When to Amend Your Return

As hard as you and your tax return preparer may try to file a complete and accurate tax return by the due date, circumstances such as the following may work against your efforts:

  • Investment firms frequently send out corrected 1099 forms and annual statements.
  • Some 1099s arrive after the filing due date.
  • You may have rolled over an IRA account or sold a stock at a loss and forgot to have it reported on your tax return.
  • A significant deduction may have been overlooked, which is easy these days with the added complications of our tax code.
  • The unexpected K-1 from your aunt's estate that you were unaware of.

Whatever the reason may be, your returns can be amended to reflect the correct information or amounts.

If you are amending for a refund, then the amended return must be filed before the statute of limitation expires on the return being amended. That is generally three years from the April due date of the return.

Thus, the statute only applies to refund returns and no refunds will be issued for returns filed after the statute has expired.

If tax is owed as a result of amending the return, file it as soon as possible to limit the interest and penalties that can accrue.

If you have unreported income from 1099s, W-2s, K-1s, etc., and wait for the inevitable notice from the IRS, you are taking the risk that they will not consider all the factors that might weigh in your favor since you have allowed the interest and penalties to build up. It may take the IRS one or two years to make the match between you and the missing income.

Does Amending Increase the Audit Liability? The fact that you amend a return does not in itself increase your chances of being selected for an audit. In fact, it might actually reduce your chances, especially if you are fixing something they will find later anyway. What concerns many about amending returns is that an IRS employee must compare the amended return changes with the original. If back-up documentation cannot be provided, the IRS may want to dig deeper.

That is why it is so important to provide proof or back-up documents to justify the changes being made. Let's say you forgot to claim a $2,000 church donation. In this scenario, you definitely want to include documentation supporting the increased deduction.

If you have questions about amending your returns, please call us to discuss what steps need to be taken.