To Amend or Not To Amend: When is it a Bad Idea to Amend Your Tax Return?

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One of the questions we got at this past Saturday’s webinar “12 Tax-Busting Strategies for Year End” was the following:

“Diane, does your company also help audit taxes from the past years and identify opportunities to save taxes?”

The answer is “yes”. This is done as part of either the tax consultation or the full-blown strategy. But it doesn’t stop there. The real question is SHOULD you amend your returns.

For federal tax purposes, you can amend up to 3 years from the filing date of the return. So right now, the open years for amendment are 2010, 2011 and 2012. You couldn’t amend 2009 or earlier. Your state may have a longer statute of limitations, so it may be possible to amend more years for your state returns than you can with federal returns.

The next thing to consider is whether it makes sense to risk additional IRS scrutiny with an amendment. For example, if you amend your 2010 return that you filed on 4/15/11, you will extend the statute of limitations for another 3 years from the date of amendment. So instead of having the SOL expire 3 years from 4/15/11 (4/15/14), you’ve now got an expiration date into the early 2017s.

Is amending your return worth the additional IRS scrutiny and extra time for the deadline? If the answer is “yes”, then do it! Otherwise, it might be better to just let it go.

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