Did You Overlook Something on A Prior Tax Return?

It is very common to discover that an item of income was overlooked on a tax return. Perhaps a deduction was not claimed, or an amended tax document was received after the tax return was already filed. Regardless of the results (a tax penalty or a refund), if you overlook something on a prior tax return, don’t ignore it.

Failing to report an item of income will usually generate an IRS inquiry. Typically, this may occur a year or more after the original return was filed. At this point, any interest and penalties will have increased exportentially. And if you have a refund coming, you don’t want to leave that sitting on the table either!

The solution if you overlooked an item on your tax return…

The solution is easy. Just file an amended return as soon as the error or omission is discovered. Amended returns can also be used to help you claim the following:

overlooked credit
correct filing status or number of dependents,
report an omitted investment transaction.
items from delayed or unexpected K-1s
corrected or late filed 1099s

They can also account for an overlooked deduction or anything else that should have been reported on the original return.

If the overlooked item results in a tax increase, the penalties and interest will add up. Fines can be mitigated by filing an amended return as soon as possible. Procrastination leads to further issues once the IRS determines something is missing. It is ALWAYS best to take care of the issues right away.

To claim a refund, an amended return must be filed quickly. An amended return should be filed within three years from the date the original return was filed. Or your can file your return within two years from the date the tax was paid, whichever is later.

Does an amendment of my tax return increase my chances of trigging an audit?

If you are concerned that an amended return might trigger an audit, don’t be. Amending your return does not increase your chances of being selected for an audit. In fact, amending a return might actually reduce your chance of being audited. Especially if you are fixing something the IRS will find later anyway. For example, The IRS has a program to match the information forms (W-2s, 1099s, etc.) they receive from employers with the income reported on your return.

That is why all amended returns must include a clear explanation and justification for the amendment. In addition, it’s important to include all the back-up documentation to support the changes. Event if the information was not required on an original return. If back-up documentation cannot be provided with the amendment, the IRS may want to dig deeper. It is very important to provide proof or back-up documents to justify any changes being made on your amendment.

For example, let’s say you forgot to claim a $2,000 church donation. You would want to include documentation supporting the increased deduction including: