How to Amend a Tax Return for a Prior Year

Tax returns can often be filed with incomplete or incorrect information, leading you to more tax trouble than you bargained for. If you filed early, you might have overlooked income from a temporary job or a side gig, only to get a 1099 or late W2 for the income earned.

Other filers may eventually realize that they were entitled to an extra deduction or exemption. The Internal Revenue Service routinely processes a significant number of amended returns each year and provides a specific form for changing the status of an earlier tax return.

Individual income tax returns filed with the IRS can be amended up to three years after the due date of the original return by filing IRS Form 1040X. However, we strongly suggest consulting a tax resolution professional to help with your amended return. They can often file multiple years of unfiled tax returns, help you settle for a fraction of what you owe, and at the very least save you a headache.

Note: If you know you’ll have outstanding tax debt and owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief and sometimes settle their tax debt for a fraction of what’s owed.

 

How Amended Tax Returns Work

Returns containing simple math mistakes are usually corrected automatically and do not require an amended return. Filing an amended return should be considered after the filer realizes the need for a change in filing status, income, allowable deductions or credits. The statute of limitations generally allows three years for each filer to claim any tax benefit not included on a prior return.

An increase in reported income is likely to result in additional tax due, but an additional deduction or allowable tax credit could result in a refund.

Unreported income is a common oversight and it’s better to report your income than it is for the IRS to come after you and add penalties and interest to your tax debt.

Form 1040X is not eligible for electronic filing and must be mailed in, this is also why we recommend hiring a professional to do this for you. A separate Form 1040X is necessary for each year being amended, and each must be mailed in its own envelope to the address provided in the instructions.

The amended return essentially adds the corrections to the original return. There is a block of space on the form to explain all changes. The explanation for each line change should include the line number followed by a clear reason for the change. Lines that entail no change need no explanation. A copy of the original return itself should not be attached, but any added IRS forms must be included to support the changes. Any other supporting documents necessary to substantiate the amendment will also need to be attached.

It can take several weeks for the IRS to process an amended return. An amendment to the federal return might also require a change to the state tax return of the filer, especially if an increase in income is to be reported.

 

OWE BACK TAXES?

If you’re going to owe money to the IRS after filing your return, It’s important to note that only experienced firms like ours are able to handle tax debt cases since negotiating with the IRS requires specialized skills that often fall outside of the scope of most conventional accounting, tax, and tax law firms.

Our firm specializes in tax problem resolution. We have CPAs, EAs and attorneys who can represent you before the IRS. We serve clients virtually so don’t hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.

 

The Procrastinator’s Guide to Surviving Tax Day

If you are a procrastinator, tax filing season is probably the worst time of year. With deadlines looming, filling out all those complicated forms and making sense of an increasingly complex tax code that changes almost every year can seem like an overwhelming task. But no matter how long you put it off, the April 15 tax filing deadline will arrive, and what you do to get ready will make all the difference.

 

Most Americans voluntarily file their tax returns and pay their taxes. Most people explain it by saying they want to pay their fair share. Others file to get a refund, claim a credit or avoid breaking the law.

 

There are times when normally law-abiding citizens fail to file. Why? IRS research shows that sometimes people don’t file in years their filing status changes, such as due to the death of a spouse or divorce. Emotional or financial reasons may cause a person to not file. Or it could simply be due to procrastination.

 

Unfortunately, failing to file a return creates additional problems.

 

So here are some timely tips you can use to get your taxes done on time and steps you can take if you do miss the April 15 filing deadline.

Note: If you fall behind on filing your tax returns, you’re not alone and we can help. Reach out to our tax resolution firm and we’ll help you file late tax returns and negotiate with the IRS if you owe taxes.

 

Communicate With Your Tax Professional Early

Getting a jump start on tax filing season starts with communicating with your tax professional early. If you wait until the last minute, they’ll likely have less time for you and you’re leaving too many chances to make a mistake on your tax returns which can often cause more trouble in the future.

 

Gather Forms as They Arrive

Facing the tax deadline with a stack of papers is daunting even for the non-procrastinator. For those with procrastination tendencies, that mountain of paperwork can induce a sense of dread and even panic.

Instead of waiting until everything is ready to go, gather each tax form as you receive it and save it in a special folder on your computer.

