November 24, 2021
You just submitted your tax return to the IRS. Their electronic system has notified you that they’ve received it via email. Now, everything is done for the year, right? Well, not if you need to file an amended tax return. These returns are similar to the standard ones, only they include some corrections to your deductions, earnings, and so on. Why do you need to amend your taxes? Is this something that you should do when you find a mistake on your return? We’ll clear up these mysteries here, as well as list five reasons why you should amend your taxes.
What Is an Amended Tax Return?
Although the IRS will check your return for simple issues, like mathematical errors, and correct them without requiring any additional paperwork, they won’t change things like filing status or missed deductions on their own. If you have a change in filing status (for example, you filed singly when you’re actually marries and want to file as a married citizen) or have forgotten something important that can change the amount of your tax return or amount due to the IRS, then you need to file an amended return.
Despite its fancy name, an amended tax return is simply one that’s been edited and corrected. You can submit it to the IRS with your new documentation just as you did your original return, and you will receive an electronic notice from the them that they received it. The only difference is that you need to file a Form 1040-X, which is an amended return form, instead of the original Form 1040 that you sent in originally.
While you may catch an error right away and file your amended return within a week or so of the original, you actually have up to three years from the date of that filing. This means that if you submit your original return on April 1, you have three years from that date to amend it. Of course, there are exceptions to this rule, such as if you were audited and found that more than one of your tax returns wound up being incorrect. For the most part, however, three years is the standard time frame.
How Are Amended Returns Filed?
In the past, an amended tax return could only be filed on paper. This meant that you or your tax preparer had to fill out the amended form in ink, attach all of your supporting documents, and mail it in the IRS. Now, things have changed, and those amended returns can be submitted electronically, much like a regular tax return. You’ll still receive a confirmation electronically, notifying you that the IRS has received your amended return, but they may not actually process it for up to six weeks after they receive it. This is just something to keep in mind when you need to go through this process.
Wondering when you should file an amended return? Here are the top five reasons.
1) You Accidentally Overlooked a Deduction
Tax deductions are very useful, because they lower the amount of your gross annual income, thus reducing the amount that you owe to the IRS at the end of the year. Some of the most common deductions include contributions that you paid on your IRA, interest paid on student loans and mortgages, certain medical expenses, money paid on property taxes, and even your charitable contributions.
Although tax credits are taken directly off of any amounts that you owe to the IRS, deductions lower your income. While they don’t count dollar for dollar like those tax credits (instead, they work more like percentages and take off certain amounts from your income), they are quite useful in helping you owe the IRS less money.
If you forgot an important deduction, like the interest that you paid on your mortgage, then you should go ahead and file an amended tax return. This will reduce your income, thus either increasing the amount of your tax refund or lowering how much money you owe the IRS.
2) Your Earnings Were Misrepresented on Your Return
Your earnings are the most important part of your tax return. Without them, you’d have nothing to deduct or credit against. Everyone on the return revolves around that number. This is why it’s crucial that your earnings are listed on the form correctly. However, if they aren’t, then you’ll need to amend your tax return.
Whether you overlooked a W2 from one of your jobs or have income from a partnership or S-corporation that you needed to correctly declare, it’s important to make sure that your income is correct, and if it isn’t, then it’s your job to correct it. Remember, the IRS will fix small things, like adding your income up wrong, but they have no idea if they are missing an income form or not. It’s up to you to ensure that everything is correctly declared by completing and sending in an amended return.
3) You Realized You Own a Worthless Stock
Sometimes stock certificates fall through the cracks. You may have them filed away in a drawer, keep them in your broker’s office, or even have them all stored online, but, oops, you happened to overlook one. All of your stocks need to be accounted for on your tax return, whether they earned you money or cost you money as their worth decreased. What happens when you discover a worthless stock? You need to correct your tax return by including that worthless stock as a tax credit.
A worthless stock can be written off on your taxes, lowering your income and making you owe the IRS less money. Or, if you were going to get money back from the IRS in the form of a refund, that worthless stock will add to the amount that they owe. Either way, you need to submit an amended tax return in order to properly list and claim that worthless stock.
4) You Need to Change Your Filing Status
Your overall filing status is important, as whether you’re single, married, or married filing jointly can make a big difference on your overall tax return. The amount of taxes taken from your paycheck can vary, depending on this status. Plus, the number of credits and deductions that you may qualify for, as well as their amounts, can vary based on whether you’re single or married filing a tax return with your spouse.
It’s easy to mistakenly file a tax return with the wrong status, based on whether or not you’ve recently been married or divorced. Many online tax return programs save your status and import it from year to year, so not checking this information and simply going with the flow may mean that your tax return status is incorrect. If this happens to you, then you’ll need to file an amended return with the correct status and information.
5) Your Credits Need to Be Recalculated
Tax credits are useful because they are taken off at the end of your tax return. They directly lower the amount of money (if any) that you owe to the IRS. Some of the most common tax credits include the Earned Income Tax Credit, designed to help low-income individuals and families offset the amount that they pay in Social Security Taxes, and the Lifetime Learning Credit, which applies to adults who have gone back to college to learn a new trade or skillset. Other tax credits, like the American Opportunity Tax Credit does almost the same thing, although it’s available to more people, and the Savers Tax Credit and Child and Dependent Care Credit. Since tax credits directly effect the amount of taxes that you owe the IRS, forgetting one is an important reason for amending your tax return.
Seeking Professional Tax Help
Depending on the complexity of your amended tax return, it’s always a good idea to seek professional help. A professional tax preparer can walk you through the process of amending the return, assist you with gathering everything that you need to submit with your amended return, and go over the return to ensure that you haven’t forgotten anything else and that everything on it is now correct. Although you can complete and submit your amended return on your own, it’s a very good idea to get professional help with it. There is no law against amending an amended return, but the IRS will appreciate it if everything is correct the second time around.
Contact Us Today
If you need to file an amended tax return for any reason or found that one of your returns from a previous year is incorrect and have questions about the amended tax return process, then please reach out to the tax advisors at Enterprise Consultants Group. We can answer your questions, discuss your rights, and provide actionable options. Please contact us online or at (800) 575-9284 today to schedule a free and confidential consultation to see how we can help you.
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