It is not unusual for a taxpayer to leave a deduction or credit off his original tax return, only to learn of it after the return is filed. If that happens, the procedure for correcting the original return is to file a form 1040X. This form contains a summary of your original and corrected information, with an explanation of the change. The tax is computed under both scenarios and the difference, in the case of an overpayment with the original return, is refunded.
IRS Audit Exposure
If you file an amended tax return and do not include evidence for the amendment, you may increase your chances of being audited. If, for example, you forgot to deduct your real estate taxes, you should send a copy of the real estate tax bill with the amended return. The greater the amount of the refund, the more likely it is you will be audited.
Interest on the Refund
Generally, if a tax refund claim is paid within 45 days of the time the claim is made, there is no interest added to the refund. However, in the case of an amended return, interest is paid from the original due date of the return until the date the amended return is filed. For example, if you filed your amended return on July 15 for a return originally filed on April 15, interest is paid from April 15 to July 15. As long as the refund is paid with 45 days of July 15, no further interest is paid.
Statute of Limitations
The IRS normally has three years to audit a tax return, except in cases of fraud or failure to file. You also have three years in which to file an amended return. If you discover your omission of real estate taxes four years after you filed your original return (including extensions), you are out of luck. But filing an amended return does not extend the three-year statute. So if you filed your original return on April 15, 2012, and your amended return on July 15, 2012, the IRS still has only until April 15, 2015 to audit you.
If you live in a state that has an income tax, don't forget to file an amended state tax return as well. You should also consider whether the amount of the potential refund is worth the time and effort of filing an amended return. When in doubt, consult with your tax professional.
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