How to File an Amended Tax Return

How to File an Amended Tax Return

Of course we all want the original return to be perfect. But sometimes you receive data that changes the return after you have filed. Maybe you made a mistake. Maybe your tax preparer did. Maybe you falsely reported income on your return, and realize you could be caught. What do you do? File an amended return!

(Note: Contacting an Enrolled Agent/Lawyer first may be advisable for dealing with tax or legal consequences.)

An amended return is done to correct or make changes in an original tax return. If you made a mistake in your filing status or failed to take a deduction or apply for a credit, you can file an amended return. One client filed an amended return to change his filing status to Married Filing Jointly and received a substantial refund. Another had done an earlier year tax return, but neither the client nor her tax preparer had realized that paying her son’s college tuition the year before made her eligible for a $2500 education credit. By filing the amended return in a timely fashion, she was able to get that $2500 refund check due to the education credit she was entitled to.

How Do You File Your Amended Return?

The amendment is done on a Form 1040X on paper (not E-file). When we do your taxes at Torchlight Tax Solution, we have all the forms needed right on our computer system. If you go it alone, you can get the needed forms from the IRS. In addition to the 1040X, attach any needed forms or schedules to the amended return.

As this is an amended return, you are already correcting an error. You do not want to make an error correcting an error. So honestly look at why the error was made. If the person doing the return did not know what he was doing, you may want to get someone else. If you were that person, the same applies. It has been said that knowing when you don’t know is a point of wisdom.

You need not file an amended return to correct math errors because the IRS automatically makes those changes for you.

If you are amending more than one tax return, prepare a 1040X for each return and mail them to the IRS in separate envelopes. Note the tax year of the return you are amending at the top of Form 1040X. DO NOT try to save stamp money by putting multiple forms in one envelope. One form might be totally overlooked when the envelope is opened. This is not theoretical. It has actually happened.

If you are filing an amended tax return to claim an additional refund, wait until you have received your original tax refund before filing Form 1040X. (You may cash your original refund check while waiting for the additional refund.)

If you owe additional taxes with Form 1040X, file it and pay the tax as soon as possible to minimize interest and penalties. Generally, to get a refund, you must file Form 1040X within three years from the date you filed your original tax return or within two years of the date you paid the tax, whichever is later. Special rules may apply to certain claims. You can find these rules on the 1040X instructions, or take advantage of your free consultation at a TAX Solutions office.

You can track the status of your amended tax return for the current year on the IRS site. I recommend keeping a copy of your amended return/returns and checking the IRS site at least three weeks after filing using the “Where’s My Amended Return” tool on the IRS website.

Tax Law and Regulations can be a complicated labyrinth to the regular taxpayer. You may plug away for hours only to find yourself at a dead end. It may be wise to get an expert’s assistance. Maybe you are going to have a substantial liability and an Enrolled Agent can get it reduced by an Offer In Compromise. Perhaps you have a debt you cannot pay, and an Enrolled Agent can get it relegated to uncollectible status.

Perhaps the income the debt is based on is bogus and is not taxable income at all, and thus the debt is invalidated. There are many scenarios that require expert skill. One of my clients, for example, was not getting the full advantage of his deductions because he was subject to the Alternative Minimum Tax. One of his deductions was for State Income Tax. In amending his return, I had him not take that deduction, as it did not reduce his tax bill. Next year, when he gets a substantial state refund, it will not be taxable income. Had I taken the deduction, it would have been taxable income and he would have paid thousands of dollars on it in taxes the next year.

Filing an amended return may be aggravating experience to many a taxpayer. Sometimes it may result in substantial savings. If you feel confident in your tax expertise, you are welcome to go it alone.

I do not recommend this. Instead, here is what you do. Call or email us for your FREE consultation. One of our Enrolled Agents will review you situation and recommend solutions based on this. You can still go it alone, but chances are our expertise will save you money and worry. Our fees are a bargain compared to the money and aggravation you save.

What to Do if You get a Letter from the IRS

What to Do if You get a Letter from the IRS

First, do not panic.

Yes, it can be upsetting to receive a notice from the IRS. But the first step is to not panic and calmly read the notice or letter. The notice or letter states the reason it was sent, its purpose, and instructions on how to respond.

