Understanding the Rules for Amending a Federal Income Tax Return

The following is important information and rules that individuals  who plan to amend their 2025 or earlier year federal income tax return should note:

• There are deadlines for filing an amended return from prior year in order to receive a federal income tax refund. Individuals who are filing an amended federal income tax return should be aware that there is a deadline to file an amended return in order to claim a refund on a prior year filed tax return. The amended return may be filed to fix an error or an omission. The general rule for claiming a refund is that an individual must file Form 1040-X within three years after the date the original return was filed or within two years after the date an individual paid the tax, whichever is later. But there are exceptions. But an individual may have more time to amend a prior-year federal income tax when the individual: (1) Lives in a federally declared disaster area; (2)Served in a combat zone or contingency operation; (3) Incurs a bad debt or worthless security; (4) Receives a foreign tac credit or foreign income deduction; or (5) Has a net operating loss or tax credit carryback.

However, there is no statute of limitation when amending a prior year federal income tax return which results in a balance due.

• Amend one year at a time. Individuals who are amending federal income returns for more than one year should file separate Form 1040-X returns for each year being amended.
• Amending state income tax returns. For individuals living in states or in the District of Columbia which have state and local income taxes, they will likely also have to file an amended state income tax return as a result of filing an amended federal income tax return.
• It is highly recommended that amended returns should be filed electronically. The IRS has permitted the electronic filing of amended federal income tax returns since 2020. That means that the first tax year for amending electronically filed returns was for the year 2019. However, in order to be able to amend a return and file electronically, an individual must have filed the original return electronically. The IRS is therefore accepting amended income tax returns for the years 2020, 2021, 2022, 2023, 2024 and 2025. Electronically filing amended tax returns is the most efficient and safest way of filing an amended federal income tax return, especially when a refund is due.
• Direct deposit option. Since 2023, the IRS has allowed individuals who electronically file their amended tax return to elect direct deposit of any refund. Before 2023, individuals who filed an amended tax return received their amended tax return refund with a paper check which, according to the IRS, added time to the amended return process.

Note that the direct deposit option is available only for electronically filed amended tax returns. In case an amended tax return shows a balance due rather than a refund, the IRS offers a range of options of electronic payments on how to pay, including direct payment from a bank or credit union checking or savings or savings account, a credit card and a debit card.

The IRS also accepts full or partial payments, including a payment plan. However, individuals should be warned that penalties and interest will continue to accrue interest charges until the full balance due is paid.

• How to deal with math errors. If an individual finds that he or she made mathematical errors on his or her originally filed federal income tax return, then an amended income tax return need not be filed. The individual should instead wait until the IRS contacts them via US mail about the errors. Chances are good that the IRS will make the necessary adjustments to their incorrectly filed tax return. If the individual receiving the IRS correspondence agrees with the IRS adjustment and the math error either increases or decreases the refund, the IRS will send (or directly deposit the refund if that was requested on the originally filed return) the individual the corrected refund amount. This refund will be sent via direct deposit, assuming the original return was electronically filed.

On the other hand, if the individual receiving the correspondence disagrees, the individual can handle that situation by responding to the IRS correspondence. According to the IRS, an amended tax return is the equivalent to correspondence. Most importantly, responding to a notice is normally faster and simpler than filing an amended tax return.

Another word of caution for individuals receiving IRS correspondence: The IRS will always communicate with an individual via US mail. Any individuals receiving emails or telephone calls from someone purporting to be from the IRS are likely going to be the victim of a scam.

Besides an individual receiving IRS correspondence via US mail concerning mathematical errors on an originally filed tax return and therefore not filing an amended tax return, there are other reasons an individual should not file an amended tax return. To determine whether amending a federal income tax return is necessary, individuals are encouraged to go to the IRS website: https://www.irs.gov/help/ita/should-i-file-an-amended-return and use the IRS tax tool Should I File an Amended Return?

Individuals contemplating filing an amended tax return should also be sure to read the Form 1040-X instructions. For more complicated tax issues that may require the filing of an amended tax return, individuals are advised to consult with a tax professional.

Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street - Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.