Sometimes a tax return which has already been filed needs to be changed or corrected. The forms filed to correct income tax returns are called amended returns. For individuals or married couples, they consist of a form highlighting the changes for the IRS (called a 1040x) and a corrected individual tax return (form 1040). They can also include other forms or information that are needed to inform the IRS why the change is needed.
Reasons to File Amended Returns
Amended returns can result in an additional refund or more tax to be paid. One common reason why people need to amend their tax returns is that they’ve filed too early. Taxpayers who expect to have refunds sometimes file very early in the year to claim their refunds, only to receive a form (1099) reporting additional income that they had forgotten about. When they receive the additional form, they need to file an amended return and pay the additional tax that is due on the income that was left off of the original return.
Amending a return to pay additional tax is no fun at all, but sometimes taxpayers can amend their returns to get additional money back. This can happen because the original return contains an error in the IRS’s favor, because the taxpayer became aware of new information that helps the taxpayer, or because information that was reported on a correct original return could have been reported in a different correct way to yield a better result. Occasionally it even makes sense to amend prior return to pay additional tax when doing so sets the taxpayer up save even more money in the current year.
Opportunities to Amend for Refunds
Here some situations where taxpayers should consider having a tax professional review their prior returns for opportunities to amend:
- The taxpayer is in business and has spent significant money on equipment in recent years but the business has performed better or worse than expected since then.
- The taxpayers are married but filed separate rather than joint returns for any of the past few years.
- The taxpayers are a legally married same sex couple and were unable to file joint income tax returns before the Defense of Marriage Act (DOMA) was repealed.
- The taxpayer has prepared his or her own return in the past, but has had new or more complicated tax situations in recent years and isn’t fully confident that the returns are correct.
These are just a few situations where it pays to have past returns reviewed and possibly amended by a tax professional, but there is a time limit on when you can do so. For an amended return to result in a refund, it must be filed within three years of when the original return was filed or two years of when the tax was paid, whichever is later. As of February, 2014, that means that individual income tax returns for 2010, 2011, and 2012 may still be amended to claim an additional refund if one is due. Taxpayers will no longer be able to amend 2010 returns after April 15, 2014, unless the original returns were placed on extension during the 2010 filing season.