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Am I likely to Get Audited If I File an Amended Return?

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Am I likely to Get Audited If I File an Amended Return?

 

Many taxpayers wonder whether filing an amended return (Form 1040X, Amended U.S. Individual Income Tax Return) increase their chances of being audited.  Taxpayers typically view filing an amended return as admitting, to the IRS that the original was not correct – and inviting the IRS to take a look closer.  While it is admitting that you missed something or made a mistake, the IRS appreciates that you are correcting it on your own. 

The is no clear data indicating that filing a Form 1040X will increase the chances of an audit.  One thing is absolutely true, unlike an original Form 1040 – 90% of which are e-filed – amended returns are each processed manually by an actual person at the IRS.  IRS does not digitally process the amended return, nor are they automatically accepted.

The IRS will not automatically initiate an audit (or "examination") simply because you file an amended return.

Below is what you should know about filing Form 1040X.

An IRS employee will physical review your return for accuracy and "reasonableness."

E-file an amended returns is still not possible.  Therefore, an IRS employee will physically process and accept your amended return.

You shouldn't have a problem if you accurately completed the amendment and properly substantiate the change(s).  Submitting proper substantiation and supporting documentation is critical.

Filing a Form 1040X is considerable harder than preparing the original return

The IRS requires you to list the CURRENT RETURN ON FILE, including any error changes and adjustment that the IRS may have made when it processed the original return through a review, previous audit, error adjustment, or notice.  You MUST start with the current version on file and make your changes to that version. 

Basically, you must properly report three items on the amended return per line item:

  • The original return line item – as listed on the CURRENT RETURN ON FILE (column A, Form 1040X)
  • The changes with an explanation (column B, , Form 1040X)
  • Corrected number as listed in the corrected return based on all the changes in column B (column C)

Amended return

For many people, completing the original return was difficult enough.

Many people use a tax pro to file amended returns, even if they originally prepared their own original returns.

Attach Substantiation documents to the amendment to help prevent an audit

In the case of an amended return, you want to provide all of the supporting documents that the IRS agent will need to reach a decision to approve your amended return.

Do not make the mistake of attaching documents that are not needed for the agent to reach a decision on the changes you are requesting.  Attach only documents that clearly support the change(s) you're making to the return.  For example, if you missed reporting property taxes that are listed on a Form 1098, You would include a copy of the Form 1098, with the property taxes highlighted.  Doing so could help prevent an audit.

Explanation in Part III, On a Line-by-Line Basis

You should provide an overall statement of the changes you are making and why and a Line-by-line of the increase or decrease of the line item and why.

This can be extremely difficult even for a tax professional that does this every day.  Because of the complexity of this filing, many people use a tax pro to file amended returns, even if they originally prepared their own original returns.

Copy of the Original Return and the Corrected Return.

While the agent can get a copy of the current return on file, they have to request it, and it takes about four weeks to receive it internally.  They have a summary of the number in their system but are still required to pull an original copy.  Suppose you provide a copy of the original return, and it matches their summary.  In that case, they are likely to forgo obtaining a copy of the original, saving you about four weeks of processing time.

Providing a copy of the corrected return helps the agent visualize the changes, the effect on the overall return, and they can be compared to their system.

Important:  Mark the original and corrected copies as "Original" and "Corrected."

 

It usually takes the IRS eight to 12- 16 weeks to process a Form 1040X

It is normal for the IRS  to take 12- 16 weeks to process an amended return.  It could even take as much as 24 weeks, depending on the IRS backlog.  The IRS gets about 4 million 1040Xs each year.

The IRS offers a tool to track the status of your amended return: Where's My Amended Return?

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