How Far Back Can You Amend Tax Returns?

You can fix tax return errors by filing Form 1040X, “Amended U.S. Individual Tax Return.” An error on a return may not become evident for some time. Or you might simply put off preparing and submitting the amended return. Those delays could cost you. Because you can lose a refund or end up paying extra penalties and interest to the Internal Revenue Service. So, how far back can you amend tax returns. The general answer is you can amend three years back tax returns. However, there are certain caveats.

You discover you missed some deductions. Perhaps you overlooked some income. Or  you used the wrong filing status. Similarly you may have made a mistake calculating a tax credit that you took. Or you may have received a corrected form 1099, W-2, or 1098 after you have filed your return. Regardless, you need to file an amended return. This is done by completing form 1040X. This form must be filed within three years of the date you filed your original return or within two years of the date you paid the tax, whichever is later. (Additional time is allowed when amending to claim a deduction for a bad debt or worthless security or a foreign tax credit or deduction.) The IRS requests that you wait until the original refund has been received before filing the amended return, if the amended return will result in an increase to your refund.

1. A W-2 or 1099 came after you filed your income tax return. You can file an amended return and pay the additional taxes immediately in order to limit any interest and penalty charges you could accrue.

If you do not amend your return, the IRS may send you a letter six to 10 months after you file. It will compute the additional taxes you owe and inform you that you can pay those taxes, and interest. The interest is charged from the due date of the return until the date of payment.

2. Your taxes were overpaid. If you filed your taxes and then found better information about deductible expenses or better proof of the basis (tax cost) of something you sold, you should definitely file an amended return. Wait until all information surfaces that might affect this tax return so you only need to amend it once.

3. You had a substantial net operating loss this year and did not include a statement to waive the carryback period. Here, you have two choices. You can make that election by filing an amended return within six months of the due date of the original return. For example, if you filed in February, you may amend your return until six months after April 15. You may want to waive the carryback if you have paid no taxes in the past or if you do not want to open up previous years’ returns to an audit.

On the other hand, you have the option to use the carryback and get your refund quickly. File Form 1045 by December 31 of the year in which you filed the original return. It has columns to compute the refunds for each of the two prior years. IRS Publication 536 takes you through this, step-by-step. You don’t have to wait for the IRS to make inquiries. You can file the amended return to avoid the IRS contacting you.