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If there are any errors in your current or prior year tax returns, the tax returns for that tax year should be “amended” (updated or corrected). While this statement is also true for payroll tax returns, it it beyond the scope of this article. There are many reasons for amending a personal (individual) tax return, including:
1. You have made a math or clerical error.
2. After you have filed your tax return you received either a new or “corrected” form from your investment firm (1099 B or K-1), your retirement plan trustee (1099 R), a financial institution (1099 INT or DIV), your employer (W-2), an income source if you are self-employed (1099 MISC), or your mortgage lender (1098).
 To paraphrase a commercial from a well-known technology product, while there’s not “an app for that” yet, there is a form for it. The form for an individual income tax return is Federal Form 1040-X. Here is the link to the form: http://www.irs.gov/pub/irs-pdf/f1040x.pdf and the related instructions: http://www.irs.gov/pub/irs-pdf/i1040x.pdf   Part I is for data entry, Part II relates to the “Presidential Campaign Election Fund” voluntary donation, and Part III is for you to provide an explanation of the error(s) or change(s).  The instructions for this section are found on page 11.  You should only provide direct, brief, factual statements. There is no requirement for you to provide a profound apology or provide unrelated facts.
While the form is already included with almost all tax return preparation software (which greatly simplifies the math calculations), you can also use the link in the above paragraph from the IRS website:  http://www.irs.gov   The form can not be filed electronically (yet).Â
While other tax practitioners may disagree with this recommendation, my past experience and communications with other tax preparers has caused me to believe that unless you owe additional income taxes, wait until sixty days after you have filed your current year tax return (which includes extensions) before you submit the Form 1040-X. This allows the IRS to process your original return before they receive the amended return.  Â
If you owe additional taxes, you can amend your current year tax return immediately to reduce the additional associated interest and penalties which may be assessed.
Finally, if you reside (or are a legal resident of) a state which has an individual income tax, be sure that you also amend your state income tax return for the same year. (more…)
