Reasons to file an amended tax return

Photo by Nataliya Vaitkevich on Pexels

By Elliot Raphaelson
Posted on November 12, 2024

After filing their annual tax return, most Americans — especially those whose employers withhold payroll and income taxes from their paychecks — needn’t think about tax filing for many months.

Some taxpayers, however, will find themselves in a situation where they should file an amended return. The reasons for doing so include:

—The income reported on the original return was submitted incorrectly, either too high or too low.

—There was a change in the filing status because of life events, such as marriage, divorce or death in the family.

—There was an error regarding dependents claimed.

—The filer overlooked tax deductions or credits.

—Relevant legislative changes were made after taxes were filed, such as tax relief due to a natural disaster.

The following situations do not warrant filing an amended return:

—A math error was made. The correction will be found by the IRS.

—An error was discovered shortly after filing. In this situation, you can simply re-file as long as the filing deadline has not passed.

—Missing forms: If a necessary form was missing that is required, the IRS will request it.

Substantive errors

In any situation that calls for filing an amended return, you should be filing Form 1040-X. Ask the IRS (or search online) for the amended return instructions for the applicable year.

Form 1040-X can be filed electronically or manually. You should submit the same forms and schedules as originally filed. You can submit up to three amended returns for one tax year.

There is no fee if you file individually; you can also use available software packages or use professional tax providers.

You can receive refunds by direct deposit or paper check; you can use Form 8888 to allocate refunds to multiple accounts. If you owe the IRS, include Form 1040-V with your payment.

Contact your state tax department for information if your amended return impacts your state tax return.

When to file

If you intend to file an amended return to obtain a credit or refund, you must file the amended return within three years after you filed your original return, or within two years after the date you paid the tax, whichever is later.

In order to receive a tax refund, you must file an amended return within three years after filing the original return.

Some exceptions can extend the time you can file an amended return. The regulations covering these exceptions are covered in the amended return instructions for the applicable year. They include:

—Bad debts or worthless securities

—Foreign tax credits

—Net operating losses or credit carrybacks

—Service in a combat zone or contingency operation

—Residing in a disaster area

If you are filing an amended return for bad debts or worthless securities, the amended return generally can be filed within seven years after the due date of the return for the tax year in which the debt or security became worthless.

Common errors to avoid

The following errors have been made by individuals in their initial filing. You can avoid having to file an amended return if you avoid making these errors when filing your original tax return.

Qualified charitable deductions: Many individuals who use the qualified charitable deduction (QCD) don’t take the deduction properly.

The form you receive from the custodian of your IRA account does not specify the amount you contributed to the charity. You have to take the deduction yourself as follows: on line 4(a) of IRS 1040, specify the IRA withdrawal; subtract the amount of the QCD and list the remainder on 4(b); specify QCD next to the 4(b) entry.

If you did not receive a deduction for your QCD because you did not enter the information properly in your original return, file an amended return.

Rental income: If you rented your home for 14 days or less, the income you received is not taxable. If you previously reported the income received as taxable, file an amended return reducing the amount of taxable income.

Self-employed deductions: In a previous column I pointed out that many self-employed individuals were not aware of an allowable deduction for healthcare premiums. If this situation applies to you, file an amended return in order to receive a refund.

Bottom line: Many taxpayers have not taken allowable deductions when they filed their original tax returns. When you make a determination that you have missed taking legitimate tax deductions or credits, don’t hesitate to file an amended return to receive refunds you are entitled to.

Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.