Each year, any American with a qualifying amount of income or domestic or offshore information reporting obligations must file the information or income tax returns with the IRS, as well as with state agencies in many cases. Tax returns can be long and complex to put together, especially for large businesses or taxpayers with lots of offshore bank and financial accounts, offshore businesses or investments. As such, it is not uncommon for people, even those who have had “professional” help filling out their returns, to make a mistake that they may not notice until they are going over their forms again after they have been submitted, especially where you change tax preparers. While sometimes it may be a good idea to simply amend your returns, other times, this could have unintended consequences.
Any time you amend your return and it changes the amount of tax due by a substantial amount you run the risk of sparking an audit or criminal tax investigation. If your tax goes up by a substantial amount the state or federal government might suspect that you cheated on the original return by omitting income or by claiming deductions or credits for which you are entitled. If your tax goes down by a substantial amount, they might infer the opposite – that you are cheating in the act of filing an amended return. It’s important to note that the very act of amending a return can be construed as a criminal admission by a federal or state taxing authority in the right circumstances. It does not take a genius to compare the original and amended return and ask questions as to “why” the return is being amended. Therefore, it’s a good idea to contact an experienced dual licensed Tax Attorney and CPA like those at the Tax Law Offices of David W. Klasing before choosing to submit amended returns so we can assess the particulars of your situation and advise you on if and how to go about the process of fixing your mistakes.
Sometimes, for simple math errors or other minor, unintentional mistakes, like forgetting to attach a form W-2, it may not be worth the trouble to go through the process of amending your returns. The IRS will either correct these types of errors on their own, process the return even without the missing forms or information, or reach out and contact you if there is an issue.
If you knew the original returns were false and willfully filed them nonetheless, you are wise to submit an amended return before the IRS catches it and opens a high-risk eggshell audit or criminal tax investigation. It is best that you avoid potentially ending up facing serious civil fines and potentially even criminal tax prosecution and restitution. However, you absolutely want to consult with an experienced Tax Attorney and CPA like those at the Tax Law Offices of David W. Klasing before making any such decisions, as we can advise you on the proper way to go about fixing your mistakes in order to mitigate the financial damage and reduce any criminal exposure as much as possible. For example, in some cases, especially where undisclosed foreign accounts or offshore income generating assets are involved or a large amount of domestic tax has been underreported over several years in a consistently deceptive manner, a domestic or offshore voluntary disclosure program may be the better option for you in order to simultaneously receive a nearly guaranteed pass on criminal tax prosecution and to minimize any potential civil penalties involved and achieve a certain degree of certainty in the process.
In order to amend your tax federal returns, you must file Forms 1040x within three years of the date when the original returns were first filed. The amended returns cannot ordinarily be filed electronically. In some instances, you will also have to submit additional or amended tax forms or information returns that were incorrect or omitted in the original filing. An experienced dual licensed Tax Attorney & CPA like those at the Tax Law Offices of David W. Klasing can help you assess your exposure over past tax and foreign or domestic information returns to make certain that there are no additional issues of which you are currently unaware. The decision to amend returns should not be taken lightly as the IRS is likely to take a closer look at your past returns if you submit an amendment, especially your amended returns result in a large + or – change in the amount of tax due. If we believe amending is the right move, we can help you properly and completely submit the necessary forms and documents and assist you in guiding the matter to a successful resolution with as few negative repercussions as possible.
One other thing to note is that in some cases, you can actually correct your return, as opposed to amending it. This is only permitted if the actual due date of the return at issue has not yet passed, as in a situation where you filed your returns early. If you file a new return before the due date, it will be considered a “superseding return,” and it will be treated as if any errors on the first submitted return never occurred. However, the IRS is known to get somewhat confused regarding their own internal process in this instance and will sometimes challenge the fact that the superseding return is valid over the original. A skilled Tax Attorney like those at the Tax Law Offices of David W. Klasing can work to ensure you timely submit everything and keep extensive records to show the agency that the matter was handled properly as per their own policy.
Of course, the best way to avoid having to deal with amending a return is to hire an experienced dual licensed Tax Attorney and CPA like those at the Tax Law Offices of David W. Klasing before filing your returns so that we can assess your books and records and make sure everything is filed properly the first time. If you have already filed and believe you need to amend, contact us as soon as possible, and we can advise you on what your best option is. Call us today at (661) 432-1480 to set up a private consultation or book online today.