If you file your income tax return and then discover that you missed some important breaks or made mistakes, it's not too late for a second chance. You have up to three years after the tax-filing deadline to file an amended return, which means you still have time to file an amended return for 2017, 2018, 2019 or 2020, if you have already filed. (The window for collecting a 2017 tax refund will close on May 17, 2021).
If you can take advantage of additional tax credits or deductions, you may get back extra money in a refund — or you may be able to stop the clock on possible penalties if you're fixing a mistake. Here are some common reasons for filing an amended return and the steps you need to take.
You missed valuable tax breaks
This is the time of year when people learn about frequently overlooked tax deductions and credits — and they may also realize that they missed some of these breaks in the past, too.
For example, a lot of people miss the retirement saver's tax credit, which can reduce your tax liability by up to $1,000 (or $2,000 if married filing jointly) if you made any contributions to a retirement savings plan, such as an IRA (traditional or Roth) or 401(k). To qualify for 2020, your modified adjusted gross income (AGI) must have been $65,000 or less if married filing jointly, $48,750 for head of household or $32,500 for single and other filers (and slightly lower for previous years). See the IRS's Saver's Credit factsheet for more information.
If you paid for continuing education classes at an eligible educational institution — even if you aren't going to school part time or enrolled in a degree program — you could be eligible for the lifetime learning credit, which can be worth up to $2,000 per tax return per year. To qualify for the credit for 2020, your modified AGI must be less than $69,000 if filing as single or head of household, or $138,000 for married filing jointly. See IRS Publication 970 Tax Benefits for Education for more information.
If you missed a deduction or credit, you can go back and amend your federal return to take advantage of the break and get an extra refund. You may get an additional benefit by amending your state income tax return, too.
The tax law changed
Sometimes tax laws change retroactively after you file your return, and you can file an amended return to take advantage of the new break.
It isn't unusual for temporary tax benefits to expire after a certain number of years and then be extended retroactively. For example, some tax breaks that expired at the end of 2017 were reinstated by Congress in 2019 — and were extended retroactively for 2018, too. “Anyone who qualified for those benefits on their 2018 returns would have already filed,” says Nathan Rigney, principal tax research analyst at the Tax Institute at H&R Block.
One reinstated tax break was for the cancellation of debt for a principal residence. “People who were foreclosed on and their debt was forgiven, that is generally taxable, and it can really be painful because it can be a large amount of money when you don't have that cash available,” he says. “Reinstating that exclusion was very valuable.” People who were eligible for the break could go back and amend their 2018 return and exclude the forgiven debt from their taxable income.
Another retroactive change was the itemized deduction for mortgage insurance premiums. In the past, you had been able to deduct the premiums you pay for private mortgage insurance, which many lenders require for people who make less than a 20 percent down payment when they buy a home. That deduction expired in 2018 but was also extended retroactively. You have to itemize to take that deduction, and it probably isn't large enough to make a difference if you already took the standard deduction instead, says Rigney. But if you itemize, you can file an amended return and take advantage of the extra break.
Most recently, the American Rescue Plan was signed on March 11, 2021, and excluded up to $10,200 in unemployment benefits from income taxes for 2020. The IRS says not to file an amended return if you have already filed your taxes: It will recalculate your return and send any additional refund to you.
You received new information or made a mistake
If you do freelance work for several companies, it can be easy to miss a Form 1099 or receive some tax forms after you file. Or you may receive a revised 1099 from a brokerage firm or company you work with, or an adjusted Schedule K-1 reporting partnership income after you file your return. In all of those cases, you may need to file an amended return to correct the information after you file your return.
The IRS usually receives copies of these forms, too, and will send you a notice (which may include penalties and interest) if the information doesn't match up with your return. “If you find a tax document after you file, you may want to amend,” says Morris Armstrong, a registered investment advisor in Cheshire, Connecticut. “The IRS does use a matching system, and if they find that issuing income document, they will send you a notice with the additional tax, interest and penalties, if any."
Another common mistake Armstrong sees is when people neglect to file Form 8889 reporting eligible distributions from a health savings account. Without this form, the IRS may assume the withdrawals were subject to taxes and penalties. “The IRS will add this back to your income, plus a 20 percent penalty, and have no idea that you spent the money for legitimate expenses,” he says. “The IRS prepares the bill based only on the information given. Don't blindly pay.”
Not reporting a cryptocurrency sale is also becoming a big issue. “The IRS now has a question about [virtual currency] sales on page one of the 1040, so you can't claim ignorance,” says Rigney. “Go ahead and amend that return. You want to catch the errors where you miss income before the IRS does.”
Pay any taxes due as soon as you discover an error, so penalties and interest won't continue to build. For more information, see the IRS Taxpayer Advocate Service “I Made a Mistake on My Taxes” factsheet.
How to file an amended return
Until recently, you could only file an amended return on paper, and it could take a long time to get an extra refund. Now, you can file an amended return electronically for 2019 and 2020 returns that were originally e-filed (you still have to file a paper return for 2018). But even for the years when the IRS is accepting electronic returns, it's still sending paper checks — you can't have your amended return deposited electronically. “That slows things down by a few days or a week,” says Rigney. To file an amended return electronically, ask your tax software provider about its procedure for filing an amended return.
If you're filing a paper amended return, fill out Form 1040-X and mark the calendar year that you're amending at the top of the form. The form includes separate columns to report the original amount and changes you are making, and also submit any additional forms that are affected by the changes (such as Form 8880 for the Credit for Qualified Retirement Savings Contributions or Form 8863 for the American Opportunity and Lifetime Learning Credits).
You can use the IRS's “Where's My Amended Return?” tool to check on the status of your amended return. You'll need to provide your Social Security number, date of birth and ZIP code. The tool will let you know if the amended return has been received and is processing, or if the adjustment has been made (either with a refund, balance due or no tax change), or has been completed. The tool generally updates daily.
It can take up to three weeks after mailing a paper amended return for it to show up in the IRS's system, and can take up to 16 weeks to process. See IRS Topic No. 308 Amended Returns for more information.
Kimberly Lankford has been a financial journalist for more than 20 years. She was the “Ask Kim” columnist at Kiplinger's Personal Finance, and her articles have also appeared in AARP The Magazine, U.S. News & World Report, The Washington Post, The Boston Globe and other publications. She received the personal finance Best in Business award from the Society of American Business Editors and Writers, and she has written three books.