An individual has submitted his or her 2018 federal income tax return. The return has been accepted by the IRS, and the refund has been deposited into the employee’s bank account. Shortly thereafter, the employee receives in late April 2019 a 2018 1099-INT (interest income), 1099-DIV (dividend income), or a K-1 (partnership income) for an investment the employee has forgotten about. The employee realizes that he or she has to change his or her 2018 federal income tax return to report this additional income, but how? The reporting is done by submitting an amended 2018 federal income tax return. This column discusses how to amend an income tax return.
Preparing an amended return is in fact not that difficult. It should not take long but an affected individual must do it or pay a tax professional to do it. The IRS will aggressively come after individuals who owe tax on unreported income. If an amended return is submitted after the filing deadline and taxes are owed, then interest will have to be paid on the late payment. On the other hand, the IRS could owe an individual a refund (with interest paid on the refund) as a result of a mistake made on a tax return.
The following are 11 tips from the IRS about amending a federal income tax return:
- When to amend a return. An individual should file an amended return if the individual needs to correct his or her filing status, number of dependents, total income, tax deductions or tax credits. The instructions for Form 1040X (Amended US Individual Income Tax Return, available for download at www.irs.gov) lists additional reasons to amend a return
- When not to amend a return. In some situations, an individual does not need to amend a tax return. For example, the IRS usually corrects math errors when processing the original return. If an individual did not file a required form or schedule with the original return, the IRS will mail a request to the individual for whatever form or schedule is missing.
- Form to use. Form 1040X is used to amend a previously filed Form 1040. In filling out Form 1040X, it is important to check the box on the top of the form showing the year being amended. Note that an amended return cannot be e-filed. An amended return must be filed on paper. A separate Form 1040X must be prepared and submitted for each tax year being amended. On the top of Form 1040X, the year of the return being amended should be entered on the top of Form 1040X. Mail each year’s 1040X in a separate envelope.
- Multiple amended returns. If an amended return is being prepared for more than one year, then a separate Form 1040X must be prepared for each year. Each return is then mailed in separate envelopes to the appropriate IRS processing center. The appropriate address will be shown in the instructions to Form 1040X under “Where to File”.
- Form 1040X. Form 1040X has three columns. Column A shows figures from the original return, Column B shows changes that are being made, and Column C shows the corrected figures. There is also an area on the back of Form 1040X where the individual should explain the specific changes and the reasons for the changes.
- Other forms or schedules. If the changes involve other tax schedules or forms, then these schedules and forms should be attached to Form 1040X. Failure to do so will cause a delay in processing.
- Amending to claim an additional refund. If one is expecting a refund from the originally filed 2018 Form 1040, then a Form 1040X for 2018 being filed to request an additional refund should not be filed until the original refund has been received. That refund check may be cashed.
- Amending to pay additional tax. If one is filing an amended tax return because one owes additional tax for 2018, then one should file Form 1040X and pay the additional tax as soon as possible in order to limit any interest and penalty charges. Once the IRS receives the amended return, the IRS will bill the individual for interest charges and any penalties
- Statute of limitations for filing for a refund. To claim a refund from a previous tax year, one must file Form 1040X within three years from the date the original return was due, or two years from the date the tax was paid if later. That means if an amended return is being filed for tax year 2016 in which the 2016 federal tax returns were due April 18, 2017, then the due date for amending a 2016 return in order to claim a refund is April 18, 2020. There is, however, no statute of limitations for filing an amended return to pay any taxes due on a previous year’s return.
- Processing time. Normal IRS processing time for a federal amended tax return is 8 to 12 weeks.
- Amending a state tax return. Depending in which state an individual lives, the individual may also have to file an amended state income tax return to report unreported income or other changes affecting state tax liability. Some states like New York permit amended state returns to be submitted online.
*** Written by Edward A. Zurndorfer, who is a Certified Financial Planner™, Chartered Financial Consultant, Chartered Life Underwriter, Certified Employee Benefits Specialist and Enrolled Agent in Silver Spring, MD. He is the owner of EZ Accounting and Financial Services, an accounting, tax preparation and financial planning firm also located in Silver Spring, MD. He is a seminar speaker at Federal employee retirement seminars throughout the country for the National Institute of Transition Planning, Inc. He is also a weekly columnist for MyFederalRetirement.com. Raymond James is not affiliated with and does not endorse the opinions or services of FEDZONE or Edward A. Zurndorfer or any of the above listed organizations. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer and/or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While the employees of Serving Those Who Serve are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Telephone number, 301-681-1652.
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