When do you need to file an amended tax return?

This is the time of the “tax year” that little tax issues on your recently filed tax return usually come to light. You thought your taxes were done when you filed your tax return in April. Well, you may have some more work to do.

The “little issues” may include the discovery of the misfiled or belatedly received income statement, the discovery of a corrected income statement, or remembering that it was (or wasn’t) your turn to claim a shared dependent. The amended tax return, simplified, is a tool often used in one of two ways; 1) to make changes to a filed tax return for the taxpayer’s benefit, or 2) to make changes to a filed tax return for the government’s benefit.

Taxpayer Will Benefit From Amending the Tax Return

The use of an amended tax return is the tool to use when you notice that you paid too much tax or you were due more money back from the government than you received on your original tax return. The government isn’t likely going to make an adjustment when the unadjusted return is in their favor. Therefore, you’re going to need to push the issue to ensure you don’t pay more taxes than you’re legally obligated to pay.

This may include correcting your filing status or the number of dependents to your benefit, or claiming credits you were entitled to claim, but didn’t, on your original tax return. Although more rare, sometimes there are changes in the law that are retroactive and allow you to amend your tax return for a past tax year to take advantage of the change to the law.

In the present age of initial computer review of your tax return, calculation or transposition errors are normally caught fairly quickly by the IRS and normally do not require amending your tax return, as you will normally be notified of errors or the need for additional information.

If you will receive an additional refund by filing an amended tax return, you should normally wait until you have received the refund due to you as shown on your original tax return before filing your amended tax return. Waiting until the original refund is received may help avoid IRS delays and errors in processing your amended return and the additional refund. Generally, to claim a refund based on an amended tax return, the amended tax return must be filed within three years from the due date of the original tax return or within two years from the date the tax was paid, whichever is later.

The Government Will Benefit From Amending the Tax Return

In cases where amending a tax return will result in a higher tax owed and a tax debt, the taxpayer may drag their feet in filing their amended tax return. This situation may include, for example, the realization that you earned more income than you thought you had at the time you filed your tax return, or you claimed a dependent you were not eligible to claim. The reality is that the IRS, for all their faults, is likely to eventually catch an error that will result in a higher tax owed. The real question most taxpayers in this situation face is whether they can actually pay the increase in tax; and they often opt to wait for the IRS to push the issue.

Similar to calculation and transposition errors that benefit the taxpayer, simple calculation and transposition errors that may benefit the government are likely to be discovered in the initial computer processing of your tax return and don’t necessarily require an amendment. It is the more complex or intentional errors that warrant use of the amended tax return to minimize civil and criminal exposure for disclosures made on your original tax return. The use of the amended tax return will minimize the monetary penalties and interest assessed if amended before the IRS corrects the return for you. Like any tax issue, a proactive and organized approach will save you money over time.