In the corner is a notice number. This number also prints on the lower left hand side of the tear-off stub included with the notice or letter. The IRS website has a table explaining each type of notice by number (see Resources). Match your letter’s number with the number in the table to get more information. Does it make sense?

Read it carefully and make sure you understand what it is saying. If you do not understand it, do not guess. Maybe there are some odd words there you can look up in a dictionary or on the internet. Maybe a friend who “speaks tax” can translate it for you. You are welcome to contact us and we will help you make sense of it as part of a free consultation.

Normally there is a specific issue related to your account or tax return. Maybe you are getting a larger refund then expected, and that is why the notice has arrived! What a waste it would be if you had a heart attack seeing you had an IRS letter and never collected on the refund. Maybe the IRS found a small math error in your return and you now owe 5 dollars. No reason to panic here. Or course maybe you do owe substantially more, or the IRS is requesting additional data. Panicking is not going to help you. VERY IMPORTANT!! Do not carry on if you do not understand the notice. Get help from a licensed tax professional. You can contact us and get a free consultation with one of our Enrolled Agents. As Confucius might have said “The wise man knows when he is in over his head.”

What next?

You generally have 30 days to respond to an IRS notice. Do not ignore it. Always check which tax year the notice relates to. It may not relate to the current tax year at all. Make sure the instructions are clear. Do not try to execute instructions you do not understand.

It may request more information or ask a specific question. If it’s a minor issue and you are confident of the facts, you can respond to the notice yourself. But sometimes, you may need to seek help from a tax professional. The IRS says in its article “Eight Things to Know if You Receive an IRS Notice” that “most correspondence can be handled without calling or visiting an IRS office.”

You are welcome to contact us. If there is something wrong with your tax return or you need professional assistance, the sooner you get it the better. If you are facing a substantial tax bill or you or your tax preparer made major errors in your return, then an enrolled agent may save the day. I had one client who had made an error in his self-done return, and was mildly panicked to receive a letter from the IRS. When I reviewed his taxes, I will able to resolve the IRS question in a few minutes. He had made made a mistake entering income on his tax form. While a professional in his own field and well-paid for it, he did not “speak tax” and had simply guessed where to enter an income item. When it was corrected, he did not owe the IRS any more money. I filed an amended return for his federal and California income tax. The federal return was a wash. But I needed it amend it to file the amended California return. And the amended California return netted him an $8,000 refund! He had made another mistake!

Now back to the notice you received from the IRS. You may receive a correction notice or a notice of unreported income. Does the notice make sense? Compare the IRS adjustments with the information on your tax return. If the adjustments make sense and you see there are correct, you can reply to the IRS with payment for the additional taxes due. Write the reference number on the check and send it with the voucher the IRS provides with your notice. If the IRS correction seems wrong, proceed to the next step.

If you do not agree with the notice

If you do not agree with the notice, make sure you understand it. Now might be a good time to seek professional assistance. The notice might seem silly, frightening, or foreboding to you, but might be old hat to one of our Enrolled Agents. Do not procrastinate or put it into your shredding. Get help if you need it. If you are in over your head, get it over to an Enrolled Agent and get his advise or give him the ball and let him run with it. Either you or your EA will need to respond within the thirty days with your reasons for disagreeing and enclose copies of all relevant documents. Mail it to the address on he top left corner, along with the tear-off stub for reference. Start a new folder and keep all correspondence in one place (including copies of your responses to the IRS) for ease of reference. If you want to use computerized files and scan the documents in, that is fine.

Allow at least one month for the response.

The important thing is to respond – ignoring notices will get you nowhere and could result in additional negative consequences. And if you or your tax preparer made a mistake, now is an excellent time to correct things. Do not leave it for the IRS to work out. If you cheated on reporting your income or entered a bogus deduction, no need to start planning your retirement to San Quentin. Have an Enrolled Agent or other licensed tax professional look over your returns and correspondence. Even if it was simple human error, a review of your taxes would be wise. If you or your preparer made one mistake, maybe there is another. Your EA can always file an amended return, state that a mistake had been made, and turn in an error free return that gives you the maximal legal deductions and minimal tax bill. If this is all that happened, the IRS is unlikely to take any further punitive action. Chances are the return your EA does will give you more tax benefits than letting the IRS figure out your tax bill.

