What should you do if you discover a mistake in your 2012
tax return that you already filed? You
have three years to file an amended return.
But the question is, should you?
Meet with your tax advisor and weigh the advantages and
disadvantages of filing an extension.
The answer usually depends on whether you owe the IRS or they owe you.
If you owe, you should file an amended return as soon as
possible. You’re not required to,
and you are not going to face criminal charges if you don’t. But it is best to file an amended return
since the IRS can often take months, and even years, to send you a correction
notice. But penalties and interest are
adding up while you wait for them to catch the error. If you file the amended return within a few
weeks of the error and pay the tax, the IRS often doesn’t assess
penalties. Of course, they will always
charge interest. (You should file an
amended return even if you can’t pay the balance due. Just set up a payment plan.)
If the IRS owes you, the answer is much more difficult. You may think it is easy since they owe you
money, but there are two reasons why you may not want to file an amended
return. First, if the refund will be
minor, the cost of hiring a tax preparer may not be worth the effort. Second, you may be drawing more attention to
your return by submitting an amended return.
I have personally seen many instances where an audit followed an amended
return requesting a refund. Of course,
the IRS will not admit that amended returns increase your chances of audit.