Amended Tax Returns

Need to Correct Forms 706, 990 / 990-EZ, 1040, 1040-A, 1040-EZ, 1040-NR, or 1040-NR EZ, 1065, or 1120 / 1120-S? If you file an individual or business tax return and then realize an error was made, your tax return can be changed.

To report changes to your income, deductions, credits and certain changes to your filing status, you will most likely be filing Form 1040-X (Amended U.S. Individual Income Tax Return), or Form 1120-X.

Here in the sections below, we’ll zone in on the amended federal tax returns. If you want to know when and how to file an amended tax return or a claim for a refund, then continue reading, or contact us and we’ll get started.

Amend Your Return

Where’s My Amended Tax Return?

It’s taking the IRS on average 16-20 weeks to process amended tax returns, add an additional 3 weeks if the return was mailed out.

It is not recommended to file a second tax return or call the IRS, until 20-23 weeks has passed.

Source: https://www.irs.gov/filing/wheres-my-amended-return

Where Can I Check My Amended Tax Return Status?

Follow the instructions found here on the IRS website:

https://www.irs.gov/filing/wheres-my-amended-return

3 Years Have Passed, Can I Still Amend My Taxes?

Yes, but normally no refund would be issued (If owed by the IRS). To be clear: tax amendments made after 3 years are usually for clients that are attempting to clear a balance verse receiving a refund.

There are exceptions to the 3 year rule in some situations, such as:

  • Financial disability.
  • Federally declared disasters.
  • Combat zones.
  • Bad debts.
  • Worthless securities.
  • Foreign tax credit or deduction.
  • Loss or credit carryback.
  • Disaster-related grants.
Can I Receive a Refund from Amended Taxes Electronically or Paper Check Only?

Starting in February 2023, taxpayers could receive their amended return refund by direct deposit into either a checking or savings account. You still have the option to submit a paper version of Form 1040-X and receive a paper check. 

Why Would Someone File an Amended Tax Return?

You may need to file an amended tax return for a few reasons:

  • To correct a error / mistake (this is the main reason).
  • Some information was left-out, and you believe it should be reported to the IRS to avoid an audit, subsequently penalties and/or interest.
Amended Return and Refunds After the Filing Deadline

It is best to file an amended return within the allowable time. If you don’t file your amended tax return on time, any refund you would have received could be forfeited. You are not entitled to get a refund back.

Although in some instances the IRS does make mistakes. There have been times where the IRS makes a mistake and issues refund checks in response to amended returns that were filed late. It is not a common occurrence, but it does happen.

It is more likely that you will receive a letter from the IRS advising you that your amended return was late and that the refund cannot be refunded to you. This is why filing an amended tax return after 3 years is usually not helpful.

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What Does Amended Tax Return Mean?

When amending a tax return, you are asking the IRS to make some changes to your “original taxes” aka previously filed taxes. Amending taxes refers to the process of asking the IRS to make the changes to your account. The amended tax return is normally filed to correct an error, or something forgotten on the previously filed tax return.

Do I Need to File an Amended Tax Return?

The short answer is usually, no, you do not need to file an amended tax return if you have correctly reported your taxes. You may need to file an amended tax return to correct any errors, or omissions. This is the primary reason to file an amended tax return. This may be due to new information or even just an honest mistake.

This is usually advisable if the mistake or error is major. The significance of the mistake or what was left out is known first-hand by the taxpayer in most cases, your tax positions, and what you have on your tax return.

Whether you already filed your yearly tax return on time or perhaps after the tax deadline, there is still a chance that you might receive information that was not included, or you notice something that was missing such as a significant deduction. In this case, you may consider filing an amended tax return.

Do I Have to File an Amended Return If an Error, or New Information is Found?

There is no actual requirement to file an amended return and no penalty if you don’t, even if you discover an error or deductions were not counted properly. Filing is not required even if new information comes to light (such as receiving a revised K-1 or 1099) although in conclusion, the IRS recommends you do amend, and being pro-active may decrease the chance of an unwanted IRS letter. Worthless securities and bad debts also may merit an amendment, and taxpayers have up to seven years to go back and claim those types of losses.

Is Amending a Tax Return Worth It?

Is the juice worth the squeeze? When determining if amending your return(s) is worth your time and money verse the reward it can possibly return is something a tax professional can help you best understand.

