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What you should know about filing an amended tax return

The IRS 1040x Amended Tax Return forms.
Adam Jeffery | CNBC
The IRS 1040x Amended Tax Return forms.

Even taxpayers who filed by April 15 may not be done wrangling with Uncle Sam any time soon.

The reason: They're amending their return. In most cases, the IRS gives taxpayers three years from the date they filed their original return, including extensions, to make changes. Regardless of what form you initially filed, and how, federal income tax amendments must be submitted via paper using form 1040X. Each state has its own forms and procedures.

"It's not extremely common, but it's certainly not rare, either," said Melissa Labant, director of tax advocacy for the American Institute of Certified Public Accountants. Last April, the IRS said it expected that almost 5 million taxpayers—about 4 percent of the 131.2 million returns received—would file an amended return.

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Although the IRS has not yet released estimates for this year, spokesman Eric Smith said it's likely to be a figure similar to last year's. "It's not unusual for there to be 3 to 4 percent of returns, sometimes a little more, amended in a given year," he said. By April 17, according to its latest report, the agency had received nearly 132.3 million individual returns, 0.8 percent more than last year.

"We have an amended return for the same reason pencils have erasers," said Smith. "We all make mistakes. … It's a mechanism to fix what's wrong."

Reasons why a taxpayer might amend an income tax return filed this year, or even in previous years, vary widely. Sometimes it's as simple as a 1099, K-1 or other tax form that arrives or is corrected after you've already filed, said Barbara Weltman, a tax and business attorney based in Vero Beach, Florida. Or maybe you realize you forgot to claim a valuable deduction. Worthless securities and bad debts also merit an amendment, she said—in which case, taxpayers have up to seven years to go back and claim the loss.

Other circumstances are tied to specific events and rule changes. For example, after the Treasury Department and the IRS ruled in 2013 that married same-sex couples would be treated as married for federal tax purposes, those couples could opt to amend returns filed up to three previous years. Victims of some natural disasters may also be able to amend their prior year's return to include the losses, said Smith, which can result in a faster refund than waiting until the next filing season.

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"It's a relatively simple process to file an amended return if you have the corrected information," said Labant. The three-column Form 1040X has taxpayers copy line items from their original return, noting which should be corrected and the net change. There's a section to explain why you're amending the return. Taxpayers should also attach any documents supporting the change (i.e., that missing charitable donation receipt or corrected 1099).

There's good reason to file an amendment quickly if you suspect you owe the IRS more. "It stops the clock on penalties," said Weltman. "It behooves you to not wait until the IRS catches you." (Keep in mind, in most cases the IRS can audit returns filed within the last three years, or up to six if a taxpayer fails to report 25 percent of more of his income.) But if you made a simple math error, there's usually no need to amend the return, she said—the IRS's computers usually catch that quickly and generate a notice with your corrected bill.

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Of course, a refund is also good reason to file an amended return. In that case, weigh your time and money costs in refiling against the potential gain, said Labant. "It may not be worth your while," she said. "Why spend a buck to get back a quarter? That's going to vary on a case-by-case basis."

If the government owes you, don't expect to get that money any time soon. While the IRS has said it issues most tax season refunds within 21 days of receipt, that's for original returns only. "You should generally allow 8 to 12 weeks for Form 1040X to be processed," it notes in the instructions. "However, in some cases, processing could take up to 16 weeks."

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"We very much have a priority during the tax season for current year, original returns," Smith said. "Amended returns are a somewhat lower priority." Paper returns also contribute to the lag, he said, because they must be reviewed by a person rather than a computer.

Many states have lengthy timelines, too. North Carolina's income tax refund FAQs note that residents can expect to receive amended refunds within six months of filing. According to Oregon.gov, the state's Department of Revenue is currently processing amended returns received the week of Jan. 20, 2015.