Once the tax season is well behind you, there’s usually a sense of relief! But that isn’t always the case. Encountering a tax return error can raise a lot of questions, starting with whether an amended return will even be necessary.
Assessing Errors on Your Tax Return
Most tax returns are filed and processed without any hiccups. When something does go wrong, though, an amended return can help get things back on track. An amended tax return is simply a revised version of a previously filed tax return, otherwise known as Form 1040X.
Submitting an amended return to the IRS allows you to correct errors, update information, or include details that may have been left out of your original return. This could be anything from deductions, tax credits, changes in reported income, or other relevant financial data.
The whole point of filing an amended tax return is to rectify mistakes, and while it’s not exactly fun to re-submit paperwork that you thought you’d been done with, it’s important to follow through on the IRS guidelines. Put simply, mistakes revealing extra tax owed mandate an amended tax return. This often involves errors linked to details that were either missing or incorrect on your Form 1099 or Form W-2. Because these earnings reports are tied to others’ tax return records, you’ll need to go ahead and file an amended return as soon as you realize that there’s a discrepancy with either of these forms. It’s never fun to find out that you owe more than you thought, but you’ll need to make sure your records are accurate.
On the other hand, there could be an upside to filing an amended return! You might be looking at a situation where correcting an error or omission would yield a substantial refund. This can make the decision to file an amended return pretty straightforward. However, it's not always that simple. There are still a few other factors to consider.
When the Problem Relates to a Refund
Even when you think that filing an amended return will work in your favor, you still need to keep a clear mind and carefully evaluate your strategy and the possible outcomes. For example, amending one tax return could necessitate revisions in other years. It’s important to understand this from the get-go to help you determine whether the effort will be worthwhile.
First off, be aware that timing is critical. You must adhere to a three-year limit after the initial filing deadline if you’re seeking additional refunds through an amended return. Even if the refund is relatively modest, you don’t want to miss out on the chance just because you didn’t watch the clock.
But along with that, amending a return could potentially reset the audit clock. It's even possible for the amended return to trigger its own IRS examination. Revisions to subjects like Earned Income Tax Credit and Small Business Income are notorious for catching the interest of the local IRS office. What’s more, changing your federal return might also impact state or local taxes, which would then require their own amended state or local tax return.
You obviously want to get what you’re owed, but it’s wise to proceed with caution. Amended returns often face lengthy wait times for processing and could be subject to audits. So while correcting errors is important, the exact next steps will vary case by case.
Talk with Local Tax Professionals
While identifying tax return errors can be unsettling, remember that solutions do exist. You just need to adopt a balanced perspective. Typically, that’s how partnering with a tax professional can help! If you’re based in the Central Indiana area, please know that NSO & Company is here for you.
The decision to file an amended return should be based on a thorough evaluation. Even if the refund doesn't seem significant enough to warrant an amended return, you’ll still need to cover your bases and maintain the correct documentation. Let our team help! Just give us a call at (317) 588-3131 and we’ll help put your mind at ease.