In various tax resolution cases an amended tax return was all that was needed to clear up a mess. We can calculate if you can expect an increase in your refund or if the increase in your refund is potentially larger. This is done by estimating how much your increase will be ahead of filing the amended return, then you can decide if the time and money is worth the increase.

What to Consider If You Amend Your Return(s)

If you decide to amend, you can’t just correct the items that will give you a refund and neglect those that increase your tax liability. An amended return is more likely to be audited than an original return in general, and every tax return is filed under penalty of perjury, so amending just partial pieces and parts of a tax return could alert trouble. If your amended return results in asking for considerable money back, the IRS may review it even more carefully.

Choosing Not to Amend

So far, we have covered some reasons to amend, now it’s worth asking whether the tax return you filed was accurate to the best of your knowledge when you filed it. If so, it’s okay to decide not to file an amended return.

If you simply discover a math error in your calculations, the IRS says there is no need to file an amended return. If you forgot to attach certain paperwork to your return, such as a W-2, 1099, or schedules to show your work for different areas of the return, the IRS will likely be able to process your return without it or will send you a letter requesting the missing information.

Do Earnings and Profession Matter?

In our experience, yes, if you’re in a higher income bracket or well-known in society, a celebrity, politician, doctor, accountant, attorney, any above-average income earner then the IRS presumes more from you. You should correct even minor mistakes by filing an amended return. A few hundred-dollar error is one thing. Anything over $10,000 is relatively another. Interest and penalties accumulate fast.

Timing an Amended Tax Return

When it comes to amending a tax return timing plays a role, and there is a select timeframe available. It’s commonly stated that you must amend within three years of your original return filing. However, the cut-off is three years from the date you filed your original return or two years from the date you paid the tax for the return you wish to amend, whichever is later.

The IRS typically has three years to audit a tax return. Even if you file an amended return, the three-year statute of limitations does not get extended. The amount of time left on the three-year window when you amend can be used to your advantage to temper the worry of an audit. However, if it shows that you owe more, you will owe additional interest calculated from the due date of the original return (without regard to extensions) and probably penalties as well.

Time Limit Exceptions

As stated earlier the time limit to file an amended tax return with the IRS is normally three years after filing the original tax return or two years from the time the tax is paid. It is the latter of these two dates. This means that you can generally go back and file an amended tax return for three years. There are numerous exceptions and special rules in addition to these general rules. So, if you are questioning “Can I amend a tax return from say… 5 years ago” or “Can you amend a tax return after 3 years,” the answer is “maybe.”

Exception for Unfiled Tax Returns

If you didn’t file an original tax return for any given year, then clearly you do not need to file an amended tax return. You can just file an original tax return and there is no time limit for doing this. Thus, you can file an original tax return 5, 10, 20 years later if one was not originally filed. The filing of the original tax return starts the three-year period running. If no return is filed, there is no time limit that starts running.

Exception for IRS Adjustments

If the IRS audits your tax return and makes an adjustment, you have three years from the date of the adjustment to file a refund claim for an amount up to the amount of the IRS adjustment.

Exception for Financial Disability

Congress amended Section 6511 to allow for an extended period to file refund claims if the taxpayer is unable to manage his financial affairs. To get this relief, you must have a physician sign and letter and include the letter with your refund claim. There are catches, of course. You should read Rev. Proc. 99-21, 1999-1 C.B. 960 if you care to know more about this exception.

Exception for Net Operating Losses

A net operating loss (“NOL”) is basically a loss that is computed by adding up all of the income less the allowable deductions reported on your tax return. Congress has changed the rules over the years, but generally, net operating losses have been allowed to be carried back to prior years. This allows you to use the NOL to recoup taxes you paid in prior years.

Exception for Deposits

There is an exception for deposits. A deposit is not the same as a payment. There are rules involved but suitable to say that there is no time limit for asking the IRS to return a deposit.

What if My Amended Tax Return Refund Claim is Overstated?

The IRS can impose penalties if you file an amended return that overstates the amount of refund you are entitled to. The IRS may impose an excessive refund penalty in this situation. This penalty is set out in Section 6676. The penalty is equal to 20% of the “excessive amount,” which is the amount by which your claim for refund or credit exceeds the amount allowable for the tax year at issue.

An “excessive amount” is the portion that exceeds the allowable amount of the claim. In other words, the excessive amount is the disallowed portion of the claim for refund or credit. The penalty typically applies to the not yet refunded/non-deficiency amount determined to be the excessive amount of the claim.