Amending a Tax Return … to File or Not to File?

The end of tax season is a relief for most (maybe not so much for those who filed extensions) but doesn’t necessarily close the book on your 2015 taxes just because you filed on time. You may realize you made a mistake, overlooked a deduction or income, or received a revised 1099 form or other adjustment. The choice to file an amended return should not be made based on whether or not you getting more money back or are increasing your tax liability, but rather on being as honest and thorough as you are able.

“Often, clients leave money on the table because they are not aware of their options,” said Kyle Kasperek, of John Kasperek Co., Inc. in Calumet City, Illinois. “We encourage our clients to be attentive to what they receive in the mail and to speak up if they realize an oversight for better or worse.”

The good news is that if you file an amended return in your favor you can ask for money back.  You have three years from the date you filed your original return, or within two years from the date you paid the tax, whichever is later. No matter when you choose to file your amended return, the IRS will typically have three years from the filing date of the original return to perform an audit.

“If you will be receiving a significant amount of money back, be aware that the IRS may be more diligent in their review of review your amended return,” said Kasperek.  “You also have the option of having the refund applied to your current year’s tax.”

So how do you file an amended return?  Be advised ALL amended returns must be filed by paper via Form 1040X no matter how the original return was filed or which forms were used. 

If filing an amended return will increase your tax liability, you should complete the Form 1040X as soon as possible.  Many individuals who realize they will owe more are inclined to wait to amend their return at the latest possible date; however, they will owe additional interest and probably penalties too. Interest is charged on any tax not paid by the original return, and the IRS will bill accordingly (penalties may also be assessed but can be contested).

So when shouldn’t you file an amended return after noticing a mistake?

“If you made math mistakes or simply failed to attach certain documents, the IRS will usually make the adjustments or reach out to you if more information is needed,” added Kasperek.