Everyone makes mistakes. Sometimes those mistakes aren’t discovered until too late – for instance, after your tax return has already been accepted by the IRS. You may not even realize you’ve made the error until after you already have your refund in hand. The good news is that the IRS is well aware that nobody’s perfect and even has a handy process in place to fix those goofs.
TL;DR (Too Long; Didn't Read)
You can file an amended return within three years of the original filing date or two years from the date you paid any taxes due on that return.
Amended Tax Return Definition
If your error is something like bad math, an IRS representative will likely fix it during processing. You may even get a letter in the mail asking you to get in touch to clarify it. But if the IRS doesn’t catch it, you simply file an amended return. You have up to three years from the date you filed, or two years if you paid taxes on the return. You simply download Form 1040X and send it to your assigned processing center. If you’re responding to a notice from the IRS by filing the form, though, you’ll send it to the address shown on the notice.
Once you’ve completed the amended return, you may find that you owe money. If that’s the case, the IRS directs you to pay using the same methods you would normally use to pay taxes due. You can pay by phone, debit or credit card (for a fee) or by check or money order. If you opt to mail a check, make sure you include your Social Security number on it. If you file jointly, use the Social Security number that appears first on the form.
What Errors Need Amending?
Don’t assume you need to file an amended return no matter what the error is. According to the IRS, you need to file an amended return if you discover you made mistakes in one of the following areas: filing status, dependents, total income, deductions or credits. If you merely made a math error, the IRS will likely figure it out and a bill will arrive in the mail. If you’re really concerned, you can pick up the phone and call the agency to ask if the omission merits an amended return.
Another common reason for an amended return is if your broker sends a corrected 1099 after you’ve already filed. However, as important as it is to file as quickly as possible, you’ll be better off waiting to make sure you have the right information. You can request a transcript from the IRS and compare what has been reported for your Social Security number for the year, then double check the information from that.
You may be surprised to learn that you aren’t obligated to file an amended tax return for an error, but tax experts advise you to do so. Failure to file an amended return could result in an audit, which means you’ll pay penalties and interest on any taxes you owed. If it was a simple error, the IRS will usually correct it and notify you by mail, but if you never receive that letter, you may spend a couple of years with unnecessary stress. If, on the other hand, you took measures to amend the mistake, the IRS will likely not hold you responsible for making it in the first place.
Penalties on Overdue Taxes
Even if you follow the amended tax return deadline, you won’t avoid penalties if you’ve neglected to pay your taxes for a period of time. If you had an extension in place originally, you’ll still pay based on the date the taxes were originally due. Interest will begin accruing starting with the day they were due, as well as interest on any penalties you accrue.
Once you’ve submitted Form 1040X, the clock starts ticking on any additional taxes you owe as well. You’ll have 21 calendar days from the date on the notice and demand for payment. After that period, you’ll owe a penalty that is generally in the area of 0.5 percent of the unpaid amount each month. This penalty continues to increase, topping out at 25 percent of the total taxes due.
Tracking Your Amended Tax Return
As with your regular tax return, you can track the progress of your 1040X online. Since amended returns can only be sent via mail, though, you’ll experience the same slowdowns that come with filing paper returns. You also won’t be able to immediately verify that your amended return has been received and accepted. The IRS directs taxpayers that it will take at least three weeks for an amended return to show up in their system. Unfortunately, processing it will take even longer. It can take up to 16 weeks for the IRS to process a 1040X.
Once the required time has passed, you should be able to track your status through the IRS’s Where’s My Amended Return? tool. You’ll need your Social Security number, date of birth and ZIP or postal code. During the processing period, contacting the IRS to ask about your return status won’t help. Representatives won’t have access to the information until the processing phase is complete.
Returning Refund Money
If you already have your refund money, you can return the uncashed check with your amended return. Include a letter explaining why you’re returning the check. Write the word “Void” in the area where you normally would have endorsed it. If you are still due a refund after your amended return has been processed, you’ll get another check to replace that one.
If you’ve already deposited the money, submit a check as soon as possible, but no later than 21 days, to the appropriate IRS facility for your location. Write “Payment of Erroneous Refund” on the check, as well as the tax period for the refund and your Social Security number. If the funds were deposited into your bank account, contact your bank’s automated clearing house and request that the money be returned to the IRS. After you’ve made that call, contact the IRS at 800-829-1040 – or 800-829-4933 if this is for your business – and explain why you’re returning the direct deposit. Be aware that you still may owe interest on the amount of the returned refund, whether you repaid the deposited check or had the direct deposit returned.
