Have you ever filed your tax return only to later realize that it was not complete? You forgot to include some income, you left off a deduction, you did something incorrect on the return. Sometimes you may want to file now, the file later when that last document comes in. After all, you’re waiting for that fat refund. It’s a situation many of us have found ourselves in. The solution is to file an Amended Return, Form 1040X. The IRS lists “Ten Facts on Filing an Amended Tax Return.” The list can be found at this site http://www.irs.gov/uac/Newsroom/Ten-Facts-on-Filing-an-Amended-Tax-Return. These facts are helpful if you need to file a return but they don’t tell the whole story.
First, as the IRS states, amended returns cannot be e-filed, they must be submitted as a paper return. What the IRS does not say is that means the submission is examined by a person, not machine scanned. Although you only changed one item on the return, the examiner can, and frequently does, examine all the items on the return. If there is anything questionable, the IRS will conduct an audit or request more information.
Second, if you file an amended return and are getting a refund, I hope that you are not in any rush. The stated IRS time for processing a Form 1040X is eight weeks. Right now, amended returns are taking about 16 weeks for processing. Currently, there are a large number of amended returns being submitted and it is taking a very long time to work through them. This backlog has been going on for at least a couple of years now, and it only appears to be getting worse.
Third, the IRS mentions this, but does not put much emphasis on it. If you file an amended return and you owe additional tax, you will be assessed penalties and interest on the amount due. Probably the best practice is to pay the amount due and let the IRS bill you for any penalties and interest. If you have a valid reason for the late payment, you may appeal to the IRS for a recession of the penalties. This may or may not be successful, but it doesn’t hurt to ask. The IRS will not and cannot forgive the interest unless the amount owed is reduced. So don’t even ask. On the positive side, if you are due a refund, the IRS will pay you interest on the amount of the refund. Of course, next year they will send you a 1099-INT, so you’ll have to pay tax on the interest income.
When you file an amended return you need to submit the Form 1040X, any supplementary form or schedule that changed, and include an explanation (on the 1040X) of why the changes are being made. Here’s hoping you don’t have to file an amended return, but if you do I wish for you a lot of patience.