The first step in resolving an outstanding tax liability should be to verify that the amount of the tax debt being reported by the IRS or State Tax Agency is correct. Because tax law is so complex, important tax deductions or tax credits are often missed when returns are completed by individuals who lack the professional knowledge and experience to determine which ones apply. Often a missed deduction, a missed tax credit, a change in filing status or an overlooked income adjustment will result in a tax amount owed that is greater than it would have been if the item had been claimed on the return. That being the case, the filing of an amended return is sometimes the simplest and most cost effective way to substantially reduce an outstanding tax liability. By law, a return can be amended within three years from the date of the original return or within two years from the date a tax was paid, whichever is later.

Some of the more common reasons for filing an amended return are outlined below:

• Errors and omissions It is not uncommon for a tax return to be filed with calculation errors or omissions of data and/or required documentation. Although the IRS will normally correct simple math errors and will often request a missing form or schedule, this type of mistake can also be corrected by taxpayer through the use of an amended return.
• Introduction of new information A return that is submitted to meet a filing deadline can be amended later if further examination of events and records of the previous year indicate that there would be a tax advantage to claiming different deductions or additional deductions.
• Change in filing status If a return has been submitted but the filing deadline for the return has not passed, it is possible to use an amended return to switch the filing status from married filing jointly to married filing separately or vice versa. Amended returns are also used to undo joint filing status when there has been the annulment of a marriage.
• Change in tax elections Tax returns allow for many elections whereby the taxpayer chooses how he or she wishes to be treated by the Internal Revenue Service for tax purposes. These elections include such things as treatment of foreign income, residency status, and income tax withholding, just to name a few of the many elections available. In certain instances, these elections can be changed through the use of an amended return when the introduction of new information indicates that there would be a tax advantage in doing so.
• Carry back of losses Amended returns can be used to apply property losses from the current tax year to the previous year’s tax return. They are also commonly used by businesses to carry net operating losses back to the previous two tax years.

If you have an outstanding tax liability, our experienced tax resolution specialists can help you resolve it. The first step in this process will be to carefully examine previously filed returns and to file amended returns when necessary. This process can often result in a significant reduction in the tax amount owed by identifying available tax benefits that have not been utilized. For more information about our tax debt resolution and tax settlement services, visit us today at professionaltaxresolution.com. Contact us by email at info@protaxres.com or by phone at (877)-889-6527 to receive a free, no obligation consultation.