Do You Need to Amend Your Return?

You’ve discovered an error or determined that you are entitled to a previously unclaimed credit or deduction, after your tax return has been filed. Do you need to amend your tax return?

The IRS usually corrects math errors or requests missing forms – such as W-2s or schedules – when processing an original return. In these instances, do not amend your return.

However, you should file an amended return if any of the following were reported incorrectly:

Your filing status
Your dependents
Your total income
Your deductions or credits

You may also elect to amend your 2008 return if you are eligible to claim the new first-time homebuyer credit of up to $8,000 for a qualified 2009 home purchase. The amended tax return will allow you to claim the homebuyer credit on your 2008 return without waiting until next year to claim it on the 2009 return.

Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040A or 1040EZ submitted electronically or by mail. Be sure to enter the year of the return you are amending at the top of Form 1040X. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the IRS processing center for the area in which you live. The 1040X instructions list the addresses for the centers.

The Form 1040X has three columns. Column A is used to show original or adjusted figures from the original return. Column C is used to show the corrected figures. The difference between the figures in Columns A and C is shown in Column B. There is an area on the back of the form where you explain the specific changes being made to the return and the reason for each change.

If the changes involve other schedules or forms, attach them to the Form 1040X. For example, if you are filing a 1040X because you have a qualifying child and now want to claim the Earned Income Credit, you must attach a Schedule EIC to show the qualifying person's name, year of birth and Social Security number.

If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund. If you owe additional tax for 2008, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.

Generally, to claim a refund, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
Form 1040X and instructions are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Form 1040X, Amended U.S. Individual Income Tax Return

Tax Facts About Amended Returns

Taxpayers who need to make a change or adjustment on a return they already filed can do so by filing an amended return. Here are the top 10 things every taxpayer should know about amending your federal tax return.

Taxpayers needing to amend their return use Form 1040X, Amended U.S. Individual Income Tax Return.

Taxpayers can use Form 1040X to correct previously filed Forms 1040, 1040A or 1040EZ. The 1040X can also be used to correct a return filed electronically.

Taxpayers should file an amended return if they discover any of the following items were reported incorrectly: filing status, dependents, total income, deductions or credits.

Generally, you do not need to file an amended return for math errors as the IRS will be ale to make the correction for you.

You also do not usually need to file an amended return because you forgot to include forms – such as W-2s or schedules – when you filed; the IRS normally requests those forms from you.

Be sure to enter the year of the return you are amending at the top of Form 1040X. Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.

If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the IRS processing center for the area in which you live. The 1040X instructions list the addresses for the centers.

If the changes involve another schedule or form, attach it to the 1040X.

If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund.

If you owe additional tax for 2008, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.

Form 1040X, Amended U.S. Individual Income Tax Return (PDF 110K)
Form 1040X Instructions (PDF 45K)
Tax Topic 308 — Amended Returns

Top Ten Tax Tips for Disaster Victims

Special tax law provisions may help taxpayers recover financially from the impact of a disaster, especially when the President declares a location to be a major disaster area. Both individuals and businesses in a federally declared disaster area can get a faster refund by claiming losses related to the disaster on the tax return for the previous year, usually by filing an amended return.

Here are the top 10 tips to help you get the proper benefits after a disaster:

Take photographs to document damage to your property or belongings. This will be helpful in calculating the amount of your loss. It may also prove beneficial to take photos showing the condition of the property after it is restored or replaced.

Keep your receipts. Certain expenses may be deductible or helpful in determining your loss. Receipts for contracting work can establish the extent of your loss and substantiate the use of insurance reimbursements (see item 5 below).

Food, medical supplies and other forms of assistance are not taxable, nor do these items reduce the amount you can claim as a loss unless they replace lost or destroyed items.

File your insurance claim in a timely manner. If your property is covered by insurance, it's important to file the claim as soon as possible because any reimbursement must be subtracted when calculating your loss.

Replace property with similar property to avoid paying taxes on any gain from insurance proceeds. However, replacement property does not have to match item-for-item. Because insurance proceeds for the home and its contents are considered a common pool of funds, you can use more of the money to replace the house than its contents, or vice versa. If you qualify, a gain related to a personal residence can be excluded using the sale-of-home exclusion rules.

Reimbursements for losses aren't taxable, unless you come out ahead by receiving more for the property than its basis (original cost plus the cost of improvements). Even if the reimbursement is more than the basis, you don't have to pay tax currently if you replace lost, damaged or destroyed items within 2 years after the loss occurs.

You may be able to claim a casualty loss on your tax return.

The loss amount is based on the lower of 2 numbers:

Either the price paid for the property plus any improvements (called the basis) prior to the casualty, or the property's decline in market value caused by the disaster, which, in some cases, can be determined by repair costs.

