By Barbara O’Neill, Ph.D., CFP®, AFC®
Martie Gillen, Ph.D., MBA, AFC®, CFLE
It happens more than you think. Taxpayers file a federal income tax return only to learn they missed a valuable tax credit, deduction, or adjustment or forgot to report a source of taxable income or remove a dependent. Between 3 to 4 million amended (a.k.a., Form 1040-X) tax returns are filed each year.
After income tax season ends, Personal Financial Managers may receive questions about the process of filing an amended tax return. Below is some “need to know” information to share with military families:
Time Limit– Form 1040-X forms must be filed within the later of three years from the original tax filing deadline or two years of paying the tax due for that year. Here’s an example of the first deadline: a 2022 tax return was due by April 18, 2023, so amended returns for 2022 must be filed before April 18, 2026.
When to File– Tax experts caution taxpayers to wait before their tax return with errors has been processed before filing an amended return. This is especially true when a tax refund is expected. Wait for the refund to be direct-deposited (or received via U.S. mail).
Separate Amended Returns– Taxpayers who discover the same error made on several tax returns (e.g., 2020, 2021, and 2022) must file a separate 1040-X form for each tax year. When filing a 1040-X by mail, only forms and schedules where errors were made need to be submitted- not the entire tax return. When amending taxes electronically, all forms and schedules from the original tax return must be included.
The Rationale for Changes– On the 1040-X, there is a section for taxpayers to explain why they are amending a previous tax return. This explanation should be clear and concise. For example, “I became aware I could subtract (item) as an adjustment to gross income” or “I am claiming the (name of tax credit) that was previously overlooked” or “I received another W-2 (or 1099) income statement after filing my original tax return.”
Tax Filing Method– Tax returns for tax years 2020, 2021, and 2022 that were filed electronically can be amended electronically, while amended paper-filed tax returns must be mailed and can take 3 weeks to show up in the IRS tax processing system.
Processing Time– The IRS advises that once received by mail or electronically, amended tax returns can take up to 20 weeks to process. Taxpayers expecting a refund should plan to wait almost half a year while those owing more taxes should pay what they owe quickly to avoid interest and penalties. The IRS Direct Pay system can be used to make fast and secure tax payments.
For additional information about income taxes, review the on-demand webinar OneOp 2023 Tax Updates.
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