A couple words of caution. Be realistic about your or your preparer’s tax knowledge. If you or he did not know what you were doing, do not make the same mistake again. You can study up by reading appropriate tax articles on the internet so you understand what you are doing. You can require your preparer do so or hire an Enrolled Agent. Another word of caution. Do not have blind faith in the IRS and operate solely off their advice. It is not true that every IRS agent is attempting to maximize your tax bill. But they are not trained to minimize your tax bill either. It is fine to call the IRS help desk. But if we are taking a considerable tax liability, get a second opinion. You are invited to contact us for a free consultation.

What to do?

If you have any questions or need any tax assistance contact Torchlight Tax for a free consultation. One of our Enrolled Agents (top federally credentialed tax expert) will assist you.  Email us or call our Toll Free Number (877) 758 7797.

IRS Statute of Limitations

IRS Statute of Limitations

YES! There is one. There is a point beyond which IRS can no longer collect on a prior tax debt. To find out more about this, click the video below.

Torchlight Tax Winning 1.8 Million Dollar Case

OK. I am jumping the gun here. But I was so happy that I wanted to share this with my friends. I have been involved in a fairly high-stakes representation case. The IRS has been coming after one of my clients for $1.8 million dollars. The problem is HE does not have $1.8 million. They earlier gave the client “Un-collectible status” but then started demanding payment again.

The contrary facts were amazing. Finally, I had an IRS Revenue Officer (RO) threatening to levy his bank accounts as she had found evidence that he had failed to disclose real estate assets. She gave only a short period of time to prove that he had not.

Now, he does not have $1.8 million dollars, but that would not prevent them from taking what he does have! He is about 80 years old and living off a pension. Having what savings, he has taken away would not have been pleasant!

There also has been a threat of going after some trusts he established decades ago for his family. He no longer owns or has access to these trusts. But the IRS was apparently trying to figure out a way to break the trusts. The situation was complicated. A few decades ago he established some trust funds for his family. This was totally legal. He no longer owns or controls these trusts. Then, about five years ago, he lost a 25-year-old court case with the IRS. The IRS then assessed him $300,000 in tax and $1,500,000 in fines, penalties and interest. But he was 75, retired, and living off a pension.

Now, he is 80 and they are threatening to levy his bank accounts because his financial report did not disclose two properties he owns! Or at least, so says the IRS. With the help of a well-connected real estate agent friend, I was able to get property profiles that showed who the real owners of those properties were. I got other finance records together as well.

After faxing her the property profiles, I finally got the RO on the phone. I asked her if that was the evidence she needed, or if she had further questions. She had further questions. I listened carefully and answered her questions exactly. She asked me if I had some additional proof. I told her that I did, and that I would send it to her. I asked her if she needed anything else. She said no, and when she got the additional data I was sending, she expected to close the case, and put my client back into un-collectible status.

What to do?

If you have any questions or need any tax assistance contact Torchlight Tax for a free consultation. One of our Enrolled Agents (top federally credentialed tax expert) will assist you.  Email us or call our Toll Free Number (877) 758 7797.

What is an Enrolled Agent & Do I need one?

What is an Enrolled Agent & Do I need one?

“An enrolled agent (or EA) is a federally authorized tax practitioner empowered by the U.S. Department of the Treasury to taxpayers before the Internal Revenue Service (IRS). Enrolled agent status is the highest credential awarded by the IRS.”
Enrolled agent – Wikipedia, the free encyclopedia

“An enrolled agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test covering individual and business tax returns, or through experience as a former IRS employee. Enrolled agent status is the highest credential the IRS awards. Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every three years.

Enrolled agents, like attorneys and certified public accountants (CPAs), have unlimited practice rights. This means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before.” — Internal Revenue Service

Do you need an enrolled agent?

If you were going to court and were potentially liable for tens of thousands of dollars or even jail, would you hire an attorney? Or would you represent yourself?

If you had to prepare documents that would determine if you were owed thousands of dollars, or had to pay out thousands of dollars, would you have an expert prepare them or at least review them? Or would you go it alone and hope for the best?

If someone was billing you and demanding payment, and you disagreed with the amount or payment terms, would you only ask them how to sort it out, or would you seek independent informed counsel?

