Correcting Mistakes “After” You Have Filed

Using Form 1040X

Your original return has been filed, manually or electronically, and now you discover an error such as unreported income or one or more expense items you forgot to include (or that you just found out are deductible) or calculated incorrectly on your Schedule C.  What do you do?   You prepare and file a separate Form 1040X – Amended U.S. Individual Income Tax Return to make the needed corrections for each year you are amending as soon as possible.

Form 1040X has three columns on page 1 – A, B, and C.  The “A” column is used to report your original return amounts, the “B” column reports your adjustments, and the “C” column shows the corrected amount.  At the bottom of the “C” column, you will determine whether your adjustments require an additional payment of tax (likely when you add previously unreported income) or they produce a refund due to you (based on newly discovered or corrected expenses).  You will complete these three columns on page 1 of the Form 1040X, write a brief explanation of the changes you made and why on page 2 along with your signature and date.  Attach to the Form 1040X your “revised” Schedule C and, if necessary, Schedule SE (self-employment tax).

Amended returns should generally be filed for “open” years — returns within three years of the original due date or the extended date (if an extension was filed in a particular year) or within two years after the date you paid the tax for that year, whichever is later.  Right now, the “open” years are 2009, 2010, and 2011.  To clarify, the 2009 Form 1040 was due by April 15, 2010, and, therefore, its three-year open status will expire on April 15, 2013.  If you filed after the original due date, using an extension request, your three-year open status expires three years from the date you filed.  If you filed your return before April 15, the April 15 date is still used for this purpose.

If you find an error on a 2008 or prior return that would generate a refund for you, it is barred, with few exceptions, by the statute of limitations.  In the past, some taxpayers who “knew” they had a refund coming would wait several years to file their returns (treating it like some kind of savings account).  Congress (with IRS urging) got tired of these laggards and changed the law to limit the time period to file and receive a refund.

You cannot e-file an amended return; it must be mailed in.  Also, if you are amending your federal return, you will most likely need to amend your state return for the same year.  Some state statutes go beyond three years.

Form 1040X is not a substitute for the required original return for any year.  If you have not filed for a particular year, you would file an original return for that year.

If your Form 1040X indicates you are due a large refund ($5,000 or more), there is a better than even chance that your return will be reviewed with you as part of an office audit or a field audit before you receive payment depending on the current examination workload in your area of the country and current examination priorities.  If your adjustments are legitimate and you have the supporting documentation, this possibility should not concern you.


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