Amended Return

Definition: An amended return is a return that is required by law if you have a return that needs to be corrected, filed, or updated. In addition, amended returns provide an opportunity to adjust reporting requirements and credit limits on prior years’ returns.

Amended returns show the final balance due on a prior year’s return plus any adjustments due to errors or understatements. If applied correctly, amended returns can provide positive value for both the money you save on taxes and the time it takes to resolve problems with your return.

Amended returns are important. Not only do they help reduce errors due to updated tax rules, but they can also provide a quicker refund if an error is found while processing your return.

Amended returns are often used by individuals who have had their income taxes audited or improperly calculated for years. In addition, an amended return is usually filed by an individual who has an additional dependent or spouse who was not previously reported on their original return. It may also be filed by an individual who believes there was an error in the payee account that affected the amount of income taxes paid or refunded.

Filing an amended return is not the same as filing a return that complies with all applicable tax laws. Instead, an amended return is intended to correct any errors, omissions, or overstatements in the original return. The aim of the amended return is to provide a more accurate picture of a taxpayer’s financial situation to determine whether correct adjustments were made to tax liabilities or whether any tax liability was overstated.

Why should you file an Amended Return?

Below are the reasons an amended return needs to be filed by a taxpayer

  1. It is filed by the taxpayer when a problem is discovered after processing the previous year’s return. For example, if the return is incomplete or if incorrect information was entered on it.
  2. An amended return is also required if a taxpayer has been awarded a bonus for completing certain activities, such as working at a certain company for a certain length of time or installing a certain device. The IRS has provided sample 2014 amended return forms for taxpayers who must make these adjustments.
  3. There was an error in computing tax liability
  4.  A refund deficiency was allowed because an erroneous tax assessment was made
  5.  If the adjusted gross income did not exceed the applicable threshold for filing a joint return.
  6. An amended return needs to be claimed when the number of dependents changes. 

Advantages

  • The major advantage of an amended return is that you can correct errors in your return before it goes to the IRS.
  • You can also claim back overcharged money, even if you didn’t file a claim on time.
  • They correct for circumstances that changed since you originally filed.
  • Amended returns include estimates of what your final payment would have been if your return had not been defective. This can help you avoid having to pay more in refunds or penalties than you should have.

Disadvantages

  • The main reason most people don’t use amended returns is that filing them can take several hours.
  • One could be penalized for having too many changes or not enough.
  • Most states have a three-year statute of limitations on file-change requests, so if you have an incorrect employee ID number or Social Security number on your original return, you will not be eligible to file an amended return until three years have passed since the original return was due.

If an amended return is filed or are required to pay tax with an amended return, it is important to understand the requirements for filing those returns. There are special rules for when and how tax is paid on certain income and losses and an additional set of rules for computing income in future years. Since there are special rules that apply to certain types of income and losses, there are special reasons why it is important to file your amended return on time.