The above questions are analogies as to why you may need an enrolled agent. You would not go to court with the potential of tens of of thousands of dollars loss without an attorney who knows the ropes to advise you and protect your rights. You would not represent yourself in an important court case unless you were a legal expert. You should not go before the IRS without an Enrolled Agent to advise you and protect your rights. You should not represent yourself before the IRS if the matter is serious and you are not a tax expert. But people do this all the time with the IRS. It is not a matter of the IRS being evil. It is matter of the person not being represented by someone who knows the rules.

I will give you a real-life example. One retired gentleman came to see me. He had enter into an instalment agreement to pay off an 8 year old debt with penalties and interest to the IRS. It is true that he had incurred a legitimate debt. He had sold a business and not paid the IRS their due. After a near brush with death and months of hospitalization, he invested his business sale savings into renovating his home for sale. He fully and expected to sell the house and pay off the IRS with plenty of money to spare. Disaster struck in a septic tank failure. The house became unsalable. He lost the house and all his savings. He had no money to pay the IRS what he owed them.

Eight years later, an IRS representative convinced him he had to enter into an Instalment Agreement–that he had no choice. He came to me with a problem as to how he would survive while making this payment. His only income was Social Security, and with the IRS monthly payment, he could not pay the rent for his small apartment, food, utilities, medical and life basics. Being in his late 70s, going back to work was not a realistic option. I had him sign an IRS Form 2848 Power of Attorney so I could represent him before the IRS. I knew what he did not know and the IRS had not told him. His income was below the level that the IRS, by their own regulations and the laws of this country, could collect. He had no property they could legally seize. So his debt goes into un-collectible status, and he continues to live modestly but in reasonable comfort and security. In two years, the debt disappears forever as the 10 year IRS Statute of Limitations is up. (And I feel good and sleep well, because I helped a nice old guy–who had paid plenty of taxes in his decades of work– live out his life in reasonable comfort and dignity.)

Another Real Example

Another friend, with a large tax bill unpaid from 8 years before, wanted to settle with the IRS. I told her to get me certain data. She did not call me back with the data. She called the IRS and asked for help. They recommended an Offer In Compromise. When I talked to her next, she was all set to do an offer and compromise and did not think she needed assistance. Maybe not. But the IRS had not explained to her that by the Statute of Limitations her bill was about to disappear.

Let me expand on this analogy. You are driving on a dark night going downhill, sober, not speeding and your brakes fail and you crash into another car at an intersection, and the drunken felon who was speeding in that car is killed. You feel bad. You should have maintained your brakes better. You realize you should have done something more effective than honk your horn as you approached the intersection with no brakes. Now, if the other driver had not been drunk and speeding himself, he might have been able to avoid the accident. But you still know you did wrong. The DA comes to you and tells you you are being charged with murder in the first degree. You think of your two kids and your wife and and wonder how they are going to get along. You say to the DA “But he was drunk and speeding and a recently-fired 45 caliber gun was found in the car which was linked to a drive-by shooting two miles away two minutes before” The DA says “Those allegations may or may not be true, but are not relevant. You did not stop at a stop sign and he is dead. You are guilty of murder.” You say, “This is terrible. My wife. My kids. You have got to help me. What can I do?” The DA says “Gosh, I feel sorry about your kids. Tell you what, you sign this confession right here and right now, don’t bother with engaging a lawyer as we are giving such a good deal, and I will let you cop a plea for 3rd degree murder. You can be out in ten years, catch your kid’s college graduation.” Since the DA is being so helpful, you thank him for letting you live and do not spoil the deal by engaging a lawyer of your own, as there is no need.

Maybe I am being a bit melodramatic. But if you are having a problem with the IRS about taxes, don’t you think it would be prudent to ask for help from someone who is not part of the IRS and whom you can hire to protect your rights? The IRS says “Per law 4857 and legal precedent of Wacko vs Fruitcake, your statement that the printing press you bought was tax deductible is false and you owe us ___”. You do not know what the IRS is talking about. You don’t speak tax. But you had prudently engaged an EA. Your EA says “Look here. Law 4857 only applies to foreign held corporations and this is a domestic LLC, and Wacko vs Fruitcake was about a KKK member who deducted the wood used for burning crosses on negros’ lawns. This does not apply here …. Let me show you the actual rulings that apply. I have them right here….”

