Correcting Mistakes After You File: Amended Tax Returns

IRS Form 1040X Amended Return
IRS Form 1040X Amended Return

So you filed your federal income tax, and just when you thought it was safe to spend your refund, did Uncle Sam come calling again?

Might be time to file an amended return.

That’s what as many as 50,000 taxpayers who receive subsidies for health insurance premiums may face this year because they received bad information from the government.

But they won’t be alone if they amend their returns. About 5 million taxpayers filed amended returns last year, according to the IRS.

We have tips to help you no matter the reason you want to amend your return.

By Feb. 20, the IRS says, nearly 50 million taxpayers had filed their 2014 returns, and almost 40 million of them were getting refunds averaging $3,218 each, or a total so far of nearly $125 billion. Although the filing deadline is April 15, many people file early to get their hands on their refund checks as soon as possible.

Wounded returns

Last week, about 800,000 HealthCare.gov customers were notified that a government goof gave them the wrong information on a new tax form called 1095-A. The form is much like a W-2 for people who got subsidized private coverage in 2014 under the Affordable Care Act, commonly called Obamacare.

The Healthcare.gov blog asked customers who received bad information to wait to file their 2014 federal income taxes until they receive corrected forms in early March.But that word went out too late for those 50,000 taxpayers who’d already filed with the bad information, the IRS said.

The Healthcare.gov blog explained the mistake this way:

“Most people received a correct Form 1095-A. However, if we contact you because your Form 1095-A is incorrect, here’s why. Some forms included the monthly premium amount of the second lowest cost Silver plan for 2015 instead of 2014, which needs to be corrected. The incorrect amount is listed in Part III, Column B of the Form 1095-A. We’re working quickly to resolve this and any other issues with the 1095-A forms. This does not mean that your tax credit was incorrect; this is purely an error in what was printed on the form.”

Form 1095-A
A blank Form 1095-A shows what column contained wrong information for 800,000 taxpayers.

That “second lowest cost” is the benchmark premium used to help determine individuals’ subsidies, computed as tax credits, which is why they complicate tax returns. You enter the information from your 1095-A on Form 8962, which you file to determine your health premium credit, whether you got too much subsidy for monthly premium payments, which will injure your refund, or too little, which will strengthen it.

The government mistake could have delayed tax refunds, which many people count on for a spring spending spree, savings spur or debt reducer.

You can find out if your original 1095-A was wrong by logging into your HealthCare.gov account, where you would find a message if you were affected. You may also phone the federal Marketplace Call Center at 800-318-2596, the blog said.

You don’t have to file an amended return because of the error. The Treasury Department said last week they were cutting taxpayers a break. From their press release:

Treasury estimates that approximately 50,000 tax filers (or less than 0.05% of total tax filers) already have filed their taxes using these incorrect form 1095As. We have concluded that these individuals do not need to file amended returns. The IRS will not pursue the collection of any additional taxes from these individuals based on updated information in the corrected forms.

So you don’t have to file an amended return if doing so would result in your having to pay more. However, you may want to if the new, corrected information would result in a bigger refund.

H&R Block, Jackson Hewitt and TurboTax say they will not charge customers to amend returns.

Amend or not amend?

Obamacare aside, there are many reasons taxpayers file amended returns. If you become one of them someday, the IRS offers these tips:

  • 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, 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 make 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’ new tool, ‘Where’s My Amended Return?‘ online or by phone at 866-464-2050.

A mistake can cost you valuable time or money. See Money Talks News finance expert Stacy Johnson’s tips to avoid some of the most common tax-time mistakes here.

If you need help with tax debt, visit our Solutions Center here.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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