Why You May Want to Amend Your Tax Return This Year—All Your FAQ Answered
It’s the most wonderful time of the year—tax season! While we tax pros didn’t think it could get much crazier than last year, 2020 returns are proving to be just as interesting. There have been a few after the fact changes to unemployment, PPP, state grants and a variety of business credits, contending with stimulus eligibility strategies. Phew, it’s a lot to keep track of, even for us nerds. This may be the first year you’re considering amending a prior tax return based on some of these changes. So we’re saving you time and frustration by answering all of your frequently asked questions regarding amended returns.
If you experienced some major life changes last year and are uncertain your return was filed correctly, we can help. First, you should know that you have three years from the original due date of a tax return to submit an amended return and recoup lost refund dollars. For example, 2017 changes would be due by 04/15/2021. This means if you think your 2020 return was not quite right, relax, because there's plenty of time to review.
Why go through the hassle of amending a return? Here are three reasons you might want to amend this year:
You qualify to exclude up to $10,200 in unemployment benefits. The IRS has “fixed it’ and you want a professional review to make sure it’s right since they will not automatically adjust credits or identify other tax savers.
Many of our clients are employed in Massachusetts…if this is you, you may qualify to exclude up to $10,200 in unemployment if you meet certain criteria. You do not need a tax pro to review this change, you will simply receive an extra refund check once MA has done its thing.
Your 19-24 year old may have gotten more in stimulus had you not claimed him or her. Unless they are the only dependent that lets you claim head of household filing status, it’s likely better to let ‘em go—at least for this year.
You rushed to get your business taxes done but neglected some expenses.
You could get your income under threshold to qualify for the third round of stimulus (up to $1400) by contributing to an IRA or HSA. (Deadline May 17,2021 for contributions)
In 2020, the IRS allowed retirement distributions to be spread out over three years. If you repay some or all of that distribution in 2021 or 2022, amending your 2020 return is the way to go to reverse the tax curse.
You’ve determined that amending your return would be to your benefit...now what?
What happens if the deadline passes?
Sorry, you snooze you loose.
Do any changes to my state filing automatically go to the state?
No, you are responsible for reporting any changes.
Can I file this electronically?
Yes! Starting this year 2019 and 2020 can be filed electronically. However, a tax pro still needs to verify. The IRS says it can take up to 16 weeks for processing time, but expect more like 8-10 months. Sorry to be the bearer of bad news.
Can I file an amended return to unclaim my teenager so they can qualify for previous and potential future stimulus?
It’s possible in some circumstances. Best to check with your pro on this one.
Can I amend my married filing jointly tax return, so we can file separately and reduce our overall taxes or unlock stimulus funds?
Typically the answer to this question would be no, however there is a provision that allows this if completed by the filing date of the tax return. For example, for 2020 returns the deadline would be 05/17/2021.
Can I track my refund for an amended return?
Yes here’s the link: https://www.irs.gov/filing/wheres-my-amended-return Notice this is a different link than typical tax returns.
Will this cause red flags or trigger an audit?
No, but your amended return is reviewed by an actual human...so don't get carried away.
If you’re a current client and think you may need to file an amended return, schedule a call with your tax pro here. And if you’re not working with us yet, see if we’re the right fit by scheduling an intro call here.
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