Panic sets in: You just realized that you made a serious error on the federal tax return that you mailed to the Internal Revenue Service (IRS) last week. Maybe you didn't put down the proper number of dependents. Maybe you forgot to list the $1,000 payment you got for a freelance-writing job. Stop panicking: You can revise your federal tax return thanks to form 1040X.
When you first discover a mistake, you might be tempted to ignore it. This is especially true if correcting the mistake means that you'll owe more money to the IRS. If you forgot to list $8,000 worth of freelance income, you might feel an urge to let the mistake go. If you file that $8,000, you'll have to pay taxes on it.
This is never a good strategy. Usually, the IRS will discover the mistake on its own. You'll then open yourself up to financial penalties that could be significant.
It's better to admit your mistake by filling out and filing Form 1040X, the form that taxpayers fill out when they need to revise their already filed federal tax returns.
Form 1040X is one of the more clear-cut forms put out by the IRS. Taxpayers have to explain the error that they made and then replace their incorrect information with the right information. The form also includes a section for adding or taking off personal exemptions. This makes it easy to fix the common mistake of miscounting your dependents.
The IRS gives you three years to amend a federal tax return with Form 1040X.
Don't Fear An Audit
You might hesitate to file a 1040X form for fear that it will trigger an audit. Tax professionals quoted in a Bankrate.com story on the subject, though, reported that such fears are unfounded.
What they said instead was that it's always best to get your tax returns filed properly, even if you don't notice a mistake until two years after you made it.
Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.