Amended tax returns aren’t an automatic red flag for IRS auditors. But, do amended tax returns trigger tax audits? It depends on what you include in the amended tax return. However, it’s common for people to make mistakes when submitting their taxes, and provided you don’t submit intentionally false information, an amendment won’t automatically result in an audit. To file an amendment, fill out form 1040-X and either e-file or file the form through the mail.
Given the confusion many of us feel when we file our tax returns, sometimes we recognize a mistake only after submitting our returns. While this may sound like cause for concern, you’ll be happy to know the IRS prepared situations like this happening. If you spot any mistakes, you’re allowed to file an amended return. However, you have to fix every mistake you spot and not just the errors that may favor you. But what does this mean for your tax return? Will this result in even more tax problems?
Do I have to amend my tax return?
It depends. If you made a substantial mistake, you may want to amend your tax return. However, the IRS will automatically correct basic math errors and you don’t need to file an amendment if you forgot to attach tax forms unless the IRS asks for them. This is not tax advice. We recommend you contact a tax professional if you are in doubt.
The IRS will fix some errors themselves, such as simple math mistakes. If you forget to add any forms to your original return, such as your W-2 or tax schedule, you can submit an amended return but may not need to as some returns are processed without these forms. You usually get an IRS notice in the mail if these forms are required.
The IRS says:
You normally don’t need to file an amended return to correct math errors on your original return. The IRS will automatically correct those for you. Also, do not file an amended return if you forgot to attach tax forms, such as a Form W-2 or a schedule. The IRS will mail you a request for them in most cases.
However, sometimes it is necessary to file an amendment using forms such as 1040-X. On the topic of tax amendments the IRS also says:
“Although the IRS often finds and corrects errors during processing, there are certain situations in which you may need to file an amended return to correct an error or make other changes to your return.”
Questions to consider before filing a tax return amendment
The IRS has a useful questionnaire that can help you determine if you need to amend your return. It will ask you the following questions (and some others depending on your answers) and give you some suggestions based on your answers.
- What year is the tax return you want to amend?
- Have you filed an original tax return for the tax year you are asking about?
- Have you received a notice from the Internal Revenue Service related to the change you are asking about for the tax return for the tax year you are asking about?
- Do you need to change your filing status?
- What was your original filing status for the tax year you are asking about?
- What do you want to change your filing status to?
How long do I have to amend my tax return?
You can technically file an amendment for any year, but you have three years from the due date of your original return to file an amended return and claim a refund. Another thing to consider is the IRS usually only has three years to do an audit on a tax return. Tax professionals refer to this as the audit “statute of limitations,” and it means the IRS has a three-year window in which to submit their audit request. This three-year window doesn’t often extend if you file an amended tax return unless the amendment is filed within the final 60 days of the statute of limitations. In that case, the IRS has an additional 60 days to decide whether to audit.
A change to filing status must be filed by the later of:
- Three years after the date you filed your original return, or
- Two years after the date you paid the tax.
This all changes if you significantly under-report your income. If your originally reported income shows 25% or more missing, then the IRS will have six years instead of three in which to audit your return.
How do I file an amended tax return?
When filing an amended tax return, you’ll need to fill out IRS form 1040X. This form details what your proposed change or amendment is and why the item must be changed. The event must have reasonable cause (meaning filing falsely cannot be the reason for the amendment) and you must offer a thorough explanation of what occurred. You must file a separate form for every tax year you wish to amend. Fortunately, you now have the option to file form 1040X through the IRS’s e-filing system instead of by mail.
Filing an amended tax return means amending everything, not only the items that result in a larger refund. You must fix all of the errors you claim in the return you filed originally, and this may mean your amended return results in additional refund or greater tax liability. And, while there’s no guarantee, you’ll likely have a greater chance of an audit if your amendment requests more money from the IRS.
How are tax returns and amended returns chosen for audit?
Both original and amended returns are chosen for audit using the same process. Tax returns submitted by similar taxpayers are compared to each other within a computer system. This computer analyzes various returns using certain thresholds and flags any that have noticeable differences. The IRS then assigns a revenue agent to physically review the flagged tax return. If the revenue agent conducting the review decides the return must be further reviewed, the tax return is handed off to the manager of another audit group. If the managing auditor decides your return must be audited, then does your audit begin and the IRS will notify you.
The IRS may choose your return for an audit without an amendment. If this happens, avoid sending an amendment. Since the auditor may never see your amended return, filing an amendment after the audit starts will create confusion and may result in a longer process than necessary.
Will amending my tax return increase my audit risk? Is it a red flag?
Not necessarily, but it all depends on what you include in the amendment. Unfortunately, many of the questions presented here don’t have a clear answer. Simply filing an amendment will not increase your audit risk, but the contents of the amendment may result in a tax audit request. For example, if your amended return shows a significantly larger refund than your original return filing, that return has a great chance of being chosen for an audit.
Is there a penalty for amending a tax return?
There is no fee associated directly with amending your originally filed return. However, there may be penalties or fines if you have additional tax liabilities.
Here’s where time is important: If you owe more in taxes, the interest and penalties apply to the difference owed. The interest also begins accumulating on the difference stated in the amended tax return starting from the date you originally filed your return. This means you could have significant tax debt depending on how quickly you file an amended tax return.
How often do amended returns get audited?
Similar to the question above, this question sadly doesn’t have an exact answer as the IRS may pay attention more closely depending on the item you amend. More audits are done so through a referral than by recognizing a return as amended since too many taxpayers submit an amended return to audit every single one. Here is a a more in-depth study of the chances of getting audited by the IRS.
Properly filing your return can be confusing, and we may not have answered all the questions you have. If you need tax advice or help to file your return or a return amendment, reach out to a tax attorney or tax expert.
- Simply filing amended returns does not increase your chances an IRS audit.
- There is a three-year time limit to file an amended return, also known as the “statute of limitations.”
- To file an amended tax return, you need to complete form 1040X and provide thorough explanations for why you are filing an amended return.
- While no direct fee comes with an amended return, you may be subject to penalties or fines if your tax liability increases.
- If you have further questions, seek professional advice from a tax attorney or expert.