Need to adjust your filed return?

Topic 308 - Amended Returns

If you discover an error after filing your return, you may need to amend your return. The IRS may correct errors in math on a return and may accept returns without certain forms or schedules. In these instances, there is no need to amend your return! However, do file an amended return if there is a change in your filing status, income, deductions, or credits. Also, if the Form 8938 (PDF), Statement of Specified Foreign Financial Assets, applies to you, the form must be filed with an annual return or an amended return. See When and How To File in the Form 8938 Instructions (PDF).

Use Form 1040X (PDF), Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040 (PDF), Form 1040A (PDF), Form 1040EZ (PDF), Form 1040NR (PDF) or Form 1040NR-EZ (PDF). You cannot file an amended tax return electronically under the e-file system. See Where To File in the Form 1040X Instructions (PDF) for the address to mail your amended return.
If you owe additional tax for a tax year for which the due date for filing has not passed, file Form 1040X and pay the tax by the due date for that year (without regard to any extension of time to file) to avoid penalties and interest. If the due date falls on a Saturday, Sunday, or legal holiday, filing the form and paying the tax is timely if filed or paid the next business day.

Generally, to claim a refund, you must file Form 1040X within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. Returns filed before the due date (without regard to extensions) are considered filed on the due date.

File a separate Form 1040X for each tax year you are amending. Mail each form in a separate envelope. Be sure to enter the year of the return you are amending at the top of Form 1040X. The form has three columns:

• Column A shows original figures (the original return) or adjusted figures (prior amendments or exam changes).
• Column C shows the corrected figures (what they should be).
• Column B is the difference between Columns A and C. There is an area on the back of the form to explain the specific changes you are making and the reason for each change.

Attach copies of any forms or schedules affected by the change including any Form(s) W-2. You should also attach Form(s) 1099 if received after the original return filing and there is income tax withheld.

You can check the status of your Form 1040X (PDF) using the Where's My Amended Return? (WMAR) online tool or the toll-free telephone number 866-464-2050 FREE three weeks after you file your amended return. Both tools are available in English and Spanish and track the status of amended returns for the current year and up to three prior years.

You must enter your taxpayer identification number (usually your Social Security number), date of birth, and ZIP code in either tool to prove your identity. Once you authenticate, the Web tool shows an illustrated graphic to visually communicate the status of your amended return within the processing stages: Received, Adjusted, or Completed. As a reminder, amended returns take up to 16 weeks to process and up to three weeks to show up in our system. Before that time, there is no need to call the IRS unless the tool specifically tells you to do so.

Please note: A change made on your federal return may affect your state tax liability. For information on how to correct your state tax return, contact your state tax agency.

Source: Internal Revenue Service

Understanding Your 5071C Letter

If you receive a 5071C letter, please respond in a timely matter. If not, the IRS will delay the acceptance of your tax return.

The following is from the IRS:

This letter tells you that the IRS received a tax return with your name and/or social security number and needs to verify your identity. You can verify your identity using our secure Identity Verification Service site at idverify.irs.gov. The contact information below is only for taxpayers who received Letter 5071C.

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Why are we contacting you?
We received a federal income tax return with your name and/or social security number. We want to protect you from potential identity theft so we are asking you to verify your identity and tell us if you submitted the return. The letter you received provides two options for responding. Both options enable you to verify your identity with us so we can continue processing your tax return.
This contact information is only for taxpayers who received Letter 5071C. The toll-free number and website are for identity verification only. No other tax-related information, including refund status, is available.

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What is involved in this process?

We will continue processing your tax return once we verify your identity and confirm that you submitted the return. If you did file the return, please know it will take approximately six weeks to process it once you verify your identity. Follow the identity verification described under "What should you do?" below to provide us with the necessary information.

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What should you do?

• Use our secure Identity Verification Service website idverify.irs.gov. It's quick and secure. You should have available a copy of your prior year tax return and your current year tax return, if you filed one, including supporting documents.
  
• If you cannot use the Idverify website, you can call us using the toll-free Identity Verification telephone number provided in your letter. Again, you should have available a copy of your prior year tax return and your current year tax return, if you filed one, including supporting documents.
  
