Do You Need to Amend Your Tax Return?

Did you file your tax return return thinking your taxes were completed only to receive another tax form in the mail? Maybe you forgot about the part time job you worked for a couple of months at the beginning of last year, or your employer sent you a corrected W-2? Maybe you received a 1099-INT for bank interest or a 1099-B for a brokerage account. Maybe Congress made a tax break that you qualify for to take retroactive to a previous tax year(s). Or did the IRS send you a notice or letter requesting you to amend your tax return? These are just a few of the more common reasons taxpayers need to amend their tax returns.

Most employers and banks are required to postmark their tax forms by January 31 each year. However, some tax forms including those reporting the sales of stocks, bonds, mutual funds, and properties are not required to be postmarked until February 15. This makes it possible to receive tax forms as late as the end of February.

Whether or not you need to amend your tax return depends on if you are legally required to report the information and how it will affect your tax return. Keep reading for additional information regarding amending your tax return including:

• Is There a Penalty for Amending Your Tax Return?
• How Long do You Have to Amend Your Tax Return?
• How Long Does it Take for an Amended Tax Return to be Processed by the IRS?

Is There a Penalty for Amending Your Tax Return?

If you are filing an amended return to report additional income or information that causes you to owe taxes, the IRS may charge you penalties and interest. Penalties and interest may be assessed by the IRS for failure to file, negligence, fraud, substantial valuation misstatements, substantial understatements of income tax, and reportable transaction understatements. The interest is assessed on the penalty from the date the tax return was due. This makes it extremely important to file your amendment as soon as possible.

The penalty for not paying the tax owed on an amended tax return on the original due date can be waived in certain circumstances. For example, if you can demonstrate reasonable cause for not paying the tax on time. Also, if you pay the tax due on an amend tax return within one year of timely filing your amended return, penalties on the amount due will not be charged.

How Long do You Have to Amend Your Tax Return?

If the IRS owes you a tax refund, generally, you have three years including extensions from the date you filed your original return to amend your tax return. If you paid taxes, you have two years from the date you paid your taxes or whichever is later to file the amendment. It can get complicated.

Example. If you filed your tax return on March 1st last year, for the purposes of an amendment, it is considered filed on the due date, generally April 15th. This means you have three years from April 15th last year to file the amendment.

In the same example above, if you filed an extension and filed your taxes on August 1st; even though, the extension gave you until October 15th to file your tax return, the clock to file an amended tax return would start on the date you actually filed your taxes. In this case, the time would start on August 1st.

It’s important to discuss your options and best course of action with a tax professional. Depending on when you filed your original tax return and whether or not the amended tax return means you owe taxes or the IRS owes you a refund will greatly affect how long you have to amend your tax return.

How Long Does it Take for an Amended Tax Return to be Processed by the IRS?

Amended tax returns have to be mailed in to the IRS. The IRS does not allow amended returns to be e-filed. This means it takes a really long time for an amended tax return to be processed by the IRS.

Typically, it takes three weeks from the date the amended tax return is mailed in to show up in the IRS’ system. The normal processing time for amended tax returns is sixteen weeks. After the initial three weeks, you can use the IRS tool -- Where’s My Amended Return? -- to check the status of your amended tax return.

The Bottom Line

The good news is mistakes on originally filed tax returns are normal and can be fixed. To file an amended tax return, you must first have filed your original tax return. If you think you need to file an amended tax return, it is important you reach out to the tax professionals at Gudorf Tax Group as quickly as possible. They can review your tax situation and determine if you need to file an amended tax return. If the amended return results in the IRS assessing penalties, there are certain circumstances when if you can demonstrate reasonable cause for not paying your tax on time, you may not have to pay the penalty.

Schedule an appointment with the tax professionals at Gudorf Tax Group. They will help you determine whether or not you need to file an amended tax return and your best course of action based on your individual tax situation.