Should You, or Should You Not, File an Amended Tax Return?

That seemingly simple question does not have a simple answer. First, we must make it clear that no U.S. taxpayer is required, by law, to file an amended tax return for the purpose of fixing an earlier mistake. The Internal Revenue Code, which is the set of domestic tax laws governing nearly all aspects of federal tax law, provides that taxpayers “should” file an amended return and pay any tax due if they notice an error. 

What Role Do Accountants Play?

Decades of case law have supported this condition. Tax professionals, on the other hand, are generally required to notify taxpayers if they notice an error on previous tax returns. Additionally, they must inform clients of the potential consequences of non-compliance. Still, these professionals are not required to file an amended return on their client’s behalf nor drop clients who refuse to file corrected returns; it’s not even settled whether or not these professionals should be required to so much as recommend filing an amended returns.

This important fact aside, the question of whether or not it’s wise to file an amended tax return after you notice an error is a separate matter and requires consideration of multiple factors. 

What to Consider Before Submitting an Amended Return

One important consideration is the matter of the intentionality (or lack thereof) associated with the error or omission. If an error on your tax return was not willful, the chances of getting hit with criminal charges is extremely low. In this case, you need to consider the financial hit you’d take by engaging in the IRS’ Voluntary Disclosure Program. Going through this IRS-approved framework comes at a substantial financial cost, but it can give you peace of mind that you will almost assuredly not be criminally charged. You may surreptitiously file an amended return (referred to as “quiet disclosure”), but that’s typically quite risky. 

One major risk of using quiet disclosure is producing evidence for a future (or current) criminal investigation. For taxpayers, a successful quiet disclosure means they can get back in compliance without paying any penalties—criminal or civil. However, if the IRS is aware of the taxpayer’s error or omission and the taxpayer gets charged, the amended return can be used to show the taxpayer knew he or she was not in compliance.

The Earlier You Speak With an Attorney, the Better

Ultimately, the most important factor taxpayers should consider before filing an amended tax return is the IRS’ knowledge of the taxpayer’s situation. Filing an amended return through the Voluntary Disclosure Program before the IRS finds out about an honest mistake is the cleanest way to get back in compliance. However, the situation is not always this straightforward. 

If you’re worried about the IRS discovering a willful error or omission on a prior tax return of yours, call the experienced team at Weisberg Kainen Mark, PL today. The earlier you contact us, the better your chances at escaping serious penalties or charges.

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Weisberg Kainen Mark, PL

As experienced trial lawyers with a passion for justice, our firm provides clients with compelling advocacy, attorney availability, and creative solutions to your tax or criminal law matters.

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