Lumping overlooked tax deductions in with this year’s return is hardly an option.
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 for them.
Each tax return reports finances for its own year and each of those years needs to be kept separate. Deductions, income or anything else from a previous year cannot be claimed with the current year’s tax information.
*Note: One of the exceptions to this rule is the tuition and fees deduction. This tax break 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.
File an amended return if you can
If you’re completely gung ho on finding a Plan B, we may have a solution for you. You can file an amended tax return if you discover a tax deduction you missed in a previous year. What’s the catch? It needs to be a completely legitimate expense. On top of that, it needs to be within the three-year time frame from the deadline date the original tax return was due.
To file an amended return, here’s what you should do:
1) Make sure that claiming this deduction will actually get you a sizable additional refund. Filing an amended return might not be worth the time and trouble.
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. It will probably take 8-12 weeks for you to receive your refund check. Unfortunately, direct deposit is not an option with paper filing.
Still haven’t filed a return from a previous year at all? Not a problem. With PriorTax, you can file any return dating back to 2005.