Filing an income tax return is an annual obligation that requires a thorough financial review. Individual taxpayers have to report all of their various streams of income to the Internal Revenue Service (IRS). They also have to acknowledge their assets that could have tax implications. Calculating the amount of taxes due can be difficult, especially when people have multiple streams of income and well-diversified personal assets.
Some people make honest mistakes while preparing their income tax returns, especially if they try to do so on their own. They might fail to disclose certain assets, such as international holdings or digital resources. They might also overlook certain sources of income.
Realizing that an error occurred while preparing an income tax return can be a nerve-racking experience. Especially if the realization comes long after submitting the return, panic is a common response. People realize that they are at risk of financial consequences or even criminal allegations.
How can people address mistakes made on a previous income tax return?
The IRS accepts corrected returns
The federal income tax code is incredibly complex, and mistakes while preparing tax returns are relatively common. As such, the IRS has a standard process in place for submitting a corrected income tax return.
The taxpayer generally needs to submit a 1040-X to the IRS as soon as possible after becoming aware of the mistakes on their documents. It may be possible to submit a 1040-X electronically, so long as the taxpayer needs to adjust either their most recent return or a return made in the two years prior.
Taxpayers who have made mistakes can correct the issue before the IRS brings it to their attention. In some cases, individuals may not even recognize that they made the mistake on their own. Instead, they may receive notice from the IRS about some kind of discrepancy on their tax return.
Especially when a mistake led to an underpayment of income tax obligations, there could be penalties and interest due when filing a 1040-X. Taxpayers may need help preparing the 1040-X and communicating with the IRS about what they owe.
Thankfully, those facing an income tax controversy generally have the right to partner with an attorney as they seek to address the matter. Working with a tax attorney to prepare a corrected income tax return and address the matter with the IRS can help people take control of their circumstances.