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How to Prepare and File an Amended Tax Return

When you Should Prepare and File Federal Form 1040X

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Have you, a business owner, ever filed your tax return and then received more information after it was filed that you should have included? Maybe you've thought of another important (and substantial) deduction you should have taken? Maybe you have run across income you received and didn't include when you filed. If these situations have happened to you, then you should file an amended tax return.

In order to properly amend your tax return, you actually have to file two returns if you are a sole proprietor. You file a new IRS Form 1040 and an IRS Form 1040X. You have to attach all the schedules and documentation to the Form 1040 that you did the first time you filed it. The Form 1040X has to be filed on a paper return.

When you Need to File an Amended Return

According to the IRS, you do not need to file an amended return if you simply made a math error on your original return. The IRS will correct math errors. You must file an amended return in case of any of the following circumstances:

  • Your filing status was incorrect
  • Your income was incorrect
  • Your tax deductions were incorrect
  • Your tax credits were incorrect

Your state tax liability will very likely be affected if you need to file an amended federal tax return. Check with your state filing agency to see how to correct your state return if need be.

Steps in Filing an Amended Tax Return

Step One: You have to fill out a new federal form 1040 showing the new information that is prompting you to amend your return. Be very careful in filling out the 1040 because you have to compare it to the old 1040 when you file your Form 1040X. The IRS also may look at amended tax returns a little more carefully than your original return so you want your return to be flawless.

Attach copies of all the original documentation that you attached to original Form 1040 to the new Form 1040.

Step Two: Fill out page one and the first part of page two of IRS Form 1040X. On page one, you will see three columns. First, fill out Column A. Take the figures for Column A from the Form 1040 you originally filed. For Column C, fill in the amounts from your new Form 1040. In Column B, fill in the change between the two amounts. If the amount is a decrease, be sure to put it in parentheses. On the top of page two, continue filling out the information in the three columns.

Part II of Federal Form 1040X asks you to explain any changes you made from your original Form 1040. Be very clear when completing this part of the form. Write down the line number and explain the change. Attach any documentation that relates to the change and be sure your name and social security number is on it.

Since Federal Form 1040X can be used for any tax year, be sure and write the tax year you are amending on it. Don't forget to sign and date your return. Remember that your original 1040, your new 1040, and the 1040X have to be sent to the IRS through the U.S. mail. They cannot be filed electronically.

What the IRS Does

If the IRS has any questions or requires any additional documentation, they will contact you, probably in writing. If you have not been clear in your explanations on what you are changing on Form 1040X, they may return the form to you. It may take 8-12 weeks, or longer, for the IRS to process the amended return.

What About Other Forms of Business Organizations?

If you have filed a corporate return and need to amend it, you should file IRS Form 1120X.

If you need to amend the tax return of a partnership or a multi-member LLC, then you should file another IRS Form 1065 and check Box 5. Then, you have to attach a statement to the form with the line number of each amended item with an explanation.

Remember that any business organization can file an amended tax return for past years if necessary or important.

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