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All Contents © 2020The Kiplinger Washington Editors
By Rocky Mengle, Tax Editor
| August 15, 2019
It's well past April 15. So, unless you applied for an extension, the stress and frustration of filing your federal tax return should be a distant memory by now. But what if you suddenly realize there's a mistake on your return or a new development that affects the amount of tax you should have paid? What do you do now? Whether the mistake or development is in your favor or the government's, filing an amended tax return is often the next step.
Filing an amended return isn't particularly difficult, but there are a few things you should know about the process before getting started. It also helps to be familiar with some of the more-common occurrences that can trigger the need for an amended return (in addition to just a mistake). That way, you'll know to check your previously filed return if and when they happen. Because every taxpayer should have a basic understanding of what it takes to change their return after it's filed, here are 10 tips on how and when to file an amended tax return.
You don't need to file an amended return if you discover a simple math or clerical error on your return. The IRS can correct those types of mistakes on its own. An amended return isn't necessary if you forgot to attach a certain form or schedule to your return, either. The IRS will contact you by mail if they need additional information to fix these types of errors. However, you should file an amended return if there's an issue that changes your filing status, income, deductions or credits.
If you do need to file an amended personal income tax return, you'll probably need to submit IRS Form 1040X, which is used to:
You can use Form 1045 instead of Form 1040X in limited situations. For example, Form 1045 might be an option if you had to repay income that was previously taxed or you're carrying back certain losses or tax credits. You should also use Form 843 if you're requesting a refund of penalties and interest or an addition to tax that you already paid. Otherwise, generally stick with Form 1040X.
One downside to Form 1040X is that it can't be filed electronically. You can use tax software to prepare the form, but in the end you have to print it out and mail it in. The form instructions tell you where to send it.
Also make sure that you file a separate Form 1040X for each tax year. Mail them separately, too. Check the box at the top of the form to indicate the tax year for the return being amended. If there isn't a box for that year, write in the year in the space provided.
Don't forget to sign the amended return. Attach any required forms or schedules as well. Generally, you need to attach any schedule or form relating to the changes you're making. For example, attach Schedule A if you're changing an itemized deduction. The form instructions tell you which other attachments are necessary.
Generally, you must file an amended return within three years from the date you filed your original return or within two years from the date you paid any tax due, whichever is later. If you filed your original return before the due date (usually April 15), it's considered filed on the due date. There are a number of special due-date rules for amended returns that are based on changes related to bad debts, foreign tax credits, net operating losses, natural disasters, service or injury in a combat zone, and a few other situations—check the instructions for Form 1040X for details.
Don't file your amended return too quickly, though. If you're due a refund on your original return, wait until you actually receive the refund before filing an amended return for that tax year.
It's nice if amending your return results in a refund, but, unfortunately, that's not always the case. If you owe the government money as a result of filing an amended return, pay the tax right away to avoid additional interest and penalties.
You can pretty much count on paying some interest, since the IRS charges interest on any taxes not paid by the due date. But you can minimize the amount of interest you'll be charged by paying the tax owed quickly. The interest rate changes on a quarterly basis (it's 5% for the third quarter of 2019).
You'll also pay a penalty if you don't pay any tax due within 21 calendar days of the date of the IRS's request for payment (10 business days if the amount of tax is $100,000 or more). The penalty is usually equal to 0.5% of the unpaid amount for each month or part of a month that the tax isn't paid. However, the IRS might waive the penalty if you have a (very) good reason for not paying your tax on time.
There are several ways to pay any tax due. You can pay online or by phone, mobile device, cash, check or money order (see the instructions for Form 1040X for details). If you can't pay the full amount right away, the IRS recommends asking for an installment agreement that will allow you to make monthly payments. You'll still pay interest and penalties, and probably a fee to set up the agreement. Other, potentially less costly alternatives include bank loans or credit card payments.
You can track the status of your amended return online using the IRS's "Where's My Amended Return?" tool or by calling 866-464-2050. You can get the status of your amended returns for the current tax year and up to three prior years. The automated system will tell you if your return has been received, adjusted or completed. All you need is your Social Security number, date of birth and zip code to access the system.
It can take up to three weeks from the date you mail your amended return for it to show up in the IRS's system. After that, it generally takes eight to 12 weeks for an amended return to be processed, but in some cases it can take 16 weeks or longer—so you have to be patient.
Now let's get into some of the more common reasons why you might want to file an amended return. Many people file one to claim an overlooked tax deduction or credit. The tax code is chock full of tax breaks, so it's easy to miss one that applies to you. If you discover a deduction or credit that you qualify for after filing your original return, simply file an amended return within the three-year period described above to claim it now and get a refund. It might not be worth the effort if it's only going to reduce your taxes for that year by a few bucks, but you do have the option.
