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4 smart reasons to file an amended tax return

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in Small Business Tax,Small Business Tax Deduction Strategies

It’s only been a short time since you put your 2011 tax return to bed. Wake-up call: Now you’ve discovered that you made an error that cost you hundreds or even thousands of tax dollars.   

Strategy: File an amended return. Simply use Form 1040X, Amended U.S. Individual Income Tax Return, to correct your mistake.

Usually, amended returns are used to claim a deduction or credit that slipped through the cracks. But that’s not always the case. For instance, if you examine your return closely, you might be able to salvage better results. Here are four examples:

1. Join separate returns. You and your spouse may have filed separate returns to take advantage of high medical or miscellaneous expenses for one of you. But now you discover that you would have saved more tax overall by filing jointly. You can both file amended returns in this situation, but you can’t do things the other way: file separately after filing an original joint return.

2. Take a refund for an overpayment. When you first filed your 2011 return, you may have asked the IRS to credit an overpayment toward your 2012 estimated tax liability. But suddenly you need the extra money to pay for an emergency. Secure a refund instead by filing an amended return.

3. Obtain fast tax relief for casualties. If you suffer a casualty loss in a federally designated disaster area this year, you don’t have to wait until you file your 2012 return to receive tax benefits. A special tax law rule allows you to claim a loss on the prior year’s return. File an amended return for 2011 to get cash back quickly for needed repairs.

4. Switch business car methods. Instead of using the standard mileage rate for 2011 (51 cents per mile for the first half of the year; 55.5 cents for the second half), you may fare better by deducting your actual operating expenses. Make the switch to the actual expense method by filing an amended return. Caveat: Once you start deducting actual expenses, you generally can’t switch back to the simplified standard mileage rate.

Tip: Download Form 1040X or file electronically.

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