Amending Tax Returns

Amending Tax Returns

During the magical time of year known as tax season, millions of US taxpayers scurry about to prepare their tax returns for eventual filing. However, since the 1040 filing process can be very complex, it is not surprising that taxpayers make mistakes when preparing their tax returns. Worse still, all tax returns must be signed under criminal penalty of perjury, which can cause some discomfort to taxpayers when they are not confident that they are submitting all of the correct information.

For those taxpayers that have improperly filed their tax returns, don’t worry. Your returns can be amended!

The Mighty 1040X, 941X and 1120X

If a client has improperly filed his or her 1040, 1040A, or 1040EZ tax return and the error is serious enough, the IRS will require that the client file a 1040X with the correction. If the client has made multiple errors over several years, the client will need to file a 1040X return for each year in question. The same applies to clients who make serious errors on their Form 941 payroll tax forms or their Form1120 corporate tax forms. In those situations, the taxpayer will need to file a 941X or 1120X to correct the error or errors.

The basic format of these amended returns is essentially the same. The taxpayer is required to place the original return income, deduction and credit figures in the first column and the amended figures in another column. The taxpayer will also need to provide an explanation regarding the figures that have been amended.

However, not all errors are created equal. Some taxpayer errors do not require the filing of an amended return, while others do. So let’s discuss a couple of categories of errors that taxpayers might make and what they may have to do to correct them.

Basic Errors (e.g. 2+2 = 5?)

  • Surprise, surprise, taxpayers make mathematical errors! However, as crucial as these errors can be to the bottom line, the IRS will typically not require the taxpayer to file an amended return. The IRS service center will usually correct most mathematical errors in their system, and will then send the taxpayer a notice regarding the change.
  • Taxpayers also forget to attach the correct forms to their 1040 tax returns (e.g. W-2 forms, Schedule Cs, etc). Again, the IRS will typically not require the taxpayer to file an amended return. The IRS will first request that the taxpayer substantiate the amounts reported by submitting the missing document(s) before they make the decision to revise a tax return.
    Serious Errors (e.g. Looks suspicious enough for the IRS to raise a red flag)

For example, the IRS will require a taxpayer to file an amended return to correct a mistake if the taxpayer incorrectly reports any of the following:

  • Incorrectly reporting the number of dependents (e.g. claiming 30 dependents when a taxpayer only has 3).
  • Incorrectly reporting the filing status (e.g. a taxpayer listing himself as single when he is married).
  • Incorrectly reporting total income (e.g. a taxpayer reporting gross wages that are different than what is on his W-2).
  • Incorrectly claiming deductions or credits (e.g. claiming a child tax credit when the taxpayer has no children)
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