THE BLOG
04/26/2013 06:47 pm ET Updated Jun 26, 2013

What to Do If You Made a Mistake or Forgot a Deduction On Your Tax Return

Your taxes have been filed, tax season is over, you breathe a sign of relief... but you just found an error on your tax return. You may be due more of a refund, or even worse, you may owe some taxes. So what do you do?

Don't panic. This is exactly why the IRS has Form 1040X (Amended U.S. Individual Income Tax Return) -- to correct any errors you or a tax professional find in your tax return. If correcting the error will get you a refund, you have up to three years after the filing or due date or two years after paying taxes to amend -- whichever is later. If you owe taxes, you should amend as soon as possible to minimize the interest and any penalties that may be assessed, since the IRS will start charging you based on the due date of the original tax return.

What you should not do is wait for the IRS to find the error and send you a letter. This may take time, and if you owe taxes, the associated penalty and interest will be higher the longer it takes to find the error. Also, while the IRS is good at finding income that has been left off of a tax return, they are not as skilled in finding omitted deductions or credits that you may have missed -- simply because they aren't structured in this way and do not have the tools to know every taxpayer's situation. So if you find you missed something, amend the tax return quickly with those deductions or credits and get the money you are owed back.

To ensure a smooth process when filing an amended return, follow these best practices:

  1. Gather a copy of your original return and any supporting records, receipts, or other documents used when you filed. Enter the information from the original return in Column A of Form 1040X.
  2. Complete a "working" Form 1040 with the correct information. Enter the correct information in Column C of Form 1040X. In most cases the amounts in Column B of Form 1040X will be the changes in the tax return from the original filing to the amended filing. If you moved since filing the original return, use your current address on the 1040X.
  3. Provide an explanation of all changes and new or changed forms on Form 1040X, Page 2, Part III. Make sure you write "Amended" across the top of any forms or schedules you are changing. You do not need to include any notes or supporting documents used to determine the changes with the completed amended return. Make sure you attach all necessary forms and schedules behind the Form 1040X in sequential order using the sequence number in the upper left hand corner of the form under the year.
  4. If you were due a refund with your original filing, wait until you have received your original refund to file your amended return. Amended returns take up to 12 weeks to process and you can cash your original refund while waiting for any additional refund.
  5. Complete a separate 1040X for each tax year you are correcting. Mail each amended return in a separate envelope. Don't forget to amend any affected state tax returns and mail them to the correct state address.

To track the status of your amended return, you can use a new online tool from the IRS. By going to the "Where's My Amended Return?" page on irs.gov, you can track your amended return for the current year and up to three years prior. To do so, you will need your taxpayer identification number (usually your Social Security number), your date of birth and your zip code as it appears on the amended return.

Finally, many people are hesitant about amending a tax return because they think this will increase the chance of an IRS audit. This is simply not true. If you find an error, or if you have left off a tax benefit such as an overlooked deduction or omitted tax credit, it is beneficial for you to amend that tax return and get your money back.

Amending a tax return can be very complex. There are many considerations, from determining what is incorrect and what the correct information should be, to knowing what forms to attach, to making sure the state return is amended correctly and timely. Because of this, it can be helpful to use a tax professional who can file the amended return or at least provide a review to make sure your return is accurate and complete.