Filing an Amended Tax Return

Aug 2018


I recently met with a potential new client and as I was looking over their tax return I noticed that there was an obvious mistake. Basically, the clients had a side business and they filed a Schedule C for the business. A Schedule C is a rather simple form that lists income and expenses for a business. What the client did not do was deduct expenses for the business. When I asked them about it, they looked at me in disbelief and said they had given their tax preparer a list of expenses and they had no idea why they weren’t taken. I told them that they should contact their tax preparer to find out what the deal was.

To make a long story short, they got back to me after a couple weeks and said the tax preparer admitted that he screwed up and forgot to take the deductions. At that point in time, I asked them if they were planning to file an amended return to correct the situation and they told me no. When I asked why, they said that the tax preparer informed them that if they file an amended return, the IRS will automatically going to audit you and make your life difficult. I told them they should consider a new tax preparer.

When it comes to taxes, there are many myths and one of them deals with amended returns. Just because you file an amended return does not mean the IRS is going to audit you. Yes, there is a possibility, but it is not automatic. My advice has always been that if there is a mistake on your return in your favor and you have the proper documentation, you should have no problem filing an amended return. On the other hand, if you discover a mistake on your return that is not in your favor, I always recommend that you amend your return. You have a much better chance in dealing with the IRS, particularly when it comes to penalties, if you voluntarily amend your return as opposed to them discovering the error.

When it comes to amending a tax return in your favor, I do recommend that you look at the dollars involved to determine if the money is material to you or not. For example, if by amending your return you will get an additional refund of less than $100, it’s probably not worth the time and energy to amend your return. On the other hand, if by amending the return you’re talking about thousands of dollars ending up in your pocket, then I think it’s certainly something you should pursue.

Typically, you can file an amended return within three years after the date you filed your original return. The form that you would use is 1040X. A 1040X is not a complicated form, and basically has three columns. Column A show the original figures from your return. Column C shows the correct numbers and Column B is the difference between Column A and C. Page two of the form is where you explain the changes and the reasons for those changes. It is not a difficult form to complete; however, if you typically don’t prepare your own tax return, you probably want to use a professional to help you complete the amended return.

Just because your tax preparer may have made a mistake, it does not mean that you should fire them or anything like that. Mistakes do happen. However, if it is a mistake by the tax preparer, my belief is that they should complete your Form 1040X without charge. If the tax preparer’s mistake results in you paying taxes, interest and penalties, my general belief is that the tax preparer should be liable for at a minimum, the penalty.

Something you do have to take into consideration is that if you amend your federal return, it may mean that you have to also amend your State of Michigan return. Not all amendments to the federal return will affect your state return; however, many will. For example, in the case at hand, when they amend their federal return to increase deductions on their Schedule C, it will also have an impact on their Michigan return. In this case, it would lower their Michigan taxes. On the other hand, if the reason why you amended your return is because you forgot a deduction such as your property taxes, typically that would not affect your Michigan return. Therefore, don’t forget that if you do amend your federal return, you at least need to determine the effect on the State of Michigan.

My belief when it comes to taxes, whether it’s filing your original return or an amended return, the key is to have the proper documentation. If you have the proper documentation, you have nothing to fear.

Good luck!



If you would like Rick to respond to your questions, please email Rick at