Amended returns are available for taxpayers who forget toclaim extra tax benefits and can bring in extra money later, CCH noted.
Even if your clients have received - and spent - arefund, it may not be too late to go back for more, according to CCH. They canusually get all that's coming to them by filling out and filing Form 1040X. Andeven if a change to the return costs them, paying a few dollars of extra taxvoluntarily with an amended return is preferable to having the IRS on theirtail.
Amended returns not only correct mistakes, but can openup previous years' taxes for adjustment.
"An amended return is the taxpayer's way to correctan error, add something that's been left out, change a previous return toreflect a loss or change a choice that the taxpayer made on a return,"said CCH senior federal tax analyst John W. Roth. "If the change is in thetaxpayer's favor, the amended return also acts as a request for a refund."
Some mistakes and omissions don't require the taxpayer tofile an amended return, however. The IRS will usually correct any math errorsand either send a refund or a bill for any resulting difference in tax. If thetaxpayer forgot to attach a form or schedule, the IRS will ask them foradditional information.
People who qualify for the first-time homebuyer's creditand who purchase a home in 2009 may use an amended return to claim therefundable credit against their 2008 taxes.
Those who haven't filed their 2008 returns and who areplanning on buying a house this year before the Dec. 1, 2009, cut-off date forthe credit have the option of applying for an extension on their 2008 returnsor filing on time and amending after their purchase is made.
Also helped by an amended return are members of themilitary who can now make a contribution to an IRA for tax years 2004 and 2005,based on their excludable combat pay that was not counted as earned income inthose years but now can be for IRA purposes. For tax years 2004 and 2005,military personnel have until May 28, 2009, to make a contribution, and afurther year after that, until May 28, 2010, in which to amend their returns toclaim a refund.
An amended return also can be used to clear up a taxpicture that wasn't previously certain. Suppose some bills have piled up, andwhen the client first takes a first look at their taxes, it seems that they'redue a refund that will cover them. One of their itemized deductions will be forstate income tax. But they might be due an even bigger refund if they took thededuction for state sales taxes instead. (They can't take both.) The problemis, it will take some time to sort through all their records to see if they havesaved enough receipts to make the sales tax deduction worthwhile.
To cover their immediate needs, they can file theirreturn right away, claiming the income tax deduction and using the refund topay their expenses. At a later date, they can add up all their receipts and, ifthe sales tax deduction produces an even larger refund, they can file Form1040X to claim the difference.
