The Internal Revenue Service provides a process by which tax payers can make corrections to a previously filed return, even if taxes have been paid or a refund made on that year’s return already. Some minor mistakes on a return don’t always require an amended return, however. For example, the IRS will usually correct minor math mistakes on returns and let you know about the correction. The agency may even accept some returns without specific forms that are considered required, particularly if the information on the form is unlikely to change return outcomes.
Reasons you might want to file an amended return usually relate to a large discrepancy in either income or deductions. For example, if you misreported your income because you failed to include a W2 or 1099, you might want to file an amended return since the IRS will likely catch this error eventually. Likewise, if you missed a deduction that could save you thousands in tax burden, an amended return may be worth the time, effort and risk.
We say risk because there is a slightly higher risk that your return will be audited if it is amended. In cases where an amended return nets a small gain, you might decide not to take the time and risk. If you do decide to file an amended return, then you must correct any possible error — not just an error that is in your favor. Amending one area of a return can also cause needed changes to other areas of the federal return or to state tax liabilities, which can complicate the process. While amending your return can be a useful financial tool, one of the best ways to reduce tax audit risks or other issues is to file accurately out of the gate.
Source: Internal Revenue Service, “Topic 308 – Amended Returns,” accessed April. 27, 2015