Finances and Taxes

How to Amend a Business Tax Return (Without Penalties or Fees)

Bryce Warnes Writer, Bench Accounting 
woman working with laptop and papers

They put erasers on pencils for a reason—so don’t feel ashamed of filing an amended tax return. The IRS won’t penalize you for amending. In fact, if you do it quickly enough, an amended tax return can save you from IRS penalties and interest—or even take advantage of deductions you missed in your first filing. 

Here’s how to file an amended business tax return, from start to finish.

Why file an amended tax return?

Typically, people amend their business tax returns because they realize, after they file, that they’ve made an error. 

You should amend your business tax return if…

You underreported your business income for the year

Maybe you realize you missed an income statement while calculating your yearly total. Or maybe you go to reconcile your books and realize you forgot to move a paid invoice from accounts receivable to cash. In either case, you’ve misrepresented your income to the IRS and that could mean paying a penalty.

You filed for tax credits or deductions you don’t qualify for

Some tax deductions tend to stay the same year to year: home office square footage, insurance for work vehicles, or flat-rate utilities (like internet usage). 

But, if one of those deductions changes—say you move to a new home office, or your insurance premium lowers after years of good driving—your deduction decreases. If you’ve filed your usual deduction without taking into account these changes, you’re claiming more deductions than you qualify for. If that’s the case, amending your return could save you from IRS penalties.

You realize after the fact that you didn’t take advantage of all your tax deductions

Maybe you’re researching tax deductions so you can save money in the new year, and you realize you completely forgot to claim staff meals on your most recent return. Or, maybe you’re used to taking the standard deduction, but your new CPA shows you how you can save twice as much by itemizing your deductions. 

In either case, amending your tax return lets you take advantage of this new knowledge after the fact. Use your amended return to apply deductions and credits you missed the first time around and lower your tax bill.

You receive new information that changes the original return

Sometimes, relevant financial info comes in a little too late. For instance, side income from a partnership or dividends from corporate shares could bump up your tax liability for the year after you’ve already filed. In that case, filing an amendment lets you correct the mistake.

You don’t need to amend your business tax return if…

You made math errors

If you subtracted your expenses from your revenue on your return and forgot to carry the one, don’t panic. The IRS will catch it, and they’ll either fix the mistake or ask you for clarification. In either case, you won’t be penalized. 

You forgot to attach tax forms

If you realize too late that you’ve forgotten to file an IRS Form 1099-MISC for one of your contract workers, it’s okay. The IRS will spot the discrepancy on your return, and they’ll contact you to get the form. When you forget to submit parts of your return, filing an amendment just creates more paperwork for the IRS. Wait until they get in touch, and then you can send in copies of the forms you forgot.

Fall in love with modern payroll

Amended tax returns and bookkeeping

The best way to avoid filing an amended tax return in the first place is to keep your books in order.

Organized bookkeeping lets you accurately track your deductible expenses, so you don’t miss out on any of them. And annual income statements ensure every cent is accounted for, so you won’t risk underreporting your income.

And, even if you do find yourself in a situation in which you need to amend a return, a comprehensive set of books gives you all the info you need to go back and easily make corrections. 

Consider giving Bench a try. They handle all your bookkeeping for you—so you save time and always have the info you need to file an accurate return.

When to file an amended tax return

Typically, you have up to three years after you first filed a return to file an amendment for it. You’ll need to file a separate amendment for each year you’re amending.

This can be handy in the case of late tax deductions—for instance, if you realize you’ve forgotten to deduct maintenance costs for your office over the past three years, you can go back and retroactively claim a refund.

When to amend if you underreported your income

If you made a mistake on your tax filing that reduces how much tax you need to pay, file an amendment and pay the difference as soon as possible. The longer you leave the error unresolved, the more likely you are to owe the IRS money for penalties and interest.

When to amend if you expect a larger refund

If you forgot to include deductions or credits that would result in a larger tax refund for your business, wait until you get the original refund before filing an amendment. That way, you’ll have most of your refund in hand sooner, while you wait to get the extra refund amount for your amendment—rather than delaying your entire tax refund by filing an amendment immediately. 

How long you’ll wait for a tax amendment

According to the IRS, you should expect to wait 16 weeks for a tax amendment. That means, if you’re expecting extra tax refund cash, be ready to wait up to four months after filing the amendment to get a check.

If you want to check your tax amendment status, the IRS offers a free online tool to let you do it. In order to check your tax amendment status, you’ll need your social security number, zip code, and date of birth.

How to file a business tax amendment

Get ready to lick envelopes. The only way to file a tax amendment is the old fashioned method: On paper, by mail.

Where you mail your amended tax return, and which form you use, varies according to your business structure.

If you know you need to make an amendment, but you aren’t 100% certain you’ll get the numbers right if you do it by yourself, it’s time to hire a CPA. An accountant can help you guarantee your amendment is accurate and save you more paperwork in the future. 

Sole proprietorships and single-member LLCs

File your amended return with IRS Form 1040X, including changes to Schedule C. Mail it to the address on page 4 of the form. 

Partnerships or multi-member LLCs

File your amended return with IRS Form 1065, include changes to schedules, and send it to the address specified in the instructions. (If you mailed your original return, it will be the same address.)

S corporations

File your amended return with IRS Form 1120S, and send it to the address specified on page 4. (If you mailed your original return, it will be the same address.)

C corporations

File your amended return, include changes to schedules, use IRS Form 1120X, and send it to the address specified on page 3. (If you mailed your original return, it will be the same address.)

Remember, there’s no penalty for filing an amended return—and doing it ASAP could save you from IRS penalties. Just be ready for a trip to the post office.

Tired of struggling to file your business tax return every year? With BenchTax, you get a team of professionals who do your bookkeeping for you, then file your taxes accurately and on time. Learn more about Bench and BenchTax. 

Bryce Warnes
Bryce Warnes Bryce is a writer for Bench, the online bookkeeping service that pairs you with a team of professional bookkeepers who do your bookkeeping, so you don’t have to.

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