 

Find Your Tax Return for Last Year

It is very important to have your prior year’s tax return available, so find it before you begin. Nothing is more frightening for a procrastinator than trying to find this vital form at the last minute, so make sure you have it before you need it.

The tax return you filed last year will be required to verify your identity, an important step the IRS implemented in the face of growing identity theft and tax filing fraud.

If you haven’t filed for the previous year, now is the time to do it. You already will likely owe penalties and interest so procrastination makes the debt even worse.

 

If You Miss the Deadline

As a procrastinator, you know that things do not always go as planned. Last minute snags do happen, and despite your best efforts, you might still miss the April 15 tax filing deadline.

The good news is that you can file an extension. Whether you are using tax prep software or filing your return online, you can request an extension and instantly get six additional months to file.

That does not mean, however, that you can avoid paying what you owe. If you think you might owe money to the IRS, you still need to pay the tab, and that is where last year’s return will come in handy.

You can avoid penalties if you pay at least as much as you owed last year, so verify the numbers and act accordingly. And now that you have an additional six months to file, it is time to stop procrastinating and get moving.

Being a procrastinator can have its benefits. Sometimes a decision made deliberately and slowly is preferable to one made in haste, something procrastinators know very well. But when it comes to filing taxes, procrastination can make an already stressful time even worse. If you want to survive tax filing season with your sanity, and your wallet, intact, you need to work smarter, not harder, starting with the tips listed above.

A tax resolution firm like ours has years of experience helping taxpayers just like you resolve IRS and State tax problems and negotiating the best deal on your behalf. If you’ll owe the IRS money for 2020 or prior years, contact us now for a consultation to learn about your options.

The good news is the IRS has several debt settlement options including their Fresh Start Initiative  and is generally willing to settle with taxpayers who have been blindsided by a surprise tax bill and can’t pay it off in full.

Hopefully, tax filing season will bring the big fat refund you are expecting, but it is important to be prepared for the unexpected. The new tax bill has unleashed a host of unintended consequences, including smaller refunds and surprise tax bills. By being prepared, you can reduce the pain of a surprise tax bill, so you can get on with the rest of your life.

Your IRS Questions Answered Here…

Question: I’ve been getting letters from the IRS saying I owe back taxes for 2017 – 2019. This is taking over my personal life and don’t know where to start. What should I do?

Answer:  Owing money to the IRS or State can be intimidating and throw your life out of balance but ignoring these notices will only make things worse. It’s important to take immediate action.  The IRS has over 148 types of penalties they can assess, and the worst part is they can also charge interest on the original penalties. Penalties can be a high percentage of the total amount owed to the IRS.

The IRS has 10 years to collect from the date you filed your return and they won’t go away.  Not only can they freeze your bank account and take the money, but they can garnish your wages and legally take as much as 90% of your net paycheck, without a court order!

You need a professional expert to help you deal with the IRS.  You can’t do this on your own. You will get run over by the IRS. As a matter of fact, going or talking to the IRS without expert representation could be the worst thing you can do.  The taxpayer Bill of Rights allows you to be represented by a Tax Resolution Specialist who can negotiate a resolution with the IRS in your best interest.

Did You Know?

Pittsburgh has a 5% amusement tax. It is added to the admission price charged for attending any amusement in the city. This includes any form of entertainment such as concerts, movies, night clubs, conventions and sporting events.

Oh, The Games People Play…Restaurant Owners Cook Up Scheme Receiving $1.7 Million on Phony PPP Applications

A restaurant owner and his son have been charged for their participation in a scheme to obtain more than 1.7 million dollars by filing fraudulent loan applications through Payroll Protection Program.

Izzat Freitekh and his son Tarik submitted fraudulent PPP applications on behalf of three companies: La Shish Kabob restaurant, Aroma Packaging Systems and Green Apple Catering, all in Charlotte, North Carolina.

In the case of Green Apple, the Freitekhs claimed that the company paid employees 4.8 million dollars in 2019, despite evidence that the company did not exist until March 2020.

The older Freitekh also lied to IRS agents and claimed that a company called Kyber Capital submitted the fake applications.

Of the 1.7 million dollars paid out to the Freitekhs, 1.3 million has been recovered by law enforcement. Both men face up to 30 years in prison and a million-dollar fine.

