• Home
  • About Us
    • Our Team
    • Our Mission
    • Testimonials
    • Service Areas
  • Services
    • Tax Services
    • Audit & Assurance
    • Accounting
    • Litigation Support
    • Valuation Advisory
    • Forensic Accounting
    • Business Consulting
  • Resources
    • Client Center
    • Online Tools
    • Important Sites
    • Timely Opportunities
  • MBA News
  • Careers
    • Senior Tax Accountant
    • Tax Manager
    • Bookkeeper / Accountant
  • Contact Us
  • Facebook
  • Google+
  • Linkedin
  • Savvy
  • Twitter
  • Home
  • About Us
    • Our Team
    • Our Mission
    • Testimonials
    • Service Areas
  • Services
    • Tax Services
    • Audit & Assurance
    • Accounting
    • Litigation Support
    • Valuation Advisory
    • Forensic Accounting
    • Business Consulting
  • Resources
    • Client Center
    • Online Tools
    • Important Sites
    • Timely Opportunities
  • MBA News
  • Careers
    • Senior Tax Accountant
    • Tax Manager
    • Bookkeeper / Accountant
  • Contact Us

Blog Post

Know the Rules for Amending a Federal Income Tax Return

19 Jul 2017
0 Comment
MBA Site Administrator
Amending in St Petersburg Florida

What should you do if you discover an error on a previously filed individual tax return? For example, you might have missed some tax-saving deductions and credits on your 2016 personal federal income tax return that you filed in February. Or you might have recently discovered that you failed to claim some legitimate tax breaks on your 2015 return that you filed last year. Here are the rules for filing an amended return.

The Basics

The first thing to know is that you should not attempt to correct the situation by filing another original return using Form 1040. That will just create confusion at the IRS and cause headaches for you. Instead, file Form 1040X, “Amended U.S. Individual Income Tax Return.”

How long do you have to file an amended return? The answer depends on whether you’re asking for a refund or you owe additional taxes.

When claiming a refund. The sooner you file an amended return, the sooner you’ll receive any refunds due. So it doesn’t pay to wait. If amending your return will produce a tax refund, the deadline for filing Form 1040X is generally the later of:

1. Three years after the original return for the year in question was filed, or

2. Two years after the tax for that year was paid.

Most taxpayers focus on the three-year rule. If you filed your original Form 1040 before the April 15 due date — adjusted for weekends and holidays — you’re considered to have filed the return on April 15 for purposes of the three-year rule. However, if you extended the return to October 15 — adjusted for weekends — you’re considered to have filed on the earlier of the actual due date or the October 15 extended deadline.

To illustrate, suppose you filed your 2016 tax return on March 1, 2017, and paid the tax due on that date. You now realize you should have itemized deductions instead of taking the standard deduction. Based on the three-year rule, you have until April 15, 2020, to file an amended 2016 return and claim your refund. On the other hand, if you extended your 2016 return to October 16, 2017, and then file before the extended deadline on September 1, 2017, the three-year period for filing an amended 2016 return starts running on September 1, 2017.

When additional taxes are due. This is a trickier scenario. If you discover that you understated your tax liability on the original tax return, you’re expected to file an amended return and pay the additional tax. If you don’t and the IRS discovers the error, the government will bill you for:

1. The unpaid tax amount plus interest, which is currently at a 4% annual rate, compounded daily, and

2. The additional failure-to-pay interest charge penalty at a 6% annual rate.

The sooner you file an amended return and pay the tax due, the sooner you’ll stop racking up interest and the failure-to-pay penalty.

You may also be assessed other penalties, depending on the nature of your underpayment — but the IRS can waive all penalties if you show you had a reasonable cause for the underpayment. For example, you might have reasonable cause if you received incorrect information from a third party, such as an inaccurate Schedule K-1 from a partnership or S corporation investment.

Although IRS audits are relatively rare these days, there is a strong chance of getting caught for omitting income that’s automatically reported to the IRS on an information return, such as Form W-2 or Form 1099.

Also, beware of the three-year statute of limitations rule: The IRS generally has three years after the date the original return was filed to discover errors and omissions and assess additional tax, interest and penalties. But a longer six-year statute of limitations rule applies if the original return understated gross income by over 25%. In addition, there’s no statute of limitations on a fraudulent return.

Bottom Line

Filing an amended return is relatively straightforward if you expect a refund — as long as you’re within the requisite two- or three-year window of opportunity. But when you’ve underpaid your taxes, filing an amended return can be a dicey situation. Always consult a tax professional first to discuss the full consequences of amending your return.

Generally, if the original return understated your tax bill by only a small amount, your tax advisor will recommend that you amend your return and pay the additional taxes, interest and penalties as soon as possible.

For larger understatements, let your tax advisor take the reins. He or she has experience in dealing with past-due taxes and may be able to get you off the hook with minimal or no penalties. But be prepared to pay at least the past-due tax plus interest. He or she can also help you file amended business returns, if needed.

About the Author
McClanathan, Burg & Associates, LLC. is a full service accounting firm. Our team members provide services including: Tax, Audit, Assurance and Accounting, Estate and Trust, Forensic Accounting, Litigation Support and Business Valuation.

Social Share

  • google-share

Leave a Reply Cancel reply

*
*

Search

RECENT NEWS

  • Do you know the tax impact of your collectibles?
  • Making 2017 retirement plan contributions in 2018
  • When an elderly parent might qualify as your dependent
  • AMT Calculations: It’s Showtime
  • New Law Eases the Individual Alternative Minimum Tax (AMT)

Categories

  • MBA Events
  • MBA News
  • Opinion & Editorial
  • Resources & Tips

Archives

  • February 2018
  • January 2018
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • November 2013

Social Media

Facebook
Linked In
SavvyCard
Twitter

“Best
Congratulations to this year's honored business!
Featured in the Tampa Bay Times.
Click here to view my profile >>

Categories

  • MBA Events
  • MBA News

Archives

Sign Up For Newsletter

First Name:
Last Name:
Email Address (required):
Company:
Phone Number:
© 2014 McClanathan, Burg & Associates, LLC | Website Design by ThinkTankConnect.com

Send to Mobile

Text or Email McClanathan, Burg & Associates online business card to your mobile device using the form below
From the card you will be able to:
  • Get turn by turn directions to the company's office
  • Access a visual company directory of employee cards
  • Call, email or text the company
  • Share/Refer the company to others
  • Save the card to your phone's home screen for future access