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Did You Overlook Something on a Prior Tax Return?
Article Highlights:
Repercussions of Incorrect Tax Returns
Filing Amended Returns
Statute of Limitations for Refunds
Potential of Audit
It is not uncommon to discover that an item of income was overlooked, a deduction was not claimed, or that an amended tax document was received after the tax return was already filed. Regardless of whether the oversight will result in more tax due or a refund, it should not be dismissed.
Failing to report an item of income will most certainly generate an IRS inquiry, which typically happens a year or more after the original return was filed and after the interest and penalties have built up. On the other hand, if you have a refund coming, you certainly don’t want that to go by the wayside.
The solution is to file an amended return as soon as the error or omission is discovered. Amended returns can also be used to claim overlooked credit, correct filing status or number of dependents, report an omitted investment transaction, include items from delayed or unexpected K-1s and corrected or late filed 1099s, and account for an overlooked deduction or anything else that should have been reported on the original return.
If the overlooked item will result in a tax increase, penalties and interest can be mitigated by filing an amended return as soon as possible. Procrastination leads to further complication once the IRS determines something is missing, so it is best to take care of the issues right away.
Generally, to claim a refund, an amended return must be filed within three years from the date the original return was filed or within two years from the date the tax was paid, whichever is later.
If you are concerned that an amended return might trigger an audit, be advised that the fact that you amend a return does not, in itself, increase your chances of being selected for an audit. In fact, it might actually reduce your chances, especially if you are fixing something the IRS will find later anyway, such as through their program that matches the information forms (W-2s, 1098s, 1099s, K-1s, etc.) that they receive from employers and other payers with the income reported on your return. What concerns many taxpayers about amending returns is that an IRS employee must manually compare the amended return changes with the original. That is why the amended return must include a clear explanation and justification for the amendment and back-up documentation to support the changes, even if these were not required on an original return. If back-up documentation cannot be provided, the IRS may want to dig deeper.
That is why it is so important to provide proof or back-up documents to justify the changes being made. Let’s say you forgot to claim a $2,000 church donation. In this scenario, you definitely want to include documentation, such as copies of the acknowledgment letter from the church and your canceled check, supporting the increased deduction.
If any of the above applies to your situation, please give this office a call so we can prepare an amended tax return for you.
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Get to Know Prestige Accounting Services Group (previously Prestige Wealth Accounting Group)
Offices in Flemington, NJ and Califon, NJ
Our Mission: At Prestige Accounting Services Group (previously Prestige Wealth Accounting Group), we are on a mission to redefine the tax experience for individuals and small businesses. With a focus on personalized service, strategic planning, and expert guidance, we aim to empower our clients to succeed financially with confidence and ease.
Expertise in Action: With a wealth of experience and a team of dedicated professionals, we specialize in individual and small business tax preparation. While we excel in all areas of taxation, our passion lies in serving the unique needs of small business owners in New Jersey. We understand that small business taxation requires specialized knowledge and attention to detail, which is why we go above and beyond to ensure our clients receive the guidance and support they deserve.
Tailored Solutions for Every Client: Whether you're a high-net-worth individual seeking comprehensive tax planning or a small business owner in need of accounting and bookkeeping assistance, we have the expertise to meet your needs. Our team takes the time to understand your specific situation and develop customized solutions that align with your goals and objectives.
Why Choose Us?: What sets us apart from other New Jersey tax firms is our commitment to excellence and innovation in the field of taxation. We don't just prepare tax returns; we provide strategic insights, proactive planning, and actionable advice to help our clients achieve their financial goals. With a team of two CPAs, an EA, and an ERO, we have the expertise and resources to deliver exceptional service and results.
Your Success is Our Priority: At Prestige Accounting Services Group (previously Prestige Wealth Accounting Group), we measure our success by the success of our clients. We are dedicated to building long-lasting relationships, providing unparalleled service, and helping our clients thrive in today's ever-changing tax landscape.
We can't wait for you to experience the Prestige Accounting Services Group (previously Prestige Wealth Accounting Group) difference.
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