August 17, 2012
Not every interaction with the IRS must necessarily induce flop sweat.
Case in point: A few years ago a friend of mine decided his income taxes had become sufficiently complicated to merit hiring an accountant. After examining previous tax returns, the accountant discovered my friend had claimed the standard deduction for two years when he should have itemized expenses. He filed a couple of amended tax returns and voila – the IRS wrote him checks totaling more than $1,200.
Of course, not all tax-filing mistakes end on such a happy note. Sometimes people find out after submitting a return that their employer had sent an incorrect W-2 form, or they forgot to report self-employment income, or they incorrectly claimed someone as a dependent.
Although it's tempting to let such mistakes slide, chances are the IRS will discover the error eventually, and when they do you could be liable for interest and penalties going back to the due date of the original tax return. Worst case: You could even face criminal charges for filing a fraudulent return.
Here's a guide to when – and how – you should file an amended tax return:
If you discover an error on your federal income tax return after having already e-filed or mailed it, you may file an amended return using IRS Form 1040X (at www.irs.gov). The following rules apply:
You needn't file an amended return because of simple math errors – the IRS will automatically make corrections and bill you for any additional tax required (or increase your refund). Nor must you file a 1040X if you forgot to attached tax forms or schedules to your return. The IRS will send a request if it needs them.
However, you should file an amended return if you:
One last tip: If you're going to the trouble of filing an amended tax return for a specific reason, review the entire original return carefully for any other deductions, credits or exemptions you might have missed the first time.
Recent Practical Money Matters