"I was told by a friend that by filing an amended return audit by the IRS is more likely. Can I amend my
charitable donations without increasing my risk of a audit?"
Filing an amended return does not necessarily increase the risk of a tax audit. Because the IRS does not
disclose the standards and criteria it uses when selecting tax returns for audits there is no reason to
believe that there is an amended return audit policy. However, the IRS might inspect a return that includes
charitable donations that seem large for the income amount. This could be the case even if the return is not an
amended return.
As a general rule, when claiming charitable deductions on your tax return you should keep good and adequate
records of the donations to provide proof of the donation. In the event of a tax audit you may be asked to
show documentation to substantiate your donations. According to the IRS, a donor may not claim a deduction
for any contribution of cash, a check, or other monetary gift unless the donor maintains a record of the
contribution in the form of either a bank record (such as a cancelled check) or a written communication from
the charity (such as a receipt or a letter) showing the name of the charity, the date of the contribution,
and the amount of the contribution.
Many taxpayers wonder whether filing an
amended return
(Form 1040X, Amended U.S.
Individual Income Tax Return) is sort of like admitting to the IRS that you didn’t do it right the first
time – and inviting the IRS to look closer.
IRS data isn’t clear on whether filing a Form 1040X will increase the chances of an audit. But, one thing
is clear: Unlike an original Form 1040 – 90% of which are e-filed – amended returns are processed by an
actual person at the IRS. That means the IRS doesn’t automatically accept amended returns.
However, the IRS won’t open an
audit
(or, “examination”) simply because you
file an amended return. Here’s what you should know about filing a Form 1040X.
An IRS employee will review your return for accuracy and “reasonableness”
Because you can’t e-file amended returns, an IRS employee will have to process and accept the return.
If you accurately completed the return, you shouldn’t have a problem, even if the IRS asks some questions.
Know that the IRS can ask questions, so having supporting documentation is critical.
Form 1040X can be harder to prepare
That’s because it requires you to list all the changes that have been made to the return, including any
changes that the IRS may have made when it processed the original return, or through an audit,
adjustment
, or notice.
Basically, you must properly report three items:
- The original return – including any changes (column A of the 1040X)
- The changes with an explanation (column B, with the explanation in Part III)
- What the return would look like based on all the changes (column C)
For many people, completing the original return was difficult enough.
That’s why many people use a tax pro to file amended returns, even if they normally prepare their own
returns.
Attach specific documents to prevent an audit
Many people wonder whether they should attach their supporting documents to an amended return. It depends.
Full disclosure is always good to avoid
IRS penalties
in an audit.
But the IRS doesn’t always need everything. You should only attach documents that clearly support the
change you’re making to the return. For example, if you just found a charitable contribution statement, you
may want to attach it to your amended return to provide a pre-emptive answer to the IRS. Doing so could help
prevent an audit.
It usually takes the IRS eight to 12 weeks to process a Form 1040X
Don’t worry if it takes a while for the IRS to accept your amended return. In general, it takes the IRS
eight to 12 weeks to process an amended return, but it can take up to 16 weeks depending on the IRS backlog
of amended returns. (The IRS gets about 4 million 1040Xs each year.) The IRS offers a tool to track the
status of your amended return: Where’s My Amended Return?
Learn about filing amended returns.