Reasons for Amended Return Delays
According to the IRS, paper-based tax returns are more likely to contain errors. In fact, the rate for errors in paper returns can be as high as 21 percent, compared to less than 1 percent for electronic returns. Since e-filing isn’t allowed with Form 1040X, that means paper-based is your only choice. It’s important to thoroughly check your amended return before putting it in the mail since even the smallest error can result in a processing delay. Although it can take up to 16 weeks to process your return, it will be longer if there is an error that needs to be corrected.
Even if you’ve double- and triple-checked the math and contact information on your form, you can still make errors that will lead to delays. If you forget to sign the return or leave a section blank, it will be marked as incomplete and the IRS will have to come back to you for more information. You may also experience a delay if you’ve fallen victim to identity theft – in other words, if someone filed taxes using your Social Security number. You may not even be aware this has happened until you experience a delay.
If your amended return has an injured spouse allocation, requesting that you or your spouse not be penalized for the other’s obligations, you could see a delay. Amended returns can also be slowed down if they need to be routed to a specialized area. If you have a bankruptcy on your record or your return needs a review for an appeal, you’ll likely have to wait longer than 16 weeks.
Paying Taxes Due
If you owe taxes you can’t afford to pay, the IRS encourages you to never let that delay you in submitting a return. You’ll be penalized for failing to file in addition to failure to pay, so filing will give you a cost break. Since the IRS wants to get paid, the agency is always willing to work with taxpayers to help them pay as soon as possible. The first step is to simply submit as much of the taxes due as you can. This will reduce the amount of overdue taxes subject to penalties and interest.
If you’ve filed an amended tax return and owe money you can’t afford to pay, the process works the same as if you’d filed your original tax return without paying. One option is to apply for an online payment agreement on the IRS’s website. If you qualify for the short-term repayment plan, you’ll have an extra 120 days to repay your taxes and no extra fees beyond the penalties and interest that continue to accrue while you pay. If you qualify for the long-term repayment plan, you’ll have more than 120 days. There are setup fees for the long-term repayment plan, but they may be waived if you qualify as low income. If not, you’ll owe $31 if you set up your payments to be automatically withdrawn or $149 if you pay on your own.
Passing the Deadline
Unfortunately, there is no option for filing an amended tax return after three years. If you recalculate and find that you have a refund due, you’ll have to kiss that money goodbye. It reverts to the government after the three-year deadline passes. You have only two years to file your amended return if you owed and paid taxes when you originally filed. This means if you pass the deadline, you won’t get back any taxes you overpaid.
The IRS generally has only three years to audit an originally filed tax return, but if they see an error, they can add years. They usually won’t go back more than six years, though. The good news is that filing an amended return doesn’t restart the clock, so you don’t have to worry about that part of it. In fact, if the IRS discovers an error on your amended return 60 days before the three-year window ends, they have only 60 days to make an assessment. However, the IRS can still audit you beyond the three years if they see a reason to do so.
Filing Multiple Amended Returns
In some instances, you may find that you need to amend more than one tax return. You’ll need to complete separate 1040X forms and mail them in separate envelopes. If you owe taxes, make those payments separately as well. If one of those amended returns is in response to an IRS notice, make sure you enclose the notice with the specific return in question.
If, for some reason, you need to amend the same tax return more than once, you can do so, as long as you are within the three-year window. Enclose a letter explaining that this is an amendment to correct a previous amendment. Keep in mind if you later amend a tax return, you’ll need to pay any interest and penalties based on the time between the original file date and the latest filed amended return, so if you owed taxes, the number will be higher.
- Credit Karma: How to file an amended tax return
- Consumer Reports: Should You File an Amended Tax Return?
- Forbes: 5 Simple Rules to Follow When Amending Your Tax Return
- IRS: Where's My Amended Return?
- IRS: Amended Returns & Form 1040X
- IRS: Topic Number: 161 - Returning an Erroneous Refund – Paper Check or Direct Deposit
- The Motley Fool: 4 Reasons Not to File a Paper Tax Return
- IRS: Form 1040X, Amended U.S. Individual Income Tax
- IRS: Topic Number 202 - Tax Payment Options
- IRS: Apply Online for a Payment Plan
- Forbes: Amending IRS Tax Returns Has Extra Opportunities, Extra Risks
- IRS: IRS Audits