Amended Return Preparation for Houston Tax Payers
Amended return preparation services are necessary when a taxpayer has reason to believe that changes should be made to a previously filed income tax return. In practice, there are a couple of reasons why someone may need to file an amended tax return:
- When a taxpayer believes that correcting a tax return will uncover additional tax deductions and a larger tax refund.
- When new information from the tax year in question significantly alters the tax return’s details.
In either case, it’s extremely important for taxpayers to consult with a trusted tax professional before filing an amended tax return, as they can identify whether filing an amended tax return makes sense for their client, and how to approach the amendment process.
What is an Amended Tax Return?
An amended tax return can be filed to update an income tax return from a previous tax year. Specifically, taxpayers have three years to file an amended return, so they can be used to correct tax returns from the previous three tax years. However, doing so will not reset the three-year statute of limitations that the IRS reserves for auditing tax returns – an important consideration for taxpayers using amended tax return preparation services to increase a previous tax refund.
While preparing an amended tax return, your accountant will review any new information pertinent to the tax year and to the relevant tax return. They’ll make any corrections necessary to tax calculations and ensure all tax-related decisions are made in compliance with current tax laws.
When are Amended Tax Return Preparation Services Recommended?
As mentioned, there are two common scenarios where filing an amended tax return makes sense. They include:
- Correcting major errors – In general, the IRS does not require or recommend taxpayers file an amended return if mathematical errors are discovered. According to the agency, its internal checks will catch such errors and handle the recalculating.
However, the IRS does recommend that taxpayers do file an amended return if major errors or compliance issues are identified on a previous return. - Securing additional tax deductions – Amended tax returns can be used to recalculate tax deductions from the relevant tax year. Further, some deductions are available for several years, such as incurred capital losses, and amending a tax return will ensure those deductions are counted. State taxes and charitable contributions are two other common examples where recalculating their tax impacts may prove profitable for taxpayers.
Three Important Considerations When Preparing an Amended Tax Return
If you’re considering amended tax preparation services to secure a larger tax refund, there are a couple of major points to keep in mind:
- Taxpayers are responsible for any additional tax liabilities – While it’s true that an amended tax return can secure a larger tax refund by leveraging extra tax deductions, the opposite is also true. If an amended return shows that additional liabilities are owed, they must also be resolved. If not, the taxpayer will be responsible for interest (and penalties) incurred since the original tax return was filed.
- Amended tax returns are audited at a higher rate – As amended tax returns are typically used to pursue a larger tax refund, amended returns are audited by the IRS at an increased rate.
Filing an amended tax return will not reset the agency’s three-year auditing window, so if you’re concerned about triggering an audit, consider timing the amended return so that it’s filed near the end of the statute of limitations for the tax year in question. - Is it worth filing an amended tax return? – Before submitting an amended tax return, it’s worth asking whether it makes sense to do so. Again, the IRS only recommends doing so if there are major errors on the initial tax return. A tax professional will file an amended tax return if there is a large potential tax deduction on the table. After everything in the initial return has been recalculated, you may not be entitled to the larger tax refund you were hoping for.
If the changes produce a relatively small tax benefit, the additional scrutiny from the IRS – and effort required to file – may not be worth it. A reputable tax professional can help their clients determine what the best decision is in each case.
Need to Update Your Tax Return for a Previous Tax Year? Schedule a Consultation with the Evident Pros Team.
Tax preparation is an inherently complex process where errors are common if it’s not handled by an experienced tax professional. If you suspect that errors have left you in a disadvantageous tax position, or if new information has changed the picture, amended tax return preparation services can help.
A trusted accountant can oversee the preparation and filing for any amended tax returns, ensuring ongoing tax compliance and ensuring you leverage the tax deductions you’re qualified for.
