Filing a US Expat tax return can be a complicated process, and fear tends to set in when you realize that you made a mistake on the expat tax return you filed. Fortunately, the IRS is fully aware of the potential for mistakes and has provided a safeguard against such an occurrence. If you failed to take one or more deductions for which you qualify, you forgot to report income, or you made another mistake that will affect your tax return or US income tax liability you will be able to file an amended return with the IRS to reflect those changes.
Form 1040X, Amended US Individual Income Tax Return is the form used to make changes to your filed US expat tax return. You may file Form 1040X any time within 3 years of the original due date. For example, if you were reviewing your tax return for the year 2010 that you submitted before April 15, 2011 and you realized you were missing information, you have until April 15, 2014 to make necessary changes.
Form 1040X is much like a regular Form 1040, but there are 3 columns. The first column is for the original number, the second column is for the amount of change, and the third column is for the correct number. You should also attach an explanation outlining your reason for having filed an amended tax return.
It’s important to realize, however, that not all mistakes warrant the necessity to file Form 1040X. The IRS uses a highly technological and intelligent system for processing tax returns. This system is designed to not only identify mathematical errors but also missing income, required schedules, and other information. If you had a 1099-INT, for example, with $200 of interest income that you forgot to report the IRS also received a copy of that 1099-INT and will adjust the income on your tax return accordingly. In this case, you will receive notification by the IRS that changes were made to your return.
The process is a little bit different for missing schedules. The IRS will make one of 2 decisions: It will either ignore the fact that you’re missing a schedule and process your return as you submitted it or it will send you a request to file the missing schedule. Either way, the IRS will let you know what action to take; you will not be required to file Form 1040X.
Other changes for which Form 1040X is not required include: Change of address, updating dependent information, or making any other non-financial editions.
When Should You File Form 1040X, Amended US Individual Income Tax Return?
If you failed to take credits or deductions for which you qualify that will reduce your United States tax liability, you should file an amended return to claim these deductions or credits. Conversely, if you have income that was not reported to you by the payer in the form of a 1099, W-2, or other document that the IRS would have received, you should include this income on Form 1040X.
In the case of missing income, this will undoubtedly raise your tax liability. Even so, you are still required to file Form 1040X. Even though the IRS doesn’t have documentation of your income now, it could come up later. The company or individual that paid you could file a return or be targeted for an audit that through which misallocated funds would be realized. If you become identified as having received income through a situation like this, the IRS will be much less forgiving than if you would have reported it on your own.
If you are reporting additional income and a significant amount of time has passed since you filed your original return, you may be liable for additional penalties and interest. In some cases, if a payment is sent with an amended return the IRS will choose to forgive and disregard additional penalties and interest. If there is a substantial amount of debt, however, the IRS is likely to process any payment received and submit an invoice for additional fees and interest still owed.
Important Facts to Know About Filing an Amended Return
Amended tax returns can only be filed by sending a paper copy – electronic filing of Form 1040X is not available.
Any tax refund that results from filing Form 1040X will only be sent in the form of a paper check – you won’t even have the option of including your bank routing and account details for a direct deposit of your refund.
You may not file Form 1040X for multiple years. If you have more than one year of tax returns for which you need to file an amended return, you must file a different Form 1040X for every tax year. While it may be more convenient to send multiple amended returns in the same envelope, the IRS recommends sending them separately to avoid confusion and to ensure that all amended returns stay separate from each other.
Typically speaking, amended returns seem to trigger more IRS audits than regular tax returns. Make sure you have documentation to support the changes you’re making to your tax return and consider attaching all supporting documentation to Form 1040X to ease the suspicion of the IRS Representative reviewing your case.
If you have an outstanding balance owed to the IRS and you qualify for a refund based on your amended return, funds from your balance will first be used to satisfy your IRS debt. If there is any money left over after your IRS bill has been paid, you will receive the rest in the form of a paper check. If you still owe a balance to the IRS after your refund has been applied, you will receive an updated invoice reflecting your balance due. You can also choose to have your refund applied to your estimated taxes for future years if you wish.
For more information on amended tax return filing procedures, you can visit the IRS website or speak to a qualified international tax consultant at Taxes for Expats – one of the most trusted names for international tax preparation for over 20 years.