Amended Returns & Form 1040X
It happens to the best of us. You gather all your tax documents, crunch the numbers, and double check everything on the tax return. No sooner have you dropped the return in the mail or pressed the efile button, but a new W2 or 1099 comes in the mail. Ah, now you remember. And now you need to Amended Returns & Form 1040X.
Amended Returns & Form 1040X. You need to use Form 1040X, along with a new Form 1040, plus any other necessary schedules and forms. Amended Returns & Form 1040X have to be mailed to the IRS on paper for manual processing. The IRS typically processes an Amended Returns & Form 1040X about 8 to 12 weeks, but this process can take longer during the IRS’s busiest times.
Why File an Amended Returns & Form 1040X?
You should file an Amended Returns & Form 1040X if you need to correct any piece of information that will alter your tax calculations. You can use an amended return to make corrections to your filing status, dependents, income, deductions, or tax credits. For example, if you need to report additional income from a W-2 that arrived after you filed your original return, you’ll need to file an amendment. Similarly, if you need to remove dependents because you were not eligible to claim them, you should file an amendment.
You should not file an Amended Returns & Form 1040X if you are only correcting math errors as the IRS computers will check your math and correct any errors in calculation. Math errors are errors in adding or subtracting items on your tax return.
Be aware that you have three years to make any corrections that result in additional tax refunds. That’s because there’s a three-year statute of limitations on issuing tax refund checks. This three-year period is measured from the date you filed your original tax return. If you filed your return before April 15th, the three-year period begins from April 15th. If you requested an extension, the three-year period runs from October 15th (Internal Revenue Code section 6511(b)(2)(A)).
If you are beyond the three-year period, you can only receive refunds for overpaid taxes that were actually paid during the previous two years.
People who need to report additional income and to correct overstated deductions can file an amended return at any time. Be aware that the IRS has three-years to audit your tax return, and may have a longer period of time if there’s substantial under-reporting.
Reasons for filing an Amended Returns & Form 1040X:
- Claiming additional dependents,
- Removing dependents you previously claimed,
- Reporting your proper filing status,
- Reporting additional income – from a W2, 1099, or other income statement,
- Making changes in your above-the-line deductions, standard deduction or itemized deductions,
- Changing your personal exemptions,
- Claiming additional tax credits, removing tax credits mistakenly taken, or recalculating the amount of the credits; and
- Reporting additional withholding – from a W2 or 1099.
How to Prepare an Amended Returns & Form 1040X
Amending your tax return is a two-part process. First you will need to prepare a new tax return. Use the long Form 1040 and any additional schedules. Secondly, report the revised figures on Form 1040X.
Part One: Preparing a new 1040. As we will discuss below, the IRS scrutinizes amended tax returns a little more carefully. That means you need to exercise extra vigilance to make sure your new 1040 is as complete as possible. It does not matter if you filed your original tax return using 1040EZ or 1040A forms. You will need to fill out a full 1040 for the amended return, because you will need to match up line items from your new Form 1040 to the various lines on Form 1040X.
Also, attach all necessary schedules, forms, and documentation to your new 1040. It’s essential to include any forms that have been added or revised so the IRS has a complete set of information about the changes you are making.
Part Two: Preparing Form 1040X. Before starting in on the Form 1040X, you need to have in front of you: your original tax return and your new Form 1040. Form 1040X basically summarizes information from your newly revised Form 1040. You will be transferring information from your corrected 1040 to the 1040X form.
The most important part of the entire Form 1040X is Part III, on the second page of the Form 1040X. Part III is where you get to explain the changes being made to your previously filed tax return. Clear and concise explanations can help the IRS process your amended return more efficiently. If you need additional space that what’s provided, you can type up a separate statement. For example, let’s say you forgot to include wages from a W-2. The Part III explanations might read as follows:
“We are reporting additional wages and additional withholding from a W-2 we forgot to include on our previous tax return. This resulted in changes to our adjusted gross income, taxable income, total tax, and refund. Enclosed is a new 1040, as corrected, with a copy of the W-2 attached.”
The idea is to be concise, and point the IRS agent to the specific changes you are making and where they can find those revisions in your documentation.
Some extra things to watch out for when preparing your Form 1040X.
Indicate the appropriate tax year you are amending at the top of Form 1040X. Form 1040X is a generic form and can be used for any tax year. If you need to revise several different tax returns, you will need to submit separate Forms 1040X for each year.
Check the numbers and your math. Check it twice.
Check the refund or amount you owe calculations on lines 17 through 22. If you received a bigger refund on your original tax return than you should have, you will need to pay back some of your refund. If your original refund was smaller than you could have received, you will get an additional refund by filing an amended return. Be aware that you have the option to have some or all of your refund applied as an estimated payment to next year’s estimated tax. If you want this option, indicate the tax year to which you want the IRS to apply payments on Line 22. Refunds from amended returns cannot be issued via direct deposit.
Sign and date the amended return. If an accountant helps you prepare the amendment, the accountant must sign and date the amended return as well.
Mail your amendment to the same IRS Service Center that processed your original tax return. If you don’t remember where you mailed your return, or if you efiled your tax return, simply mail the amended return to the IRS Service Center shown on pages 4 and 5 of the Instructions for Form 1040X.
What Happens When You File an Amended Returns & Form 1040X
The IRS Service Center will manually process your amended return. They will check to make sure your explanations are sufficient. They will check to see that you have sufficiently documented the changes in your tax return. For example, they will double check your W-2 statements, withholding, and other information reporting on your amended tax return. If the IRS needs more explanation or documentation, they will write you a letter and ask for the specific information they need. If you owe additional tax, you should mail in a check to pay the tax in full. If you are due an additional refund, expect your refund to arrive in approximately 8 to 12 weeks.
Do Amended Returns Trigger an Audit?
There has been discussion among various tax professionals whether an amended tax return will trigger an IRS audit. So far, there’s no conclusive evidence. Based on my experience and the experience of other tax professionals, the IRS does check amended tax returns more thoroughly than original tax returns. If you explain the reasons why you are correcting your tax return, and if you back this up with proper documentation, the IRS is likely to process your amended return more efficiently.
For example, let’s say you forgot to report the full amount of mortgage interest you could have claimed. You should attach a photocopy of all your 1098 mortgage statements and highlight which one was left off the original return. While the IRS agent could look this information up on their computers, it will be easier and more efficient for them to see the documentation right there in your tax return.
The Bottom Line
Filing an Amended Returns & Form 1040X is the right thing to do if you need to correct the amount of income, deductions, credits, filing status, or dependents on your tax return. You can amend to claim tax benefits that will result in an additional tax refund, and you can also amend to remove deductions and credits you were not entitled to. In preparing Form 1040X, you need to provide thorough documentation, and clear explanations of your changes.