Today we are going to talk about the myths of amended tax returns. Now this is a subject that consistently year-over-year gives clients a lot of anxiety, a lot of heartburn, but I am here to tell you today some of the truths and some of the myths about filing amended tax returns so that will hopefully help you come to a more informed decision if you need to go that route for any particular reason
Article - Filing an Amended Tax Return
It's time to get down to the brass tacks. My name is Mel Sams, and I'm the managing associate of Sams CPA in Dunedin, Florida, and today we're going to talk about the myths of amended tax returns. This is a subject that consistently year over year gives clients a lot of anxiety, a lot of heartburn, but I'm here to tell you today some of the truths and some of the myths about filing amended tax returns, so that will hopefully help you come to a more informed decision if you need to go that route for any particular reason. First, let me talk about a few of the myths and when people come in, and I sit with them, and I review, and we always review their prior year's tax returns, a lot of times we will come back with recommendations or maybe different ways of reporting things.
Their previous tax preparer did something different, and in a lot of times that results in me saying, "We should consider filing an amended tax return," and then a lot of people have anxiety over that and they say, "Oh no, I wouldn't want to do that because it puts you at a greater risk of audit. It's a red flag." I'm here to tell you that filing an amended tax return is neither a red flag, nor does it put you at a greater risk of audit. In 2016, there were over five million amended tax returns filed in the United States, five million, so as you can see, it's a very common tool, and things happen. Things get left off. We find additional information after the fact. We might hurry to file, and forget something, or we may decide that there was a more advantageous way to report something.
Or again, another CPA comes in and gives a different opinion, such as what I was just describing. The myth of amended returns creating a red flag, or putting you at audit risk, is simply not true. Another myth that I hear about amended returns is that I've had people say, "Well, they didn't know. Well, you can't go back and fix things. They didn't know that you could." You certainly can. As I was just saying, it's a very commonplace occurrence for people to need to refile their return. Now let's talk a little bit about the when, and the why, and the how, and the easiest one on that is the when. When you file your income tax return, let's use 2018 as an example. That tax return, this is for individuals. Businesses can also file them into tax returns, but I'm going to talk about individuals, initially.
Individuals, your return is due April 15th each year, so your 2018 return will be filed on April 15, 2019, so the code says that you have three years from that due date of April 15, 2019 to file an amended return if additional information becomes available, or if you receive an additional form, or something to that effect. That three year window also includes extensions, so if you file for an extension that pushes you out to October 15th, then you have three years from that day under which to file an amended return. That covers the when. The when, it's typically a three year window from the date of filing, including extensions. The why. The why we just touched on a few minutes ago. You may have realized that you left off a deduction. You may have received an amended K1 or 1099, or you may have received advice on an alternative way for reporting or stating a transaction.
All of those are valid reasons for which to file amended returns. There are always other considerations, and each return needs to be taken on a case by case basis. As I always do, I recommend you sit down with a CPA, and review that, and look at it with them, and decide if your situation is going to raise any unforeseen problems, or if it's going to be advantageous for you to file that amended return. Finally the how. The how would be a situation where we take your tax return as it was filed, and then we apply the changes, whatever they may be, and once we have that newly formed and created return with the changes, we attach a cover form to that. A form 1040X. We fill that out, we submit that to the IRS with a variety of documentation. We have to mail that in. We can't efile those yet for individuals, and then usually somewhere in the 90 to 120 day range, you'll receive a letter back, and it says that they've either accepted your changes or they might need additional information.
Regardless, I recommend you sit down with a CPA to help you determine if this is something that's going to work for you or be it an advantage for you.
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