How to correct the mistakes in your tax return?

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A double edged weapon

In fact it’s a double edged weapon. If you file an amended return, it will raise eyebrows and IRS may take your return for audit. But at the same time, if you do it correctly, your chances of getting audited are reduced considerably!

Sometimes you make mistakes inadvertently. Your math is fine, your supporting papers are appropriately inserted, your tax strategies are correct, but then some things slip off your mind.

Don’t worry. This is not something incurable. If you find a mistake in your tax return, the best way is to correct it quickly. It may be a modified W-2 in favour of IRS or an unclaimed deduction in your favor, just proceed to correct it.

There is a specific form for such corrections – Form 1040X
This form is very easy to fill in. It has three parts – one for what you filled in originally, then one for what changes you wish to make and the last one for final numbers. You can explain the changes at the back of the form.

Take this opportunity to show your sincerity to IRS. If you are claiming a deduction which was originally missed, then attach relevant receipt. If you want to correct any third party document, attach a copy. This will support your changes.

This will minimize your chances of making it in the audit list. Just because you have filed an amended return, it will NOT initiate the audit process. There are some extra checks which IRS will perform on amended returns. The concerned officer will call up the original return and compare it with changes you have made in the amended return.

This gives IRS an opportunity to double check your return. So its important to ‘prove’ your intentions. For example, if you have missed out a charitable contribution, then its better to attach a receipt with the amended return, which will automatically resolve the issue. This will convince the reviewing person that you are sincere in your approach and you know the rules.

Within how much time you can amend your return?

The legal limitation is three years. So you get three years from the date your original return was due. For example, amendment to your return filed on April 15, 2005 should have been made before April 15, 2008. So if you have filed a return by April 15, 2006, then you can still amend it before April 15, 2009. But take my advice, don’t prolong too much!

This provision of limitation is very important if you are due for a refund and still not filed your return for the current year. Some people just delay it, thinking that they don’t owe anything to IRS so delay is fine. But they are wrong in that assumption, because if the period of three years expires, they lose their tax refunds.

In fact that refund of overpaid money could have been used for paying your subsequent taxes. But due to the delay, the money is lost. IRS admits from time to time that it is holding billions of dollars in unclaimed refunds.

Remember, there are penalties for non-filing – even if you don’t owe any tax. So just go ahead and file. IRS computers may be looking for the corrections!

If you file an amended return claiming a deduction, which was legitimate and unclaimed, say before two years, IRS will give you interest on holding your money. (That interest is taxable, of course!)


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