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My husband and I had to deal with canceled debt from a Deed in Lieu of Foreclosure on a second home with our 2012 taxes. We never had to deal with this type of tax experience and needless to say, we were fearful. Owing taxes on possible additional income was stressful. We searched for CPA’s as well as info about DILs and how Insolvency worked. When we came across Gary’s website, we were impressed. We found his website 8 months prior to tax season. We kept it as a “Favorite” as we knew we would need to contact him for assistance. When it was time to get a CPA, we called Gary. We felt relieved that we actually had someone that not only understood our concerns but was an expert in this area. He walked us through the process and all the time telling us not to worry. When our taxes were completed, you cannot imagine the relief we had when we actually were able to get a refund.

Gary is a dedicated professional and attentive to his clients. We love the virtual office as it is convenient during tax time and he’s fees were fair and affordable when you consider the depth of work accomplished on our taxes!

We’ve already started recommending Gary to others. We are so blessed and grateful for all that Gary did to assist with our taxes.

 

Patty and Tim, Fredericksburg, VA

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

Amended tax returns sometimes generate refunds. If you get uncomfortable with IRS tax Form 1040-X or the underlying tax issues consider calling for a free consult. (910) 399-2705.

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.

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

  • ksiegowosc wroclaw

    Very nice information, thanks a lot.

  • Zeni Carter

    I received a 1099-C after I filed my 2009 tax return and I qualify for Mortgage Debt Relief. I was told I needed to amend my 2009 return and only fill in the top and only Part III, Explanation of changes. I was also told to be sure to attach Form 982 and mail to the IRS. Can you please confirm this information? Thank you!

    • admin

      I agree you’d amend your 2009 Zeni. I don’t know why the Form 1099-C was issued. So I wouldn’t want to speculate on Form 982 mechanics, not because I don’t wish to be helpful, it just isn’t prudent with limited information. Sorry.

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