Updated for Tax Year 2014
The Internal Revenue Code is lengthy and complex, which can sometimes mean that your personal income tax return will be riddled with errors and omissions. The IRS allows you to voluntarily correct the mistakes you later discover by filing an amended tax return. However, you have to adhere to all eligibility criteria before filing the amendment.
Staying within the statute of limitations for filing a tax amendment
Before you begin the process of amending a personal income tax return, you should first make sure that filing an amended return isn’t time barred by the statute of limitations. The statute of limitations prohibits you from filing an amendment that increases a refund amount beyond three years of the original filing date or two years of the date you actually pay the tax, (basically whichever one is later).
Reasons to file a tax amendment
A valid tax return amendment requires you to complete IRS Form 1040X. The two-page form requires you to update the amounts that differ from what you reported on the first tax return. The form also provides space for you to draft a short note to the IRS explaining why you are amending the return. However, if the error relates to information you initially reported on a schedule or attachment to the tax return, you have to update that schedule and attach it to the 1040X.
Interest and penalties on tax amendments
Although the IRS encourages taxpayers to amend a tax return when the original does not accurately report the correct tax, you are still liable for interest and penalties if the amended return requires an additional payment of tax. Monthly interest will also accrue on the tax you underreported between the original filing date and the date you file the amendment.