You don’t always need to file an amended tax return to fix an error

While people are often terrified that a simple mistake on their annual federal income tax return will result in an IRS audit, the truth is that minor errors are not uncommon and often easily rectified. In some situations, the IRS would prefer that you don’t file an amended return because the agency will correct minor math errors and either request that the taxpayer pay additional tax or refund an overpayment. However, knowing which situations require an amended return can often trip up taxpayers.

To help taxpayers who believe they may need to file an amended return, we are providing answers to some common questions.

What is an amended return?

An amended tax return is simply a form(s) filed by a taxpayer to correct errors made on a tax return. Most individual taxpayers will use Form 1040-X, Amended U.S. Individual Income Tax Return, to file an amended return.

Form 1040-X can be filed electronically or on paper, but the electronic option is only available for the current tax year and the prior two tax periods. Corrections to older returns must be paper filed. If the amended return corrects a paper-filed return from the current processing year, the amended return must also be paper-filed.

A taxpayer may e-file up to three amended returns per tax year, but any additional returns filed by the taxpayer will be rejected after the third return is accepted.

When should you file an amended return?

An amended return is usually filed to correct errors with the following information provided on the initial return:

• Amount of tax owed
• Reported income
• Number of dependents
• Filing status
• Claimed tax credits or deductions
• Certain claimed deductions affected by legislative changes

An amended return is also used to claim tax relief if the taxpayer was affected by a federally declared natural disaster that changes their tax liability. This is sometimes necessary when the victims of natural disasters must file their federal returns before action is taken to provide them with tax relief.

The IRS also offers a free online tool to help taxpayers determine whether to file an amended return.

When should you not amend?

In most cases, an amended return is not required when the taxpayer discovers a math or clerical error on a recently filed return. The IRS usually finds these errors while processing the return and will send you a bill for any underpayments it uncovers. If the agency determines that you overpaid your taxes due to the error, it will refund the overpayment amount.

How long do you have to amend?

If the amended return will result in a tax refund, the taxpayer must file their Form 1040-X within either three years from the original filing deadline or two years of paying the tax due for that year, whichever is later. Extensions are not included when determining the date the return was due. Still, if the statutory due date falls on a Saturday, Sunday or legal holiday, it must be filed on the first day that is not a weekend or holiday.

For taxpayers not seeking a tax refund, there is no time limit for filing an amended return to correct a previously filed return.

What if I owe the IRS money?

If the amended return shows the taxpayer underpaid their tax due for the year at issue, taxpayers who e-file their Forms 1040-X can make a payment using IRS Direct Pay. Taxpayers who cannot pay the full amount may request a payment plan/installment agreement. A check should be included with the Form 1040-X if paper-filing the form.

Do not make any payments for any interest or penalties you may also owe. The IRS will calculate those amounts and make any needed adjustments.

Should you discover you made a mistake on a previously filed return, a tax preparer can often help. A qualified tax professional understands the rules and regulations that apply to amended returns and can guide you through the process to ensure the amended return is correct and help limit the penalties and interest that may be accruing on any taxes you underpaid in previous tax years.

If you are a tax professional and looking for more information on amended returns, check out our on-demand webinar on filing amended returns for individual taxpayers that will be available beginning in May.