It’s relatively uncommon to make an error on your federal tax return or to omit essential information, such as a tax exemption or credit to which you are entitled, especially using online accounting software—but the IRS has a mechanism in place that provides you with a second opportunity.

Tax preparation is time-consuming for company owners, not when you use (free accounting software for business), and errors can occur—even on income tax returns. 

If you discover an error on your tax return for this year or earlier years, you do not need to submit a new return or fear an IRS audit. You also do not need to bother filling out a slew of tax paperwork, even if you use online billing software

There is just one income tax form. Utilize Form 1040x to file an updated tax return.

When should an updated tax return be filed?

The following are some frequent instances that need an amendment:

  • Tax deductions or credits that you were eligible for were not available to you.
  • You made an error in claiming the incorrect tax filing status.
  • You need the addition or deletion of a dependency.
  • You overlooked the taxable income section of your tax filing. 
  • A purchase, rebate, or credit that you could not claim was discovered.

Data loss/ missing Data is the key reason for businesses for which they need to file revised returns. And that’s where the importance of cloud accounting software or online billing software holds a vital role in any organization.

Generally, suppose you have clerical problems on a recently filed tax return. In that case, you are not required to submit an amended return. Often, the IRS will remedy such errors on its own and will send you a bill for the extra tax owed or a refund if the mistake was in your favor.

Before submitting an updated return with the help of free accounting software for business, verify that the tax return you want to modify has been completed with the IRS. In this manner, you can guarantee that the IRS does not mix up your original and altered returns. There’s a good chance that the IRS has already handled your claim, as shown by the fact that you got a refund.

When should form 1040x be filed?

Before submitting an updated return using cloud accounting software, you should verify with the IRS that the tax return you want to modify has been processed. This may be accomplished by connecting to your IRS.gov account or using the IRS’s Where Is My Refund? Feature.

Allowing the IRS to complete your return assures that the IRS does not mix up your original and modified tax returns.

That is the earliest you may modify a tax return, but the length of time you have to file an updated return is also limited. This limitation is as follows:

Within three years after the first filing date, or within two years of paying the year’s tax owed, whichever is later

For instance, suppose you submitted your 2021 tax return on or before the initial deadline of May 30, 2022, and paid the tax due on that day. Therefore, the deadline to submit a tax revision or amended return for the 2021 tax year would be May 30, 2025.

If you miss that deadline, you will be unable to submit an updated return, even if doing so might result in a sizable tax refund.

How to Complete Form 1040x

The process for amending a return is essential. Here is a step-by-step breakdown of the procedure.

1. Have your documents ready with you

Have your documents ready with you

You must have a duplicate copy of the income tax return to revise it. A new W-2 or 1099 and records for any expenses you choose to claim will be required, and any further supporting documents you may have created utilizing free accounting software for business.

2. Obtain the appropriate forms to update 

Obtain the appropriate forms to update

If any other forms or schedules need to be updated, you’ll also require Form 1040x. Consider the following scenario: you’re updating your return to include a business cost. You will also want a copy of Schedule C in this scenario.

Ascertain that you have the correct income tax forms for the proper tax year. For instance, if you are updating your 2020 return, you will want a copy of the 2020 Schedule C. Prior-year forms and instructions are available on IRS.gov.

Need to Download Taxation Reports?

3. Complete the form 1040x

Form 1040x asks for your name, Identification Number, residential address, and contact information, as well as your filing status for the year you’re revising.

The remainder of Form 1040x is divided into three columns.

Column A contains the data from your first income tax return. Complete this column with information from your previously filed return or with the help of free accounting software for business. 

Keep in mind that when you file a revised return for a particular tax year, it serves as your fresh income tax return for that year.

Therefore, if you need to update an income tax return that you have already revised, utilize the numbers from your previous amendment rather than your initially filed return.

Column B illustrates how your initial return amounts may grow or decrease due to the modification you make. 

For instance, suppose you’re updating your Schedule C to incorporate $5,000 in extra deductible costs. In that situation, you put ($5,000) on line 1, column B to reflect a decrease of $5,000 in your adjusted gross income.

Column C has the proper value. Add the numbers in columns A and B and put the total in this field.

4. Submit your modified tax return

Submit your modified tax return

Once you’ve completed the paperwork under the instructions and using online accounting software, it’s time to mail the IRS Form 1040x and any accompanying schedules.

If you need to modify a return submitted in 2018 or before, or if the return was filed on paper in the year in question, you’ll need to print Form 1040x and any accompanying schedules. 

As instructed in the IRS guidelines for Form 1040x, submit your documents to the IRS office for your state. You’ll note that the instructions do not include a street address; nevertheless, this is because the zip code is unique to the IRS processing facility and identifies the envelope as being sent to the IRS.

If you respond to an IRS notice by amending your return, mail your 1040x and any associated forms and attachments to the addresses shown on the letter.

While e-filing is usually the most secure manner of submitting a tax return, if you must send your return, you should select a method that offers evidence of postage. For instance, if you want to ship your updated return by the United States Postal Service (USPS), do not just drop your documents in the next mailbox. 

Also Read: All You Need To Know About 2022 Federal Income Tax Brackets and Rates

Wrap up

If you utilized tax software or online accounting software to create and then e-filed your initial return, the program may assist you in filing an updated state return. A second e-filed return may be subject to extra e-filing costs.

Form 1040-X may be used for various reasons, and millions of taxpayers do so each year. Make sure you don’t get too worked up about an error on your tax return, whether or not you owe money. 

Please take a look at the form and make the necessary changes. Double-checking your arithmetic will guarantee that you get it correctly the first time.

Using smart technology such as cloud accounting software can help you minimize errors. If you are not relying on online billing software, contact us at support@mooninvoice.com or call +1-805-491-9393 to get in touch with us now!

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