Far too many of us are familiar with the frantic, last-minute rush of preparing your financial reports, reviewing your income and expenses, and filing your taxes right before the deadline for every tax season. In the chaos, it’s easy to miss a crucial detail or two — causing you to overpay (or underpay) your taxes. Sigh.
Even the most diligent of taxpayers can err on their tax return. Luckily, the IRS is reasonable about honest mistakes — you can file an amended tax return using the IRS Form 1040-X.
Filing an amended tax return can result in a tax refund adjustment or a tax liability adjustment, depending on whether you owe money to the IRS or stand to receive money since your original filing. Whatever be the case, we’re here to guide you through the process — starting from when to an amended return.
When exactly should you file an amended tax return?
There’s no specific annual date by which you’re obliged to file your amended tax return. However, there is a time limit to file. Generally, you have up to three years from the date you filed your original return or up to two years from the date you paid the tax, whichever is later, to file Form 1040-X for a credit or refund. Generally, the IRS takes up to 16 weeks to process your amended return..
How to file an amended tax return
Filing an amended tax return can be tricky, but it's key to correcting errors or omissions on your original return while ensuring that you pay the correct amount of taxes and avoid penalties or other consequences. It can be overwhelming at first glance, but here’s a step-by-step breakdown.
Step 1: Determine if you qualify for an amended tax return
While this may sound obvious, one too many business owners face ambiguity around the circumstances calling for an amended tax return. This leads to you missing out on substantial amounts in tax savings or worse—unpaid taxes (gasp!). Let’s put an end to the confusion once and for all.
In general, you should file an amended tax return for the following corrections:
- Income Adjustment: If you’ve discovered an error or omission in your reported income, you’ll need to file an amended return with documentation supporting the reason for the income adjustment — such as errors in calculating income, or additional income discovered after the original return was filed.
- Filing Status or Address Correction: Modifications in business structure (such as from a sole proprietorship to a partnership) and changes to the business address often go unreported and may need to be corrected accordingly.
- Math Error Correction: While the IRS has advanced processing software that can catch most mathematical errors, there’s still a chance for some to slip through, in which case you’ll need to fix those with an amended tax return.
- Itemized Deduction Correction: With such a variety of itemized deductions such as medical expenses, charitable donations, state and local taxes, business travel, office supplies, etc., you may forget to report some deductions that reduce your taxable business income.
- Capital Gains Correction: Mistakes on reporting capital gains — such as failing to include all capital gains and losses or miscalculating the cost basis of your investments — need to be corrected with an amended tax return.
Step 2: Gather necessary documents and information
First, you'll need a copy of your original tax return from your tax preparer, online tax software, or the IRS. This serves as a reference point for all corrections you make.
Next, gather any new or corrected forms or schedules that you need for your amended return. For example, if you're correcting your income, you need to include a new Form W-2 or 1099. If you're claiming additional deductions, you need to include a new Form 1040 Schedule A, which lists itemized deductions.
It's important that you use the correct forms and schedules for the tax year you're amending. For reference, the IRS website has a comprehensive list of tax forms and schedules for each tax year.
Once you have all the necessary documents and forms, review them carefully to ensure that you have all the information you need. Make note of any differences or changes from your original return so that you can accurately complete Form 1040-X (our next step). Finally, keep all your documents and forms organized in a safe place until you're ready to file. This helps you avoid any delays or mistakes in the amended return process.
Step 3: Fill out Form 1040-X correctly
Form 1040-X is your second chance at filing taxes correctly, so make it a point to include all mistakes or omissions on your original tax return. A new mistake on this form to correct a mistake in your original tax return is the last thing you want, so let’s take a moment to understand its nuances.
Form 1040-X is a bit different from your standard Form 1040. It has three columns as follows:
- Column A: Where you show the amounts reported on your latest tax return. If you’ve already filed an amended tax return after the original return, use the numbers from the amended return and not the original one.
- Column B: This is where you show the corrections you're making to the amounts in Column A.
- Column C: The final corrected amounts are reflected in this column.
To fill out the form correctly, you'll need to follow the instructions carefully and make sure to provide all the necessary information. Start with your personal information, including your name, address, and Social Security number. You'll also need to indicate the tax year you're amending.
Next, you'll move on to the actual corrections. For each line item you're changing, you'll need to provide the original amount, the new corrected amount, and a brief explanation of the change. Remember gathering all necessary documents and forms and keeping them organized in Step 2? This is where it comes in handy, so you don’t have to rummage through old documents at the last minute.
Lastly, when filling Form 1040-X, be sure to double-check your math and ensure that your corrections are accurate. When correcting multiple items, going through the form line-by-line helps ensure that you haven't missed anything.
