Taxpayers who discover they made a mistake on their tax returns after filing can file an amended tax return to correct it. This includes changing the filing status and dependents, or correcting income, credits or deductions. The instructions for Form 1040X, Amended U.S. Individual Income Tax Return, list more reasons to amend a return. Taxpayers should not file an amended return to fix math errors, because the IRS will correct those.
Here are some tips on how a taxpayer amends a tax return. Taxpayers should:
Complete and mail the paper Form 1040X, Amended U.S. Individual Income Tax Return, to correct errors to an original tax return the taxpayer has already filed. Taxpayers can’t file amended returns electronically and should mail the Form 1040X to the address listed in the form’s instructions. However, taxpayers filing Form 1040X in response to a notice received from the IRS, should mail it to the address shown on the notice.
Prepare Form 1040X. Many taxpayers find the easiest way to figure the entries for Form 1040X is to make the changes in the margin of the original tax return and then transfer the numbers to their Form 1040X indicating the year they are amending. Use the second page of Form 1040X in Part III to explain the changes.
Know when not to amend. Aside from math errors, taxpayers also do not need to amend their return if they forgot to include a required form or schedule. The IRS will mail a request to the taxpayer, if needed.
Use separate forms for each tax year. Taxpayers amending tax returns for more than one year will need a separate 1040X for each tax year. Mail each tax year’s Form 1040X in separate envelopes.
Wait to file for corrected refund for tax year 2017. Taxpayers should wait for the refund from their original tax return before filing an amended return. It is okay to cash the refund check from the original return before receiving any additional refund.
Pay additional tax. Taxpayers filing an amended return because they owe more tax should file Form 1040X and pay the tax as soon as possible. This will limit interest and penalty charges.
File within three-year time limit. Generally, to claim a refund, taxpayers must file a Form 1040X within three years from the date they timely filed their original tax return or within two years from the date the person pays the tax – usually April 15 – whichever is later.
Track an amended return. Taxpayers can track the status of an amended return three weeks after mailing using “Where’s My Amended Return?” Processing can take up to 16 weeks.
During the summer, taxpayers often rent out their property. They usually think about things such as cleanup and maintenance, but owners also need to be aware of the tax implications of residential and vacation home rentals.
If taxpayers receive money for the use of a house that’s also used as a taxpayer’s personal residence, it generally requires reporting the rental income on a tax return.
Vacation Home. This may be a house, an apartment, condominium, mobile home, boat, vacation home or similar property. It's possible to use more than one unit as a residence during the year.
Used as a Home. When the property is used as a home, the rental expense deduction is limited. This means the rental expenses cannot be more than the rent received.
Personal Use. Personal use means use by the owner, owner’s family, friends, other property owners and their families. Personal use includes anyone paying less than a fair rental price.
Divide Expenses. Generally, special rules apply to the rental expenses of a property used by the taxpayer as a residence during the taxable year. Usually, rental income must be reported in full, and any expenses need to be divided between personal and business purposes.
Members of the military and their families are often eligible for certain tax breaks. For example, members of the armed forces don’t have to pay taxes on some types of income. Special rules could also lower the tax they owe or give them more time to file and pay taxes.
No matter what time of the year, it’s good for members of the military and their spouses to familiarize themselves with these benefits. Here are some things for these taxpayers to know about their taxes:
Combat Pay Exclusion. If someone serves in a combat zone, part or even all of their combat pay is tax-free. This also applies to people working in an area outside a combat zone when the Department of Defense certifies that area is in direct support of military operations in a combat zone. There are limits to this exclusion for commissioned officers.
Deadline Extensions. Some members of the military, such as those who serve in a combat zone, can postpone most tax deadlines. Those who qualify can get automatic extensions of time to file and pay their taxes.
Earned Income Tax Credit. If those serving get nontaxable combat pay, they may choose to include it in their taxable income to increase the amount of EITC. That means they could owe less tax or get a larger refund.
Signing Joint Returns. Normally, both spouses must sign a joint income tax return. If military service prevents that, one spouse may be able to sign for the other or get a power of attorney.
ROTC Allowances. Some amounts paid to ROTC students in advanced training are not taxable. This applies to allowances for education and subsistence. Active duty ROTC pay is taxable. For instance, pay for summer advanced camp is taxable.
Now that school’s out, many students will be starting summer jobs…from working at a summer camp to being an office intern. The IRS reminds students that not all the money they earn may make it to their pocket. That’s because employers must withhold taxes from the employee’s paycheck. Here are a few things these workers need to know when starting a summer job:
New employees. Students and teenage employees normally have taxes withheld from their paychecks by the employer. When a taxpayer gets a new job, they need to fill out a Form W-4. Employers use this form to calculate how much federal income tax to withhold from the employee’s pay. The Withholding Calculator on IRS.gov can help a taxpayer fill out this form.
Self-employment. Students who do odd jobs over the summer to make extra cash – like baby-sitting or lawn care – are considered self-employed. They should remember that money earned from self-employment is taxable. Workers who are self-employed may be responsible for paying taxes directly to the IRS. One way to do that is by making estimated taxpayments during the year. Taxpayers who do this should keep good records of all money they receive.
Tip income. Someone working as a waiter or a camp counselor who receives tips as part of their summer income should know that tip income is taxable income and subject to federal income tax. They should keep a daily log to accurately report them, as they will report tips of $20 or more received in cash in any single month.
