11 Tips on How and When to File an Amended Tax Return
What to do if you discover a mistake on a previous tax return (and other reasons for filing an amended return).
Everyone makes mistakes. And sometimes you don't even realize your errors until well after they're made. But what if you suddenly realize there's a mistake on a tax return that you filed months (or years) ago? Or what if there's a new development that affects the amount of tax you should have paid on a previous return? 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 11 tips on how and when to file an amended tax return.
File a Superseding Return if the Filing Deadline Hasn't Passed
What if you just filed a tax return and then discovered a mistake the very next day. If the filing deadline, including extensions, hasn't passed, then you don't want to file an amended return. Instead, you can file what's called a "superseding return." Basically, if you file a second return before the filing deadline, the second return "supersedes" the first return and is treated as the original return.
A superseding return must be filed on a paper Form 1040 – e-filing is not allowed. We also recommend writing "Superseding Return" at the top of the form.
Since 2019 tax returns aren't due until July 15, 2020 (or October 15 if extended), there's still time to file a superseding return this year. Say, for example, you filed a 2019 return back in February and, instead of getting a refund, elected to apply your overpayment against your 2020 tax liability. But then you lost your job in April because of the coronavirus pandemic and now wish you were getting a refund. If you file a superseding return before July 15, you can get the refund this year. It might take a while before the IRS is able to process your superseding return, since they're behind on tackling paper returns, but at least you won't have to wait until next year to benefit from the overpayment.
Let the IRS Correct Certain Errors
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.
Use Form 1040X
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:
- Correct Forms 1040, 1040A, 1040EZ, 1040NR or 1040NR-EZ (some of these forms are no longer in use);
- Make certain elections after the election deadline;
- Change amounts previously adjusted by the IRS (except IRS changes to interest or penalties); or
- Claim a loss or unused credit carryback.
[Note that, starting in August 2020, you can file an electronic Form 1040X with commercial tax-filing software to amend a 2019 tax return. You'll still have to file a paper amended return for other tax years…at least for now.]
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.
Also make sure that you file a separate Form 1040X for each tax year. Submit them separately, too. If filing a separate return, 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.
File Your Amended Return Before It's Too Late
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.
Pay Any Tax Owed Right Away
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 3% for the third quarter of 2020).
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
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.
Claim Missed Deductions or Credits
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.
Watch for New Laws Applied Retroactively
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. For example, a "tax extenders" law was passed in December 2019 that will trigger a lot of amended returns. (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.) The 2019 law temporarily revived a number of tax breaks that had expired at the end of 2017, including the mortgage insurance premiums deduction, income exclusion for forgiven mortgage debt, college tuition and fees deduction, and credit for energy-efficient home improvements. (For more information on these tax breaks, see 4 Back-From-the-Dead Tax Breaks for Your 2019 Return.) If you can claim any of these tax breaks for 2018, go ahead and file an amended return to get a refund.
You Receive New Information After Filing Your Return
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.
Disaster Victims Can Amend Return to Deduct Losses
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 2020 and you want to claim your loss on your 2019 return, you must file an amended 2019 return by October 15, 2021.
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. (Note that, if you don't itemize, you can claim an additional standard deduction for uninsured casualty losses in excess of a $500 threshold from a federally declared disaster that occurred between January 1, 2018, and February 18, 2020.)
Take Advantage of State Tax Laws
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 2019 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 $24,400 federal standard deduction because it's higher. Their overall federal tax liability was $19,350. A week after filing their federal return, Andrew and Becky started working on their state return. They soon realized that (1) their state standard deduction is much lower than the federal standard deduction, and (2) they cannot itemize on their state return unless they itemized on their federal return (which is a common restriction). Claiming their state standard deduction, which was only $4,000, 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 $24,400 standard deduction, their overall federal tax liability will increase by $310. However, that allows them to itemize on their state tax return, which will lower their overall state tax liability by $750. That's an overall gain of $440!
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.