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How to File an Amended Tax Return

Updated on January 2, 2012
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Keith Schroeder writes The Wealthy Accountant blog with 30 years experience in the tax field. He is the tax adviser of Mr. Money Mustache.

It happens. You file your tax return and another tax document comes in the mail or you discover a deduction was missed. To fix the missing information on an originally filed tax return, you amend the return on Form 1040-X.

Filing an amended tax return is easy, but not always possible. Form 1040-X must be filed in most cases:

  1. Within three years of the due date of the original return, plus extensions, or
  2. Within two of when the tax was paid.

There are other instances where amending is available and necessary to acquire a refund up to 10 years after the originally filed tax return with no consideration toward extension.

Common Uses of Form 1040-X

Missed income and deductions must meet the deadline listed above. After the 3 year statuette of limitation , refunds are lost forever on that return. The good news is that if you owe and the IRS has not figured it out by the deadline, you no longer owe the money.

The best way to amend a return is to notate the changes in the margins of the original return. By doing this you can prepare the return next to the original numbers. If you filed on a computer you can use the auto-fill feature, insert the changes, and calculate.

Be sure to add the income and deductions on the correct form, as you would when preparing an original return. Add an explanation at the beginning of Form 1040-X where space is provided. This allows the IRS to easily see the changes and will speed your refund if you are due one.

If the adjustments create a balance due, include payment or an installment agreement. Do not calculate interest or penalties. The IRS will do this for you. If you are assessed a penalty, file for abatement.

Special Uses of Form 1040-X

Bad Debt or Worthless Securities: You have 7 years to file an amended return, without consideration to extensions, for the year in which debt goes bad or securities become worthless.

Foreign Tax Credit/Deduction: You have 10 years to file an amended return, without consideration to extensions, to claim a foreign tax credit or deduction. The 10 year limit starts with the year the foreign tax is paid or accrued. The 10 year time limit to file does not include the carry back of foreign tax credits or deduction. To carry back a credit or deduction, the regular 3 years limit applies. You can also Use Form 1045 to carry back the credit or deduction.

Net Operating Losses (NOL): A net operating loss is frequently generated by a business loss (Schedule C, etc.). NOLs can be handled by filing an amended return with the 3 years limitation or by filing Form 1045. Depending on the year the NOL is generated will determine the rules and the available years to carry the loss. The instructions to Form 1040-X and Form 1045 deal with the complex issues connected with net operating losses and carry backs.

Claiming a Refund for a Deceased Taxpayer

If an amended return generates a refund for a deceased taxpayer special rules apply. If the return is a joint return, the surviving spouse can file the amended return and claim the refund the same as if both spouses were alive.

Decedent returns without a surviving spouse need to attach Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer.

Final Notes

An amended tax return is routine for tax professionals, but daunting for taxpayers. Complex rules surrounding amended tax returns may require a tax professional. At a minimum, a tax professional should be consulted. NOLs and other special situations send CPAs for the instruction books. Going it alone without a tax background could subject you to 20% penalties.

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