Dollars & Sense - Amending Your Tax Return

As people tax plan they often pull out prior tax returns to use as a guide. It’s not uncommon to occasionally discover an error or an overlooked deduction. Taxpayers don’t usually jump at the chance to amend a prior year’s tax return if it means they’ll owe the IRS money. Instead most sit tight, hope the error isn’t noticed and wait for the statute of limitations to expire. However, people’s attitudes rapidly change when they find an error in their favor, have a net operating loss carry back, or a neglected deduction that would give them a refund. You can amend your last three income tax returns. Form 1040X needs to state the reason why the amended return is being filed. You need to use facts and figures that clearly show the changes between items shown on the original return and the amended return. Treat items in the same manner on your amended return as on your original return. You can’t switch from a joint return to married filing separate for instance nor can you change accounting methods from cash to accrual for example. If you are divorced and are amending an old joint return because of a net operating loss that you want to carry back, you can do so and you would receive the tax refund. People sometimes worry that if they file an amended tax return it will call them to the attention of the IRS. It won’t, nor will it extend the three year statute of limitations regarding the amount of time the IRS has to audit a return, unless of course you have filed a fraudulent return.

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