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Do You Have to File an Amended Return?

By Jeffrey Levine, Director of Retirement Education 
Follow Me on Twitter: @IRAGuru4EdSlott
 

If you’re like most people, you’ve probably wondered at some point, “Do I need to file an amended return for that?” It is in that spirit that we offer you seven common errors and whether or not you should file an amended return after you discover them.

Issue #1 – You forgot to take a required minimum distribution last year.

Should you file an amended return? – No. There’s nothing to amend. If you didn’t take the distribution, you don’t have any income to report. That said, you should take corrective action and file a Form 5329 to try and get out of the penalty.

Issue #2 – You recharacterized a prior year Roth IRA conversion after filing your return.

Should you file an amended return? – Yes. The portion of your return that was recharacterized is no longer taxable. The IRS doesn’t know that though, unless you file an amended return to tell them. If you’re entitled to a refund as a result of the recharacterization, which would almost certainly be the case, then filing an amended return is the only way to get that money back now.

Issue #3 – You forgot to tell your tax preparer that your donation to charity went to charity right from your IRA.

Should you file an amended return? – You don’t have to file an amended return, but if you were 70 ½ or older at the time of the distribution, you’d probably be well-served to do so. When distributions from IRAs are made directly to a charity on or after your 70 ½ birthday, they can qualify as a qualified charitable distribution (QCD). “Regular” charitable contributions are itemized deductions that help to reduce your taxable income. QCDs, on the other hand, are not deductible, but the income never gets included in your AGI to begin with. That’s way better than claiming the itemized deduction in most cases, and in no situation would it be worse.

Issue #4 – You forgot to include a 1099-R from one of your retirement accounts on your return.

Should you file an amended return? – Yes! 1099-Rs report income, which you must report on your tax return. To make matters worse, the data reported to you is also reported to the IRS. So if you don’t go back and amend your return, you should expect to receive a letter from the IRS in the near future to address the deficiency. Computers and technology have made matching the 1099-Rs that the IRS received to the amount of income reported on your tax return much easier, so this is definitely not one of those things you should just sit tight and hope not to be bothered about.

Issue #5 – You forgot to tell your CPA that you made a Roth IRA contribution

Should you file an amended return? – No*. As weird as it sounds, Roth IRA contributions are not reported anywhere on your tax return. That said, you should let your tax preparer know. Most tax software has a place to input that data, even though it’s not reported on the return. If for whatever reason you need to take a distribution from your Roth IRA prior to reaching qualified distribution status, having this info will help you reduce or eliminate any tax bill.

Issue #6 – You forgot to tell your CPA that you made a non-deductible IRA contribution

Should you file an amended return? – Maybe*. Did you also take a distribution from your IRA for the year the contribution was made for? If so, the taxable amount of your IRA distribution is off (thanks to the pro-rata rule) and an amended return should be filed. If you didn’t take an IRA distribution, then you don’t need to file an amended return. There’s nothing to change. You should, however, be sure the file Form 8606 to report that non-deductible contribution to make sure that you don’t pay tax on that money again when you take distributions in future years.

Issue #7 – You forgot to tell your CPA that you made a deductible IRA contribution

Should you file an amended return? – Yes*. Deductible IRA contributions give you an above-the-line deduction that reduces your AGI (adjusted gross income). In some cases, your tax bill may not drop by much. In other situations, the IRA deduction could be what gets your AGI low enough to qualify for a credit you’d otherwise be phased out of receiving. Depending on the credit, that could be some meaningful dollars.

*If you are eligible for the Retirement Savers Credit, you should always file an amended return in these circumstances unless your tax bill was already $0. The credit will be reported on its own form, but will also change page 2 of your Form 1040.

 

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