Have you ever experienced that sinking feeling when you realize you’ve made an error on your tax return? Mistakes may happen—whether you erroneously claimed a business deduction that’s no longer valid or forgot to include a source of earned income. But despite its hard-nosed reputation, the Internal Revenue Service (IRS) realizes that we are all human, and fortunately, mistakes on tax returns are fixable.
While the IRS catches and fixes some mistakes—most notably math errors that will result in a larger or smaller return—others need to be corrected with an amended return. And although your first inclination might be to rush out and file an amended return—especially if you’re expecting a refund—the IRS advises that you wait to get your original return.
Here’s what to know about filing an amended version, including the forms you’ll need depending on your business structure.
To Amend or Not Amend
The IRS says there are two types of common tax return filing errors that don't require an amended return—the first is for those afore-mentioned math mistakes, and the second is for missing forms. So, if you’re not a math whiz or you forgot to attach your W-2, you don't have to worry as the IRS will correct them for you or ask you to send in the applicable forms.
However, you may need to file an amended return for more significant issues, such as if you realized that you incorrectly reported your business's income, deductions or tax credits; incorrectly reported the allocation of profits in a partnership or Subchapter S corporation; or made any material error that affected your tax status. Here’s how to do it.
For Sole Proprietors
Sole proprietors correcting tax filing errors need to file Form 1040X, the "Amended U.S. Individual Income Tax Return." That form should be accompanied by the original return and updated versions of any supporting forms or schedules affected by the error, such as Schedule C for business profits and losses and Schedule SE for self-employment income. (Note that Form 1040X forms can’t be e-filed….you’ll need to mail it in.)
Although partnerships do not pay income tax directly, they still file a return each year to report their profit and explain how it is allocated among the group of partners, who then claim their portion of the profit as income on their personal tax returns. Partnerships file returns on Form 1065. If you are filing your amendment electronically you will use the same form—just check the box for "Amended Return" on Line G; if you are filing by paper, you’ll use Form 1065X.
The amended return must be accompanied by updated versions of any supporting forms or schedules affected by the error. This includes Schedule K-1, the form used to notify partners of their share of the company profits. Any partner whose K-1 is amended must also get a corrected copy of that schedule.
The process to amend a corporate tax return depends on whether the company is a Subchapter C or Subchapter S corporation.
Subchapter C corporations file their tax returns using Form 1120. They amend those returns with Form 1120X, the "Amended U.S. Corporation Income Tax Return."
A Subchapter S corporation, meanwhile, is treated much like a partnership. It doesn't pay taxes on its profits, but it does file an annual return with Form 1120S. To amend an "S-corp" return, file a new 1120S with the box for "Amended Return" checked on Line H.
In either case, an amended return must be accompanied by revised versions of any supporting forms or schedules affected by the error. For S-corp returns, this includes Schedule K-1. Just like the partnerships, any shareholder whose K-1 is amended must also get a corrected copy of this schedule.
Cathie Ericson is a freelance writer covering business and consumer topics. She creates branded content for Fortune 500 companies, and her work has appeared in LearnVest, Costco Magazine, Forbes, TheGlassHammer.com and IDEA Fitness. Follow her @cathieericson.
All content provided herein is for educational purposes only. It is provided “as is” and neither the author nor Office Depot, Inc. warrant the accuracy of the information provided, nor do they assume any responsibility for errors, omissions or contrary interpretation of the subject matter herein. The information should not be relied upon as replacement for professional tax advice.
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