Does Amending Taxes Trigger an Audit?

The process of amending a tax return allows individuals to make necessary adjustments to previously submitted information. A common concern is whether filing an amended return might increase the likelihood of a tax audit. This article explores reasons for amending a tax return and addresses the relationship between amended returns and audit risk.

The Purpose of Amending a Tax Return

An amended tax return formally corrects a tax return that has already been filed. It allows taxpayers to rectify mistakes or include overlooked information. Taxpayers might amend a return for reasons such as correcting misreported income, claiming previously missed deductions or credits, or adjusting their filing status due to a life event. For instance, if additional income forms, like a W-2 or 1099, are received after the initial filing, an amendment is necessary to accurately report the income.

If a taxpayer realizes they qualified for a tax credit, such as the Earned Income Tax Credit, or a deduction they did not claim, an amended return can be filed to potentially receive a larger refund. Taxpayers have three years from the date they filed their original return, or two years from the date they paid the tax (whichever is later), to file an amended return to claim a refund.

Audit Risk and Amended Returns

Filing an amended tax return does not automatically trigger an audit. However, submitting an amended return brings the original return back to the attention of the IRS. While most amended returns are processed without further inquiry, certain factors or significant changes can lead to increased scrutiny.

Substantial changes to reported income, significant increases in deductions, or shifts in tax liability might prompt a closer look. The IRS employs various methods to select returns for examination, including computerized systems that assign scores based on the potential for change or unreported income. An amended return introducing large adjustments or claiming substantial refunds without clear justification may align with these flagging criteria.

Preparing an Amended Tax Return

To correct a previously filed federal individual income tax return, taxpayers use Form 1040-X, Amended U.S. Individual Income Tax Return. Gather all relevant documents supporting the changes, including the original tax return for the year being amended, corrected income statements like W-2s or 1099s, and documentation for new deductions or credits.

Form 1040-X shows the original amounts, the net change from the amendment, and the corrected amounts. Taxpayers must clearly explain the reason for the amendment in the designated section. Any schedules or forms affected by the changes, such as Schedule A for itemized deductions, should also be recomputed and attached to Form 1040-X.

Submitting and Processing Amended Returns

After completing Form 1040-X and gathering all necessary supporting documentation, the amended return is ready for submission. Form 1040-X can be filed electronically for certain tax years. If e-filing is not an option, the form and all attachments must be mailed to the appropriate IRS address.

Once submitted, taxpayers can expect the IRS to take several weeks to process an amended return. The IRS offers an online tool, “Where’s My Amended Return?”, to check the status of submitted Form 1040-X approximately three weeks after mailing. An amended return may result in an additional refund, tax owed, or no change to tax liability. If additional tax is owed, interest and potential penalties may apply, so pay any additional tax promptly.