Amended Return: Does the IRS Owe You Money?


According to the IRS, 5 million people were expected to file amended tax returns for 2014.  Many amended returns actually result in a refund that would have been awarded if the original return had been filed correctly.  If you prepare your own taxes, changed accountants, or had a major life change (such as change in marital status, dependents, or house move), how can you really be sure that you’re not leaving money on the table if by not filing an amended return?  As a real estate agent, how confident are you that your previous year tax returns accurately reflect all the deductions you’re entitled to?  Conversely, you could be waiting for the IRS to find your mistakes and say that you owe more than your tax return indicated.

The IRS rule is that you can to file an amended return for up to 3 years after the original due date (or the file date if the due date was extended).  However, if you missed previous filing or payment deadlines, or are amending a previously amended return, there are additional restrictions that may apply.

Amended return opportunities

If you think you may want to amend a return, below are five places to start:

  1. Change in status

    This can be a move, getting married or divorced, having a baby, or any number of things that you wouldn’t have accounted for the year before.  For example, in light of the Supreme Court decision to legalize same-sex marriages has unleashed a flurry of amended returns to reflect joint filing or married filing separately status.

  2. Math Errors

    In its most recent report, the IRS reported over 2.2 million math errors for 2013 individual tax returns.  Out of approximately 147 million returns, this results in approximately 1.5% of all returns.  The IRS usually will correct math or transposition errors during the initial processing of a filed tax return by comparing the return to supporting documents.  However, it doesn’t hurt to check for errors, particularly on things that the IRS might not be able to see, such as receipts.

  3. Schedule A-Itemized Deductions

    Schedule A contains most of your itemized deductions, including charitable contributions, mortgage interest, and miscellaneous deductions.  If you recently bought or refinanced a house, or you do a lot of charitable work, it may benefit you to take a look at your Schedule A to see whether an amended return is appropriate.

  4. Schedule D-Capital Gains & Losses

    Although tax harvesting seems to be a catch phrase during the end of year, there are a lot of people who make mistakes when recording their capital gains on their tax return.  For example, a common mistake is listing the sale price for a security, but forgetting to note the basis (purchase price + commission).  Not only does this apply to securities such as stocks & mutual funds, but it applies to the sale of your principal residence.  When calculating your home’s basis, don’t forget to add the cost of major improvements, systems & renovations.  Think roof replacement, air conditioners, or kitchen remodeling.  Major projects (not repairs) will increase your basis, therefore lowering your taxable gain.  Also, real estate commissions & closing costs should be considered, as they will lower your taxable gain as well.

  5. Schedule C-Profit or Loss from Business

    Unless you have a separate tax entity for your real estate career, you’re most likely going to be using Schedule C to itemize your business-related deductions.  If you do, but you never filed a Schedule C, you should look a little further to see what you may be able to deduct as a real estate agent.

This article isn’t meant to replace competent tax advice that is tailored to your specific situation, and it definitely is not an all-inclusive list of mistakes that could be in a tax return.  However, as a real estate agent, you should be aware that doing your own taxes or sticking with a bad tax preparer could have you leaving money on the table, or worse, waiting for the IRS to find your mistakes and come after you for the difference (plus interest).  If you’re not sure what to do, you should consult with a fee-only financial planner or tax professional in your area.