For simple math errors and some uncomplicated omission errors here and there, the IRS advises the taxpayer not to file an amendment as it is not necessary. The IRS will make the basic corrections without getting back to you. Errors that need amendments are those that impact on ones tax liability.
Having said that, it is important to note that mathematical errors and other simple errors can trigger extra scrutiny on your form and so, you want to avoid such probability. Therefore, ensure that you counter check and do the math a second time to ensure that there are no such simple errors. Furthermore, with e-filing, small errors such as omissions and addition errors are eliminated, as the software does the additions automatically and reminds you of areas that you have not entered information. It also helps with other simple errors.
Other Significant Errors
For substantial errors (such as understated incomes or overstated deductions or credits), the IRS advises the taxpayer to file an amendment as early as possible. With the increased sophistication of the tax reviewing system, the IRS can now much more easily catch mistakes. Therefore, the chances of being identified and audited by the IRS because of such errors are higher now than they were before. The IRS system is able to compare and check off entries from corresponding taxpayers' returns and so, if the amounts conflict, it may be a matter of time before your get an audit notice.
Filing an amendment to alert the IRS of an error may also get your tax penalties waved. The IRS waives penalties if the taxpayer is deemed to have been genuinely unaware of the liability (and it is not an issue of fraud or negligence).
To file an amendment, you need to fill out Form 1040X, "Amended Return Form" with the correct information.
Details at the Narrative Section of Amendment
The amendment Form 1040X has a narrative section that enables the taxpayer explain the reason of the error or the nature of the error. It is best for the taxpayer to provide as detailed information as possible so that the case will be clear to the person reviewing the form. Unclear corrections with scanty explanations can be a direct route to an IRS audit. Therefore, ensure that whoever gets a hold of the return will easily understand the error being corrected and the reasons for the error. Clarity at this section can also contribute to the IRS waiving any tax penalties for unpaid taxes.
State and Federal Corrections
One of the important notes for making a correction on the Form 1040X is to ensure that you make any relating state tax corrections. The Federal and State tax authorities do a lot of information sharing. The State Tax administrations usually get alerted to the corrections made on Federal taxes and therefore, if you do not file a corresponding amendment for the State taxes, you will be setting yourself up for an audit. Therefore, ensure that all related taxes are filed for a given error.
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