Individuals who found errors on their 2022 federal income tax returns that they (or their accountants) prepared and filed earlier this year, or they found errors on previous year tax returns they filed, are not alone.
Each year millions of individuals file amended tax returns to correct errors or omissions on their originally filed federal income tax returns. IRS Form 1040-X (Amended U.S. Individual Income Tax Return) is used to amend a federal income tax return.
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A portion of IRS Form 1040-X is presented here:
Those individuals who decide to file an amended tax return to claim a refund should be prepared for what is likely to be an unusually long and most likely frustrating wait from the IRS to issue the refund check.
Tax professionals are warning their clients that the IRS is still struggling to deal with a vast income tax return processing backlog, a result of the COVID pandemic and other issues. According to the IRS, amended returns can now take more than 20 weeks to process. Pre-COVID pandemic processing of amended returns usually took approximately 12-to-16 weeks.
Aside from expecting delays in processing the amended tax return, the following are some suggestions for individuals planning to amend their 2022 or earlier year federal income tax returns:
• There are deadlines for filing an amended return in order to receive a federal income tax refund.
Individuals who are filing an amended tax return should be aware that there are deadlines for filing a return in order to claim a refund on a prior year filed tax return. The amended return may be filed to fix an error or an omission. The general rule for claiming a refund is that an individual must file Form 1040-X within three years after the date the original return was filed or within two years after the date an individual paid the tax, whichever is later.
But there are exceptions. For example: The time limit can be “suspended” for certain individuals who are physically or mentally unable to manage their financial affairs. Another exception is in the case of an individual who amends a return in order to claim a credit or refund based on a “bad debt” or a worthless security. In that case, the amended return must be filed within seven years after the due date of the return for the tax year in which the “bad debt” occurred or the security became worthless.
Note the there is no statute of limitation with respect to amending a federal tax return which results in a balance due. The balance due may have been a result of an error or an omission on the originally filed tax return.
• Amend one year at a time. Individuals who are amending federal income returns for more than one year should file separate Form 1040X returns for each year being amended.
• Amending state income tax returns. For individuals living in states or living in the District of Columbia which have state and local income taxes, they will likely also have to file an amended state income tax return as a result of filing an amended federal income tax return.
• It is highly recommended that amended returns should be filed electronically.
The IRS has permitted the electronic filing of amended federal income tax returns since 2020. That means that the first tax year for amending electronically filed returns was for the year 2019. However, in order to be able to amend a return and file electronically, an individual must have filed the original return electronically as well. The IRS is therefore accepting amended federal income tax returns for 2020, 2021 and/or 2022. Electronically filing amended tax returns is the best and most efficient way of filing an amended federal income tax return, especially when a refund is due.
• Direct deposit option. Earlier in 2023, the IRS announced that individuals who electronically file an amended tax return will for the first time be able to elect direct deposit of any refund.
Previously, those individuals who filed an amended tax return received the refund via paper check, which according to the IRS added time to the amended return process.
Note that the direct deposit option is available only for electronically filed amended tax returns. In case an amended tax return shows a balance due rather than a refund, the IRS offers a range of options of electronic payments on how to pay, including credit cards and debit cards.
The IRS also accepts full or partial payments, including a payment plan. However, individuals should be warned that penalties and interest will continue to accrue until the full balance due is paid.
• How to deal with math errors.
If an individual finds that he or she made mathematical errors on his or her originally filed federal income tax return, then an amended income tax return need not be filed. The individual should instead wait until the IRS contacts them via US mail about the errors. Chances are good that the IRS will make the necessary adjustments to incorrect originally filed tax return.
If the individual receiving the IRS correspondence agrees with the IRS adjustment and the math error either increases or decreases the refund, the IRS will send (or directly deposit the refund if that was requested on the originally filed return) the individual the corrected refund amount. This refund will be sent via direct deposit, assuming the original return was electronically filed.
On the other hand, if the individual receiving the correspondence disagrees, the individual can handle that situation by responding to the IRS correspondence. According to the IRS, an amended tax return is the equivalent to correspondence. Most importantly, responding to a notice is normally faster and simpler than filing an amended tax return.
Another word of caution for individuals receiving IRS correspondence: The IRS will always communicate with an individual via US mail. Any individuals receiving emails or telephone calls from someone purporting to be from the IRS are likely going to be the victim of a scam.
Besides an individual receiving IRS correspondence via US mail concerning mathematical errors on an originally filed tax return and therefore not filing an amended tax return, there are other reasons an individual should not file an amended tax return. To determine whether amending a federal income tax return is necessary, individuals are encouraged to go to the IRS website here and use the IRS tax tool Should I File an Amended Return?
Individuals contemplating filing an amended tax return should also be sure to read the Form 1040-X instructions. For more complicated tax issues that may require the filing of an amended tax return, individuals are advised to consult with a tax professional.