Everyone makes mistakes. And sometimes you don`t even realize your mistakes until they`ve been made. But what if you suddenly discover there`s an error in a tax return you filed months (or years) ago? Or what if there is a new development that affects the amount of tax you would have had to pay on a previous tax return? What do you do? Whether the mistake or development is in your favor or in favor of the government, filing an amended tax return is often the next step. If you need to file an amended tax return, you will likely need to complete the IRS Form 1040X, which is used to: Most taxpayers who file an amended tax return electronically have already filed their original tax return electronically. Therefore, the simplest procedure for filing the amended return electronically is to update the original underlying return with the amended items. Once the declaration has been updated with the amendments, attach the required XML document (see below) and any other supporting explanations, and submit the amended declaration by email, ensuring that the modified Return box is checked. Taxpayers can also change their return electronically if the status of their return changes, or to add a dependant already claimed to another return. According to IRS Publication 4163, “a substitution declaration is a declaration filed after the declaration originally filed but submitted within the filing deadline, including renewals.” A replacement declaration is considered the original declaration because it replaces all other declarations already submitted during the filing period, including extensions. If you submit a subsequent declaration, including renewals, after the registration deadline, you must submit an amended declaration.
What happens if you just filed a tax return and discover an error the next day? If the submission deadline, including renewals, has not passed, you do not wish to submit an amended declaration. Instead, you can submit a so-called “substitution statement.” If you submit a second declaration before the registration deadline, the second declaration “replaces” the first declaration and will be treated as the original declaration. The CCA 202026002 presented two scenarios in which taxpayers filed replacement returns before the extended due date of Form 1120, U.S. Corporation Income Tax Return. In the first scenario, the taxpayer did not file a copy of Form 3115, Request for Change in Accounting Policy, with the original return. The taxpayer then submitted a replacement return containing the missing Form 3115 in due course. More than three years after filing the original return, but less than three years after filing the replacement return, the taxpayer filed a Form 1120X, Amended U.S. Corporate Income Tax Return, requesting a refund. In the second scenario, the taxpayer also filed a replacement Form 1120 in a timely manner, reporting losses in addition to the losses reported on the original Form 1120, resulting in a larger refund claim.
The creator of the statement called me to ask which statement should be attached to an amended statement. He stated that he wanted to file the amended return quickly because the deadline to submit an original return would soon have passed and he felt that filing an amended return before the deadline would help pay the penalties. It got me thinking: this can`t be the first time this has happened. There were to be situations where a tax return is filed and before the deadline to file an original return, additional information is discovered that changes the original return. So I quickly did some research and found what`s called a “stain remover.” A replacement declaration is a declaration submitted after the declaration originally submitted, but submitted within the submission deadline, including valid renewals. A replacement return filed in a timely and correct manner is treated as the original return for the tax period and eliminates the possibility of penalties or other measures due to a lack of information. A taxpayer may want to file their return at the beginning of tax season for a number of reasons. Maybe they`re waiting for a refund or maybe a tax return filed is needed to determine a child`s financial support at university or when they enter university. Whatever the reason, a return is filed, and then additional information is discovered that changes the tax return. If the deadline for submission is still open, a replacement declaration may be submitted, which will be treated as an original declaration. It can take up to three weeks from the date you send your amended return for it to appear in the IRS system.
After that, it usually takes eight to 12 weeks for a modified return to be processed, but in some cases it can take 16 weeks or more – so you`ll need to be patient. All business rules for the electronic filing of original Forms 1120, 1120-S and 1120-F are applied to replace the returns. If you`re editing an older tax return, keep in mind that the recent Tax Reform Act changed many tax breaks starting with the 2018 tax year. Some deductions and credits have been cancelled or reduced, others have been added or expanded. Just because you are now eligible for tax relief does not mean you were eligible when you filed your pre-2018 return. In reaching these conclusions, CCA relied 202026002 on two Supreme Court decisions in 1934 in which newly enacted tax laws required a taxpayer to complete the original tax returns by filing an amended return (Zellerbach Paper Co. v. Helvering, 293 U.S. 172 (1934) and National Paper Products Co. v.
Helvering, 293 U.S. 183 (1934)). In both cases, the Supreme Court found that the filing date of the original declaration was the relevant date for the purposes of applying the limitation period for assessments. Although the Supreme Court`s 1934 decisions concerned the limitation period for assessed contributions, the CCA concluded that the same logic underlying the Court`s decisions must be applied to the question of what constitutes compensation for the purposes of the limitation period for making a claim for reimbursement. Here`s an example: For the 2019 tax year, Andrew and Becky filed a joint federal return with adjusted gross income of $150,000. They had $23,000 in individual draws, but they claimed the standard deduction of $24,400 because it is higher. His total federal tax payable was $19,350. A week after filing their federal return, Andrew and Becky began work on their state declaration. They quickly realized that (1) their federal standard deduction is much lower than the standard federal deduction and (2) they cannot file their federal return unless they have broken down their federal statement (which is a common caveat).
The claim for their standard state deduction, which was only $4,000, resulted in a total state tax liability of $7,000. If Andrew and Becky file an amended federal return and claim their $23,000 in individual deductions instead of the standard deduction of $24,400, their total federal tax increases by $310. However, this allows them to file their state income tax return, which will reduce their total tax liability by $750. That`s a total gain of $440! Note: Currently, California, New York and Utah accept replaced returns. If the federal government is marked as replaced, these declarations will also be replaced. If other state tax returns are filed again with a replaced federal return, those states will be rejected as a double filing. You don`t need to file an amended tax return if you discover a simple calculation or typo on your return. The IRS can correct these types of errors on its own. An amended declaration is also not required if you forgot to attach a specific form or schedule to your return. The IRS will contact you via email if they need additional information to correct these types of errors. However, you should file an amended tax return if there is a problem that changes your return status, income, deductions or credits. This is fine if changing your return results in a refund, but unfortunately this is not always the case.
If you owe money to the government because of filing an amended return, pay tax immediately to avoid additional interest and penalties. And while we`re on the subject of state tax returns, remember that a change to your federal filing can also affect your state tax liability.