The Price of Not Knowing

One last example. You would not draw up a legal agreement committing yourself to tens of thousands of dollars of payment without knowing fully what you are agreeing to or whether the document was legally correct. Well, what about the guy who files his taxes with Turbo Tax because it is easy to do and he can slip in some nice deductions, but he does not know what all the words mean on the tax form and he does not know exactly where to enter . . .. Besides, his tax bill is only $40,000 and that was already withheld from his wages, so he will even get a refund. “Yeah,” he thinks, “I can do this. No need to hire a pro.”

And then he gets a notice and finds himself under an IRS audit by mail because he entered a forgiven loan correctly as income but in the wrong place. Luckily, he had the good sense to call me, an enrolled agent. When I review his taxes I discover he filed and paid over $10,000 in State Income taxes to a state he no longer worked in. He does not owe that state income tax! Now, this is a real example, It happened. I was able to correct his initial error, put his income in the right place under the right heading, and file an amended return with the IRS and the state and request a $10,000 refund. (By the way, there is nothing wrong with Turbo Tax. But the person using it has to know what he is doing.) Filing his own tax got him an IRS audit by mail and if left uncorrected would have cost him 10 Gs.

One last tip. There are many tax preparers out there with no formal training in tax. And there are many very high-quality computer programs that print out very professional looking completed forms and tax analyses, but are really only as good as the data was input correctly by someone who understands tax. The untrained preparer may have a nice office and friendly manner. An untrained person who is unethical can even get you large refunds. Inflated expenses and spurious deductions and credits are not hard to put into a tax return. If your refund is too good to be true, it may be. Of course, if the IRS audits you, you wind up with penalties and interest and a vastly increased bill. Indeed, if you did not carefully read what you sign, the preparer who made up a fraudulent return may say, “but he told me his start-up company lost 50,000 dollars and these expenses were what he told me. He was lucky he had not quit his day job. Look. He even signed the return.” It is not hard for anyone to call himself a tax specialist. There is no mandatory training or exam they have to pass to say “expert” or “pro” or “specialist”. Lawyers, CPAs and Enrolled Agents DO have to pass rigorous exams and do lots of continuing professional education every year to maintain their license.

And you have to be one to call yourself one, or it is a crime. The EA has the advantage of ONLY doing taxes and so all his exams and continuing education is on taxes. I would personally recommend only using a licensed professional. I am sure some un-licensed tax preparers do a good job even if they are not an EA, CPA or Lawyer. But if they really know taxes, they should be able to take and pass the EA exams.

Lawyers, CPAs and EA also are part of professional organizations and hold a valuable license that they keep by maintaining an ethical standard and quality of product. A competent tax pro knows his long term prosperity is only guaranteed by good ethical work. If you like your un-licensed tax preparer, encourage him to take the exams to become an enrolled agent. He simply has to demonstrate he knows his business on taxes to pass the exams.

Can You Afford Not to Have the Right Representation?

So, do you need an EA? Maybe not. You are single making $10 an hour in wages, have no dependants, no house, are not going to college. Heck, file direct with the IRS or use Turbo Tax. You probably do not need an EA. If you have a CPA who specializes in taxes (not just one who does Corporate Audits), and he always does a good job and he is always helpful, knowledgeable and ethical then fine. If you have a lawyer representing you before the IRS and just won your case, fine. You may not need an enrolled agent (EA).

However, if you are in any of the following categories, you probably DO need an EA, and should call us to schedule a free consultation. We will review your situation and advise you on your options.

  • You think your taxes are too high
  • You think your taxes may have been done wrong
  • You are spending too much time on your taxes
  • You have a large tax debt
  • You have defaulted on an offer in compromise or instalment agreement
  • You want to be represented before the IRS
  • You are self-employed and pay a lot of self-employment tax
  • You are under audit
  • You want someone to stand in your shoes before the IRS
  • You have not filed your taxes for some years
  • You think some returns need to be amended
  • You have received a letter or notice from the IRS
  • Your tax preparer has disappeared
  • You are confused about your taxes
  • You are worried about your taxes
  • Your books are a mess and you do not know what to do to file
  • The IRS seems to have different records than you have
  • You wake up at 3:00 am sweating because of tax nightmares


What to do?

If you have any questions or need any tax assistance contact Guarddog Tax for a free consultation. One of our Enrolled Agents (top federally credentialed tax expert) will assist you.  Email us or call our Toll Free Number (877) 758 7797.