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CCH can assist you with stories, including interviews with CCH subject experts.
Also, the 2005 CCH Whole Ball of Tax is available in print. Please contact:
Leslie Bonacum
(847) 267-7153
mediahelp@cch.com
Neil Allen
(847) 267-2179
allenn@cch.com
Link to special CCH Tax Briefings on key topics from 2004:
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2005 CCH Whole Ball of Tax
Amended Returns Offer Taxpayers a Second Chance
(RIVERWOODS, ILL., January 2005) – Even taxes can be better the second time
around, when a change in the law or an overlooked deduction puts cash in your
pocket. Even if you’ve received – and spent – a refund, it may not be too late
to go back for more, according to CCH INCORPORATED (CCH), a leading provider
of tax and accounting information, software and services (tax.cchgroup.com).
You can usually get all that’s coming to you by filling out and filing an amended
return on Form 1040X. Even if a change to your return costs you, paying a few
dollars of extra tax voluntarily with an amended return is preferable to having
the IRS on your tail.
Amended returns not only correct mistakes but can open up previous years’
taxes for adjustment, according to John W. Roth, JD, federal tax analyst for CCH.
"An amended return is the taxpayer’s way to correct an error, add
something that’s been left out, change a previous return to reflect a loss or
change a choice that the taxpayer made on a return. If the change is in the
taxpayer’s favor, the amended return also acts as a request for a
refund," Roth said.
Some mistakes and omissions don’t require you to file an amended return,
however. The IRS will usually correct any math errors and either send you a
refund or a bill for any resulting difference in your tax. If you forgot to
attach a form or schedule, the IRS will ask you for additional information.
Amended Returns Offer Second Chance
A forgotten deduction or piece of income is one of the most common reasons
for filing Form 1040X, but an amended return also can be used to clear up a tax
picture that wasn’t previously certain.
Suppose it’s January, bills have piled up, and when you take a first look
at your taxes, it seems that you’re due a refund that will cover them. One of
your itemized deductions will be for state income tax. But you might be due an
even bigger refund if you took the new deduction for state sales taxes instead.
(You can’t take both.) The problem is, it will take some time to sort through
all your records to see if you’ve saved enough receipts to make the sales tax
deduction worthwhile.
To cover your immediate needs, you can file your return right away, claiming
the income tax deduction and using the refund to meet your immediate needs. At a
later date, you can add up all your receipts and, if the sales tax deduction
produces an even larger refund, you can file 1040X to claim the difference.
Time to sort things out can also be an issue when you need to determine that
a stock actually became worthless – or a debt became uncollectable – in a
previous tax year. These also are situations that can be addressed through
amended returns.
Use Amended Returns to Make, Change Elections
Amended returns are also a common way of making or changing a tax election
– a choice of tax treatment. Dozens of elections are available relating to
business, farming, foreign income, residency status and other special
situations.
For example, if one spouse is a nonresident alien, a couple normally cannot
file jointly, but they can elect that status for a year in which the spouse
becomes a U.S. resident. If they do not do so on their original return, they can
do so on an amended return.
"Taxpayers will have to do some research or consult a qualified tax
advisor to learn how long they have to make or change an election by filing an
amended return," Roth noted. "Sometimes they have up to three years
from the original due date of the return, sometimes up to the original due date
plus extensions, sometimes only up to the due date without extensions."
Changing Filing Status
Amended returns are often required when a couple has their marriage annulled.
Unlike a divorce decree, an annulment looks backward and undoes a marriage from
its beginning. Since unmarried couples don’t qualify for joint filing status,
any joint returns filed for prior tax years have to be "undone" by the
filing of amended returns as single filers.
"This is a rare circumstance in which people who have filed a joint
return can change their filing status," Roth said. "Normally, after a
joint return has been filed, the filing status can’t be changed – for
example, to married filing separately – unless the amended returns are filed
before the due date for that year."
If a couple has filed jointly but wants to change to married filing
separately and the filing deadline hasn’t passed, the two spouses must take
two different paths. The spouse whose Social Security Number appears first on
Form 1040 files a Form 1040X. The other spouse files a new Form 1040.
Amended Returns for Losses
Amended returns can also come into play if casualty losses occur in an area
determined by the President of the United States to be a "disaster
area." In this case, a property owner can elect his or her losses in the
year immediately before the tax year when the disaster occurs. This allows some
taxpayers who suffer losses in 2005, for example, to get some quick relief by
applying the loss to an already-paid 2004 tax bill and getting a refund check.
By contrast, taxpayers with 2005 casualty losses outside of presidentially
designated disaster areas have to wait until they file their 2005 returns to see
any tax relief as a result of their losses. Business losses can also give rise
to amended returns. A net operating loss can be carried back to the previous two
tax years, and carried forward to be applied against income in the succeeding 20
years. Carrying the loss back can produce a refund.
"If you carry back a loss, you also have to recompute any deduction you
took that was tied to adjusted gross income, such as the deduction for medical
expenses," Roth observed.
Amended Returns Not Electronic
While an amended return allows you to bring your tax status up to date, the
actual process of filing takes you back to an earlier era of IRS processing and
service. Form 1040X is one of the few that can’t be filed electronically. Your
tax software may allow you to fill out and print the form, but you’ll have to
send a paper copy to the IRS. It can take the IRS 12 weeks to process the form,
and don’t bother calling the automated tax line for a quick check on the
progress. You must call the live-answer line, 1-800-829-1040, instead. If you’re
due a refund, look for your check in the mail. Electronic deposit is not
available when you file an amended return.
"There’s certainly a benefit to getting things right the first time
around, but it can be worth the wait when an amended return puts money back in
your pocket," Roth noted.
About CCH INCORPORATED
CCH INCORPORATED (tax.cchgroup.com),
based in Riverwoods, Ill., is a leading provider of tax and accounting information,
software and services. CCH has served tax, accounting and business professionals
and their clients since 1913, providing them with the most authoritative, timely
and comprehensive tax resources. CCH is a Wolters Kluwer company (www.wolterskluwer.com).
Wolters Kluwer is a leading multinational publisher and information services
company. The company’s core markets are spread across the health, tax,
accounting, corporate, financial services, legal and regulatory, and education
sectors. Wolters Kluwer has annual revenues (2003) of €3.4 billion, employs
approximately 18,750 people worldwide and maintains operations across Europe,
North America and Asia Pacific. Wolters Kluwer is headquartered in Amsterdam,
the Netherlands. Its depositary receipts of shares are quoted on the Euronext
Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.
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nb-05-03
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