What happens if you discover an error on your tax return?

Spring is almost here, which means the deadline to file your tax return is quickly approaching. Now is the time to start gathering the appropriate documents you will need in order to file your taxes.

However, things can sometimes get missed. As hard as you might try to make sure everything is correct, mistakes can still happen. If you are wondering what happens if you accidentally make a mistake on taxes, the good news is that an honest error does not automatically mean penalties, an audit, or criminal consequences. So, what are the consequences for an error on your tax return? Will you be fined? Will there be an audit? Will you serve jail time?

Luckily, there is still hope if you discover an error. Consider the following ways to correct your tax return to avoid penalties.

File an amended tax return

An amended tax return is an additional return that you file with the Internal Revenue Service (IRS) to notify them of any corrections you need to make on a previous tax return. These returns allow you to correct changes if you omitted taxable income or if you want to claim a refund.

If you forgot to report income or discover a similar error, you should file an amended tax return as soon as possible. It is important to explain the mistake on your original return and pay any difference you owe. Generally, the form used to file an amended tax return is Form 1040X.

Common tax return errors can include forgotten W-2 or 1099 income, incorrect deductions or credits, filing status mistakes, or other reporting issues. In many cases, correcting the error promptly can help limit additional interest or penalties.

Amended tax returns can also be used if you are looking to claim a refund or failed to report the correct tax credits. Generally, taxpayers have up to three years from the original filing deadline, or two years from the date the tax was paid, to claim certain refunds. Unlike in years past, many amended returns can now be filed electronically, depending on the tax year and filing circumstances. Processing times vary and may take several weeks or months.

Will an error on your tax return trigger an audit?

Many taxpayers worry that correcting a mistake will automatically trigger an IRS audit. While filing an amended return does not necessarily lead to an audit, significant discrepancies, substantial underreporting of income, or other IRS audit triggers may receive closer scrutiny.

Rather than waiting years for the IRS to discover a mistake on your tax return, filing an amended return as soon as you notice an error is often the better approach. The IRS generally has three years to examine a filed return, and in some circumstances, longer periods may apply.

It can be beneficial to consult with an experienced tax attorney if you have questions about correcting a return, potential IRS exposure, or a developing tax controversy matter. In more complex situations involving substantial unreported income, business tax issues, or concerns about IRS enforcement, speaking with an experienced IRS tax attorney may help you better understand your options.