With many things in life, you don't get do-overs. Fortunately, taxes aren't one of them. Months, even years, after filing your return, if you want to claim a deduction you forgot or fix another mistake, you can. Meet the 1040X.
Ever filed a tax return, then months or years later thought of something you forgot to deduct? I have. So has the reader who asked me this question:
I purchased a house in 2008 with a mortgage rate of 5.67 percent. The interest for that first year was, of course, astronomical. I (stupidly) did my own tax return for 2008, but did not include the mortgage interest on my tax return! Is it too late to file an amended return? If not, is there anything I can do now to try to recover some of that loss?
I can tell Alex is young. The giveaway: He thinks 5.67 percent is astronomical.
Ever hear an old-timer talk about buying bread for a nickel back in the day or a new car for $5,000? In the early 1980s, that’s what a 5 percent mortgage sounded like. And now they’re 3.25 percent? Knock me over with a feather.
OK, on to Alex’s question.
Going back in time with a 1040X
The time machine that lets you travel back to fix tax mistakes is Form 1040X. Here’s when you need to use one:
- When to amend: File if your filing status, number of dependents, total income, tax deductions or tax credits were reported incorrectly or omitted. Also file if a bad debt or a security becomes worthless, to claim or change a foreign tax credit or deduction for foreign taxes, to carry back your unused foreign tax credit, or to reduce a casualty loss deduction after receiving a hurricane-related grant.
- When not to amend: Do not file an amended return if you made math errors, which the IRS will automatically change for you, or if you forget to attach tax forms, such as W-2s or schedules. The IRS normally will send a request asking for those.
- Deadline: Generally, file Form 1040X within three years from the date you filed your original tax return or within two years of the date you paid the tax, whichever is later. Enter the year of the return you are amending at the top of Form 1040X.
- Paperwork: An amended return cannot be e-filed. You must file it on paper, but you can track it online later. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes. If your changes involve another schedule or form, you must attach that schedule or form to the amended return.
- Timing: If you are claiming an additional refund, wait until you have received your original tax refund before filing Form 1040X. Amended returns take up to 12 weeks to process. You may cash your original refund check while waiting for the additional refund.
- Pay now: If you owe additional taxes with Form 1040X, file it and pay the tax as soon as possible to minimize interest and penalties.
- Follow-up: You can track the status of your amended tax return three weeks after you file with the IRS’s new tool, “Where’s My Amended Return?” online or by phone at 866-464-2050.
How far back can you go?
The news isn’t good for Alex. As mentioned above, you need to file an amended return by three years from the date the original return was filed, or two years from the date the taxes were paid — whichever was later.
Since Alex presumably filed his 2008 return on or before April 15, 2009, his clock ran out on April 15, 2012. Had he filed an extension that year, the clock would have started running on the date he filed.
How much hassle is it?
A 1040X isn’t rocket science. Take a look at the form and you’ll see how it works.
On the 1040X you’ll show the numbers you changed. In part 3 of the form, you’ll briefly explain why you’re changing them. For example: “Forgot a W-2,” or “Forgot mortgage interest deduction.” You’ll also send a copy of the W-2 or 1098 to support your change.
If you owe money, you’ll send a check. If you’re getting a refund, the IRS will send you one.
It will take two or three months for the form to get processed – maybe more if you do it when the IRS is busy, like during tax time.
Will I get audited?
While nobody knows for sure whether a 1040X is more likely to get audited, it’s certainly going to be looked at by a human being, perhaps carefully. That’s why it’s important to fill out the form properly, include the documentation necessary to prove your point, and provide a detailed, yet concise, explanation.
Your goal is to provide everything they need to easily see what’s going on.
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I founded Money Talks News in 1991. I’m a CPA, and over the years I’ve also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate. Got some time to kill? You can learn more about me here.