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Are you worried about having to file an amended tax return? Well, you're in good company. In 2014, an estimated five million taxpayers amended their tax returns. This year, as the April deadline approaches, millions more will likely do the same. Amending your 1040 individual tax return form is simple; you simply fill out a 1040X form, an amended individual income tax return, and send it into the IRS. Unlike the 1040, however, this form cannot be e-filed; you must fill it out and then mail it to the IRS.
However, how do you know whether you need to file an amended tax return? Let's look at five of the top reasons you might need to fill out a 1040X form and amend your Federal income tax return this year.
1. You didn't include all the required tax forms in your return
You should file an amended tax return if you failed to provide the various forms that the IRS requires to process your return. The main forms that taxpayers often fail to provide in their original return are 1099 forms reporting income from investments or non-payroll work, W-2s from employers, or health insurance information contained within an IRS Form 1095-A. As more and more Americans earn their living as freelancers, contractors, sole proprietors, or work side hustles, failing to include these forms is a common misstep. If you make this mistake, fix it with an amended return.
2. You receive additional tax information after filing your return
Despite your best efforts, you often cannot get all your tax information paperwork in time to file all of it with your 1040. Businesses are notoriously late in completing their 1099s and mailing them out; mortgage lenders and banks can be late sending out their tax-related documents as well. If you file your return and later receive documents that you must include with your tax return, go ahead and file an amended return.
3. You didn't report all of your income, or claim all of your tax credits
Did you remember to report all of your income? Sometimes, people forget to claim income they make from work they did on the side, which nonetheless may have generated a 1099. Failing to report it could lead to a penalty, or potentially an audit if the IRS believes the omission was egregious enough. Some taxpayers forget to take advantage of the credits available to them, such as child tax credits and mortgage interest deductions. If you've forgotten to report income or failed to take advantage of a tax credit, you can file an amended return to set things straight.
4. You spot an error on your tax return after you file it
At some point, you may file your tax return only to discover afterward that you made a mistake. Failing to correct errors can often be costly. If you erroneously select the wrong type of return (for example, selecting "single," instead of "married filing jointly"), you could end up paying more than necessary. Similarly, you may have claimed deductions that you subsequently realized you weren't eligible for. If you spot an error on your return, all is not lost; simply file a 1040X form and send in the amended return.
5. You decide to make advantageous changes to your tax return
Did you change your filing strategy after the fact? Some taxpayers file their tax returns only to realize that, had they filed them differently, they could have saved some money. For example, say you chose the standard deduction and then realized that itemizing would have increased your overall refund. You can still make changes after you filed your tax return; simply fill out a 1040X form, make the changes you consider necessary, and then mail it in.
While it's a relatively simple process to amend your tax return, you should review your information carefully. Although an amended tax return doesn't increase the chances of an audit, any changes to your tax return are going to increase the scrutiny it receives. Make certain that you review your entire tax return and make all changes when you send in your 1040X amended return.
Additionally, you should always work with a trusted tax professional as you're preparing your original or amended returns. A tax expert can help you determine when omitted information such as a 1099 form may require an amended return, while other information, such as a mathematical error on your 1040, won't require any amendments. A good tax professional can also give you the advice you need to get your taxes filed correctly and keep you out of trouble. And of course, make sure to keep your stress low during tax season so you can stay in good physical and good financial health.