How to File Amended Business Tax Returns

When it comes to business tax returns, it's best to get it right the first time. But that's not always possible, so the IRS allows you to update your information by filing an amended tax return. This lets you address issues before they potentially find them!

Whether you need to know how to file an amended tax return immediately or are curious to learn more, this blog details everything small business owners need to know about amending federal tax returns. It describes scenarios where an amended return would be appropriate, the steps to take after the amendment process is triggered, and what to expect in the aftermath of your submission.   

When should a business file an amended tax return?

The amended tax return deadline is three years from the original submission date. Some of the common reasons the IRS finds acceptable to begin the business tax amendment process include the following: 

• You made a substantial error on the original return that will affect your tax liability
• You received new information that needs to be included, such as Income, Deductions & Tax Credits
• The IRS made changes to your federal tax return
• You need to report a net operating loss carryback or carryforward

This is a partial list of reasons for amending corporate tax returns. If you need to amend a previous tax return, speak to your accountant or other trusted advisors before you begin.  

What You’ll Need to File an Amended Return

You must gather all relevant documentation before you amend your business tax return. You'll first locate the original tax return you'd like to amend and other documents necessary to make changes and complete the process.

You'll need a copy of the tax return you'll be amending and the documentation necessary to make changes. For instance, if you would like to claim an additional deduction or credit, you must have proof, such as a receipt or paid invoice for a deduction.

The amendment process is slightly different for certain entities.

Steps to Amend a Schedule C

Amending your business tax return is slightly different if you're a sole proprietor or single-member LLC. To do this, you'll focus on updating Schedule C, which would be included in your original personal tax return. The changes you make to your Schedule C will impact the information provided on your main Form 1040-X. 

The Schedule C amendment process:  

• Update your Schedule C form. Changes will appear on the Loss or Net Profit lines. 
• If the profits for your single-member LLC or sole proprietorship change, update Schedule SE to reflect the difference in self-employment taxes. 
• Update the amount on Form 1040-X's adjusted gross line and make additional adjustments on your return where appropriate.
• Include updated Schedule C and SE forms when you submit your amended return. 

The amendment process for sole proprietors and single-member LLC owners is relatively straightforward. Just remember to check your work thoroughly before submitting it.

Steps to Amend a Corporate Tax Return

Certain aspects of the amendment process differ for C corporations and S corporations. 

The amendment process is similar for C corporations, with one distinct difference. Instead of using Form 1040-X like other entities, C corporations must file Form 1120-X instead. Beyond a change in forms, the amendment process is very similar for C corporations from there. 

S corporations will also use a different form for the amendment process, Form 1120-S. But the steps S corporation owners must follow for how to amend 1120-S are unique to this entity Select the "Amendment Return" box on the form and attach a listing of each amended item, the corrected amount for each entry, and explain why those changes were made. 

You must also file a Schedule K-1 if the amended return alters shareholder information. If so, fill out the form and distribute copies to shareholders before submitting your amended return to the IRS.

What to Expect After Filing an Amended Return

Regardless of your business's entity type, it will typically take 16 weeks for an amended tax return to process. The IRS allows you to check your amended tax return status/1040-X status anytime by accessing their website. This is much more convenient than attempting to get a hold of a busy IRS agent for updates. 

If the process exceeds 16 weeks, you should contact the IRS directly for a status update.  

How A Tax Professional Can Help in Filing Amended Business Tax Returns

Taking steps to proactively adjust taxes after filing is commendable, but it's not without its difficulties. You'll have to be timely in your submission to avoid the three-year deadline and a possible audit that could happen at any time. And while directions to amend taxes are relatively straightforward on paper, ensuring your amended return is accurate and complete can be difficult for first-timers. 

That's why so many owners and entrepreneurs trust the experts at 1-800Accountant, America's leading virtual accounting firm for small businesses, for their needs. Whether it's small business taxes, tax advisory, educational content, or any of our professional accounting services, we have the solution you need at a price that works for you. Schedule a quick consultation – usually 30 minutes or less – to learn how we can help.