Made a mistake? File an amended return!

from www.moneycenteral.msn.com

Make a mistake? You can make amends
Although an amended return will make the IRS sit up and take notice, if you do it right, your chances of being audited may actually decrease.
Article IndexBy Jeff Schnepper
I know you were careful. You did the math. Your tax preparer did the math. You double-checked HIS math. But sometimes, no matter how hard you look at a figure, that error you just made -- or that your preparer just made -- doesn't register in your mind.
This is not the end of the world. When a mistake is made on your tax return, correct it. The error may be in your favor, or in favor of the IRS. But in any case, correct it. It may be due to a missed deduction, an incorrect interpretation of the law or facts, or simply a late or corrected W-2 or 1099.
Fortunately, the IRS recognizes that your tax return may need to be corrected and has drafted a specific form for that purpose: Form 1040X (.pdf download). This form is easy to complete. It has three columns: one for what you originally reported, one for the changes in the numbers, and a third for the final, corrected numbers. On the back, you explain the change.
If the reason for the change is a corrected 1099 or other third-party document, attach a copy to your return. If the change is because of a deduction you missed, attach a copy of the receipt to the return. It's optional, but I suggest that you try to attach documentation to "prove" your change.
What I'm trying to do here is minimize your chances of getting audited. The very fact that you filed an amended return will not, in and of itself, increase your chance of being audited. However, an amended return demands extra scrutiny by the IRS. An agency representative must call up your old return and compare the changes with the new return. That gives the IRS twice as many chances to see something that concerns an agent.
Prove those deductions That's why I recommend attaching substantiation for the changes on your Form 1040X. If the change, for example, is a huge charitable contribution missed on your original return, the IRS computer will pop out your return for human review. That's where your attached substantiation should dissolve any audit questions, because you've already "proved" your deduction.
In fact, by attaching substantiation of the change to your amended return, you have shown the reviewing agent that you know the rules and would be a poor audit risk. You may have actually decreased your chances of a full audit.
When can you amend your return? The normal statute of limitations for a tax return is three years. That means that you have three years from the due date of your return to amend your return.
For example, your 2003 individual tax return should have been filed by April 15, 2004. Now that April 15, 2007, is passed, you can no longer amend that return. If you have found a mistake on your 2004 return (which should have been filed by April 15, 2005), you have until April 15, 2008 to amend it.
This statute of limitations is really important if you are due a refund and haven't yet filed your return for the current year. Some people, if they think they're due a refund, take the easy route and procrastinate. They know they don't owe any additional tax, and therefore they figure there's no rush in getting that return out to the IRS. They're wrong.
Use refund or lose it If you don't file your tax return within three years and you're owed money, sorry. You just don't qualify at all to get it back.
Everyone -- even the government -- will agree that you overpaid and that the IRS should have sent you your refund. But they won't and, under the law, you can't make them. In fact, you can't even use that "refund" to offset taxes for future years; it's lost forever.


Look out for hidden tax breaksCongress renewed some tax credits and deductions too late to make the IRS' forms. Here's how to find out what you're entitled to.That's the nature of the statute of limitations. It limits the time both you and the IRS have to make changes. The IRS has publicized the fact that it's holding billions of dollars in unclaimed taxes.
If you haven't filed . . . file! There are penalties for not filing, even if you don't owe any money. If you have filed and received a corrected or late 1099, file an amended return. The IRS computers are going to be looking for those corrected numbers.
If you found out that you missed a deduction or a credit two years ago, file an amended return. And make sure they give you the interest owed for holding your money. (Of course, that interest will be taxable.)
Updated April 30, 20if you need help filing an amended return, contact us at www.taxadvocacyllc.com