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Should you amend your federal income tax return?

The IRS has announced that over 131 million personal income tax returns were filed for 2013, and that they expect over 5 million of those returns to be amended yet during 2014.

Taxpayers who discover an error on their tax return may not know what to do.  Will correcting the error result in further scrutiny by the IRS, or will it become more problematic if the error is found by the IRS without the taxpayer having revealed it?  How does a taxpayer amend his income tax return if he finds an error and wants to come clean?  Can it be done electronically.

As all amended returns must be filed on paper by filing Form 1040X .  There is no provision to file an amended tax return electronically.  Allow up to 12 weeks for Form 1040X to be processed.  Starting 3 weeks after filing their amended returns, taxpayers can use the “Where’s My Amended Tax Return?” tool on IRS.gov to check the status.

Do not be concerned about drawing attention from the IRS.  There are many valid reasons that an amended tax return may be necessary, which is why the IRS expects to see 5 million amended 2013 tax return filed this year alone.

If the error necessitating a correction to the tax return is a mathematical error [addition or subtraction or transposition] or a procedural error [using the wrong line of the tax table, failing to bring forward the correct number, not using the alternate tax calculation method, failure to consider alternative minimum tax], the IRS computers will detect the error and send a notice of correction.  This will be automatic and will result in a higher or smaller refund, or an additional balance due, which should then also result in an interest assessment.  When discovering such errors, do nothing and allow the IRS to do its job.  These corrections will usually transpire during the normal processing period for the tax return, with notification of the adjustment and why it was made being provided to the taxpayer.  Trying to correct such errors by an amended tax return will usually result in a further delay in processing an existing refund.

However, if the error resulted in omission of an item of income reported to the IRS by a third party, or overstatement of an item of expense reported to the IRS by a third party, these items should be corrected as soon as possible by the taxpayer filing an amended tax return.  It takes the IRS longer to find these errors and the clock is ticking for the taxpayer relative to interest and penalty assessments should there be additional tax due, so it is in the best interest of the taxpayer to submit amended returns as soon as possible.  These errors will be detected by the IRS in any event, so filing an amended return allows the taxpayer to minimize interest and penalty.

Forgetting to take a deduction or claim a credit for which the taxpayer is eligible will usually result in a lower tax bill and thus a return of funds to the taxpayer. Filing an amended tax return is the only way to get that money back because the IRS would not be aware of the applicability of the omitted item unless reported to them on Form 1040X.

Taxpayers who need to amend their returns should file this form only after filing the original return. Generally, for a credit or refund, taxpayers must file Form 1040X within 3 years, including extensions, after the date they filed their original return or within 2 years after the date they paid the tax, whichever is later. For most people, this means that returns for tax-years 2011 or later can still be amended until April 15, 2015 and that amended returns for tax-years 2010 and prior will now no longer be accepted as of April 15, 2014, unless the 2010 tax return was filed under extension.

This year, many same-sex couples may want to consider filing amended returns. A same sex couple, legally married in a state or foreign country that recognizes their marriage, is now considered married for tax purposes. This is true regardless of whether or not the couple lives in a jurisdiction that recognizes same-sex marriage.

For returns originally filed before Sept. 16, 2013, legally married same sex couples have the option of filing amended return to change their filing status to married filing separately or married filing jointly. But they are not required to change their filing status on a prior return, even if they amend that return for another reason. In either case, their amended return must be consistent with the filing status they have chosen.  Further details on this subject are discussed on other posts to this blog and may be accessed from the blog archives using the blog search engine.

Do you need help filing an amended tax return?  Roy & Associates, PC and its predecessor firms have been providing tax services to individuals in southwestern Pennsylvania since 1942.  Any individual in need of assistance in the preparation of an amended tax return or other consultation on tax-related issues may make  an appointment with one of our Directors of Audit and Tax Services, all of whom are well-versed in personal income taxation.  See the CONTACTS page above.  Standard rates and terms for service will apply.

DISCLAIMER: This information is extracted with permission from IRS releases.  We are not responsible for the application of this general information to the specific circumstances of a reader unless we have been engaged as the reader’s accounting firm.

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