Tax returns are complicated documents; it’s not uncommon for somebody to file a return with an error on it that alters the tax liability, meaning they either owe more to the government or are due a larger refund. If you make such an error, after you catch it you have either the option or the obligation to file an amended return, depending on several circumstances.
If the error is in your favor, it might seem obvious to file the amended return in order to receive the additional money due to you. However, the first thing you should consider is the monetary size of the error—filing a new return is a time-consuming process, and if you employ the services of a professional tax preparer, the amount you receive back may not be worth the effort. Additionally, there is some practical value in not making yourself more “visible” to the IRS with an amended filing—while it doesn’t necessarily mean your return will face greater scrutiny or that you’re in danger of an audit, most tax experts will tell you that it’s best to remain among the “herd” of filed returns.
If you owe money, on the other hand, you should consider an amended filing to be a high priority. It’s a very high risk to assume that the IRS won’t discover the error—they are granted three years to audit a return, and if you underreported the income by 25% or greater they have six years. Additionally, if the IRS believes a conscious attempt to defraud has occurred, there is no statute of limitations on when they can pursue criminal charges.
Generally, you can avoid the penalties associated with misfiling by sending in the amended filing within weeks after you sent in the erroneous one. You will also have to pay the amount you owe at that time, as well as interest assessed. However, the IRS does offer payment plans for taxes owed, so even if you’re not in a position to pay right away, you should get the amended filing in as soon as possible.