 |  | Home  |  | | About Us | | | Order Products | | | Press Center | | | Customer Service | | | Career Opportunities | |
|
CCH can assist you with stories, including interviews with CCH subject experts.
Also, the 2006
Link to special CCH Tax Briefings on key topics from 2005:
| |
Amended Returns Offer Taxpayers a Second Chance(RIVERWOODS, ILL., January 2006) – Taxes can be better the second time around. When a change in the law or an overlooked deduction tilts the tax situation in your favor, an amended return can put 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, a Wolters Kluwer business and 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 Form 1040X. And 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, CCH federal tax analyst. “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. “In cases of natural disaster, an amended return can expedite tax relief for losses,” Roth added. “This aided many victims of last year’s hurricanes.” 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 ChanceA 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 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 Form 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 uncollectible – in a previous tax year. These also are situations that can be addressed through amended returns. Use Amended Returns to Make, Change ElectionsAmended 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 StatusAmended returns are usually 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 LossesAmended 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 occurred. This allowed some taxpayers who suffered losses in the 2005 hurricanes, for example, to get some quick relief by applying their loss to their already-paid 2004 tax bills and getting refund checks. By contrast, taxpayers with 2005 casualty losses outside of presidentially designated disaster areas have to wait until they file their 2005 returns to see their tax relief. 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 ElectronicWhile 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, a Wolters Kluwer businessCCH, a Wolters Kluwer business (tax.cchgroup.com) is a leading provider of tax, audit and accounting information, software and services. It has served tax, accounting and business professionals and their clients since 1913. Among its market-leading products are The ProSystem fx® Office, CCH® Tax Research NetWork™, Accounting Research Manager™ and the U.S. Master Tax Guide®. CCH is based in Riverwoods, Ill. Wolters Kluwer is a leading multinational publisher and information services company. Wolters Kluwer has annual revenues (2004) of €3.3 billion, employs approximately 18,400 people worldwide and maintains operations across Europe, North America and Asia Pacific. Wolters Kluwer is headquartered in Amsterdam, the Netherlands (www.wolterskluwer.com). Its depositary receipts of shares are quoted on the Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. -- ### -- nb-06-04
|
© 2024, CCH INCORPORATED. All rights reserved. |
Back to Top | Print this Page |
|
|||||||||||||||||