Be Careful When You Decide to Amend Your Taxes

Be Careful When You Decide to Amend Your Taxes

Be Careful When You Decide to Amend Your Taxes

Nobody’s perfect. Even the most careful people make mistakes from time to time. Some mistake hurt much worse than others. Of course, when you’re doing your taxes, mistakes can really be magnified. In fact, they can cost you a lot of money if they’re really big mistakes. And you feel even worse, when you discover your mistake right after you’ve submitted your tax return. It’s bad enough waiting for the IRS to process your return, but now you know you’ve messed up. And the IRS could hold it against you. So what should you do if realize you’ve made a mistake after submitting your tax forms?

When Is it Best Not to Amend?

You should immediately try to fix the error, right? Well, that’s not always the case. Amending your taxes can be tricky. First off, ask yourself this question: “Was my return accurate to the best of my knowledge when I filed it?” If you can answer yes to that question, then you might not need to file an amended return. On the other hand, if you know it wasn’t as accurate as it could’ve, or should’ve, been then filing an amended return is a good idea.

What If You’re Being Audited?

Additionally, if the IRS is currently auditing you, then filing an amended return might not be the best idea, either. It could make you look bad and give the IRS more reason to closely examine your tax history. The kind of mistake you make could also play a role in deciding whether or not to amend. For example, if you forget to attach a Form W2, or you made some math errors, you probably don’t need to send in an amended return.

The IRS will fix math errors for you and if you forgot to attach a W2 or 1099, but reported the money on your return, the IRS may just process your return without the paperwork. If they want them, they will send you a letter to request them. So just be sure to hold onto all your forms in case they ask.

Do it Right the Second Time

On the other hand, if you need to file an amended return, then make sure you get it right. You should probably avoid trying to send a corrected return, which would essentially wipe the original return from the slate. But if the IRS confuses your two returns, things could get messy. You’re safer filing an amended return. To do that, you use Form 1040X and you must file this form within three years of the due date of your original return, or within two years from the time you paid the tax. You should base this off whichever date is later.

You Have to Use Paper

Additionally, you cannot file a 1040X electronically, even if you filed your original return that way. You must fill out your 1040X by hand on paper. If you happen to be amending more than one return, be sure to fill out separate Form 1040Xs for each return. And be prepared for more scrutiny if you ask for a large amount in your amended return. If you owe more money than reported on the original return, you will likely have to pay interest and possibly some penalties.

 

We hope you found this article about “Be Careful When You Decide to Amend Your Taxes” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

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Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

Alan L. Olsen, CPA, Wikipedia Bio

 

 

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The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.

Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.

The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.

They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..

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