• If you did not file the return in question, you can use either option to notify us.
  

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How can I learn more about the IRS's identity protection efforts?
The IRS is continually looking at ways to increase data security and protect taxpayers' identities. To learn more, view these topics on IRS.gov.

• Identity Protection: Prevention, Detection and Victim Assistance
• Publication 4535, Identity Theft Prevention and Victim Assistance

Source: Internal Revenue Service

IRS Deadline: Forms 990 Due May 15

The IRS issued a reminder to some tax-exempt organizations: May 15 is the deadline to submit Forms 990, 990-EZ, or 990-PF. If those affected miss this deadline, it could result in the loss of tax-exempt status.*

To read the full article, click here.

* According to the article, “organizations that fail to file annual reports for three consecutive years will see their federal tax exemptions automatically revoked as of the due date of the third required filing.”

Source: Internal Revenue Service

Strike That: IRS Guidance for Amending a Return

The IRS released advice for amending a federal tax return. Among the ten tips, the article highlights the circumstances necessitating an amended return, the number of forms needed, how long to wait before filing, when owed taxes should be paid, and more.

When filing an amended return, remember to get your hands on a Form 1040X. As the IRS suggests, don’t worry about correcting computational errors: They will make corrections for mathematical mistakes. The IRS also reminders readers that amended returns can be tracked online at IRS.gov.

To read the original article, click here.

Source: Internal Revenue Service

ARE YOU READY TO RECONCILE?

Calculating the ACA’s new Premium Assistance Tax Credit is No Simple Task

If your idea of a good time is a new tax credit that works differently from other credits, that’s calculated per person and per month, and will likely cause the filing season to start late and end early, then 2015 is the year you have been waiting for. Welcome to the Premium Assistance Tax Credit (PATC), compliments of the Affordable Care Act.

The PATC is a complicated new credit based on a number of new concepts that is calculated and reported on new IRS form 8962. The purpose of this post is to give a general overview of the credit and bring awareness to its complexity so that you will be on the lookout for new information as it is released.






 One way the Premium Assistance Tax Credit is different from other credits is that it could produce either positive or negative results for clients. While credits generally benefit a taxpayer, the PATC could require repayment which would cost the taxpayer money and lower their refund or increase their balance due.

Another way the Premium Assistance Tax Credit is different from other credits is that it doesn’t necessarily begin on the tax return; it can begin in the government-run health insurance exchanges, like www.HealthCare.gov, long before the return is filed.

The Affordable Care Act mandate that every American has health insurance at all times sets the standard for minimum essential health insurance coverage and puts limits on the dollar amount individuals and families pay for health insurance. In general terms, when the cost of a heath insurance plan is higher than the government limit, the Premium Assistance Tax Credit can kick in to cover the difference.

For example, if the cost of a desired health insurance plan is $750/month but ACA standards limit the taxpayer’s cost to $500/month, the Federal Government subsidizes the taxpayer by making a payment of $250/month directly to the insurance company on behalf of the taxpayer. When the credit works this way and is paid in advance of the tax filing, it is known as an Advance PATC.

Advance PATC subsidies are calculated when the insurance is purchased and are based on assumptions made by the taxpayer at the time of purchase, like expected household income and family size. However, for many taxpayers, these assumptions will change during the tax year and create a discrepancy between subsidies paid and subsidies allowed. Starting next year taxpayers will be required to reconcile the advance payment assumptions with what actually happened during the tax year and calculate a new PATC amount. If the taxpayer has not received the full amount of eligible PATC in advance, he or she can claim it as a refundable credit when the 1040 is filed. 

However, if the amount of advance PATC is greater than the eligible PATC amount, the taxpayer must repay the overage, requiring them to return money they never actually received.

In addition, taxpayers who did not originally qualify for the Advance PATC, did not take the Advance PATC, or who claimed less than the full amount allowed, but qualify after the reconciliation, can claim the PATC as a refundable credit on Form 1040, line 69.

