Amending Your Tax Return – the How, Why and When

When should you amend your tax return?

So, we are all on the same foot, amending your tax return is basically sending the IRS a new tax return, correcting errors made on the last tax return you filed for that year. You technically can amend more than once, but it is generally not advised. The way the IRS communicates the when ‘should’ one amend is very simple and straightforward, simply, if there was anything wrong with the last one, amend your tax return. I will lay out a more realistic approach in a little bit; life is rarely a clean yes or no choice and sometimes we have to explore.Before all of that however, some vital facts of amendments are important. These matter regardless if you want to amend or feel obligated to amend.

  • First, amendments cannot be electronically filed (personal returns) which means you are printing and mailing the documents to a human, and they will be subject to a human looking at it at least once. For some, that is not an awesome thought – others will think so what? It is just information to have as part of the whole decision-making process.
  • Second, the amendments take time to process. The IRS publicly states that an amendment will take up to 3 weeks to even register in their system, and up to 16 weeks to process. They have been known to work faster than that plenty of times,  but set the expectation it will take quite some time for the IRS to give you any feedback on your amendment. They generally do send a yes, we accept or no, we do not accept letter to you especially those who are anxiously awaiting any kind of refund. Don’t go spending it until it actually arrives!
  • Third is that an amendment can be filed for any tax year. For those expecting a refund, you have a limited time to claim that refund. 3 years from the due date, or 2 years from the tax paid. The 2019 tax returns are due July 15, 2020 – thus one would have until (+3 years) July 15 of 2023 to file an amendment for 2019 and get any money back. However, if someone were to amend their 2013 tax return tomorrow – the 3-year rule means they get no refund. However, if they owed a bunch of money in 2013, have been paying on that debt over time, and the amendment lowers the total amount due to less than what they have paid then you can recoup any monies actually paid in the last 2 years despite it being more than 3 years of the original due date. Wasn’t that just a rollercoaster of ‘if ‘ ‘if’  ‘if’! Third can still apply to those who owe money, as interest and penalties are calculated on the tax due from the original due date. An amendment that lowers the total tax bill, will force the IRS to calculate the interest and penalties they charge (to your benefit) based on the new lower number instead of the higher amount due that was originally filed.

Ok, back to the ‘should’ I amend question. Should is a very subjective word in my book, meaning I can make an informed decision about what to do. What I would suggest looking at, and sometimes just is the situation we are in – is what would be the ramifications if I do not vs what would it take to actually do. Completing an amendment is something that looks simple to do, but it is deceptively time consuming. You can do it on your own, but as an amendment is already correcting an error (intentional or unintentional it still looks like an error) I would suggest at least using professional software – or please consider using a professional to prepare the amendment.. which cost money. That is where the decision process comes in. What actually needs to be changed on your tax return? Did you forget $200.00 of dividends from XYZ bank? Ok, you have $200.00 more of income you should have paid tax on and have not yet paid.

The IRS states you need to amend your tax return and pay them, and they are correct. However, what are the ramifications? Interest and late payment penalty on tens of dollars of tax? It would cost much more than any interest or penalty on that little amount of extra tax to buy software or hire a professional. One could have the wild thought in their head to just wait for the IRS to catch it, send them the bill, pay and be done. A very different scenario is when you just plumb forgot about that $35,000.00 withdrawal from your 401k to fix the foundation of your home, never got the tax form in the mail, only to remember 2 weeks after you filed your taxes? [By the way, even when they take the taxes out, the income and the taxes taken out still have to be added to your tax return] $35,000.00 is quite the change in income and you simply need to amend your tax return. Even if the result is that the taxes taken out were perfect and you owe nothing extra and get nothing back – any modest increase in income needs to be properly reported. The same advice goes for removing income, via deductions or corrected forms (your employer gives you a corrected W2 with $110.00 less of income). If the amount is very small, looking at the cost and result is normal human wisdom. Pay X dollars to get Y dollars? Is X bigger than Y? That would be my answer – coupled with the 3 facts noted above.

If you find yourself wondering if you need to amend your tax return please don’t hesitate to give us a call. We are here to serve you and tend to all of your tax and financial needs.

Charles Steinmetz

Senior Tax Advisor


The Molen & Associates Difference

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