Should I amend my tax return?

Now that the tax deadline for filing has come and gone, most Americans will not have any contact with the IRS until after the first of next year when the filing process starts all over again. For most, the receipt of the refund is the last contact necessary until next year. But, what happens if you made a mistake? In some cases, the IRS will notify you, and in others, it is your responsibility to notify them. As you might conclude, the notification is often dependent upon whether you, the taxpayer, owe more tax or have an additional refund coming.

If the mistake is due to an error in mathematics (an addition or subtraction error), the IRS will correct those errors and adjust the tax due accordingly. If you are due an additional refund, they will add it to your check. If you owe additional funds, they will bill you. In these days of computer generated tax forms, these types of errors occur less and less frequently. However, for those who still rely on the pencil and scratch paper method, mistakes will be corrected by the IRS. There is no need to file an amended return if you find a mathematical error after you file.

If the mistake is due to the omission of W-2s or other income statements, the IRS will usually notify you to supply missing forms or schedules. The IRS will determine your new tax liability. They receive copies of all statements of taxable income that are issued to you, and expect you to include all of these statements in the appropriate places on your return. The resulting tax liability in most cases will result in penalties and interest since the required tax was not paid by the due date.

When Should You Amend Your Filed Return?

There are three circumstances under which you should definitely file an amended return: if you filed using an incorrect filing status, if you incorrectly reported your total income, or if you made an error in computing your deductions or credits. Changes in any of these areas should be reported to the IRS on Form 1040X.

As stated above, the IRS usually finds out about unreported income and will eventually take steps to collect any additional tax you owe, along with penalties and interest. If you file an amended return claiming the income and pay any additional tax before the IRS catches the mistake, you will not be assessed nearly as much in interest and penalties.

Most often, returns should be amended because deductions and credits were omitted that taxpayers are entitled to yet neglect to include. Usually, this occurs because the taxpayer lacks reliable information. When the taxpayer includes the omitted deductions and credits on their return, it will often result in higher refunds for the taxpayer. The IRS, typically, is not going to make you aware of your error(s).

So what should you do if you discover mistakes in your filed return? The general rule is that if you will owe additional money, you should file an amended return as soon as possible. If the IRS will owe you money, you have until three years from the date you filed the original return, or two years from the date you paid the tax, whichever is later. If you are owed an additional refund and are waiting for a refund for this year, do not file the amended return until you have received the refund from the original return. After you have received and cashed the original refund check, file your amended return to claim your additional refund.