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Telling all on a tax do-over

By Kay Bell · Bankrate.com
Tuesday, April 24, 2012
Posted: 4 pm ET

One survey, conducted early in the 2012 filing season by CouponCabin, found that more than a third of taxpayers were unsure as to whether they would claim multiple deductions on their tax returns.

If those folks filed their forms and then ultimately discovered that they had indeed missed a deduction or two, then they need to get Form 1040X pronto.

1040X is the Internal Revenue Service's way of giving taxpayers a do-over. They can use it to file an amended tax return.

Some folks are leery of filing yet another tax document for the IRS to examine.

But if a substantial amount of money is involved, either due you or the U.S. Treasury, it's generally a wise move to make sure your taxes are correct before the IRS discovers your error. It takes the IRS a while sometimes to discover filing errors. During that interim, penalties and interest can really add up.

Telling all

It's also good idea to make sure that your amended return is as complete as possible.

Many filers, especially those already redoing a tax return, are hesitant to give the IRS extra information. They view it as potential added ammunition if Uncle Sam is inclined to audit them.

But being forthcoming might actually work in your favor.

Part III of Form 1040X asks you to explain any changes you made from your original Form 1040.

Be very clear when filling out this section. Note the line number of the revised tax entry and explain the change.

And, as the 1040X notes, "Attach any supporting documents and new or changed forms and schedules."

For example, you realized that you made a couple of charitable deductions after you filed your taxes. They aren't large enough to require that you send along a receipt or other documentation as noted with Form 1040 filings. That's required by the IRS only for certain charitable gifts of $500 or more.

But they are enough to shave some more dollars of off your tax bill.

So you file a Form 1040X. And you should attach a copy of the donation substantiation.

That way the IRS employee looking at your 1040X -- and a person will be examining your return because you have to file an amended return on paper, not electronically -- who might question your late deductions discovery won't have to come back to you with questions.

You've already provided the revised claim's necessary proof.

Keep up with tax news and tax-cutting tips by subscribing to Bankrate's free Weekly Tax Tip newsletter.

You also can follow me on Twitter @taxtweet.

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