Today TaxMama® hears from Saver in the TaxQuips Forum with a reasonable question. “I have just received a corrected mortgage interest statement for the tax year 2010.
Because the amount is lower, and I itemized in the return, I will owe some money. The taxable state refund should be smaller for the tax year 2011. So I need to amend the return for both 2010 and 2011. The question is, should I:
1. Amend both and send both in one envelope?
2. Pay the different tax for 2010 return and expect a refund for 2011 return?
3. Or pay only the difference for the corrected 2010 and 2011 return?
4. Or Amend 2010, pay the tax and WAIT a few months(?), then amend 2011 return to ensure they can verify the changed in the 2010 return?”
Dear Saver,
You won’t need to amend BOTH years.
You amend the 2010 return to correct for the lower interest expense. The state refund you received in 2011 doesn’t change. You still received that amount in 2011, right? As a cash basis taxpayer, you report your income when you receive it.
In 2012, you may find yourself having to pay a little extra to the state when you amend the 2010 state return.
On your 2012 return, you will be able to claim that additional state tax as a deduction.
So, you only need to amend the ONE return – in 2010.
For folks, in general, who need to amend two years. Amend one return at a time. If there are no carryover changes from one year to the next (like depreciation adjustments, capital losses, charitable contribution carryovers, etc.), then each year stands alone. You can file them in separate envelopes, on the same day. If there are carryover changes, then file the first return. Wait about 3 months for the changes to post – or until you get a letter from IRS with reference to your amended return. Then file the second one.
And remember, you can find answers to all kinds of questions about amended returns, and other tax issues, free. Where? Where else? At www.TaxMama.com.
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