Also, if you're amending an older return, remember that the recent tax-reform law changed many tax breaks beginning with the 2018 tax year. Several deductions and credits were eliminated or reduced, but others were added or expanded. So just because you're entitled to a tax break now doesn't mean you were entitled to it on your pre-2018 return.
If there are any retroactive tax laws enacted that include new or expanded tax breaks, you'll want to check your previous tax returns to see if you can take advantage of the new law. So far this year, no legislation of this kind has gotten out of Congress. However, if anything does materialize that benefits you, submit your Form 1040X as soon as possible to get a refund for some of the taxes you already paid.
One proposal stuck in Congress right now that could trigger a lot of amended returns is the 2019 "tax extenders" bill. The term "tax extenders" refers to a collection of tax breaks that keep expiring but are then retroactively extended by Congress for another year or two. This cycle has repeated itself over and over again—except for this year. As of press time, the tax breaks that expired at the end of 2017 have not yet been extended for the 2018 tax year or beyond. Most of the tax extenders are for businesses, but there are a few tax breaks for individual taxpayers, such as the mortgage insurance premiums deduction, income exclusion for forgiven mortgage debt, college tuition and fees deduction, and credit for energy-efficient windows and doors. There's still a chance that a tax extenders bill will be enacted later this year. If that happens, make sure you file an amended 2018 return if you qualify for any of the extended tax breaks.
You'll need to file an amended return if you receive information after filing your original return that significantly changes your taxable income. For example, you might receive an amended W-2 form or a 1099 form showing previously unreported income (enough to make a difference on your return). If the new information affects the deductions or credits that you claimed on your original return—for example, by upping your income to a point where the tax break is reduced or no longer available to you—you'll need to file an amended return for that, too.
You won't receive a refund for these types of changes, but you still need to file an amended return to avoid penalties and additional interest.
Changes you make on an amended return affecting your income, deductions or tax liability may also affect the amount of or cause you to owe the alternative minimum tax. So be sure to check that, too.
If you're the victim of a hurricane, wildfire or other natural disaster, you might be able to file an amended return to claim a casualty loss deduction for the tax year before the disaster. Alternatively, you can claim the loss in the year of the disaster: Pick whichever year is more favorable to you. However, the loss must be attributable to a federally declared disaster that occurred in an area warranting public and/or individual assistance. Otherwise, this special rule doesn't apply.
If you decide to claim the loss for the year before the disaster, you must file your amended return no later than six months after the due date for filing your original return (without extensions) for the year in which the loss took place. So, for example, if the disaster occurred in 2019 and you want to claim your loss on your 2018 return, you must file an amended 2018 return by October 15, 2020.
Also note that a casualty loss deduction is generally subject to a $100-per-casualty limit. It also can't exceed 10% of your adjusted gross income, and you have to itemize to claim it.
If you prepare your own tax returns, it's best to fill out both your federal and state returns before actually submitting either one. But sometimes that's just not possible. You might be too busy to do them both at once, so you send in your federal return (which has to be done first) one day and put off your state return for another day. Then, when you're finally working on your state return, you realize that something you did on your federal return is going to cost you more in state taxes than what it saves you in federal taxes. If that's the case, it might make sense to amend your federal return—and pay a little more in federal taxes—so you can cash in on a larger state tax break.
Here's an example: For the 2018 tax year, Andrew and Becky filed a joint federal return reporting $150,000 in federal adjusted gross income. They had $23,000 of itemized deductions, but they claimed the $24,000 federal standard deduction because it's higher (but not by much!). Their overall federal tax liability was $19,600. A week after filing their federal return, Andrew and Becky started working on their state return. They soon realized that (1) their state did not adopt the new federal standard deduction, which was practically doubled beginning in 2018; and (2) they cannot itemize on their state return unless they itemized on their federal return (which is a common restriction). As a result, their state standard deduction was only $4,000, which resulted in an overall state tax liability of $7,000. If Andrew and Becky file an amended federal return and claim their $23,000 in itemized deductions instead of the $24,000 standard deduction, their overall federal tax liability will increase by $220. However, that allows them to itemize on their state tax return, which will lower their overall state tax liability by $650. That's an overall gain of $430!
And while we're talking about state tax returns, remember that a change made to your federal return may very well affect your state tax liability, too. So, if you've already filed your state return, check to see whether filing an amended federal return means you'll have to file an amended state return as well.