The deductible amount is reduced by insurance and most other nontaxable reimbursements.

If the property is not used for business, the deductible amount is reduced by 10% of the taxpayer's adjusted gross income and then reduced again by $100 ($500 for 2009). The 10% floor does not apply to net disaster losses sustained In 2008 or 2009.

A nonbusiness loss generally is claimed as an itemized deduction on Schedule A. But a net disaster loss sustained in 2008 and 2009 is added to your standard deduction. You don't have to itemize to claim these losses.

The cost of cleaning up or making repairs can't be considered part of your casualty loss. However, you can use the cost for repairs as a basis to determine the decrease in fair market value.

The IRS will waive fees and expedite requests for copies or transcripts of your federal tax return. If you need information from your tax return, use Form 4506-T, Request for Transcript of Tax Form, to request a transcript of your federal tax return. A transcript shows most of the line items from your return. You may also use Form 4506-T to request account information (payment of estimated taxes, etc.) and transcripts of W-2s and 1099s. If you need greater detail on prior returns than is provided by transcripts, you may request a photocopy of a prior return and any attachments by submitting Form 4506, Request for Copy of Tax Form. You may obtain these forms by calling the IRS toll-free disaster hotline at (866) 562-5227 or by going to www.irs.gov.

Special considerations for federally declared disaster areas:

You have up to 4 years after the close of the first year in which any gain was realized to replace your principal residence or pay tax on the gain.

You can choose to deduct a loss on the current-year return or amend the preceding year's return, whichever helps your current financial or tax situation the most.

You may have filing and payment deadlines postponed for a time specified by the IRS. Any interest that normally would apply to late payments is waived in this situation.

Also Read:

Disaster Relief
Amended Return
Address Changes

Tax Help - Are You Sure That 2004 Return Is Correct?

Can you even begin to imagine $1.2 billion dollars of money that the IRS is trying to give away? And we're not talking about the Stimulus Package monies.





Believe it or not, that's how much money the IRS is holding for taxpayers who need to file their 2004 taxes.



And now you ask, "how on earth do I get a piece of that action?". Well, it's really very simple.

To receive a chunk of this billion dollar overflow, you just need to file your delinquent 2004 tax return.

But don't forget that there's a three-year deadline for refunds. Taxpayers have three years from the original due date to file a return and ask the IRS for a refund. This statute of limitations on refunds is written directly into our tax code, section 6511 if you want to look it up. The long and the short of it is this: if you haven't filed for 2004, you should do so by April 15th, 2008. That's the final, final deadline before your refund vanishes into the government's coffers.

This 3-year deadline also applies to amended returns as well. Perhaps you forgot to take a deduction or a tax credit? The IRS will send out your extra refund from any corrections to your return, but only if the amendment is filed within this same three-year period.

It only makes sense to this preparer pull out that 2004 return and review it for additions or corrections, amend the return if necessary and got for a chunk of that change.

• Additional resources to help you prepare a 2004 return:
  Filing back taxes
  Getting documents from the IRS
  2004 federal tax forms from IRS.gov

Tax Debt Help - Made a mistake? Form 1040X can save the day!

This is another great article from "Don't Mess With Taxes" blogsite and certainly worth restating for the coming tax filing year......................

Uh-oh! You were slipping that W-2 copy into the drawer when it caught your eye.

How could you have missed that when you did your final filing review and dropped your return in the mail? What can you do about it now?

As it turns out, plenty.

The complexity of the tax code, coupled with the frantic lives most of us lead, means that there is ample opportunity for tax-filing mistakes. Sometimes the mistakes could cost you, like forgetting to include income earned on an investment account. Other times it might lower your tax bill, such as when you run across a forgotten receipt for a generous charitable contribution you made.

Either way, the Internal Revenue Service provides second chances to get your tax return right with Form 1040X.

This X-file is normal

There's nothing supernatural about this X-file.

For a tax form, the 1040X is pretty easy to complete. Basically, the IRS wants to know what you originally reported, what your corrected numbers are and why you are making the changes.

There's also a section for adding or subtracting personal exemptions in case there was some confusion as to whether you properly counted someone as a dependent.

And, in most cases, you can change your filing status, which could get you a bigger refund. For example, a new divorcee filed this year as a single taxpayer. But that cost her some tax money because she's got custody of the kids. She should have filed as a head of household, which would have provided her with a larger standard deduction.

These are the kind of things you most definitely should correct with a 1040X, say tax experts.

When the IRS benefits

Taxpayers also should be diligent about correcting their returns even if it means they end up paying a bit more in taxes.

Why? Because it's a pretty safe bet that the IRS is going to discover your error eventually.

If it's a simple addition or subtraction mistake, there's no need to amend the return. The IRS says its computers will detect the error, notify you and adjust your return automatically.

