Amend a Tax Return – Fix or Correct A Federal Tax Filing
Mistakes happen, that is a fact of life. The IRS encounters thousands annually. The IRS’s complicated tax laws are overwhelming for the average taxpayer. Every tax season something is bound to go wrong. In light of all the errors that inevitably occur, the IRS has created ways for taxpayers to amend tax returns that were filed incorrectly.
The IRS usually corrects math errors on tax returns so if you received a letter about this it does not mean that you need to amend your tax return. In addition to that, they usually request forms that are missing (like a W-2) when they process original returns. If the IRS has done this bit of work on your behalf, it will not be necessary to file an amended tax return.
What Is the Time Limit for Amending Old Tax Returns?
Generally, you have three years to amend an old return. However, there are a few exceptions. In particular, if you forgot to report a loss on a bad debt or claim a foreign tax credit, the three year limit does not apply.
What Changes Can You Make to Old Returns?
The IRS lets you amend returns for several reasons. If you’re trying to reduce the amount of tax owed in a previous year, you should focus on the following changes:
1. Credits you forgot to claim
Tax credits directly reduce the amount of tax you owe and can sometimes trigger a refund. The IRS offers a huge range of credits for donations to charity, child care expenses, interest paid on student loans, and much more.
There’s also an earned income tax credit (EITC)—as of 2017, families with incomes up to $53,930 can qualify, but the limits vary based on your filing status and number of children. That can be a very useful credit for reducing tax debt, and if you forgot to claim it, you should go back and do it retroactively.
2. Changes to your filing status
If you noted the wrong filing status on your return, that may have increased your tax liability, and you should also change that. In particular, if you filed as “married filing separately” switching to “married filing jointly” saves money in most cases.
3. Losses on bad debts
Bad debts are a bit more rare, and they usually only apply to small business owners or independent contractors. If you use accrual basis accounting, that means you report your income when you issue invoices. You don’t wait until you receive the payment from your clients.
If you report an invoice as income to the IRS but the client never pays you, that is a bad debt. You get to claim that amount as a loss the following year. If you forgot to report a bad debt, you should amend that old return.
4. Foreign tax credits and deductions
If you reported foreign income on a prior tax return, make sure you claimed all the available credits. The US has tax treaties with the majority of countries in the world, and a lot of those agreements are designed to protect you from double taxation.
5. Reduced income amounts on W2 and 1099 slips
Finally, if you received an amended 1099 or W2 form that shows less income than you reported, you should also file an amended return. Lowering your income lowers your tax liability straightaway, and it might even make you eligible for certain income-based tax credits.
Steps to Take for Filing an Amended Tax Return
- Use Form 1040X, “Amended U.S. Individual Income Tax Return.” You can use this to correct previously filed Forms 1040, 1040A, and 1040 EZ.
- Write the year of the Return you are Amending at the top of Form 1040X. You cannot use one Form 1040X to correct two tax returns. You must prepare a separate 1040X form for each Tax Return. You must also mail them in separate envelopes.
- Mail the envelope containing the Amended Tax Form to your area’s IRS processing center. The Form 1040X instructions list the addresses for your area’s IRS processing center.
As long as you act swiftly you can still receive your Tax Return. However, making sure that you fill out all of the correct columns of Form 1040X can be a bit tricky.
What Happens When You Amend a Return?
The IRS takes about 12 to 16 weeks to deal with amended returns. If you have an outstanding tax bill, any reductions get applied to your bill. If there’s any money left, you get that as a refund.
Forgot to claim a tax credit? Ticked the wrong status box? If there are mistakes like that on a previous return, it pays (literally) to amend that return. If you are not sure about the details of your Tax Situation or you’re unsure of some specific Tax Laws, consider contacting a professional to help you with this step of the process. We have a diverse tax team that has helped taxpayers amend tax returns time and time again.
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