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Be Careful When You Decide to Amend Your Taxes

Be Careful When You Decide to Amend Your Taxes

By Alan Olsen


Nobody’s perfect. Even the most careful people make mistakes from time to time. Some mistake hurt much worse than others. Of course, when you’re doing your taxes, mistakes can really be magnified. In fact, they can cost you a lot of money if they’re reallybig mistakes. And you feel even worse, when you discover your mistake right after you’ve submitted your tax return.It’s bad enough waiting for the IRS to process your return, but now you know you’ve messed up. And the IRS could hold it against you. So what should you do if realize you’ve made a mistake after submitting your tax forms?

When Is it Best Not to Amend?

You should immediately try to fix the error, right? Well, that’s not always the case. Amending your taxes can be tricky. First off, ask yourself this question: “Was my return accurate to the best of my knowledge when I filed it?” If you can answer yes to that question, then you might not need to file an amended return. On the other hand, if you know it wasn’t as accurate as it could’ve, or should’ve, beenthen filing an amended return is a good idea.

What If You’re Being Audited?

Additionally, if the IRS is currently auditing you, then filing an amended return might not be the best idea, either. It could make you look bad and give the IRS more reason to closely examine your tax history. The kind of mistake you make could also play a role in deciding whether or not to amend. For example, if you forget to attach a Form W2, or you made some math errors, you probably don’t need to send in an amended return.

The IRS will fix math errors for you and if you forgot to attach a W2 or 1099, but reported the money on your return, the IRS may just process your return without the paperwork. If they want them, they will send you a letter to request them. So just be sure to hold onto all your forms in case they ask.

Do it Right the Second Time

On the other hand, if you need to file an amended return, then make sure you get it right. You should probably avoid trying to send a corrected return, which would essentially wipe the original return from the slate. But if the IRS confuses your two returns, things could get messy. You’re safer filing an amended return. To do that, you use Form 1040X and you must file this form within three years of the due date of your original return, or within two years from the time you paid the tax. You should base this off whichever date is later.

You Have to Use Paper

Additionally, you cannot file a 1040X electronically, even if you filed your original return that way. You must fill out your 1040X by hand on paper. If you happen to be amending more than one return, be sure to fill out separateForm 1040Xs for each return. And be prepared for more scrutiny ifyou ask for a large amount in your amended return. If you owe more money than reported on the original return, you will likely have to pay interest and possibly some penalties.

The post Be Careful When You Decide to Amend Your Taxes first appeared on Advisors to the Ultra-Affluent – Groco.


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