Made a mistake? Form 1040X can
save the day
Uh-oh! You were slipping that W-2 copy into
the drawer when it caught your eye.
How could you have missed that when you did
filing review and dropped your return in the mail? And what
can you do about it now?
As it turns out, plenty.
The complexity of the tax code, coupled with
the frantic lives most of us lead, means that there is ample opportunity
mistakes. Sometimes the mistakes could cost you, like forgetting
to include income earned on an investment account. Other times it
might lower your tax bill, such as when you run across that forgotten
receipt for a generous charitable
contribution you made.
Either way, the Internal Revenue Service provides
second chances to get your tax return right with Form
X-file is normal
There's nothing supernatural about this X-file.
For a tax form, the 1040X is pretty easy to
complete. Basically, the IRS wants to know what you originally reported,
what your corrected numbers are and why you are making the changes.
There's also a section for adding or subtracting personal exemptions
in case there was some confusion as to whether you properly counted
someone as a dependent.
And, in most cases, you can change your filing
status, which could get you a bigger refund. For example, a
new divorcee filed this year as a single taxpayer. But that cost
her some tax money because she's got custody of the kids. She should
have filed as a head of household, which would have provided her
with a larger larger standard deduction.
These are the kind of things you most definitely
should correct with a 1040X, say tax experts.
the IRS benefits
Taxpayers also should be diligent about correcting their
returns even if it means they end up paying a bit more in taxes.
Why? Because it's a pretty safe bet that the
IRS is going to discover your error eventually.
If it's a simple addition or subtraction mistake,
there's no need to amend the return. The IRS says its computers
will detect the error, notify you and adjust your return automatically.
But if it's something bigger -- you overlooked
a Form 1099 for $1,500 you got from a freelance house painting job
-- and you catch and correct it first, it could save you from paying
even more to the IRS.
The IRS may not penalize you for this honest
mistake, but it sure will collect some interest on the proper amount
you didn't pay on time in the first place. The sooner you correct
the error, the less interest you'll face.
"We had one preparer who filed a client's
return," explains Brenda Schafer, senior tax research coordinator
Block, "and then the employer informed the person that
he would be getting a corrected W-2, so it had to be re-filed.
"You just want to be sure you have a correct
return," Schafer says, "whether it's in your favor or
amended filing season
Such corrections are a year-round occurrence, but tax professionals
say the need to amend a return often is discovered during the following
year's filing season.
"Sometimes when you're having next year's
return prepared," notes Schafer, "the professional says,
'Oh, you didn't tell me about that last time.'"
Then there's the case where a little more knowledge
can mean more tax filing work.
"We've had people take income tax courses
to help them do their own returns and pick up items where they could
or should amend a return," Schafer says.
But don't go searching through old files for ancient tax
returns in the hopes of possibly eking out a few more refund dollars.
The IRS generally gives taxpayers three years
after the original return's filing date to make any changes with
a Form 1040X. If you filed early, you get three years from the return's
due date to correct any errors.
Your window to amend closes a bit if you didn't
pay all the tax you owed when you filed. In this case, you must
revise your return within two years of the day that you finally
paid your full bill to Uncle Sam. If, however, the two-years-since-payment
date arrives after the standard three-year time limit, the IRS says
you can amend your return using the deadline that comes later. Similarly,
if you paid your taxes late, but not that late, and the three-year
grace period provides you more revision time, you can use it.
And don't automatically reject filing an amended
return out of fear of inviting an IRS audit.
Sure, the IRS will take a close look at an amended
return that's netting you you a refund. And that means tax agents
could conceivably look at your original tax paperwork in the process.
So why, ask hesitant amended filers, should
they invite the extra attention, especially if they file just within
the three-year amendment limit -- the same time period after which
the original 1040 would be off the tax examination radar?
"An amended return might just draw attention
to a return," acknowledges Schafer. "But, really, people
shouldn't be concerned. The main thing
with tax filing is to get it right."
And that means getting it right any time.
-- Updated: March 16, 2007