Virtually all United States citizens, legal residents, and nonresident aliens (that make money in the United States) are required to file annual tax returns with the Internal Revenue Service (IRS). This is done by filing the 1040, 1040A, 1040EZ, 1040NR, or 1040NR-EZ as applicable to the individual’s circumstances and situation.
However, the American tax system is extremely complex and constantly changing, so it is very easy to make mistakes or overlook tax credits or other benefits. Therefore, in order to amend a tax return that has already been filed, one can use the 1040X.
Generally speaking, the 1040X has to be filed within three years of the original income tax filing to be amended, or two years after the tax was actually paid, whichever of the two is later. It is important to note that if you want to change something on a previous filing, you must use the 1040X, as if you send in a second full 1040 filing for the same year, or a second versions of the full 1040 filing for the same year, you confuse the entire situation. Causing such confusion often leads to an IRS audit as they want to review everything much more carefully. Using the 1040X works much better to change the data on a previous filing.
The 1040X can also be used to claim a tax credit from some special circumstance that was not available at the time of the original filing. For example, victims of natural disasters or other situations that resulted in the federal government declaring a state or emergency frequently leads to additional tax credits for the people directly affected.
Some victims of the Hurricanes Katrina, Rita, and Wilma that received grants and other federal assistance were often entitled to additional tax credits as well and used the 1040X to file for them.
The 1040X can also be used if it is determined that some previously reported information that affected the amount owed was incorrect. Though most people that file 1040X forms do so in the hopes of receiving a refund, some filers do so just to keep their tax record clean in order to avoid trouble.
This may result in additional amounts being owed, but also avoids any potential fines and penalties being exacted by the IRS once the incorrect reporting is discovered.
The 1040X also allows tax payers to effectively change amounts that were previously adjusted by the IRS. Tax payers that feel that an IRS adjustment was incorrect – and can document this – can file a 1040X as essentially an appeal to the previous decision taken by the IRS. However, interest and penalties assessed by the IRS should never be added into the amounts claimed on the 1040X as this may be considered fraud.