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IRS to start accepting some e-filed amended returns

Finally! That's what every taxpayer who's ever had to file an amended return is saying now that the Internal Revenue Service has announced that the process is going digital.

1040 oops cropped

As long as I've been blogging about taxes, I've included in every post about correcting previous tax filings some version of this instruction —

An amended return cannot be filed electronically. You must use snail mail, using the appropriate address shown in the 1040X instructions.

But in the summer of 2020, that changes.

The Internal Revenue Service announced today that "later this summer" the Form 1040-X, Amended U.S Individual Income Tax Return, is going digital.

Another e-filing goal attained: In issuing the upcoming electronic 1040-X, the IRS acknowledges the anticipation for this option, which it says has been an agency goal "for a number of years."

And my 1040-X snail mail posts over the last almost 15 years are in good company. The IRS points out that the inability to e-file this form also has been cited by several official IRS advisory boards.

"It’s been an ongoing request from the nation’s tax professional community and has been a continuing recommendation from the Internal Revenue Service Advisory Council (IRSAC) and Electronic Tax Administration Advisory Committee (ETAAC)," according to the IRS.

But while the IRS finally has addressed the electronic 1040-X option, the actual implementation will start slowly.

Limited X filings to start: In most amended return situations, you can file a form 1040-X to make changes to returns you filed three years (including any extension period) earlier. That's still the law.

However, when electronic 1040-X filing is available, you'll be able to make digital correction only for errors on tax year 2019 Forms 1040 and 1040-SR returns.

If you need to file a 1040-X for earlier year returns, you'll have to stick to the old-fashioned pen to paper process.

IRS digital priorities: Yeah, I know. The ability to e-file a 1040-X for just 2019 tax corrections or changes is a bit disappointing.

But taxes, like life, are a process. So I'm cutting the IRS some slack here.

The agency has faced continual budget challenges, particularly when it comes to getting its computer systems up to 21st century speed, meaning it had to prioritize what electronic steps it would take.

Form 1040-X_excerpt
A snippet of 1040-X

The 1040-X also posed unique challenges as far as converting the form to an electronic process, according to IRS Commissioner Chuck Rettig. He lauded the efforts of IRS personnel who "have worked diligently" to overcome those e-filing hurdles.

Eventually, as the time frame for filing 1040-X progresses, all such corrections will be electronic.

Easier, more accurate for all: Even better, e-filing of amended returns will make things easier for taxpayers and the IRS alike.

Most taxpayers already use tax software and e-file annual returns. Last year, almost 88 percent of the nearly 156 million returns filed were submitted electronically.

The IRS is delighted with this digital tax transformation. Rettig called return e-filing "one of the great success stories of the IRS."

The reason Uncle Sam's tax collector has long encouraged e-filing is that it reduces errors, both those made by taxpayers and IRS agents.

Tax software tends to be more accurate. Most tax preparation programs walk filers through the process, helping ensure they don’t overlook tax-saving options or tax-due requirements that could prompt future IRS inquiries.

The computer tax programs also do the math for us, transferring numeric entries from one form to appropriate others. That's great, since math errors are always on the most-common tax mistakes list. The only catch here is that we must make sure we enter in the correct data the first time.

When filers send in an old-fashioned paper return, that's just another chance for more mistakes.

Instead of our electronically submitted entries being automatically transferred to the IRS computers systems, IRS employees must hand enter our information into the IRS system. More human involvement means more possible human error.

Eliminating correction errors: Another bonus of the impending 1040-X e-filing is that it should end another mistake-making possibility that, ironically, has been forced by the IRS upon the around 3 million taxpayers who each year amend their returns.

In filing a paper amended return, we have to take the info from our original return, which probably is on our computer, and enter it by hand on the 1040-X.

Then, as with paper Form 1040 return info transference, there are added chances for errors when our hand written 1040-X data is entered by an IRS worker into its computer system.

With electronic Form 1040-X filing, which will be incorporated into tax software programs, there won't be any more awkward and potentially error producing tax pas de deux of moving info to and from paper and computer systems.

The IRS noted that efficiency and error-easing benefit in its electronic 1040-X announcement.

The agency also said the transition "will provide the IRS with more complete and accurate data in an easily readable format to enable customer service representatives to answer taxpayers' questions."

Good for the IRS for finally making electronic X filings a reality. I always believed that the amended e-filing truth was out there!

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