You just filed your tax return a few weeks ago, but now you realize you made a mistake. What should you do?

Don’t panic. You can always amend your return if you have to. But first, make sure you have to. You need not amend your return if you discover that you made a simple math error. These will be corrected by the IRS computers, and you’ll be notified of the change by mail.

However, you should seriously consider amending your return if you paid substantially more tax than you had to — for example, because you forgot to claim a deduction you were entitled to. If you made a mistake in your favor, failed to report income, or took deductions that you were not entitled to take, amending your return may avoid all or some fines, interest, and penalties if you’re later audited by the IRS.

Caution: Filing an amended tax return increases the chances that your tax return for the year involved will be audited by the IRS. If you’re not sure whether to amend, consult a tax professional for advice. You don’t have to make this decision immediately. The general rule is that you can file an amended return until the later of:

  • three years after the date you filed the original return (April 15 or Oct. 15 if you obtained an extension to file), or
  • two years after the date you paid the tax, whichever is later.

How to amend your return

If, like most small-business owners, you are a sole proprietor, you amend your income tax return by filing IRS Form 1040X, Amended U.S. Individual Income Tax Return. When you file Form 1040X to obtain a refund of taxes you’ve already paid, it is called a "claim for refund."

If you’re amending your previous year’s tax return and are entitled to an additional refund for that year, tax experts suggest that you wait until you receive your original refund check for that year. You can go ahead and cash the first refund check as soon as you receive it. Of course, you can file your amended return immediately if you were not entitled to a refund on your original return.

You must mail or hand deliver Form 1040X to the IRS. You can’t file it electronically. If you mail it, send it by certified mail with postal return receipt requested. This will let you know when the IRS received it. If you amend your returns for more than one year, mail each 1040X in a separate envelope. The 1040X instructions show where to mail the form.

You may also hand deliver the form to the IRS service center where you file your tax returns. If you do this, be sure to get a stamped copy as your filing receipt.

How the IRS processes refund claims

The IRS doesn’t like paying back money to taxpayers. When you file a Form 1040X claiming that you paid too much tax for the year involved, your tax return for that year will receive extra special attention. An IRS employee will pull your return and examine it together with your 1040X to decide whether you’re really entitled to a refund and, if so, how much. Your claim may be denied or accepted as filed, or the amended items may be audited. If a claim is audited, the procedures are almost the same as in the audit of a regular tax return. Moreover, the IRS has the option of extending the audit to your entire tax return, not just the amended items. Thus, filing an amended tax return increases your chances of an audit.

You should receive your refund, if you’re entitled to one, in about 12 weeks. However, your refund may be reduced by amounts you owe for past-due child support, debts you owe to another federal agency, or past-due state income tax obligations. You will be notified if this happens.

If the IRS denies your claim, it must explain why. You have the right to appeal such a denial.

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