Yes, you can – and should – amend tax return errors

I filed my 2016 tax return last month, and I just realized that I may have made a mistake. Can I correct, and if so, how should I proceed?

You definitely can correct a mistake on past tax returns, and, more importantly, you should. You have three years from the date you filed your original return or two years from the date you paid the tax, whichever is later, to make any corrections to your tax return. If the mistake you made was a one-time error, it isn’t necessary to panic. There are interest charges if you owe additional tax, so you may want to act promptly.

If you do amend your return, be aware that you must also correct any other mistakes that might have been made when you originally filed. By this we mean that you can’t just choose to amend only the items that will reduce your tax – you must amend all errors, regardless of the outcome. So if you failed to report certain income or inadvertently overstated other deductions, you must include the proper amounts on your revised return.

Keep in mind that if your original return doesn’t accurately report the correct tax, you may still be liable for interest and penalties if the amended return requires an additional payment of tax. Monthly interest will accrue on any tax you underreported between the original filing date and the date you file the amendment, so you do want to take care of any updates or changes as soon as you are able.

There are a number of other potential issues to consider when determining whether or not you should amend past tax returns.

If you inadvertently omitted, or incorrectly listed your filing status, dependents, income, deductions or tax credits, you should amend your return.

Math errors, on the other hand, do not require that you amend your return. The Internal Revenue Service (IRS) computers will correct any errors in calculation. Remember that they will not send you an email, so be wary of potential fraud if you receive an email from the IRS requesting information.

If your amended return will result in a refund it cannot be issued via direct deposit. The IRS will issue you a check, which will be mailed to the address on your return.

Finally, don’t forget about any state amendments when you file your federal revised return. States use special forms, as well, and most require a copy of your federal amended return and proof of refund from the IRS. In many cases, you have an extra year to amend your state return, but be sure to verify the specific rules for your home state.

It’s important to note that the statute of limitations on tax returns works both ways. The IRS also has three years to audit tax returns, and may have a longer period of time if there's substantial under-reporting. The IRS scrutinizes amended tax returns more thoroughly than original tax returns, so it’s important to explain the reasons why you are correcting your tax return and reinforce those explanations with proper documentation.

When it comes time to actually file an amended return, it will have to be mailed to the IRS on paper for manual processing to the same service center where you filed the original return. So even if you initially filed your return electronically, you’ll have to amend on paper. And, if you need to amend more than one tax return, you must prepare a separate form for each return.

If you aren’t sure whether you need to file an amended tax return, consult with a tax professional as soon as you can. They can guide you through the process, and help you determine whether or not it is necessary.

Tom Cooney and Crystal Faulkner are partners with MCM CPAs & Advisors, a CPA and advisory firm offering expert guidance and beyond the bottom line thinking for today’s public and private businesses large and small, not-for-profits, governmentalentities and individuals. For additional information, call 513-768-6796 or visit us online at www.mcmcpa.com.