E-Filing Amended Returns Improves Turnaround Times and Security
Historically, tax professionals and taxpayers alike board a slow-moving train when amending returns. Until 2020, all amended returns had to be paper filed, regardless of the original submission method.
While most taxpayers receive refunds within 10-14 days (if using direct deposit) during filing season, those with amended returns often wait months and even years to see the refunds. We can only assume that wait times on amended returns—particularly for paper submissions—will continue to grow: the number of paper returns submitted to the Internal Revenue Service topped over 21 million at the end of May 2022.
Advancements in Amended Return E-File
In 2020, the IRS launched an electronic-filing option for amended returns. There were some restrictions initially, but the options continue to expand as the IRS seeks more ways to eliminate the backlog and speed up the process for taxpayers. For example, beginning in Jan 2022, the IRS began accepting amended returns electronically even if the original tax returns were paper filed.
The most recent development, announced in IRS news release IR-2022-130 on June 23, 2022, expands amended e-filing to include more 1040 form types, such as Form 1040-NR, U.S. Nonresident Alien Income Tax Return. In addition, Form 1040-X—the IRS tax form used to amend returns—can now be e-filed when a taxpayer needs to change their filing status or add a dependent who was previously claimed on another return.
Another update shared in IR-2022-130 is the ability to identify that a superseded, or corrected, return is being electronically filed. Superseded returns are similar to amended returns in that they are used to correct the information in a taxpayer’s initial filing, but one key difference is timing: superseded returns are filed on or before the relevant deadline, and amended returns are filed after that deadline has passed. Since they are filed before the original due date, superseded returns preserve the limited number of times available (three) to amend a return electronically.
E-File is Secure
While the IRS continues to expand e-file, some taxpayers might still be convinced that paper filing is the most secure way to file. The Electronic Tax Administration Advisory Committee’s recent report suggests the opposite. In fact, the IRS’s Modernized e-File System (MeF) addresses identity theft tax refund fraud with automated controls: "Electronically filed amended returns also have the benefit of the automated validity, fraud detection, and consistency checks that the MeF system applies to all tax returns." The reality is that more than 90 percent of all individual taxpayers now file their returns electronically. IRS e-file meets strict security guidelines, uses modern encryption technology to protect returns, and, through the work of the Security Summit, is continually monitored and strengthened with new safeguards.
Amended Returns Still Require Manual Review
The case for e-filing is strong, and the ability to e-file amended returns is a giant leap for the IRS. However, these advancements still do not have amended returns moving at the speed of light. Though an amendment can be electronically filed, IRS employees must still manually process these returns. The notable difference is that there is no wait for the form itself to be entered by an employee into the system, therefore bypassing the mail backlog (so, it is still much faster). Speaking of the mail backlog, if an amended return is filed on paper, give plenty of time for the IRS to process the return and resist the temptation to file that same amended return electronically. With the agency experiencing turnaround times exceeding 20 weeks, sending a duplicate could cause confusion and further delay the process. Instead, tax preparers can recommend clients check the status of their return with the free Where’s My Amended Return? tool on IRS.gov.
Lean on a Trusted Tax Professional
While a taxpayer may certainly e-file their own amended return, Drake Software always recommends they take advantage of the services of a trusted tax professional. Experienced tax pros are very familiar with the e-filing process and are therefore better equipped to avoid other processing hold-ups. Tax professionals are also bound by federal due diligence requirements, and many complete annual continuing education to stay up to date with the latest tax and IRS regulations. Depending on their professional designation, tax pros may also have some representation rights before the IRS—giving the taxpayer an advocate in case the IRS questions the amended return.
E-File for the Win
Over the last few years, the IRS has taken several monumental steps toward providing services and resources for tax professionals and taxpayers. One example is the voice-bot system that has been implemented—with recent announcements including systems for transcripts, payment history, and current balance. The IRS even maintains a directory of trusted tax pros. With the expansion of electronic filing for amended returns, we are experiencing real-time improvements that will help tax professionals serve taxpayers more efficiently. The tax ecosystem, as a whole, wins when paper-filing is reduced, security and accuracy are improved, and refunds are timely processed.
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Amanda Watson, EA, is the Onboarding and Retention Manager at Drake Software, where she leads a team to drive customer success. As a tax industry veteran, Amanda is a favorite speaker and trainer known for making tax topics accessible and relevant.