Eight Things to Consider When Filing an Amended Tax Return

Now that we are past the traditional individual tax return filing deadline of April 15, you might find yourself in a situation where you need to amend your return.

In order to help you understand the process of amending a return, let’s look at a number of rules and other items you need to keep in mind.

1. Amending your tax return is not required

The IRS requires that taxpayers file a tax return each year if your income is larger than certain thresholds. The IRS means serious business when it comes to their filing requirement. You can be even be prosecuted for a misdemeanor for failure to file or worse a felony for filing falsely. Once you have met your initial filing requirement however, you cannot be prosecuted for failing to file an amended tax return.

2. There is no picking and choosing

While you might not be required to file an amended tax return as discussed above, if you do you must correct everything. You are not allowed to only change certain items that are to your benefit so you get more money back or end up with a lower additional liability. Generally, all tax returns must be filed completely and accurately to the best of your knowledge.

3. Paper only please

It does not matter how you filed originally, you must file your amended tax return on paper. An amended return is filed on Form 1040X regardless of whether you originally filed Form 1040, 1040A or 1040EZ – and no electronic filing is allowed.

4. Each year stands on its own

You need to file a separate Form 1040X for each year and each time you amend, even if you are amending a previously amended return.

5. Audit risk goes up

Generally, amended returns are more likely to be audited and examined than original returns.

6. Refunds can be applied

If your amended return ends up getting you an additional amount refunded, you have the option of applying this as a payment against future tax liabilities instead of actually receiving the refund.

7. A kinder, gentler statute of limitations

Typically, the IRS has a three-year window to audit a tax return. This same statute of limitations does not apply to amended returns. If your amended return results in an increased tax amount due and is received within 60 days before the original three-year window expires, then the IRS only has 60 days after receiving your amended return to make any assessments.

If your amended return results in an additional refund, there is no change in the original three-year statute of limitations.

8. There is no free ride on interest and penalties

If you amend and end up owing more than you did originally, you could be subject to interest and penalties. The worst part about interest and penalties is that they apply to the difference owed on the amended tax return starting from the original return filing date. There is no point ignoring it since the IRS will calculate the interest and penalties and send you a bill if you do not include them yourself.