It is not uncommon to discover that an item of income was overlooked, a deduction was not claimed, or an amended tax document was received after the tax return was filed. Regardless of whether the oversight will result in more tax due or a refund, it should be noticed.
Failing to report an item of income will generate an IRS inquiry, typically a year or more after the original return was filed and after the interest and penalties have built up.
On the other hand, if you have a refund coming, you certainly want to avoid that going by the wayside.
The solution is to file an amended return when the error or omission is discovered. Amended returns can also be used to claim overlooked credit, correct filing status or the number of dependents, report an omitted investment transaction, include items from delayed or unexpected K-1s and corrected or late filed 1099s, and account for an overlooked deduction or anything else that should have been reported on the original return.
If the overlooked item results in a tax increase, penalties, and interest can be mitigated by filing an amended return as soon as possible. Procrastination leads to further complications once the IRS determines something needs to be added, so it is best to take care of the issues immediately.
Generally, to claim a refund, an amended return must be filed within three years from the date the original return was filed or within two years from the date the tax was paid, whichever is later.
If you are concerned that an amended return might trigger an audit, be advised that you amend a return does not increase your chances of being selected for an audit. It might actually reduce your chances, especially if you are fixing something the IRS will find later anyway, such as through their program that matches the information forms (W-2s, 1098s, 1099s, K-1s, etc.) that they receive from employers and other payers with the income reported on your return. Many taxpayers are concerned about amending returns because an IRS employee must manually compare the amended return changes with the original. The amended return must include a clear explanation and justification for the amendment and backup documentation to support the changes, even if these were not required on an original return. The IRS may want to dig deeper if backup documentation cannot be provided.
That is why providing proof or backup documents is so important to justify the changes. Let's say you forgot to claim a $2,000 church donation. In this scenario, you want to include documentation, such as copies of the acknowledgment letter from the church and your canceled check, supporting the increased deduction.
If any of the above applies to your situation, please call this office so we can prepare an amended tax return for you.