Amending Very Old Returns

Today TaxMama hears from Mark in West Virginia with this problem. “The IRS thinks I owe them money from 1999. I have proof to the contrary, but they say I can’t file a 1040x after 3 years. Even the Tax Advocates told me that. My father acting as my power of attorney filed it through H&R block. They forgot to show $17,000+ that was paid to a sub-contractor. I even have the sub-contractors tax return for 1999 showing I paid her.” Read the rest of the story in TaxQuips 1205 (see link in Resource Box below)

Dear Mark,

I’ve been sitting here for the last hour or two, trying to find a gentle and helpful way to answer you. I’m not sure there is one. You seem to be your own worst enemy. If you knew there was a major mistake on your tax return, why didn’t you amend it right away? Or within the three years? Isn’t three years long enough to send IRS a letter?

It’s not clear why it was necessary for your father to file your tax return with a power of attorney. If you were ill, or away on active duty in the military all that time, you will probably be able to get IRS to give you some special consideration.

But I don’t understand why, if you’re working with a Taxpayers Advocate, you didn’t drop what you were doing and get her all the documents she asked for? Was this not a priority for you? The Advocate’s office has limited staff. They need to devote their energies to people they can help. Those who won’t help themselves do tend to fall by the wayside.

Now, as to not being able to file an amended return for 1999, that is not correct. I’ve done that many times, working with people in trouble. You may file the amended return. Three things will happen if you do. 1. You will reduce your tax liability for 1999. 2. You will not get any refunds, except for money IRS took within two years of the date you file the amended return. 3. You will extend the collections statute for another 10 years, if there is still a balance due.

So, if you have only one year left on the open statute of limitations for collections, your best bet is reduce your withholding on your current paycheck, so you don’t end up with a refund next year. And wait for the 10 years to end.

As to WV, call them up and have a talk with them, too. Find out when their statute ends, or if they are willing to accept the amended return, just to reduce the balance – even if you don’t end up with a refund.

Incidentally, consider joining Procrastinators Anonymous – http://www.procrastinators-anonymous.org . They may be able to help you understand why you keep putting off tasks that are essentially simple, and definitely beneficial to you.

And remember, you can find answers to all kinds of questions about amended returns and other tax issues, free. Where? Where else? At TaxMama.com

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