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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 2005 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 2005, 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? . . . or is this, as Dave Ramsey would call it, a “stupid tax” I paid. If it’s significant, I still live in the house and have refinanced at a lower rate.
(This mistake certainly has kept me humble.)
I can tell Alex is young. The giveaway: he thinks 5.67 percent is astronomical.
I can remember thinking I’d be in hog heaven if I could get a mortgage at less than 10 percent. Ever hear an old-timer talk about buying bread for a nickel 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 you need to fix a mistake on a 1040, 1040A, or 1040EZ.
- When you need to change your filing status, income, deductions, or credits.
Here’s when you don’t:
- When you made a math error; the IRS will catch it.
- When you forgot to attach something, like your W-2; the IRS will ask for it.
You can’t file an amended return electronically – it’s got to be done on paper and mailed in.
How far back can you go?
The news isn’t good for Alex. In order to get a refund, you need to file an amended return within three years of the filing deadline of the original return. Since Alex presumably filed his 2005 return on or before April 15, 2006, his clock ran out on April 15, 2009. 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.
You’ll mail the form to the same IRS address where you sent your original return. If you don’t know it, you can find it in the 1040X instructions.
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.
Got a money-related question you’d like answered?
Drop me a line! Just try to make sure your question would be of interest to our other readers – don’t ask for personal or super-specific advice. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.