Filing taxes for your small business can be quite a challenge, especially if it’s your first time filing or your business has undergone significant growth. If you make mistakes on your business tax return, you may need to take action to correct them by filing an amended return.
Failing to correct tax return errors can result in additional scrutiny or penalties from the IRS. However, some errors do not need to be corrected because the IRS will take measures to resolve them. Therefore, if you’ve made an error on your tax return, it’s a good idea to determine the right process for your specific business entity and tax situation.
When Can You File an Amended Business Tax Return?
As a business owner, you may amend your tax returns within three years of the original filing date or within two years from the date you paid your taxes, whichever is later. However, it’s generally a good idea to amend your tax return as soon as possible after the IRS processes your original return.
Mistakes That Require an Amendment
If you made significant errors on your original tax return that will impact your tax liability, you will likely need an amendment to correct them. Some common situations that require an amended business tax return include:
- Filing the wrong form for your business entity type
- Underreporting your business’ income
- Forgetting to take advantage of tax deductions or credits
- Filing for tax deductions or credits you do not qualify for
- Receiving new information that changes your business income or tax liability (like corporate dividends)
Situations That Do Not Require an Amendment
In many cases, the IRS will work with you to clarify errors they find on your tax return. As long as you respond to their inquiries in a timely manner and with the requested information, you will be able to correct your tax return without an amendment.
You do not have to amend your business tax return in the following scenarios:
- You Made a Math Error — The IRS will correct or reach out to clarify miscalculations in the body of your tax return.
- You Forgot to Attach Secondary Tax Forms — If you’re missing a necessary form, such asForm 1099-MISC for contract workers, the IRS will reach out to notify you.
- You Received a Formal Inquiry or Audit Notice from the IRS — in this case, the tax agency will expect a response to the inquiry rather than an amendment
Amending Your Business Tax Return
Regardless of your business entity type, you will need to complete your amended tax return on paper and file it by mail. You cannot amend your amended tax returns electronically. However, your business structure will determine which forms you use and where you mail your amended tax return. Each form will provide additional instructions for amending and filing your corrected return.
If you want to file an amended tax return for an S corporation, you’ll use Form 1120-S, just as you did when you filed your initial return. However, when filing the new return, you’ll need to check the box next to “amended return” on the first page. Once complete, you’ll send your amended form to the address where your original return was filed.
For a Subchapter C corporation that wants to amend its business tax returns, you need to use Form 1120X. You should include any altered schedules, as well as the new totals calculated with the new information you have gained since filing your original return. Your amended forms should be sent to the address where you filed the initial return.
Single-Member LLCs and Sole Proprietorships
For a single-member LLC or sole proprietorship, you’ll amend your business tax return using Form 1040X, the form specifically reserved for amended individual tax returns. You’ll include changes to Schedule C and any additional sections and will mail your amended return to the address on page 4 of the form.
Partnerships and Multi-Member LLCs
If your business is a partnership or multi-member LLC, you can amend your business tax return by filling out a new Form 1065 and checking the box labeled “amended return.” Ensure you include any changed schedules and send your amended forms to the address where you filed your original return. Partners must include all partnership income on their tax returns.
It’s worth noting that if you need to file amended tax returns dating back several years, you’ll need to file a separate amendment for each year and mail the returns separately. Amended tax returns take approximately 16 weeks to process, but you can track your progress by calling the IRS or visiting the IRS website.
If your business is claiming a larger refund on the amendments, you will have to wait until after getting your original refund. If you discover that you owe the IRS more money with your amended return, ensure that you pay your taxes as soon as possible to avoid incurring additional interest and penalties.
Remember that there are no penalties for filing amended business returns, so it’s best to correct errors as soon as you discover them. If you have questions or concerns related to business taxes, don’t hesitate to reach out to a trusted tax accounting professional.