A taxpayer researching red flags that could trigger an audit.
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Taxpayers typically amend their returns to correct mistakes, claim missed deductions or report additional income. While the IRS does allow amendments, many worry that filing a Form 1040-X could increase their chances of an audit. Since tax laws are complex, making an error when amending a return could lead to further issues. A financial advisor who specializes in tax planning can help you amend your return correctly and take advantage of eligible tax benefits.
Submitting an amended tax return does not inherently raise red flags, but it does prompt the IRS to take a second look at your filing. The IRS receives thousands of Form 1040-X submissions each year, and most are processed without issue. However, certain factors may lead to increased scrutiny, such as adding substantial new deductions or credits or making a significant change to your reported income.
In most cases though, if an amended return is filed correctly and honestly, it is unlikely to trigger an audit. The IRS understands that mistakes happen and provides a formal process for making corrections.
While an amended return alone is not a guaranteed audit trigger, certain red flags in your tax filings-whether original or amended-can increase your chances of being selected for review. The IRS uses an automated system to identify discrepancies and anomalies that deviate from normal taxpayer patterns. Here are four common red flags that could trigger an audit.
If your amended return shows a significant increase in taxable income, the IRS may have questions. For example, if you initially reported $50,000 in income but later amended the return to include an additional $25,000, this could prompt the IRS to investigate further.
Excessive or unusual tax deductions may stand out. Common deductions that may trigger scrutiny include:
If an employer or financial institution reports income to the IRS that was missing from your original return, an amendment that suddenly includes that income could prompt a review. The IRS cross-checks reported income against W-2s, 1099s and other official records, so omitting income-even by accident-can cause issues.
Consistently amending tax returns over multiple years or filing amendments close to the IRS deadline may draw attention. While amending occasionally is normal, repeated corrections suggest a pattern of inaccurate reporting, increasing the likelihood of closer scrutiny.
A taxpayer amending her tax return.
If you need to correct an error, claim a missing deduction or update your income, the IRS provides a formal process for filing an amended tax return using Form 1040-X. Below are five steps can help reduce the risk of errors and potential audit concerns:
Gather any necessary documents. Collect all relevant tax forms, including your original tax return, W-2s, 1099s and any supporting documents related to the amendment. Make sure that you have records to justify the changes you’re making, such as receipts for deductions or updated income statements.
Complete form 1040-X. Use IRS Form 1040-X to specify which changes you are making. Clearly explain the reason for the amendment in Part II of the form, providing concise but detailed information.
Recalculate your tax liability. Adjust your total income, deductions and tax credits based on the corrections you are making. Compare the revised figures with the original return to determine whether you owe additional taxes or are due a refund.
Submit the amended return. If you are filing for tax years 2020 and later, you can submit Form 1040-X electronically through the IRS e-file system. If e-filing is not available, print and mail the completed form to the IRS address listed in the instructions for Form 1040-X.
Pay any additional taxes owed. If the amendment results in a higher tax liability, submit payment as soon as possible to avoid penalties and interest. The IRS allows payments via direct transfer, credit/debit card or check.
After you have filed your amended return, make sure to store a copy of it and any supporting documents in case the IRS requests further information. The IRS typically takes eight to 12 weeks to process amendments, but delays may occur during peak filing seasons.
A couple preparing their taxes.
Filing an amended tax return is a standard practice for correcting mistakes, but many taxpayers worry about whether it will raise red flags or trigger an audit. While amending a return does not automatically lead to an IRS review, certain changes-such as reporting additional income or claiming large deductions-could lead to increased scrutiny. To minimize potential issues, taxpayers should make sure that their amended returns are accurate, well-documented and filed correctly.
A financial advisor can help ensure that any tax adjustments are handled properly while maximizing available deductions and credits. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you want to know how much your next tax refund or balance could be, SmartAsset’s tax return calculator can help you get an estimate.
