You filed your taxes on time and it was a huge relief. Getting your taxes prepared every year is burdensome. Then you stumble upon some additional tax information. The nervous twitch you feel inside about taxes comes back. We recommend amending your IRS tax return.
It takes the IRS longer to process an amended tax return. There is also a greater risk of IRS audit. But if the amended tax return is prepared with adequate supporting documentation, the process for filing an amended tax return should run smoothly.
Additional IRS Deductions
You have the option to amend your tax return if you find additional deductions. A tax return can be amended for additional business deductions or personal deductions. The personal deductions could be additional charitable contributions or employee expenses. You may receive an additional refund by filing the amended tax return. Generally, you have 3 years from the date the tax return was due to claim the refund. For example, 2013 tax return was due on April 15, 2014. You have until April 15, 2017 to amend the 2013 tax return to claim a refund.
It is optional to amend your tax return for additional deductions. The decision to amend your tax return for additional deductions depends on the cost to amend the tax return and the expected refund.
Finding additional income is a different story. When you receive a W-2 or 1099 from a company, a copy of the W-2 or 1099 is filed with the IRS. When you file your tax return, the IRS will compare the income reported on your tax return to the W-2s and 1099s submitted to the IRS. If the numbers do not adequately match, the IRS will send you a letter about unreported income.
Receiving a letter about unreported income is not fun. It may take the IRS 9 to 18 months to notify you of unreported income. The IRS will charge interest and penalties for additional taxes owed. The penalty for unreported income can vary greatly. The penalty for a small error may be 5% or less. The penalty for a large error can be 20 to 40%. The penalty for a significant error can be as high as 75%.
If you find unreported income, we highly recommend amending your tax return. You may greatly reduce the IRS penalties and interest.
IRS Circular 230 Disclosure: To the extent this writing contains advice on a federal tax issue, the advice is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.