Posted on: 24 June 2019Share
You file income taxes each year, but there are times when you may want to go back to prior years and reexamine those earlier returns for a variety of reasons. What are these reasons? And what should you do about it? Here are a few answers.
Why Would You Go Back?
The most common reason to reassess a prior return is when the IRS sends a notice or letter about it. Usually, such notices concern the most recent return and involve things like income you failed to include, math errors, or mistakes made when calculating items on the return.
However, you may find out something on your own that causes you to suspect a prior year return wasn't correct. For example, while filling out this year's return, you may realize that a document wasn't included with last year's documents given to your tax preparer. If using a new tax preparation service, they may note certain items that prior services didn't include when completing returns.
Married persons should consider re-examining older returns if they have any concerns about the truthfulness of their spouse or if contemplating a divorce. Likewise, if only one spouse handles the bulk of the income tax filing process, the other spouse should ensure that it's being done accurately and legally.
Finally, if you pay high-income taxes each year, consider getting a 'second opinion'. You can file an amendment to reduce taxes by normal means—such as if you discover items that weren't deducted or by making changes in your filing status—but you generally only have three years. A reevaluation should be done within the time frame to collect any potential refund before it expires.
How Should You Proceed?
If you want to reexamine any prior year returns, you should look for a tax preparation service or accountant other than the one that completed the original returns. This way, you get that second opinion from an objective source. The preparer can go over forms and original documents to ensure that numbers were entered correctly, that income and expenses are legitimately claimed, and that there are no missing documents.
If you and the preparer find anything that could reduce a prior year tax burden, the preparer can file Form 1040X to amend that year's numbers. If the changes affect returns from that point forward, you may also need to amend other intervening years. If you find evidence that your spouse may have filed incorrect amounts, your preparer can also help you request the protection of Innocent Spouse Relief for those years.
Although no one likes spending extra time with their taxes, doing so can uncover potential dangers to joint filers and even free up money you didn't know you were overpaying. Start by meeting with a professional tax company like Hough & Co CPA today.