Did you make an error on a tax return for your small business? Your first time filing taxes for small business can be tricky. You can file an amended tax return to fix mistakes and omissions that date several years back. While there are some advantages to filing an amended tax return, you do not need to correct some types of errors. Your first step is to determine when to file an amended tax return, and when it might not be necessary.
When to file an amended tax return
Some common mistakes on your small business tax return require an amendment. You need to make corrections if you made a large error on the original tax return. The mistake affects your tax liability if you do not correct it.
A large error might be filing the wrong form for your business. For example, if you are incorporated and returned Form 1065, you sent the form for partnerships. You will need to send an adjusted return of the correct form for your business structure type.
Also, correct your tax return if you claimed a tax credit you shouldn’t have. You might have thought you were eligible for the tax credit, or you were wrongly advised to claim it. Claiming an incorrect tax credit could lead to an audit if you do not file an amended tax return.
You can also claim appropriate tax credits that you missed on previous returns. For example, if you didn’t claim the Small Business Healthcare Tax Credit last year while filing and paying your business taxes, you can change the return as long as you were eligible. This is a great example of when to file an amended tax return that will benefit your small business.
Amend the tax return if you receive new information that needs to be included on the form. Maybe, you found a Form 1099 in the back seat of your car that you didn’t report. This kind of mistake can affect your tax liability.
When not to file an amended tax return
For some errors, you do not need to file an amended tax return. Most likely, the error does not affect your refund or tax liability.
You do not need to change your tax return for math errors. The IRS will check your calculations and make corrections if necessary.
You also do not need to file an amendment if you forget to attach files to your return. The IRS will request the missing documents. You only need to send the files, not an amended tax return.
When can you file an amended tax return?
You can amend tax returns within three years of the date you filed the original return, or you can adjust the return within two years of the date you paid the tax. Amend the return by whichever date is later. To file an amendment for a 2013 return, the last year you can file an amendment is 2017.
You can file an amended tax return immediately after you send the original. But, you may not want to. The general rule is to fix a return after the IRS processes your original return. If you claim a larger refund on the amendment, you need to wait until after you receive your original refund.
If you realize you owe more money with the amended return, pay the tax as soon as possible. The longer you wait to correct your return and pay the tax, the more penalties and interest you incur.
Forms to use for an amended return
To file an amended tax return, you will use a different IRS form, depending on your type of business structure. Look for forms that end in the letter “X.”
Sole proprietors and single member LLCs file an adjusted tax return on Form 1040X, Amended U.S. Individual Income Tax Return. Form 1040X includes changes to Schedule C.
Corporations file tax return amendments on Form 1120X, Amended U.S. Corporation Income Tax Return. S corporations use Form 1120S.
Partnerships and multiple member LLCs use Form 1065X, Amended Return or Administrative Adjustment Request to make a change.
No matter what your business type is, you cannot e-file amended tax returns. You must submit a paper form to correct the tax return. The instructions attached to the form will tell you where to send the amendment.
If you file amended tax returns for several years, prepare a separate form for each year. Mail the adjusted returns in separate envelopes.
When you amend a tax return, you must correct every mistake on the original form. You can’t just make corrections to increase your refund and leave out information that increases your tax liability.
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This article has been updated from its original publication date of April 26, 2016.
This is not intended as legal advice; for more information, please click here.