Does Filing an Amended Return Trigger an Audit? A Comprehensive Guide

The Internal Revenue Service (IRS) conducts audits to ensure that individuals and organizations comply with tax laws and report accurate financial information. While audits can be triggered by various factors, one common concern is whether filing an amended tax return increases the likelihood of an audit. This article delves into the relationship between amended returns and audits, providing insights into the IRS’s selection process and offering guidance on minimizing the risk of triggering an audit.

Understanding the IRS Audit Selection Process

The IRS utilizes a multifaceted approach to select tax returns for audit. These methods include:

  • Random Selection and Computer Screening: Statistical formulas are employed to identify returns that deviate from established norms based on industry benchmarks and historical data.

  • Related Examinations: Returns may be flagged for audit if they involve transactions or relationships with other taxpayers whose returns have been selected for examination.

  • Amended Return Screening: Amended returns undergo a separate screening process to assess the nature of the changes made and identify potential discrepancies or inconsistencies.

Impact of Filing an Amended Return on Audit Risk

Filing an amended return does not automatically trigger an audit. However, it does draw attention to your tax return and may increase the chances of being selected for an audit, particularly if the amendments involve significant changes to reported income, deductions, or credits.

The IRS scrutinizes amended returns to ensure that the changes are accurate and supported by proper documentation. If the amended return raises red flags or suggests potential non-compliance, it may warrant further investigation.

Factors that Increase Audit Risk for Amended Returns

Certain factors can heighten the risk of an audit for amended returns:

  • Substantial Changes: Major alterations to income, deductions, or credits, especially if they result in a significant tax refund or reduced tax liability.

  • Late Filing: Amending a return after the original filing deadline may raise concerns about the accuracy and completeness of the original return.

  • Multiple Amendments: Filing multiple amended returns within a short period can signal frequent errors or attempts to manipulate tax outcomes.

  • Complex or Unusual Transactions: Amended returns involving complex financial transactions, such as business expenses, capital gains, or property sales, may require closer examination.

Minimizing Audit Risk for Amended Returns

To reduce the likelihood of an audit triggered by an amended return, consider the following strategies:

  • File Accurately: Ensure that the original return is filed correctly and completely to minimize the need for amendments.

  • Document Changes: Keep thorough records and documentation to support any changes made on the amended return.

  • File on Time: Submit amended returns promptly to avoid late filing penalties and potential audit triggers.

  • Consider Professional Help: If the amended return involves complex issues, consult a tax professional to ensure accuracy and compliance.

Filing an amended return does not guarantee an audit, but it does increase the chances of being selected for examination. By understanding the IRS’s audit selection process and taking steps to minimize risk, taxpayers can reduce the likelihood of triggering an audit and ensure the accuracy and integrity of their tax filings.

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Will I be audited if I amend my return?

But, one thing is clear: Unlike an original Form 1040 – 90% of which are e-filed – amended returns are processed by an actual person at the IRS. That means the IRS doesn’t automatically accept amended returns. However, the IRS won’t open an audit (or, “examination”) simply because you file an amended return.

What are the consequences of amending a tax return?

If you file an amended return, you should still get the refund figured on the original return. Then, if your refund is larger due to the change, you’ll get the difference between the original and amended amounts.

What is most likely to trigger an IRS audit?

High income As you’d expect, the higher your income, the more likely you will get attention from the IRS as the IRS typically targets people making $500,000 or more at higher-than-average rates.

Does filing an amended return restart the statute?

Amended Returns & Refunds (Generally 3 Years) In general, amending a tax return does not restart the IRS’s three-year audit statute for assessment.

Will an amended tax return trigger an IRS audit?

Are you concerned that if you file an amended return that it will trigger an IRS audit? If so—don’t be. Amending a return is not unusual and it doesn’t raise any red flags with the IRS. In fact, the IRS doesn’t want you to overpay or underpay your taxes because of mistakes you make on the original return you file.

What happens if you file an amended tax return?

Whenever someone files an original or amended tax return, the same audit selection process prevails. The IRS first uses a computer program to compare the information on your return to a random sample of returns from similar taxpayers. If the program picks up on something out of the ordinary—your return is flagged.

Should I amend my tax return after an audit?

However, if you made a mistake in your favor, failed to report income, or took deductions which you were not entitled to take, amending your return may avoid all or some fines, interest, and penalties if you’re later audited by the IRS. If you’ve been chosen for an audit, it is better not to file an amended return after the audit starts.

Does the IRS accept amended returns?

That means the IRS doesn’t automatically accept amended returns. However, the IRS won’t open an audit (or, “examination”) simply because you file an amended return. Here’s what you should know about filing a Form 1040X. Because you can’t e-file amended returns, an IRS employee will have to process and accept the return.

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