When you e-filed your tax return or mailed it at the post office the old fashioned way, you may have breathed a sigh of relief. Once it’s filed, you can stop second-guessing whether a deduction you claimed was too aggressive or whether you filed out that charitable contribution form correctly. Whether you paid too little or too much to suit you, it’s out of your hands.
But what if shortly after filing you realize you made a big mistake? Suppose you forgot to include $20,000 of consulting income, forgot to claim your car given to charity, or forgot to check the box on Schedule B stating that you have a foreign bank account? Despite your best efforts and honesty, you may forget something or make an innocent–even if foolish–mistake. It may not even be your fault.
Sometimes, although you are organized and report everything you know about, you receive new information after you file. You might receive a Form 1099 or Form K-1 after you file your return. The forms may be late, or they may be amended or corrected. Forms K-1 from partnerships, S corporations and LLCs have a particularly bad habit of showing up right after you file. Some mistakes are bigger than others.
Here’s what to consider as you commence the hand-wringing process.
Correct vs. Amend? You can’t correct a tax return without amending it. Once your return is filed, you can’t change it. You signed it under penalties of perjury and its too late to cross a “t” or dot an “i” you forgot. You should amend, but do you have to?
In such cases, it may surprise you to learn that you are not required by law to file an amended return. Once you have filed your tax return, you cannot be prosecuted for failing to file an amended return, even if something happened after you filed that makes it clear your original return contains mistakes. When considering an amendment, first ask yourself whether the return you filed was accurate to your best knowledge when you filed it.
If it was, you are probably safe in not filing an amendment. You still may want to amend, of course, but filing an amendment would be optional. Conversely, if you knew the return was inaccurate when you filed it, you should amend it to make it accurate without delay.
It may behoove you to get some professional advice about the nature and scope of the inaccuracy and your best plan for rectifying it. Although you may not be required to file an amended return, if you do, you must correct everything. You can’t cherry-pick and make only those corrections that get you money back, but not those that increase your tax liability.
Math errors are not a reason to file an amended return, since the IRS will correct math errors on your return. Likewise, you usually shouldn’t file an amended return if you discover you omitted a Form W-2, forgot to attach schedules, or have other glitches of that sort. The IRS may process your return without them, or will request them if needed.
Impossible Amendments? Certain parts of your original return can’t be changed with an amended return. Surprisingly, you can change your filing status on an amended return from married filing separate to joint, or from qualifying widow(er) to head of household status. However, you cannot change from married filing joint to married filing separate after the due date for the original return (usually April 15th) has passed.
For alerts to future tax articles, follow me on Forbes. You can reach me at Wood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.
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