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

Mike Forsyth

“Super helpful and timely. This is our first year with them and we look forward to trusting them with our taxes and business books for years to come.”

Caitlin Daulong

“Molen & Associates is amazing! They run an incredibly streamlined process, which makes filing taxes a breeze. So impressed with their attention to detail, organization, and swift execution every year. Cannot recommend them enough!”

Sy Sahrai

“I’ve been with Mr. Molen’s company for few years and I felt treated like family respect and dignity. They are caring, professional and honest, which hard to find these days. Love working with them.”

How To Accurately Record Commuting Mileage and Increase Tax Deductions

Increase Tax Deductions With the Business-Mileage Rule Using the Business Mileage tax deduction can be tricky. There are lots of situations that count while others do not. We don’t like commuting mileage. You should dislike it, too. It’s personal. It’s not deductible....

Bookkeeping 101

As a new business owner, you will certainly have some responsibilities you won’t be able to avoid. One of those non-negotiable part of your business is producing financial statements. It can be overwhelming trying to master a topic such as bookkeeping but don’t worry...

Bankruptcy – Everything You Need to Know

Everything you need to know Filing for bankruptcy protection is considered a statement on your ability to repay your debt to your creditors. Filing for bankruptcy will also put a halt to foreclosure or legal actions against you, and it stops creditors from calling and...

Top Tax Tips for 2023

Tax Refunds May Be Smaller This Year Plan now to learn these 2023 tax tips avoid surprises in the future! If you’re expecting a tax refund in 2023, it may be smaller than last year, according to the IRS. Your annual balance is based on taxable income, calculated by...

What is an EA?

Have you ever seen the title EA next to a tax professional’s name and wonder what it means? Or maybe you’re familiar with the title and you’re curious about the differences between an EA and CPA? Either way, in this blog I will be answering these frequently asked...

History of Federal Income Tax Rates: 1913 – 2021

The United States federal government levies taxes on the income of its citizens and legal residents. The Internal Revenue Service (IRS) is the agency responsible for collecting these taxes.  Federal income tax rates have changed several times since 1913, when the...

Familiarize Yourself With Tax Terminology

Yes, I know, tax terminology feels like a whole new language. For most people all of tax forms can be even more confusing than a foreign language. What’s the difference between itemized deduction and standard deduction? What’s Income tax?  These words and more tax...

Never Too Young To Learn About Taxes

Taxes is a topic that affects us young and old – whether we are worrying about how much taxes to pay if you win the lottery or buying your first item as a kid for $10.00 and realizing sales tax is a thing and it truly costs more than $10.00. While taxes do serve a...

Ten Proven Strategies For Saving Big Money As An S Corp Owner

Are you tired of paying massive amounts of money to the government? Strategy is essential when it comes to anything in life, but especially when it comes to saving money. Many different techniques can be used when it comes to slashing taxes as an S-Corp owner; each...

Change Independent Contractors into Employees Trouble-Free

Independent contractors are a vital part of the American workforce. They work for themselves, usually providing services to other businesses. While this setup offers many advantages to both the contractor and the hiring business, it can also create tax problems.   You...

Request an Appointment Today

14 + 11 =

Call us at

Pin It on Pinterest

Share This