CPA accountant discusses Amended Tax Returns | IRS Tax Form 1040-X | Virtual CPA Office

CPAs use Form 1040-X to amend a previously filed tax return. You can amend most types of IRS tax returns e.g. business (Form 1120-S, Form 1120, Form 1065), payroll (Form 941, w-2) and personal (Form 1040). I’ll post on how a CPA accountant might approach preparing an amended tax return, in this case using Form 1040-X.

Here’s an example of when to prepare an Amended Tax Return

In 2013, you receive an IRS Notice, like CP 2000 or Form 4549, stating they received a Form 1099-C for 2011 that you didn’t include on the original Form 1040 return. Form 1099-C reports cancelled debt, which becomes taxable income unless you can exclude it through Form 982. The IRS assumes all debt cancellation is taxable income and you have to prove them wrong. So your IRS notice demands additional tax, penalties and interest. Ouch. I’m sure some folks just pay the IRS because they don’t realize Form 982 excludes some or all of that debt cancellation taxable income. You’re expected to pay in full, or, produce a Form 1040-X to show your side of the situation.

But you were unemployed in 2011 with plenty of bills but few assets. You fit the IRS’ technical definition of insolvency, in 2011. Form 982 is the key document here. Here’s our post on Form 982 and insolvency.

So, amend your original tax return, via Form 1040-X, instead of just paying the IRS demand.

“If you find IRS Form 1040-X daunting, please call us for a free initial consult.”
- Gary Bode, CPA accountant

The steps for IRS Form 1040-X tax preparation include:

• Understanding the IRS Notice.
• Ascertaining if the IRS is correct.
• Preparing a new, correct Form 1040 for the year.
• Noting all the changes between the original and the corrected Form 1040.
• Filling out Form 1040-X.
• File Form 1040-X with appropriate components of the corrected Form 1040 and associated documents.

The IRS Probably Examines Form 1040-x Carefully

It takes the IRS 8-12 weeks to process an amended tax return. Which implies, to me at least, that they review every 1040-X thoroughly. I’ve never had the IRS deny my tax position on amended tax returns, but in a few cases they wanted to see the underlying documentation for the Form 1040-X changes. If you don’t have documentation your CPA can help you reconstruct part of it.

We’re a Wilmington NC CPA firm specializing in tax. But we serve a larger geographic region through our virtual office. No CPA firm guarantees a tax refund. But we’re thorough about looking at your tax situation from all angles. We offer other services too, like financial accounting, QuickBooks training, business consulting etc. For a free initial phone consult, call us at (910) 399-2705.