You can’t just lump overlooked tax deductions in with this year’s return, but you may still be able to claim them by filing an extension
Generally speaking, you cannot deduct expenses from a previous year on this year’s tax return. You can only deduct expenses in the year that you paid them.
Each return deals with its own year and your finances for each of those years needs to be kept separate. You can’t just lump deductions or income or anything else from a previous year in with this year’s tax information.
One of the exceptions to this rule is the tuition and fees deduction, which allows you to claim qualified education expenses from the previous year as long as they were for school sessions that began in January-March of the tax year you are currently filing for.
How to file an amended return
If you discover a tax deduction you missed in a previous year, here’s what you should do:
1) Make sure that claiming this deduction will actually net you a sizable additional refund. If it doesn’t amount to much, it might not be worth the cost and trouble of filing an amended return.
2) File Form 1040X [Amended U.S. Individual Income Tax Return] for the tax year that you need to correct.
If you filed your original return with PriorTax, you can also file an amended return with us. If you didn’t originally file with us, it’s probably best to contact the service that prepared your original return.
3) Make sure you’re within the time limits. Generally when it comes to filing an amended return you have three years from the original due date of the return or two years after you paid any tax due, whichever is later. After this time the statute of limitations kicks in and you won’t be able to get an additional refund.
If you requested an extension and filed after the deadline, your three year time frame starts the date your return was filed.
There are some exceptions to these time limits. For example, if you are filing an amended return for a bad debt or worthless security you have seven years and if you are claiming or changing a foreign tax credit or a deduction for foreign taxes you have ten.
4) Print and mail your 1040X. Unfortunately, the IRS doesn’t allow you the ability to e-file an amended return so you’ll have to print it out and mail it to the IRS.
5) Wait. Also you will have to wait for a paper check as additional refunds cannot be issued via direct deposit. This means it will probably take 8-12 weeks for you to receive your refund.
Still haven’t filed a return from a previous year at all? Not a problem. On PriorTax you can file any return going back to 2005.
Photo via Carly Lesser & Art Drauglis on Flickr.