Payroll taxes. This tax pays for benefits under the Social Security system. While taxpayers may earn too little from their summer job to owe income tax, employers usually must still withhold Social Security and Medicare taxes from their pay. If a taxpayer is self-employed, then Social Security and Medicare taxes may still be due and are generally paid by the taxpayer.
Reserve Officers' Training Corps pay. If a taxpayer is in an ROTC program, active duty pay, such as pay for summer advanced camp, is taxable. Other allowances the taxpayer may receive – like food and lodging allowances paid to ROTC students participating in advanced training - may not be taxable. The Armed Forces' Tax Guide on IRS.gov has more details.
Taxpayers who sell a home may qualify to exclude from their income all or part of any gain from the sale. Below are some things taxpayers should keep in mind when selling a home:
Ownership and use. To claim the exclusion, the homeowner must meet the ownership and use tests. During a five-year period ending on the date of the sale, the homeowner must have:
Owned the home for at least two years.
Lived in the home as their main home for at least two years.
Gain. Taxpayers who sell their main home and have a gain from the sale may usually be able to exclude up to $250,000 from their income or $500,000 on a joint return. Homeowners who can exclude all of the gain do not need to report the sale on their tax return.
Loss. Taxpayers experience a loss when their main home sells for less than what they paid for it. This loss is not deductible.
Reported sale. Taxpayers who cannot exclude the gain from their income must report the sale of their home on a tax return. Taxpayers who choose not to claim the exclusion must report the gain on a tax return. Taxpayers who receive a Form 1099-S, Proceeds from Real Estate Transactions, as part of the real estate transaction must also report the sale on their tax return.
Mortgage debt. Some taxpayers must report forgiven or canceled debt as income on their tax return. This generally includes people who went through a mortgage workout, foreclosure, or other process in which a lender forgave or canceled mortgage debt on their home. Taxpayers who had a written agreement for the forgiveness of the debt in place before January 1, 2017, might be able to exclude the forgiven amount from income.
Possible exceptions. There are exceptions to these rules for persons with a disability, certain members of the military, intelligence community and Peace Corps workers, among others.
Worksheets. Worksheets included in Publication 523, Selling Your Home, can help taxpayers figure the:
Adjusted basis of the home sold.
Gain or loss on the sale.
Excluded gain on the sale.
Multiple homes. Taxpayers who own more than one home can only exclude the gain on the sale of their main home. They must pay taxes on the gain from selling any other home.
All taxpayers have the right to a fair and just tax system. This is one of 10 rights in the Taxpayer Bill of Rights, which clearly outline the fundamental rights of every taxpayer.
Here’s what the IRS wants all taxpayers to know about the right to a fair and just tax system:
Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their tax liabilities, ability to pay or ability to provide information timely.
Taxpayers can receive assistance from the Taxpayer Advocate Service if they’re experiencing financial difficulty resolving their tax issues properly and timely through normal IRS channels. Taxpayers experiencing significant hardships because of IRS action or inaction may also be eligible for assistance from TAS.
Taxpayers who cannot pay their tax debt in full and meet certain conditions can arrange a payment plan with the IRS. This means the taxpayer will pay a set amount over time, generally monthly.
Taxpayers can submit an offer in compromise asking the IRS to settle their tax debt for less than the full amount if they:
Believe they don’t owe all or part of the tax debt
Are unable to pay all of the tax debt within the time permitted by law to collect
Have factors such as equity, hardship, or public policy they think the IRS should consider in determining whether to settle the liability
The IRS has a list of national and local guidelines covering the basic costs of living that it uses when considering a settlement offer reducing someone’s tax debt. IRS employees cannot use these guidelines if they would result in the taxpayer not having enough money to pay their basic living expenses. In these cases, the IRS will use the taxpayer’s actual expenses.
The IRS cannot seize all of someone’s wages to collect their unpaid tax. A portion is exempt from levy to allow the taxpayer to pay basic living expenses.
The IRS has the authority to decrease an excessive unpaid portion of any tax or liability assessed after the statutory period of limitations has expired or is erroneously or illegally assessed.
The IRS has the discretion to decrease interest on an underpayment when an IRS employee caused an unreasonable delay or error, and when no significant aspect of the error is attributed to the taxpayer.
Generally, income received in the form of tips is taxable. Here’s some information to help taxpayers correctly report the income they receive as a tip:
Use the Interactive Tax Assistant. The ITA tool is a tax-law resource that asks taxpayers a series of questions and provides a response based on the answers. Taxpayers can use Is My Tip Income Taxable?.
Show All Tips on a Tax Return. Use Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to report the amount of any unreported tip income to include as additional wages. This includes the value of non-cash things someone receives as a tip, such as tickets or passes to an event.
Report All Types of Tips. Taxpayers must pay tax on all tips received during the year, including those:
Directly from customers.
Added to credit cards.
From a tip-splitting agreement with other employees.
Report Tips to an Employer. Employees who receive $20 or more in tips in any month must report their tips for that month to their employer by the 10th day of the next month, including cash, check and credit card tips received. The employer must withhold federal income, Social Security and Medicare taxes on the reported tips.
Keep a Daily Log of Tips. Use Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record tips. This will help report the correct amount of tips on a tax return.