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Second thoughts on your 1040?

File an amended return to claim deductions or report income you overlooked

Last reviewed: March 2010

You may have felt a sense of relief when you sent your 2009 tax return to the Internal Revenue Service. Or you may have had a nagging feeling that you forgot something, causing you to pay more or less tax than you should have. If that's the case, you can set the record straight with an amended return.

If you discover that you owe more than you paid, you can file an amended return at any time and pay the additional tax. If you want a do-over to claim a refund, you generally must file an amended return within three years of the due date of your original return or within two years from the date you paid the tax, whichever is later. Suppose, for example, that you filed your 2009 tax return on April 15. You can file an amended return for a refund until April 15, 2013. If you filed for an extension, you have three years from the extended due date to file an amended return.

Reopening your return

There are generally two reasons to file an amended return:

You underpaid

You may have forgotten to include the interest income credited to your checking account, for example. Edward Mendlowitz, a partner in the accounting firm WithumSmith+Brown, in New Brunswick, N.J., advises correcting such an error with an amended return only if the amount is large in relation to your total tax obligation and not reported to the IRS on a Form 1099. "If you left off income that has been reported on a Form 1099, the IRS will usually pick that up and send you a notice informing you of the additional tax you owe," he says.

Even if the information has been reported to the IRS, filing an amended return quickly might make sense if a substantial sum is involved. The sooner you pay, the less interest you'll owe on the underpayment—and you may also reduce your chance of being hit with a penalty.

You overpaid

If your first return omitted or underreported deductions such as real-estate taxes, mortgage interest, medical costs, state income taxes, charitable contributions, employee business expenses, or child-care costs, you can claim those items on an amended return. In addition, you'll collect interest from the IRS on any tax overpayments.

But amending your return increases the number of eyes examining it and boosts your audit risk. You must judge whether the amount at stake justifies taking that chance. "The greater the refund, the greater the chance of audit," says Mendlowitz.

Sometimes married couples who filed separate returns because they wanted to avoid commingling their finances find they would have paid less tax with a joint return. They can file an amended return to change their filing status, Mendlowitz says. "This only works one way," he notes. "A couple that originally filed a joint return cannot refile separate returns."

Making amends

If you decide to file an amended return, the process is simple. Amended returns cannot be filed electronically, but you can use tax software to help prepare the form and then send it by mail. "Check to see if you also need to amend your state tax return," says Roger Lusby, a tax partner in the accounting firm Frazier & Deeter in Atlanta.

To reduce the chance of an audit, you can attach copies (hold on to the originals) of the documents supporting your claim. If you neglected to take a deduction for alimony, for example, you might file an amended return and attach copies of the canceled checks along with a copy of your divorce agreement.

This article appeared in Consumer Reports Money Adviser.

Posted: March 2009