Filing an Amended 2022 Tax Return? One thing you should know is that you can expect more delays than in the past if you're seeking a refund

This Week's Quote:

“The sun himself is weak when he first rises, and gathers strength and courage as the day gets on.”

                                  -Charles Dickens, Author

You feel great because you just filed your tax returns.  What a relief!  Then, just when you think all is well, you get a set of corrected 1099’s in the mail.  So now, the returns you just filed report incorrect information.  What do you do next?  File amended returns, or play roulette and see if you get any notices?  Sometimes, errors are best left to the IRS to correct, and sometimes not.  The following article written by Tom Herman in the WSJ discusses when and when not to file amended returns.  The article also discusses when amended returns can be electronically filed, and when you can have your refunds direct deposited.

-Norm Hicks

If you’ve found errors on the tax returns you just filed earlier this year, or in previous years, you likely are joining a very large club. Each year, millions of people file an amended return to correct errors or omissions on their original returns.  

But if you decide to file an amended return to claim a refund, be prepared for what’s likely to be an unusually long and frustrating wait to get a response from the Internal Revenue Service, tax pros warn. The IRS still is struggling to deal with vast return-processing backlogs in the wake of the pandemic and other issues.

Amended returns can still take more than 20 weeks to process, says Eric Smith, an IRS spokesman. “A few years ago, they were more in the 12-to-16-week range.” 

Smith adds that taxpayers should “keep in mind that returns are amended for a host of reasons, so even in more normal times, lengthier processing times can be more related to the circumstances for the amendment, rather than any processing backlogs.” 

Steven Toscher, managing principal at the law firm Hochman Salkin Toscher Perez P.C. in Beverly Hills, Calif., says some taxpayers “are still waiting for refunds that should have and would have been issued more than a year ago.”

The IRS received just over 5.8 million amended returns for calendar-year 2021, Smith says. That was also the first complete year in which taxpayers could file either on paper or electronically. “We estimate that the amended-return total dropped during calendar-year 2022,” he says, “and project a further drop for calendar-year 2023, with nearly 4.6 million paper and electronic amended returns expected during 2023.”

Aside from expecting delays, here are some pointers for taxpayers planning to file amended returns for the 2022 tax year or for previous years. 

Do it electronically

The IRS has allowed electronic filing of Form 1040-X since 2020, says Smith. Thus, the first tax year for amending electronically was 2019. “But to be able to amend electronically, you must have filed the original return electronically as well. Where that was done, we can currently accept amended returns for 2020, 2021 and/or 2022,” he says.

Toscher and other tax professionals agree that the best way to file an amended return is to do it electronically, whenever possible. 

Direct deposit option

Earlier this year, the IRS announced that people e-filing an amended tax return will, for the first time, be able to select direct deposit to receive any resulting refund. Previously, taxpayers who e-filed amended returns received any refund via a paper check, “a step that added time onto the amended-return process,” according to the IRS.

Some important fine print:  “This option is available only for e-filed amended returns,” says Smith, and only for tax-year 2021 and thereafter.

If, on the other hand, your amended return shows you owe more money, the IRS offers a range of options on how to pay. (See the “Make A Payment” page on the IRS site.) The IRS says it accepts full or partial payments, including a payment plan. Warning: “Penalties and interest will continue to grow until you pay the full balance,” according to the IRS.

Timing matters

Don’t compound your mistakes by assuming there is no deadline to fix errors or omissions. The general rule for claiming a refund or credit is that you must file Form 1040-X “within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later,” according to the IRS.

But there are important exceptions. For example, the time limit can be “suspended” for “certain people who are physically or mentally unable to manage their financial affairs,” according to the IRS. Also, if you amend a return in order to claim a credit or refund based on a “bad debt or worthless security,” you generally must do so “within 7 years after the due date of the return for the tax year in which the debt or security became worthless.” 

Another example: People in places officially designated as federal disaster areas because of severe storms, floods and other natural disasters. The IRS routinely grants them additional time to file a claim for a credit or refund on amended returns.

See the instructions for Form 1040-X for more details on these and other exceptions.

One year at a time

If you want to fix mistakes for more than one year, the IRS says to file a separate Form 1040-X “for each tax year you are amending.” Also, if you amend your federal return, check to see if you need to amend your state returns as well. 

Dealing with math errors

If you find that you made math errors on your original tax return, you don’t need to file an amended return to fix them. “That’s a key one where no amended return should be filed,” says Smith.

Instead, you should wait until the IRS contacts you about the mistake. “Chances are that we will do that and make any necessary adjustment,” says Smith. “If you agree with the adjustment and the error either increases or decreases your refund, we’ll send you the corrected amount. If you disagree, you can handle that situation by responding to the notice. Technically, we consider an amended return to be equivalent to correspondence. So responding to a notice is normally faster and simpler than filing an amended return.”

One important note: The IRS will communicate with you via a letter in the mail. So if you receive an email or phone call from someone purporting to be from the IRS, it likely is a scam. ​“If you’ve given us an email address or phone number to contact about your account, it’s possible you’ll be contacted in this way if we have a question,” says Smith. “But if you haven’t done that, you shouldn’t get unsolicited emails or phone calls about the processing of your return.”

There are other reasons you don’t need to amend a return. To see whether an amended return is necessary, try using the interactive tax tool on the IRS website: “Should I file an Amended return?” Also, look at Form 1040-X instructions. For more complicated corrections, you might want to consult with an accountant or other tax expert.

Possible perils

Deciding whether to amend a return can sometimes be very tricky, especially in cases that might involve criminal tax issues. In these situations, consider hiring a lawyer with experience in criminal tax-law issues. Lawyers say there may be better alternatives than amending, depending upon the facts and circumstances of your situation.

Another issue to consider: ​“Taxpayers should be aware that filing an amended return seeking a claim for refund could trigger an audit of the entire tax return,” says Toscher. “So if there are other issues on that return, taxpayers and their advisers need to take that into account.” Even though you clearly might be entitled to a refund based on what you would claim on your amended return, the IRS might “come up with another separate issue,” or even multiple issues, that could prove costly to you. 

Credit goes to Tom Herman. Published May 18, 2023 in the Wall Street Journal.
 
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This Week’s Author, Norm Hicks

-until next week