It's April 15. Your tax return is filed. You're relieved. The task is behind you -- until you realize you've made a mistake on your return. There's no need to panic, says the California Society of CPAs (www.calcpa.org). You can easily make amends by completing and filing IRS Form 1040X, "Amended U.S. Individual Tax Return." Generally, you have three years from the time your original return was filed or two years from the time the tax was paid, whichever is later, to file an amended return. A return filed before the April 15 due date is treated the same as filing on the due date.
Reasons for Amending your Return
There are a number of circumstances that could necessitate amending your tax return. These include failing to take deductions or, conversely, claiming deductions you should not have taken. Overstating or understating your income also requires an amended return. In either case, if it turns out that you owe additional taxes, acting quickly will minimize IRS interest or penalties.
Another common reason for filing an amended return is to change your filing status. For example, a taxpayer who files as "single" and later learns that he or she qualifies for the "head of household," may save valuable tax dollars with an amended return. Also, a couple that files separately can change their status to married filing jointly. (But you cannot switch from filing jointly to filing separately.) Form 1040X also includes a section for revising the number of exemptions.
Special situations also can trigger the need for an amended return. For example, taxpayers who suffer casualty losses in presidentially declared disaster areas may amend the prior year's return and deduct the loss in that year. Retroactive changes in the tax law also may precipitate a need to file Form 1040X.
Not all errors require an amended return. If, after filing, you discover a math error, there is no need for an amended return. The IRS will make the correction and notify you. If you forget to attach a W-2 or 1099, the IRS will request copies.
Completing Form 1040X
Fortunately Form 1040X is relatively simple to complete. Column A is used to record the figures from the original return and the corrected information is then entered in Column C. In Column B, the difference between the two figures is tabulated. On the reverse side of the form, an explanation must be provided for each change made to your return. You can request Form 1040X by calling 1-800-829-3676 or by visiting the Forms & Publications section of the IRS Web site (www.irs.gov). When amending more than one return, a separate envelope should be used for each.
If your amended return reflects a balance due, you should send payment along with your Form 1040X. The IRS will bill you for any interest and penalties you may owe. Keep in mind that you must send payment even if your previously filed return reflected a refund. The IRS will not reduce your refund check to cover the additional tax due on your amended return. You'll need to pay the full amount you owe, and you will receive the original refund separately from the IRS.
In the event you're filing Form 1040X to claim a larger refund than you claimed on your previous return, CPAs suggest that you wait until you receive your original refund before sending the amended paperwork. Feel free to cash your original refund check.
You do not need to attach to your amended form copies of W-2s and all schedules sent in with your original return. However, if you have revised any forms and schedules, you should include them with your Form 1040X. For example, if you are filing an amended return to claim the dependent care credit, you will need to submit Form 2441, "Child and Dependent Care Expenses," with your amended return.
CPAs Offer Advice
Since the IRS routinely shares information with states that have income taxes, CPAs recommend that you make any necessary amendments to your state and local returns as well. You are required to notify the California Franchise Tax Board within six months of a final federal determination. If you need additional advice concerning a mistake in a previously filed return, consult with a CPA.