Oops! There’s a Mistake in My Taxes, How Do I Fix It? Amended Returns

May 3, 2011 by · 508 Comments
Filed under: Amended Returns, Tax Preparation 
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Mistakes happen.  You file your return and later get a W2 in the mail for a job you had forgotten about.  Maybe your investment firm sent you an amended 1099 because your interest income they reported was wrong.  Or maybe you were talking to a friend and learned about a deduction that you should have been claiming for the past three years and you’d like a refund.  What do you do?

It’s easy, you need to file an amended return, the form is called a 1040X and you can find it on the IRS website:  http://www.irs.gov/pub/irs-pdf/f1040x.pdf.

An amended return can’t be filed electronically like a regular return.  You must mail it in and it’s going to take about 12 weeks to process.   That’s a bummer if you’re expecting a refund, but that’s the way it works.   If your regular return had a refund, make sure you wait until you’ve received the first refund before you file the amended return.  (If they start processing the amended return before your original refund gets paid, it can mess up you getting the original refund.  You don’t want that to happen now do you?)

If you have more than one tax return that needs to be amended, you must file separate returns for each year and mail them in separate envelopes.  For example, say you found out that you had missed a $1000 deduction on your Schedule A every year and you’re in the 25% tax bracket.  You can’t just put $3000 on this year’s return for a $750 refund.  You’ll have to amend 2010, 2009, and 2008 separately and you’ll receive three checks for $250 each.  It’s too late now to claim a refund that should have gone on 2007.

When you amend your tax return, you’ll have to send in the schedules of anything that changed.  In the example above, the thing that changed was on the schedule A, so that form would also have to be attached.  Don’t attach any forms that didn’t change.  Warning:  for many folks, a change in one part of your tax return can cause a change somewhere else-most notably on your schedule A.  Before you actually mail anything in, go over it carefully to see if you have any unexpected changes.

When you file a 1040X, make sure you check the box for the tax year that you’re amending.   That’s a pretty common mistake.  The IRS can’t process the return if they don’t know what year it’s for.

When not to file an amended return:  You don’t need to file an amended return for a basic math mistake.  The IRS will automatically fix that for you.  You also don’t need to file an amended return if your original was missing a schedule.  That’s where you get a letter from the IRS saying that you claimed something on your return but that you’re missing the supporting documents.  A common example of that would be a capital gain of $2000 on your return, but there’s no schedule D to back it up.  You don’t need to amend the return, just mail them the schedule D.   The IRS will ask you for whatever schedule they’re looking for, you won’t have to guess at what’s missing.

I’ve talked a lot about filing an amended return because of a refund.  Sometimes when you file an amended return you’re going to owe.  If you have a balance due, mail the payment check with your 1040X.  The IRS will probably send you a bill for interest and maybe even penalties depending upon how much you owed.  Be prepared for that.

Often times, people are thinking about filing amended returns because they received an IRS letter.  Sometimes, you don’t need to amend, just pay the tax.  Sometimes, you really need to amend because you shouldn’t have to pay the tax but you need to submit more information.  Sometimes, you don’t need to amend and you don’t need to pay the tax—the IRS made a mistake and they just need to have it pointed out to them.  Before you start writing that check, get a professional opinion–you want to pay your fair share, not more than you owe.

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