Soccer Star Misses the Goal Ruled Offside by the IRS

A former Seattle college soccer star, Dion Earl, pleaded guilty to making false statements on a tax return. Earl used false documents to lie about his income, his mortgage deductions and the amount of money withheld by employers so he could claim tax refunds of more than 1.6 million dollars.

On his 2012 Form 1040 tax return Earl claimed that he made 1.6 million dollars working for eight different car dealerships, which withheld more than $660,000 in taxes. He claimed that his wife was employed by Total Soccer and Tennis Camps which paid her $240,000 and withheld $51,000 in taxes, and he stated that he made $520,000 in mortgage interest payments on four different properties. All these claims were false, but Earl managed to get a federal tax refund of $414,160.

Even after the IRS began an audit in 2013 Earl continued to make false claims on his tax returns. In all he claimed he was due 1.6 million dollars in refunds from the IRS, and was ultimately paid $1,093,534.

As part of the plea deal Earl agreed to pay $600,000 in restitution. Prosecutors are recommending he serve a one-year prison sentence, which will be added to 15 years he is already serving for sexual assault.

This Magnificent Seven is Going to Jail

Joseph Octave, owner of Kapital Financial Services in North Carolina, pleaded guilty to preparing and filing false tax returns. Six of Octave’s employees also pleaded guilty to the same crime.

From 2014 to 2019 Octave and his employees falsified clients’ tax returns by claiming false deductions, earned income tax credits, business losses, and education credits that the clients were not eligible for in order to increase refunds to be paid by the IRS.

Octave trained his employees to file false tax returns and gave them cheat sheets and scripts for dealing with clients. He instructed employees to discuss nothing beyond the refund amount with clients.

As the owner, Octave received the largest share of the $700,000 earned by the company in tax preparation fees and faces up to eight years in prison. His employees face a maximum of five years in prison each.

The Fruits of His Labor Earned Him an Indictment

Daniel Fruits has been charged with fraud by a federal grand jury after stealing more than 14 million dollars from his employer.

In 2015 an investor founded Secure Transit, a trucking company in Indiana, and hired Fruits to run the business. During the next four years the owner of the company invested 14 million dollars in his company, based on information presented by Fruits. Fruits lied about the company’s financial health, who its customers were, and what the money invested was being used for. He sent the owner fictitious customer sales contracts and falsified financial statements that inflated company profits. Simultaneously, Fruits asked the owner for multiple investments, in the millions of dollars, for the purchase of trucks and other business purchases that were never made.

Fruits spent the majority of the money on personal expenses, including $880,000 on a horse farm and a personal residence, $560,000 on an RV and trailer, $111,000 on a Corvette, $90,000 on three Rolex watches, $55,000 on a horse, $33,000 on a horse trailer, $23,000 on payments for two Ferraris, and $30,000 for two escorts. He faces up to 25 years in prison.

Bar Owner Steals Payroll Tax And Funds Strip Club…

The owner of Moonshiner’s Patio Bar and Grill, Rafael Salas, was sentenced to 18 months in prison for failing to pay the government the taxes he withheld from his employees’ paychecks. From 2014 to 2016 Salas had approximately 20 employees during each tax period and failed to file the company’s quarterly tax returns.

Salas used the funds to pay his personal expenses, including $36,000 on his home, $11,000 for a boat and trailer and approximately $10,000 at a local strip club.

Bookkeeper Gives Oscar Worthy Performance to Cover Up Embezzlement

Anndrea Jacobs, the office manager and bookkeeper for a medical practice in Portland, Oregon was sentenced to four years in prison for filing false tax returns, falsely impersonating an IRS employee, identity theft, wire fraud and bank fraud.

From 2011 to 2015 Jacobs stole money from the medical practice by writing business checks to herself to pay for personal expenses. In order to cover her tracks she prepared and maintained false financial records, overstating expenses and estimated tax payments. She also opened a business bank account in the owner’s name, without his knowledge, gave the owner false property tax statements with total due balances of zero, and convinced the owner to give her limited power of attorney so she could handle the practice’s IRS tax collection action.

In a bold attempt to conceal her embezzlement activity, Jacobs created a fictitious  identity as an IRS Taxpayer Advocate named Linda Gibson, set up a phone number and voicemail for the fictitious identity, and then ‘helped’ the business owner with his IRS issues while pretending to be Linda Gibson.

In addition to the four-year prison sentence, Jacobs has been ordered to pay 1.2 million dollars in restitution.