With all the tax deductions and credits available, it's not surprising that people sometimes find one that they've forgotten to claim on a previous tax return.You aren't automatically out of luck if you've discovered that you missed a deduction after you filed your federal income tax returns. Consult with a financial or tax professional with questions concerning your individual circumstances.
You can file an amended tax return using Internal Revenue Service Form 1040X. You generally have three years from when you filed your original return to claim an additional refund.
Claiming Tax Deductions from Previous Years
American tax laws are among the most complex, and the Internal Revenue Service makes changes to the tax code every year, some of which are significant. Missing one-time tax deductions is a common oversight made by taxpayers, especially diligent taxpayers who file their returns early in the year. Even professional tax preparers often miss one-time deductions.
Other tax deductions taxpayers often miss are travel expenses to and from receiving medical treatment, home improvements that increase energy efficiency and mortgage refinancing points. Commonly missed tax credits, which reduce the amount of tax you owe, can include ones for contributing to accounts like 401(k)s and IRAs, ones covering education and credits for low income elderly people and those with disabilities. Some mistakes are not even discovered until taxpayers file the following year's returns.
If you make a mistake on your federal income tax return, including missing a significant tax deduction, you must file Form 1040X to correct the error. The form and instructions are available to download from the IRS website. Include the year for which you are making the correction on the form, along with any schedules that you did not file with your original return. You don't need to file new copies of your original schedules or W-2 forms, however. Wait until you've received your original refund before filing Form 1040X.
You may complete Form 1040X on your computer and save the completed form for your records. However, once you complete Form 1040X, you must print out and file one copy of the completed form, along with copies of any additional schedules, by mail. The IRS will issue a paper check for your additional refund; you cannot specify direct deposit for refunds issued from filing Form 1040X. As a result, the normal wait time for the IRS to process your return ranges from eight to 12 weeks.
Indicate on form 1040X why you are making changes from your original return, noting the line number on the return. You must print a separate Form 1040X for each tax year for which you are submitting a corrected return. Each return must be mailed in its own envelope. The deadline for filing Form 1040X is three years from the date you filed your original return, or two years from the date you paid any taxes on your original return, whichever is later. Tax returns filed before the original due date, notwithstanding extensions, are considered to be filed on the due date.
You may also need to file an amended state income tax return. Check with your state to be sure.
Other Ways to Claim Deductions for Previous Years' Activities
There are other situations in which you can claim deductions for things that happened in previous tax years.
For example, if you own a business and you purchased property for it, you can often depreciate that property, claiming deductions for its value over the course of its useful life, as determined by IRS rules.
In other cases, if you take a capital loss on investments that isn't offset by capital gains, you can carry forward some of that loss into subsequent years to offset future gains and income. Generally, you can use capital losses to offset capital gains on other investments, and can deduct up to $3,000 in such losses from ordinary income and then must carry over any unused portion to get a deduction for it.
If you have a mortgage, you can generally deduct the interest you pay on it up to IRS limits but can't carry forward interest deductions to a following year. Some exceptions apply for a mortgage interest credit program, though, designed for low-income homeowners. If you receive a credit through that program that you can't use because it comes out to more than you owe in tax, you can carry it over to the next three years or until it's used up.
2018 Tax Law Changes
The 2018 tax year is bringing with it numerous changes to credits, deductions and tax rates, so make sure you understand these changes before filing your taxes.
Also, the standard deduction is increasing, which may make it more advantageous to take that deduction rather than itemizing your deductions starting in 2018.
Filing Amended Returns for 2017 and Previous Years
Remember that if you are filing an amended return for a previous tax year, you must use the rules for that tax year, rather than subsequent ones, in filing your return and figuring out your refund or tax owed.
You cannot use 2018 rules, even if they're advantageous for you, for tax years 2017 and before.
- IRS: Topic 308 - Amended Returns
- IRS: Amended Returns -- Eight Facts
- Bankrate.com: Oops — Mistake on Your Tax Return? Form 1040X to the Rescue
- Bankrate.com: 10 Overlooked Tax Breaks That People Often Overlook When Filing Their Tax Return
- IRS: A Brief Overview of Depreciation
- CARRY OVER (SOMETHING) | definition in the Cambridge English Dictionary
- IRS: Mortgage Interest Credit
- Forbes: New: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More
- MoneyCrashers: List of 16 Commonly Overlooked Personal Tax Deductions & Credits for Individuals
Chris Blank is an independent writer and research consultant with more than 20 years' experience. Blank specializes in social policy analysis, current events, popular culture and travel. His work has appeared both online and in print publications. He holds a Master of Arts in sociology and a Juris Doctor.