Mistakes happen. When you're talking about filling out complicated and confusing federal tax forms, it's easy for people who do their own taxes to make mistakes. Maybe you forgot to list your international bank accounts. Maybe you changed jobs and forgot about the W-2 from your former employer. It's even possible that a glitch in the tax preparation software you use could cause you legal and financial issues.
Calculating your taxes exactly is a precise process, and omitting any amount of data could impact how much you owe or how much you can expect to get back from the IRS.
There's nothing like that sinking feeling you get when you realize after filing your taxes that you made a mistake. Many times, people realize their own errors when they receive or locate a critical tax form.
When that happens, if you originally filed with Forms 1040, 1040A or 1040EZ, you will need to file a special form, the 1040X, which includes an amended version of your tax return. Unlike your original return, the 1040X can only be sent as a physical copy. You have three years to file the amended return, which is also how long the IRS has to audit your tax returns.
Don't fear the amended return
Many people may postpone or even forego filing an amended return out of concern for an audit. That is usually a mistake. The IRS is less concerned with people who make mistakes than those who are trying to hide assets or income. Especially in cases where your changes would decrease your refund or increase your taxes due, filing an amended return is in your best interest. It generally takes between eight and 12 weeks for the IRS to process amended returns. If you already received your refund and expect more money back, you can cash your initial return check while waiting for the balance.
The IRS has flatly stated that amending returns won't inherently increase your chances of an audit. It is true that the IRS looks a little more closely at amended returns than at standard returns. Before you mail in your 1040X, review it several times. Ideally, you can have another person that you trust also review the documents for any critical errors. As long as you haven't made major mistakes on the amended return, you shouldn't have to worry about an audit.
It's important to remember that most audits get performed at random, with tax filers selected by computer programs. Certain factors, like reporting a financial loss through a solely-owned business or claiming the Earned Income Tax Credit could increase the potential for an audit. In the long run, you'll sleep better and have greater peace of mind once you correct your return. That way, if you do get selected for an audit, you'll know that your tax records are accurate, and you shouldn't owe any penalties or fines.