A registered tax return preparer course will mention some important facts about amended tax returns that deserve attention. Despite traditional placement in the final chapter of an RTRP exam study guide, amending tax returns is a common activity in the tax profession.
A newly licensed tax professional will commonly expect experienced colleagues to prepare amended tax returns. However, the only way to gain experience is to tackle amendments that are certain to arise in the tax preparation industry.
Fortunately, preparing amended tax returns is simplified by using tax preparer software. Still, a tax practitioner must understand the process for creating amendments that are ready for IRS processing. The first step in the procedure is having a copy of the originally filed tax return. If that initial filing is not retained in the software of a tax preparer, it is created as if completing the forms for the first time.
After having an original tax filing, the second phase begins. This is the preparation of a new Form 1040 personal tax return. It must contain all the correct details that an original return should have reported. Any attached new schedules and forms are also completed. This includes any schedules or forms that either added or revised with different information than the original filing.
The next step of the tax preparer job matches the information on the original filing with the correctly completed return. This step leads to preparation of Form 1040X, which summarizes information from the newly revised Form 1040. Lines on the corrected Form 1040 are transferred to Form 1040X.
Most importantly, Form 1040X has a Part C for describing the purpose of the amendment. The IRS can reject an amended return if the reason for amending is not sufficient. Therefore, clear and concise explanations in Part C are essential. Tax practitioners should state the item omitted from the original return. Then, describe the corrective action taken. The objective is pointing the IRS agent to the new or revised form that fixes the error.
A Registered Tax Return Preparer should verify the figures on a Form 1040X before signing it. The calculation of a refund or additional tax owed is on lines 17 through 22. Taxpayers who received larger refunds with their original returns than the amendment entitles them to obtain will owe the IRS. However, the amendment might indicate that the initial return calculated an insufficient refund. Other possibilities are payments made with original returns that were too small or too large. Tax professionals should assure that Form 1040X accurately indicates whether more tax is due or an overpayment is refundable.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.