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Under what circumstances would you need to file an amended tax return?

The IRS says you should file an amended return, Form 1040X, if you discover mistakes in any of the following: filing status; dependents; total income; deductions, or credits.

Don't jump to file an amended return if you've discovered a small mistake on your 1040, such as forgetting to include the interest income credited to your checking account.

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.

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"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. You can then simply send a check for any difference owed and move on with your life.

If, after filing, you received any corrected 1099 documents from your broker, you also may need to file an amended return. Receiving such a document after mid-February is becoming more common, according to Cari Weston, director of tax practice and ethics for the American Institute of Certified Public Accountants. 

How to File an Amended Tax Return

To amend your return, you'll need to fill out Form 1040X and any accompanying schedule—like Schedule C for the self-employed—that also has changes. You can't e-file an amended return, but you can use your tax software to input the change and mail in a paper copy.  

Weston suggests filing the amended return as soon as possible, but not before it’s complete and accurate. Ask for a Wage and Income Transcript from the IRS, she recommends, and compare it with the information you received on your W-2 and other income documents. “It’s better to correct any discrepancies all at once, rather than run the risk of having to amend a second time,” she says.

If the IRS owes you a refund, filing an amended return right away means you'll get that money faster. And if you owe, filing quickly reduces how much you'll pay in penalties and interest.