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Everything You Need to Know About Filing an Amended Tax Return

Tax season officially came to a close on April 18th this month after a crazy one-day extension that the IRS granted. As tempting as it is to set tax planning aside until next year, now is a good time to review your tax return for potential mistakes and whether or not you need to file an amended return.

What is an Amended Tax Return?

Before you can truly know whether you need to file an amended tax return, you need to understand what they’re for. An amended return offers you, the taxpayer, a chance to correct filing mistakes you’ve made in the past. 


Sometimes, this means you missed a significant deduction, or you need to add or remove dependents. Other times, it may mean you didn’t correctly report income and you owe the IRS more than you’ve already paid when you originally filed. 


Amended tax returns can be submitted up to three years after the original file date or 2 years after you paid the tax due, whichever is later.

When Should You File an Amended Tax Return?

An amended tax return can come in handy in many different situations. The first thing to determine is whether you owe the IRS more than what you paid, or whether they owe you a refund. They might owe you a larger return than you originally received if:

  • You make estimated quarterly payments but didn’t record them correctly
  • You forgot to claim a deduction
  • You forgot to change your filing status (for example: you got married but still filed as single)

👉🏽 Related: Don't Make These 6 Common Tax Mistakes

If you’ve made a tax filing mistake that results in the IRS owing you money, it’s important to file an amended return - as they often won’t correct the error in their own system. However, in other cases you may owe the IRS more money than you’d originally paid them. This might be true if:

  • You listed too many dependents
  • You’ve forgotten to report additional streams of income (interest, dividends, etc.)


Occasionally, the IRS will catch a mistake on your tax return before you can file an amendment and either request additional information or that you file an amended return. That being said, if you know a mistake was made, it can be in your best interest to handle it before the IRS catches the mistake in an audit. In some cases, if you file an amended return and pay the extra tax you owe as a result, you can halt penalties for your error. 

When Shouldn’t You File an Amended Return?


It’s tempting to go back through your previous three years of tax returns to check for errors and file amendments for all of them. However, you should know that you don’t need to file an amended return for every small mistake you make. 


For example, if your return had simple math errors, the IRS’s computers likely already caught that and corrected it for you. The same is true for if you forgot to include a W2. The IRS will have received a copy from your employer, and will be able to include the information. If, for some reason, they can’t - they’ll contact you requesting the additional forms necessary.

How to File an Amended Return

Filing an amended return is, unfortunately, somewhat more complicated than filing your original tax return. This is mostly because the IRS is a little bit skeptical of people who suddenly found information that means a larger tax refund for them - which makes sense. Because of this, the process tends to be more in depth than simply filing your taxes. 


The first thing you need to know is that all amended returns must be filed on paper. This is still true if your original return was filed electronically. You'll report the revised figures that you’re amending on a Form 1040X. 


When giving an explanation of your amendments on the Form 1040X, be direct and honest. The IRS needs to be able to quickly find and understand the changes you’re making and where they can see clear proof that these changes are accurate. Be prepared to attach supporting documents for new or changed forms and schedules. 

Keep in mind that if you’re going to file an amended return, you need to report all corrections. That means if you found two mistakes - one that will get you a refund and one that will cost you money - you need to report both of them on your amended return.

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What Happens After You File?

In a perfect world, you’d file an amended return as soon as a mistake was made, and you’d either make an extra payment to the IRS or receive a corrected refund as soon as possible. Of course, we don’t live in a perfect world. Sometimes mistakes go unnoticed when we file our tax returns, which is why there’s a 3-year grace period for filing amended returns.


In the same way, the IRS is fairly open about the priority amended returns take. During tax season, all tax returns that are filed for that same tax year are the IRS’s first priority. After that, they take a careful look at any amendments that have been submitted. 


Although it’s not an official rule, it also tends to be true that any amendments where you’re expecting a refund from the IRS are even lower on their to do list in comparison to amendments where you’ll owe the government money. This isn’t necessarily bad, it just tends to be the way things work.

Your Best Bet? Catch Mistakes Before They Happen

Although an amended tax return is sometimes necessary, your best bet is to avoid mistakes when filing your tax return if at all possible. In the event that you don’t catch an error, you could be in hot water with the IRS and face some serious penalties. One of the benefits of working with a financial planner is that they can guide you through big-picture tax strategies and help you understand the impact taxes have on your financial decisions. A financial planner can also refer you to a qualified tax professional if your unique situation calls for it. 


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Desmond Henry, financial advisor in Topeka, KS

Desmond Henry is a fee-only CERTIFIED FINANCIAL PLANNER™ professional and founder of Afflora Financial Life Planning in Topeka, Kansas. He helps the retiring/retired plan their finances and invest their money. CLICK HERE to learn more.