Amending a return

Made a mistake on your business taxes? Take these steps

For small business owners, preparing an income tax return is far from simple. That can increase the chances of making a mistake. Here are some tips that small-business pros suggest if you discover an error after you've filed.

1 Double-check your work

If you suddenly think something’s wrong with the tax return you already filed, make sure there is in fact a mistake before taking further action.

“Go back to the original preparer and verify what you’re seeing first,” says David Klasing, a certified public accountant and attorney in Irvine, California.

Also, make sure you gave the preparer accurate information, says DeLisa Clift, who is a mentor with the Savannah, Georgia, chapter of SCORE, a national nonprofit that offers free resources to business owners.

2 Stay calm

If all you’ve done is make a simple math error, the IRS’s automated systems may catch it, fix it and send you a letter saying so, Clift says. If the math error means you underpaid or overpaid, the IRS will let you know that too, she adds.

3 Amend your tax return

Amending your tax return means filling out either an IRS Form 1040-X or an 1120-X, depending on your business structure. Don’t try to DIY it, Klasing says.

Some steps include showing where and how your tax return changed, providing documentation explaining why you’re amending your return, then remembering to actually amend your state tax return by filling out the new separate paperwork, if necessary.

4 Get ready to pay

If the mistake resulted in you underpaying the IRS, the IRS may hit you with interest and penalties in addition to the taxes you mistakenly didn’t pay. However, the IRS may give you a break on the penalties.

“Reasonable reliance on a professional is grounds for penalty abatement,” Klasing says. But good luck getting your preparer to admit to an error.

5 Restrategize your filing habits

Once you’ve fixed the error on your tax return, work on avoiding a repeat for next year. First, consider setting aside more time to review your return before filing it. In the eyes of the IRS, you’re personally responsible for everything on your tax return — even if someone else prepared it, Klasing says.