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Ask the Expert - Added Expenses on Extended Tax Return

Question:
I extended my tax return that is now due on October 15th. I just discovered that I left off some expenses from the previous year that I should have included. Can I include those amounts on this tax return or on next year’s tax return, or have I lost the benefit of those expenses?

Answer:
The easy answer is ‘No’ to both questions. It would not be appropriate to include payments made in a prior year on the current year’s income tax return or on the next year’s tax return, but the good news is that does not mean you have lost the benefit. As you probably already know, the IRS keeps our tax returns ‘open’ for three years, meaning that they can go back and examine those returns for potential errors or omissions at any time during that three year period. That may not sound fair, but it also means that we can make adjustments to those returns as well if indeed we find that something was omitted or we discovered an error. The correct approach for the omitted deductions that you have discovered is to file an amended tax return for the tax year to which the items actually apply. The process is much easier than it sounds and in most cases you can complete the process yourself. If you use a tax professional, it would be a good idea to visit with them first to see how much in additional fees you will incur compared to the tax that you will recoup to determine whether or not the amended return is worth the effort.

The amended return is completed using IRS Form 1040X. You can download a copy of the form along with detailed instructions directly from the IRS website at www.IRS.gov. The form is basically just a comparison of the information that was originally filed and the new information that includes the missing items. Any specific forms from the original return that have changed based on the new data are also attached to the Form 1040X and that’s it. Pretty simple and in most cases certainly worth the effort. The bottom line is that you should not include old items on the current tax return, but also don’t assume that there is no benefit from those items.

As always, don’t forget that you are not alone. Bookmark our website at NASE.org as well as the IRS website at IRS.gov you will always be able to find the help you need.