You have completed all necessary tax documents, including Schedule C and your tax return. Now you discovered a mistake, and an Amended form 1040X will come to your rescue.
Form 1040X: How does it Work?
On filing form 1040X, it becomes the new tax return. Whatever you have on the new form 1040X updates all information on the old tax return to include the new info.
Many times, you have already filled the original file before sending it in Form 1040X. If you haven't submitted the old tax return, you do not need form 1040X as you can adjust it before submission. However, be sure you get a confirmation that the IRS already has your Form 1040 before submitting an amended one.
Filing form 1040X qualifies you for a refund or credit. The form should be filed within three years of filing the original tax return. Other instances when it's necessary to submit form 1040X are:
Receiving an IRS Notice: there are times the IRS will notify you of an error on your return. They could also notify you if the reported income is not correct. Getting to the root of the matter and making corrections is the first point of action. This notice usually comes with a deadline.
Discovering a missed deduction or credit: should there be such, filing Form 1040X will help you get the refund or credit. There are times you could miss things like disaster casualty loss, tax loss carryback for your enterprise. You will get the specific limits and qualifications for these and other forms of errors.
Types of Mistakes
Making simple mistakes might not warrant you going as far as filing an amended return. The IRS is kind enough to adjust simple math and calculation errors. Even if you miss out on a schedule or a form, Uncle Sam could contact you to send it.
You might, however, need to correct schedule C if you want to correct information on deductions, credits, and business income. Also, missing vital information warrants an amended return.
Amending Mistakes on Schedule C
In correcting mistakes on schedule C, you will forward the changes to Uncle Sam in two steps. You have to prepare a new schedule C, which does not have to carry the amended inscription.
You also need to calculate everything again after making the changes. For instance, correcting the cost of goods sold will completely alter your total net income. After getting the accurate info, you can transfer this from Schedule C to your Form 10040X
According to the IRS, when making entries into Form 1040X, put the changes in the margin of the original tax return and transfer it to the Form 1040X.
How to File and Pay Form 1040X and pay
Depending on your location and the reason for the amendment, you should forward both Form 1040X and schedule C to the designated area. It cannot be sent electronically. There is an instruction containing details of address on the form
There is also the option to send the amended form via a private delivery service. You will get a list of the services on the instructions in the form.
Filing form 1040X does not translate to paying any tax. There are times errors will turn to extra tax due. It is a good idea to pay this as soon as you can to avoid penalties. Your file can be forwarded with a check or money order. There is an IRS-approved payment plan you can go with.
Any adjustment you make on Form 1040X could trigger interest or penalty as the case may be. You will likely be penalized if you do not pay enough taxes, as seen in the faulty Form 1040. You, however, need not include penalties or interest on Form 1040X. You will get a bill because Uncle Sam will calculate it.
