CORRECTING YOUR TAX RETURN: IT'S NEVER TOO LATE
Michigan Credit Union League - Your Money Matters
OK, the April 15 deadline has passed and you got those tax forms out on time. But, you still have a nagging thought that your tax return wasn't quite right. Maybe you forgot to declare something or even to deduct something. There is still time to fix it.
"There's no need to lose sleep worrying about whether you dotted every 'i' or crossed every 't'," assures Carmen Hernandez of the Michigan Association of Certified Public Accountants (MACPA). "Uncle Sam believes in second chances."
REASONS FOR AMENDING YOUR TAX RETURN
If you find that you've made a mistake, you can easily amend your tax return - and you won't be alone. Each year, millions of taxpayers make mistakes on their returns and take advantage of the opportunity to make corrections. You simply need to file Form 1040X, the "Amended U.S. Individual Income Tax Return."
Common mistakes include over- or underestimating income or incorrectly reporting Form 1099 information. You can also file an amended return if you want to claim a credit or deduction you may have overlooked, decide to change your filing status or want to alter the number of exemptions you claimed. However, Hernandez cautions that changing your filing status from married, filing jointly to married, filing separately is generally not permitted.
Filing an amended return in order to benefit from a retroactive change in the tax law might also be necessary, such as the case several years ago when the 25% deduction for heath insurance premiums paid by self-employed workers was reinstated or, more recently, when the exclusion for employer-provided education was retroactively extended.
HOW TO FILE AN AMENDED RETURN
Whatever the reason, if you need to revise your return, it's relatively easy. First, get a copy of Form 1040X. On the front of the form you list your income, deductions, and credits, as you originally reported them. Then, compute the net increase or decrease to arrive at your corrected amount of taxable income.
This is the figure to use to determine the additional tax you owe or the refund you are due. If you discover that you underpaid your taxes, submit a check for the amount due; the IRS will bill you for interest or penalties. If you overpaid, the IRS will include in your refund any interest it owes you.
There's a place on the front of the form for changing your filing status and the reverse side of the form contains a section for revising the number of exemptions you claimed. You also can use the reverse side of the form to provide a complete explanation of the changes you are making. It's to your advantage to make your reasons as clear and complete as possible to avoid having the IRS draw its own conclusions, which may result in unnecessary correspondence.
There's no need to attach your original Form 1040, but be sure to include any new or revised schedules and forms. For example, if you're amending your return to claim the child care credit, you'll need to submit Form 2441 with your amended return, just as you would have if you claimed the credit on your original return. If you're correcting the amount of wages you reported, attach a copy of your corrected W-2.
Before filing your amended return, be sure you've signed the form and indicated the year you are amending. Send Form 1040X to the IRS center where you originally filed your return. Be aware that if the reason you're filing an amended return spans more than one tax year, you must file a separate Form 1040X for each return you need to amend.
TIMING IS EVERYTHING
You generally must file an amended return within three years from the date you filed your original return or within two years from the time you paid the tax, whichever is later. A special rule allows a seven-year window if you're claiming deductions for bad debts or worthless securities. This is allowed because, if litigation is involved, the date on which the security or bad debt became worthless may not be determined until after the statute of limitations has run out.
According to Hernandez, "The IRS routinely shares information with most states that have income taxes. If you filed an amended return with a balance due, be sure to amend your state return as well, if the change would affect that return. Doing so will help to minimize interest and any penalties due to your state."
Additional tax information can be obtained by contacting the Michigan Association of Certified Public Accounts at (810) 855-2288.