbreviated version of form 1040.
4. You’ll need a copy of your previously filed return. On form 1040X, in Column A, you’ll briefly summarize the items on your tax return as originally reported. In Column B, you’ll indicate any adjustments for items of income, deductions, liabilities, and payments. In Column C, you’ll report the correct amounts as they should have appeared on the original tax return. That means that Column A + or – Column B should equal Column C. Make sense?
5. Remember that changes to one item may have other consequences. For example, if your adjusted gross income (AGI) changes, items which use your AGI may also change (such items include certain itemized deductions, tax credits, and taxable amount of Social Security benefits). Ditto for changing your filing status.
6. Just because a tax break has disappeared doesn’t mean that you can’t claim it on an amended return. The Tax Cuts and Jobs Acts (TCJA) changed a lot of tax items. However, so long as those tax breaks were still applicable for the tax year you are amending, you can still make the change. For example, at Part I, at the top of the second page, you can still make adjustments to your personal exemptions and dependents for prior years (like 2017)—even though personal exemptions don’t apply for the 2018 tax year.
7. Tell your story. You’ll use the space at Part III on the second page to explain why you are filing the amended return. But use restraint: This isn’t a confessional or an appeal. Be clear and concise. There’s no need to offer context unless it’s relevant to the error (remember, you’re not using this form to request a penalty abatement or payment plan, but just to correct prior reporting). Examples might include “I missed reporting this income because I received my 1099 late” or “I forgot to claim the child tax credit.”
8. There is no e-filing option for amended returns.When you’re finished, you must print out and mail your form 1040X.
9. Attach the right documentation but don’t over-paper. You must attach copies of any forms or schedules affected by the change, including any forms W-2 or forms 1099 (the normal rules apply here), or specific schedules that you didn’t attach previously. Don’t confuse the IRS by adding other forms or papers. In the instructions, they specifically request that you “not attach items unless required to do so.”
10. Include payment if you owe. If your amended return now reflects a balance due, include payment with your return (for more on how to pay your tax bill, check out this prior article; if you can’’ pay in full, check out this prior article). There may be penalty and interest due, but don’t fret: You can be sure that the IRS will let you know those numbers.
11. You might be due a refund. If you’re due a refund, you can choose to apply it to the next year’s return or have a refund check mailed to you. To claim a refund, you typically must file your form 1040X 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. If you file after the statute of limitations has run, you may be out of luck. In previous years, some tax professionals have (*cough*) suggested that if the statute of limitations has run for a refund, there’s no point in filing an amended return. I respectfully disagree. If a change might result in a measurable benefit even after the statute runs, consider this:
- The IRS has been known to send an occasional refund outside of the refund window based on facts and circumstances;
- The IRS may credit an unpaid refund amount to a later (or earlier) tax year with a balance; or
- If the adjustment is in your favor—even if you don’t get a refund—you’ve documented the adjustment. If the IRS were to examine your return at a later date and make an adjustment which would have resulted in additional tax, those adjustments could offset.
12. Pay attention to the statute of limitations. The normal statute of limitations rules apply. That means that filing an amended return does not extend the statute of limitations, or extend the time to pay. For more on statutes of limitations, click here.
13. Don’t amend in a bubble. If you’re making a change that is more than correcting a missed line item or righting a transposed number, take a breath first and think about the big picture. Merely filing an amended return may not be the best way to correct tax fraud or address a significant omission like a missed foreign compliance form (such as an Report of Foreign Bank and Financial Accounts (FBAR) or form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations (downloads as a PDF)). If your amended return carries potential consequences beyond payment due, check with a tax professional before mailing it in. You can’t un-ring that bell.
14. Track the progress of your return online using the “Where’s My Amended Return?” tool. You’ll need to provide your Tax ID number, your date of birth and your Zip code. Be patient: a federal form 1040X usually takes an additional 8 to 12 weeks to process (in some instances, IRS says it could take 16 weeks). Be aware that the return won’t even show up in the system for about three weeks.
15. File for the right reason. Do not use form 1040X to file for an injured spouse claim. That’s a form 8379, Injured Spouse Allocation (downloads as a PDF). And don’t use form 1040X to request a refund of penalties and interest or an addition to tax that you have already paid. Make that request via a form 843, Claim for Refund and Request for Abatement (downloads as a PDF).