Amended Returns – When/Who Should File?

Posted by Amy L. Gordon, CPA

Amended Tax Returns - Delaware CPA

Did you file a timely income tax return and then realize you missed something or made a mistake? If so, you will want to consider amending the return. Amended returns are filed by all types of entities that want to make changes to a tax return whether it’s an individual (Form 1040), partnership (Form 1065), corporation (Form 1120), S-corporation (Form 1120S), or trust/estate (Form 1041).

When determining whether you should file an amended return it is important to note that the Internal Revenue Code does not require a taxpayer to file an amended return to correct mistakes found after filing the original return. Treasury regulations note that if a taxpayer determines an item should be included in gross income in a prior taxable year, the taxpayer should file an amended return and pay any additional tax due. Despite the reference to amended returns in the Treasury regulations, taxpayers are not required by statute to file an amended return. Even though filing an amended return is not required, it is recommended when an originally filed tax return is discovered to be incorrect.

As previously mentioned, an amended return is not always required to be filed. If the error is a mathematical or clerical error, the IRS may automatically correct the return in which there is no need to file an amended return. In addition, you usually should not file an amended return if you omitted required forms or schedules. The IRS may process the return without them or will request them if necessary. However, if you discover a material error and correcting your return would result in additional tax due or an increased refund then filing an amended return is recommended. Amended returns are not only filed to correct errors, but can also be filed to make a claim for a carryback due to a loss or unused credit.

When filing an amended return, if you owe additional tax, the IRS will calculate penalties and interest on the additional amount due. If you owe additional tax for a tax year in which the due date for the filing has not yet passed, you can avoid penalties and interest if you file the amended return and pay the tax by the filing due date for that year. In the case of additional tax due, it is recommended that an amended return be filed as soon as an error has been discovered to reduce the amount of penalties and interest charged. In the case of a refund, you can elect to receive the entire amount or you can apply all or part of the refund to your current year’s tax liability.

There is a statute of limitations for filing amended returns. Generally, to claim a refund, you must file your amended return within three years after the date you filed your original return, or within two years after the date you paid the tax, whichever is later. Filing an amended return does not restart the three-year statute of limitations. Thus, if you file your amended return right before the three-year limitation, the IRS only has a narrow window to assess your return. Special rules apply for refund claims related to net operating losses, foreign tax credits, bad debts, and other issues.

For individual taxpayers, amended returns are prepared on Form 1040X. This form must be used when you previously filed Form 1040, 1040A, or 1040EZ. It is important to note that amended returns are only filed on paper. Even if you electronically filed your original return, you must prepare the amended Form 1040X on paper and mail it to the IRS. If amending more than one tax year, a separate form will need to be prepared for each year.

Determining if and when you should file an amended return can be complicated. It is important that original returns are prepared as accurately as possible, however, if you discover that amendments are needed you should certainly consider filing an amended return. If you have any questions or believe that you need to file an amended return please contact us for assistance.


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