Should You File an Amended Federal Tax Return?

As the end of the year approaches, many taxpayers begin the process of preparing to file next year’s tax returns. When going through this process, some taxpayers will discover that they made mistakes in their previous filings. If you discover that you made mistakes, should you file an amended federal tax return? New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains:

Filing an Amended Return is the Right Choice in Some (But Not All) Circumstances

On October 25, 2021, the Internal Revenue Service (IRS) issued new guidance regarding how and when taxpayers should file amended tax returns. It notes that there are three primary circumstances in which taxpayers should file an amended return:

• Incorrectly reporting income on a prior return
• Incorrectly claiming deductions on a previous return
• Not claiming credits on a prior return

The IRS also notes that its revenue agents “may correct math or clerical errors on a return and may accept returns without certain required forms or schedules.” In these instances, the IRS states, “there's no need for taxpayers to amend the return.”

However, as a taxpayer, you won’t necessarily know if the IRS simply accepts (or corrects) your return. With this in mind, as with most tax matters, it is better to be safe than sorry. A New Jersey tax lawyer can help you decide whether you should file an amended return—or if you may need to consider other options.

What if Filing an Amended Tax Return Isn’t Your Best Option?

When might it not be in your best interests to file an amended return? There are two circumstances in particular in which taxpayers may need to consider other options:

Willful Tax Law Violations

You may need to make a “voluntary disclosure” if you willfully underreported or underpaid your federal tax liability. If you submit an amended return and the IRS determines that your past filing error was willful, you could potentially face a criminal investigation and federal charges. Submitting a voluntary disclosure allows you to avoid these consequences—as long as you do so properly. There are strict eligibility criteria for submitting a voluntary disclosure, and there are strict filing requirements as well.

Foreign Financial Asset Reporting Violations

You may need to make a “streamlined filing” if you failed to report or pay taxes on foreign financial assets. The IRS’ streamlined filing compliance procedures are unique to foreign financial asset reporting, and they require a certification of “non-willfulness.” If you are delinquent on your foreign financial asset reporting requirements, you may need to submit a streamlined filing, not an amended return.

Request a Consultation with a New Jersey Tax Lawyer at Thorn Law Group

Do you have questions about what you should do to correct a past filing mistake? Or, have you been contacted by the IRS about a potential issue with your federal returns? If so, we encourage you to contact us promptly. To speak with a New Jersey tax lawyer at Thorn Law Group in confidence, call 201-355-8202, email ket@thornlawgroup.com or send us a confidential message online now.