Step 4: Submit Form 1040-X to the IRS
Once you've thoroughly reviewed your amended tax return form for errors, you’ll need to sign and date it before submission. Don’t forget to include any additional forms or schedules that support your corrections as the IRS requires proof of the claims in your 1040-X form.
Previously, you’d mail your Form 1040-X to the address given by the IRS. However, thanks to recent amendments, you can now file your amended tax returns electronically too. It’s never been more convenient to correct a mistake, but it’s crucial that you meticulously double-check and review your tax returns!
Step 5: Wait for a response from the IRS
Once you've submitted your amended tax return, the waiting game begins. According to the IRS, it can take up to 16 weeks for them to process an amended tax return. Processing times can vary depending on a number of factors. For example, amendments to a paper-mailed tax return take longer to process than for an e-filed return. Processing your amended tax return can also take longer than usual if additional information is required or if your return is selected for review.
While you wait, why not take a moment to prevent future errors? Fincent helps you keep track of your expenses, invoices, and records, so you never have to go through that last-minute where-are-my-documents dance that almost always causes errors in your tax return.
How to check the status of an amended tax return
Before checking the status of your amended tax return, make sure to have all the necessary information at hand. This includes your IRS Form 1040-X, the form you used to make corrections to your original tax return, as well as any supporting documents or schedules.
The easiest way to check the status of your amended tax return is to use the IRS's Where's My Amended Return? tool. Here, click the blue ‘Amended Return Status’ button. Now, you'll need to enter your Social Security number or your Individual Tax ID Number (ITIN), date of birth, and ZIP code. On filling the form, click the blue ‘Continue’ button to check the status of your latest tax return.
Tips for completing Form 1040-X accurately
If filing your taxes makes you anxious, filing an amended tax return can be worse. After all, our friends at the IRS are playing nice right now but they won’t if we repeat the same errors. But with the right tools and knowledge, you can fill in your Form 1040-X without the stress and receive any tax refund adjustments that you may owe or tax liability adjustments you’re entitled to.
To complete Form 1040-X accurately, here are a few little-known tips to keep in mind:
- Use the correct tax year: When filling out Form 1040-X, make sure to indicate the correct tax year that you're amending your return for. For example, if you're filing an amended tax return for the 2022 tax year, make sure you indicate "2022" on the form.
- Provide detailed explanations: When making corrections to your tax return, provide detailed explanations of each change to help the IRS understand why you're making it so they can process your amended return correctly.
- Include all necessary forms and schedules: Depending on the type of correction you're making, you may need to include additional forms or schedules with your amended tax return. For example, if you're correcting itemized deductions, you'll need to include a corrected Schedule A.
- Double-check your calculations: It's important to double-check all your numbers and calculations when completing Form 1040-X. While most math errors are detected and corrected by the IRS, it’s always a good idea to make sure for yourself that there aren’t any.
Common mistakes to avoid when filing an amended tax return
To ensure that your amended return is both complete and accurate, it's essential to avoid common mistakes that lead to delays, additional taxes, or even an IRS audit.
Here are some such mistakes to avoid when filing an amended tax return:
- Filing an amended return for the wrong filing submission: It’s possible to file an amended tax return over an amended tax return. However, the second amended return should be filed with respect to the first amended return and not the original tax return filed for the year. This is because once you file an amended return, it’s counted as your official tax return for the year and your original tax return becomes obsolete.
- Not using IRS Form 1040-X: You cannot use the standard Form 1040 to make an amended return. The only form accepted by the IRS for filing an amended return is Form 1040-X.
- Not including supporting documentation: If you're making changes to your income, deductions, or credits, make sure to include all supporting documentation, such as W-2s, 1099s, and receipts. This helps the IRS process your amended tax return more efficiently.
- Not including all necessary corrections: Be sure to correct all errors, omissions, or mistakes on your amended tax return. This can include corrections to your filing status, address, deductions, credits, or income. While you can still file another amended return in case you make a mistake on the first one, it means going through the entire process again, not to mention attracting negative attention from the IRS.
Don't hesitate to seek professional assistance
No matter how careful you are, even the best of us can make mistakes when filing a tax return. Managing your own business day-in and day-out is already tough, and with invoices and records piling up by the day, keeping track of your documents and finding them in time for tax filing can be a challenge.
Enter Fincent! With monthly bookkeeping, tax-ready financial reports, and expert help at your fingertips (beautiful software too, we’re proud!), everything you need is in one place. No more piles of folders and documents overcrowding your drawers. No more tax-season blues. No fumbling, no panic.
Fincent: Your Business's Personal Financial Wizard - From Bookkeeping to Tax Filing