Sometimes in a rush to file your income tax return, you may unintentionally overlook some income that had to be reported, or a deduction that you should or should not have taken. Now what? The solution is usually straightforward: you should file what is called an amended return.
Taxable income is measured on an annual basis so you cannot generally wait on correcting a mistake by “making up the difference” on the return that you file next year. You need to make the correction(s) directly on a revised return for the same tax year. Form 1040X, Amended U.S. Individual Income Tax Return, is used to amend any individual income tax return. Income tax returns other than individual income tax returns or returns filed on Form 1120, U.S. Corporation Income Tax Return, or Form 1120-A, U.S. Corporation Short Form Income Tax Return, are amended by filing the same form originally used to file the return. Partnerships may use Form 1065X. Amended returns should clearly be marked as such. Some return forms such as Form 1041, U.S. Income Tax Return for Estates and Trusts, contain a box to be checked if it is being filed as an amended return. For returns other than income tax returns, Form 843, Claim for Refund and Request for Abatement, is used to claim a refund.
To amend a non-income tax return other than to claim a refund, the same form originally used to file the return generally should be used. Estate tax returns cannot be amended after they are due. However, supplemental information may be filed that can change the amount of estate tax due from the amount shown on the return.
When to file an amended return. A taxpayer must file an amended return and pay the additional tax due if the taxpayer omitted an item of income or incorrectly claimed a deduction for a tax year for which the limitation period is still open. A tax year ordinarily remains open for three years from the filing of a return. The three-year period starts running the day after the return is filed. A return that is filed early is treated as filed on the due date of the return. The limitations period on assessment for which a return remains open does not start over if an amended return is filed.
If you realize that you made a mistake on your return that is not in IRS’s favor, it is best to correct it through filing an amended return as soon as possible. If the IRS starts to audit you and finds the mistake first before you file your amended return, it can assess penalties on the original amount and treat you as if you had not come forward voluntarily on your own.
Special disaster loss option. Not all amended returns are filed to correct a mistake. One in particular –claiming a disaster loss—may be filed to effectively accelerate a casualty-loss deduction. A taxpayer may elect to deduct a disaster loss in the year of occurrence or the immediately preceding year. To qualify for the election, the loss must occur in a federally-declared disaster area. The election is made on a return (if you have not filed your return yet for the preceding tax year), an amended return or a refund claim. The amount of the deduction is determined using the casualty loss limitations.