But if it's something bigger -- you overlooked a Form 1099 for $1,500 you got from a freelance house painting job -- and you catch and correct it first, it could save you from paying even more to the IRS.

The IRS may not penalize you for this honest mistake, but it sure will collect some interest on the proper amount you didn't pay on time in the first place. The sooner you correct the error, the less interest you'll face.

"We had one preparer who filed a client's return," explains Brenda Schafer, senior tax research coordinator for H&R Block, "and then the employer informed the person that he would be getting a corrected W-2, so it had to be re-filed.

"You just want to be sure you have a correct return," she says, "whether it's in your favor or not."

Year-round amended filing season

Such corrections are a year-round occurrence, but tax professionals say the need to amend a return often is discovered during the following year's filing season.

"Sometimes when you're having next year's return prepared," notes Schafer, "the professional says, 'Oh, you didn't tell me about that last time.'"

Then there's the case where a little more knowledge can mean more tax filing work.

"We've had people take income tax courses to help them do their own returns and pick up items where they could or should amend a return," Schafer says.

Amending time limits

But don't go searching through old files for ancient tax returns in the hopes of possibly eking out a few more refund dollars.

The IRS generally gives taxpayers three years after the original return's filing date to make any changes with a Form 1040X. If you filed early, you get three years from the return's due date to correct any errors.

Your window to amend closes a bit if you didn't pay all the tax you owed when you filed. In this case, you must revise your return within two years of the day that you finally paid your full bill to Uncle Sam. If, however, the two-years-since-payment date arrives after the standard three-year time limit, the IRS says you can amend your return using the deadline that comes later. Similarly, if you paid your taxes late, but not that late, and the three-year grace period provides you more revision time, you can use it.

And don't automatically reject filing an amended return out of fear of inviting an IRS audit. Sure, the IRS will take a close look at an amended return that's netting you a refund. And that means tax agents could conceivably look at your original tax paperwork in the process.

So why, ask hesitant amended filers, should they invite the extra attention, especially if they file just within the three-year amendment limit -- the same time period after which the original 1040 would be off the tax examination radar?

"An amended return might just draw attention to a return," acknowledges Schafer. "But, really, people shouldn't be concerned. The main thing with tax filing is to get it right."

And that means getting it right any time.

S. Raines, Sr. Financial Advisor/Tax Preparer

The Top 5 of the Dirty Dozen List of Mistakes

After receiving the November 2007 issue of the FEDERAL TAX ALERT from the National Society of Tax Professionals and reading this article, I felt that I really needed to pass this information along. And trust me, it is the most valuable information that you can receive for the 2008 tax season or for any tax year.

(Checkout "Ten Ways To Annoy An IRS Agent" first.)

The IRS announces each year what they are going to be looking for in their annual "Dirty Dozen" report. They also make the audit statistics available in order to see that they are auditing taxpayer's returns.

The following are the top five red flags for audits. They include:

Location. Where you live makes a difference in determining whether you are more at risk from an audit. You are more likely to get an audit if you live in one of these places:

Los Angeles, North Central District (ND, SD, MN), Southern California, Northern California, Manhattan, Central California, Brooklyn, Southwest (AZ, NV, NM), South Florida and Houston.

How Much You Make. This statistic is fascinating. It would seem to make sense that the IRS is more likely to audit people who make more money. But, the fact is that they are actually more likely to audit people who make LESS money. In fact, the most likely return to be audited is a return that includes a business that makes less than $25,000 per year. If you do not have a business, you have the most chance for an audit if you file a Form 1040A and make less than $25,000 per year. Business Entities. If you have a business, you are much more likely to be audited if you operate in a Sole proprietorship, Schedule C. In fact, you are ten times more likely to be audited as a Sole Proprietorship than if you are an S Corporation or C Corporation. Why? That is because most Sole Proprietorships do not have great recordkeeping systems and the IRS knows that.Under-reporting Income. the IRS receives copies of your K-1s form Limited Partnerships and S Corporation, 1099s from interest, dividends and sales, and W-2s. If you do not report these items on your return, or you report a different amount, your return will get pulled for inquiry.Who Files Your Return Matters. If you have a complex return and prepared it yourself or if your return was prepared by someone on the IRS's problem preparer list, you are more likely to be audited."The most important advice that you need to remember is "once you have been audited, then you cannot go back and amend a return for changes". Once the audit has taken place you will have to live with the IRS's decision and finding. And once that happens, most folks find themselves having to solicit the help of Tax Resolution services such as Effectur, Inc to help with audit representation and negotation of payments. "What is the difference between a taxidermist and a tax auditor?" The taxidermist takes only your skin!"............

S. Raines, Sr. Financial Advisor/Tax Preparer