5 Times You Need To File An Amended Tax Return

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Filing your taxes is easier said than done because it is much involved. There is always a chance of error. Everyone knows that messing up your return can have serious implications.  The complications may vary from paying more taxes than you are liable for receiving a lower refund value than you are entitled to. In the worst-case scenario, you may get hit with penalties and interests by the IRS, which is the last thing that you would want to face. However, there is still a solution to such tricky situations and it comes in the form of the amended tax return. Before knowing when you need to file an amended return, you should understand what it actually is.

What is an amended tax return? 

As the name suggests, an amended tax return is the one with changed information. Obviously, you would want to amend your original tax return if you realize that you have made some errors in it. Filing an amendment means a lot of work as there are extra forms that you need to complete besides the original 1040. A 1040X amended return is what you file to change any information related to your filing status, income, deductions or credits. The 1040X shows the original numbers and new numbers in addition to the difference between the two. Even though it requires much work, you should still file an amended return when there is a need for the same.

Reasons to file an amended tax return

To err is human, so a mistake in the tax return is something that may happen with anyone. An amendment in your tax return is something that can save you from trouble. Here are the reasons why you may consider filing an amendment.

You got another W-2 or income statement after filing your taxes

Consider a situation when you get a W-2 for a job you which you held just for a few weeks. The amount may be insignificant but could still impact your tax. A missed interest statement for a bank account could be another cause of an increase in your tax liability after filing your taxes initially. The best thing to do in such a situation is to file an amended return. Even great tax lawyers you’ll swear by will want you to do so because the IRS would penalize you for not reporting all of your income. Also, it is advisable to make sure that you receive all the income statements before filing to avoid a mismatch in the first place.

Your employer made an error on your W-2 and sent a corrected document

Another scenario that involves W-2 and requires you to file an amendment is when your employer made a mistake on the form and resend a corrected one later. When you receive this one, it will show the previously reported information along with the correct information to indicate what needs to be rectified. If the numbers have changed and you have already filed your tax return with the incorrect W-2, filing an amendment is the only option.

You forgot to report a side gig income

A majority of taxpayers have no idea about the fact that any income from a side hustle is taxable as well. If you failed to consider our side gig income while filing your return, the IRS will probably send you a CP2000 notice for not reporting your income correctly. In this situation, you are liable for underpaying your taxes. You don’t need to amend the return if the information in the notice is correct and you have no additional income, expenses or credits to report. Conversely, an amendment has to be filed if there are some expenses that you need to deduct from the income from your side gig.

You missed claiming a legitimate deduction or credit

There are several credits and above-the-line deductions (ones which you need not itemize to take) which could lower your tax bill to a considerable extent. If you are eligible for such credits and deductions but do not claim them, you will lose your money. The best thing to do in this case is filing an amended tax return. Obviously, you will end up paying a smaller amount to the IRS by doing so.

You used a wrong filing status

Filing with a wrong status is another legitimate reason for the amendment. The most common scenario, in this case, is when a taxpayer gets married at the end of the year but was single for a major part. The IRS considers the filing status of a person as married for the entire year if they get married by December 31 of the tax year they file for. Filing as married has some tax advantages and you must absolutely file an amended return to claim them if that is the case. 

An amended tax return is the best thing to do if you are facing any of these circumstances because it will keep you on the right side of the law. It keeps you stress-free and ensures that you are able to claim your rightful deductions and credits as well. 

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