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How to Fix Errors on Form 1040

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Many filers discover after having mailed in their Form 1040 that they made a mistake, such as missed deductions or understated income. Not to worry, says tax guru Julian Block. Here, he explains what a filer must do to amend a 1040 depending on their error and how to minimize the chance of IRS audits.  

Apr 28th 2022
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When Form 1040 time rolls around, I receive queries from filers who made mistakes on their 1040s. They want to know how to fix their tax errors, and I tell them not to worry: Usually, they can still set things right after the fact.

This series will respond to a query from a freelance writer based in New York City. Like a lot of other filers, her tax tribulations began when she scanned her already-mailed 1040 and felt a little jolt of panic when she realized that she messed something up. To soothe her, I reminded her that she’s hardly alone. That’s why the Internal Revenue Service offers what it characterizes as an easy way for her to correct filing errors, such as missed deductions or understated or overstated income.

The tool she needs is a two-page form called Amended U.S. Individual Income Tax Return, or Form 1040-X, formerly 1040X (so named, I like to think, because it lets a filer “X-plain” her mistakes). The IRS mandates its use to justify changes to a filer’s original return and compute any resulting refund or balance due.

Claim game. For starters, I reminded her that the 1040-X comes with its own set of tricky rules. What follows are tips on how to fill it out and set things right with the IRS.

First, she must file a separate 1040-X for each year in which she is claiming a refund or acknowledging that she underpaid. This is the case even if she has made a similar mistake in more than one year because a claim filed for one year doesn’t automatically put the IRS on notice that she seeks a refund or that she underpaid in another year. Along with her 1040-X, she should submit any applicable correspondence from the IRS and corrected versions of her 1040s. 

For example, let’s say she forgot to take advantage of the child-care credit (for 2021’s 1040, it’s at Part II, Line 13g), which gives her a tax break on money paid to a caregiver for her children. No problem: Along with 1040-X, she can submit Form 2441, Child and Dependent Care Expenses, just as she would have to claim the credit on her original return. Or, let’s say she needs to correct the amount of wages or tax withheld (for 2021’s 1040, it’s Lines 1 and 25) that she reported for the year in question. She should attach a copy of any additional or corrected W-2 forms that she received after she first filed. Suppose her mistake was simply due to her misreading a correct W-2 form. Chances are, the IRS computers will catch it, but she should still send in a 1040-X and explain the error.

Whatever she is correcting, the IRS wants her to carefully explain the grounds upon which she seeks a refund or admits an underpayment. What if she’s uncertain about which grounds to list? It’s okay for her to cite several grounds, though the IRS might disagree with both interpretations, of course.

Escaping audits. She must include all information the IRS will need to substantiate her claim. In theory, a 1040-X isn’t automatically flagged for special scrutiny—IRS officials say that original returns and 1040-X forms are treated the same way. Now the reality: It’s always possible that an amendment of her 1040 could prompt the IRS to question other items on her return and on past returns. Consequently, she should make sure that her deductions, present and past, can stand a closer look. 

An audit might uncover errors that erase her hoped-for refund and entitle the IRS to exact back taxes and nondeductible interest and penalties. Proactive accountants will spell out for clients that when the IRS okays refund claims, approvals don’t bar the possibility of later audits.

What’s next. Subsequent columns will further discuss whether the IRS’s response to a filer's 1040-X will be good news or bad news.

 

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By BobRoyal
Jul 8th 2022 11:51 EDT

usable information!

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