Talk to an attorney before filing an amended tax return

On Behalf of | Aug 2, 2016 | Tax Controversies

A taxpayer that amends a tax return may be attempting to do the right thing. Yet before taking this action, an individual might benefit from a consultation with a tax attorney.

Notably, there may be reasons not to amend a return. Signing a return is akin to filing it under penalty of perjury. The law requires a tax return to be truthful and accurate to the best of a taxpayer’s knowledge at the time it was filed. Consequently, a taxpayer may not necessarily have a legal obligation to file an amended return to reflect subsequent events.

In addition, the Internal Revenue Service may not always perceive an amended return favorably.  One commentator even characterizes an amended return as audit bait. This might be more of a risk when a taxpayer’s amended return seeks a sizable refund, however.

As in other areas of tax law, there are strategies that may benefit a taxpayer. The IRS has a three-year statute of limitations to audit a return, and that clock is not reset or tolled by an amended return filing. Consequently, a taxpayer might consider filing an amended return close to the expiration of that three-year limitations period for strategic reasons.

On the other hand, there may be a disadvantage to putting off an amended return filing. For example, filing an amended return won’t deflect interest and penalty charges if the taxpayer owned more than the original return stated. For that reason, it may be better to correct mistakes sooner, rather than later.

Source: Forbes, “Amending Just Filed Taxes? IRS Tips For Amended Tax Returns,” Robert W. Wood, April 19, 2016