Information required to reconcile the Advance PATC will be provided on new IRS form 1095-A, Health Insurance Marketplace Statement. This statement, similar to the 1099 series of forms, will be issued by the Health Insurance Marketplaces for each policy purchased through a marketplace and must be sent to taxpayers on or before January 31, 2015 for tax year 2014. It will show the assumptions made when purchasing health insurance and provide a basis for the PATC reconciliation.

While this will affect every taxpayer who purchased insurance through the Marketplaces, it could hit lower-income taxpayers with simpler returns disproportionably hard. For starters, they may not be able to file as early as usual while they wait for their 1095 to arrive in the mail. In addition, the PATC reconciliation is a complicated series of new forms and cannot be taken on the 1040EZ so their tax prep bill is likely to rise.

*Finally, according to IRS attorney Kim Koch, taxpayers who do not complete the PATC reconciliation in 2015 will not be eligible for subsidized health insurance in 2016. Since IRS currently plans to verify the reconciliations in September, that could turn a traditional 6-month extension into something less. Keep that in mind when planning your workload for the fall.
To see the new PATC forms, including new forms 8962, 8965 & 1095, check out the IRS draft forms here: http://apps.irs.gov/app/picklist/list/draftTaxForms.html .

Lower Tax Refunds?

ACA Credits Could Mean Lower Tax Refunds

The Affordable Care Act (ACA) is already proving to be confusing and costly for consumers, with widespread premium increases and plan cancellations. Now, the Centers for Medicare and Medicaid Services (CMS) is warning tax preparers that their clients could face lower refunds in the coming tax season due to excessive tax credits on their 2013 returns.

CMS initially accepted the consumer’s estimates of income and other data, but subsequently verified that data through independent sources. That process revealed some 1.2 million households with income-related data mismatches, and another 966,000 individuals with citizenship or immigration data matching issues, as of May 30^th.
 



It is a situation that will require more work on the part of preparers, helping their customers understand and accept lower refunds as appropriate for this year. How the preparers will handle the costs of such additional services will be left to the discretion of each preparer.


The tax credits are paid directly to the insurer if taken in advance, and are capped so that the insurance is affordable for all consumers. The cap is based on household income, ranging from $300 to $1,250 for some single taxpayers and $600 to $2,500 for married taxpayers.

Premium tax credits are available to individuals and families with incomes between 100% of the federal poverty line ($23,550 for a family of four this year) and 400% of the federal poverty line ($94,200 for a family of four) who purchase coverage in the health insurance marketplace in their state. Incomes at 400% or more above the poverty line have no cap and the taxpayer must pay the full amount of the credit.

The problem occurs, according to IRS Publication 5152, because consumers do not update their data to reflect life changes. These changes include a move, an increase or decrease in income, a marriage or divorce, the birth or adoption of a child, incarceration or release from incarceration, starting a job that offers health insurance and whether eligibility for other health care coverage was lost or gained.
The IRS has now closed 85 percent of the immigration and citizenship data issues, and is working to resolve the remaining 115,000 cases. Likewise, there are some 279,000 families with unresolved income issues. Letters have been mailed to these in English and Spanish, requesting supporting documentation.

Tax preparers can find information they need at DrakeHealth, which provides a referral service for preparers and their customers and a variety of cost calculators for healthcare. An overview of the ACA is availablehttp://drake.ws/resources/resources/affordable_care_act.php here. And a range of useful IRS notices can be found at the Taxing Subjects blog.


Sources: Internal Revenue Service Premium Tax Credit at http://www.irs.gov/pub/irs-pdf/p5152.pdf; Centers for Medicare and Medicaid Services at http://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2014-Press-releases-items/2014-09-15.html.

2015 PTINs Due Before Dec 31

Any person who prepares, or assists in preparing, a tax return must renew their Preparer Tax Identification Number (PTIN). This includes CPAs and Enrolled Agents as well as independent preparers.

All PTINs expire on Dec. 31 and must be renewed annually. The renewal fee is $63 online at www.IRS.gov/ptin, and new PTIN numbers are $64.25.

Keep up to date by following the IRS Return Preparer Office on Facebook. Click on “Ways to Stay Informed” at www.irs.gov/for-Tax-Pros for the link, along with other tools for staying connected.

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Source: Internal Revenue Service