You may have submitted your tax return form weeks ago and you still do not…
So, we are all on the same foot, amending your tax return is basically sending the IRS a new tax return, correcting errors made on the last tax return you filed for that year. You technically can amend more than once, but it is generally not advised. The way the IRS communicates when ‘should’ one amend is very simple and straightforward, simply, if there was anything wrong with the last one, amend your tax return. I will lay out a more realistic approach in a little bit; life is rarely a clean yes or no choice and sometimes we have to explore. Before all of that, however, some vital facts of amendments are important. These matter regardless if you want to amend or feel obligated to amend.
Ok, back to the ‘should’ I amend question. Should is a very subjective word in my book, meaning I can make an informed decision about what to do. What I would suggest looking at, and sometimes just the situation we are in – is what would be the ramifications if I do not vs what would it take to actually do. Completing an amendment is something that looks simple to do, but it is deceptively time-consuming. You can do it on your own, but as an amendment is already correcting an error (intentional or unintentional it still looks like an error) I would suggest at least using professional software – or please consider using a professional to prepare the amendment.. which cost money. That is where the decision process comes in. What actually needs to be changed on your tax return? Did you forget $200.00 of dividends from XYZ bank? Ok, you have $200.00 more of income you should have paid tax on and have not yet paid.
The IRS states you need to amend your tax return and pay them, and they are correct. However, what is the ramifications? Interest and late payment penalty on tens of dollars of tax? It would cost much more than any interest or penalty on that little amount of extra tax to buy software or hire a professional. One could have the wild thought in their head to just wait for the IRS to catch it, send them the bill, pay, and be done. A very different scenario is when you just plumb forgot about that $35,000.00 withdrawal from your 401k to fix the foundation of your home, never got the tax form in the mail, only to remember 2 weeks after you filed your taxes. [By the way, even when they take the taxes out, the income and the taxes taken out still have to be added to your tax return] $35,000.00 is quite the change in income and you simply need to amend your tax return. Even if the result is that the taxes taken out were perfect and you owe nothing extra and get nothing back – any modest increase in income needs to be properly reported. The same advice goes for removing income, via deductions or corrected forms (your employer gives you a corrected W2 with $110.00 less income). If the amount is very small, looking at the cost and result is normal human wisdom. Pay X dollars to get Y dollars? Is X bigger than Y? That would be my answer – coupled with the 3 facts noted above.
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