Tax Amendments - Fix errors in F1, J1, H1B visa taxes
Tax amendments - Fix errors in previously filed IRS tax returns
- Due to the complexity of the income tax system in the United States,F1 H1B J1 L1 visa tax payers typically make errors in preparing their returns. They often fail to claim perfectly legitimate deductions (such as moving expenses, daycare costs for their children, child tax credits, dependency exemptions for wife or children, etc.).
- These non-claimed deductions or exemption can be claimed by amending your tax return using Form 1040X.
- There is a time limit for claiming these exemptions/deductions to an additional refund. The statute of limitation states that the taxpayer has until the third anniversary of the initial tax filing deadline to amend their return for additional refunds.
- It is very common for International Students in F1, J1 visas to file Resident Tax Form 1040 instead of Form 1040NR, the correct International Student Tax Form for Non Resident Foreign Students.
- Example: The taxpayer arrived in the United States on an H-1B visa in December, 2001. He properly filed a resident tax return (Form 1040EZ) in 2002, but failed to file jointly with his wife and claim her exemption because she had stayed behind in his home country in 2002. She joined him in the U.S. in 2005, and he discovers his error in May 2006 when he files his 2005 tax return. Unfortunately, it is too late to amend the 2002 tax return, because the initial filing deadline for 2002 tax return is 15 April 2003, and the third anniversary of that deadline (15 April 2006) has already passed.
- Second Example: Same as above, only the taxpayer discovers the error on 7 April 2006. He contacts VisaTaxes.com, who prepares the amended return and sends him the Form 1040X via FEDEX. He receives the Form 1040X on 14 April 2006 with a detailed letter of instruction from VisaTaxes.com. As instructed by that letter, first thing the next day (15 April 2006), he signs and dates the Form 1040X, and has his wife sign and date the Form 1040X, then immediately takes it to the local post office where he mails it to the IRS using Certified Mail With Return Receipt (per the letter of instruction fromVisaTaxes.com). Since the return had been mailed and post-marked on 15 April 2006, the deadline of filing no later than the third anniversary of the initial filing deadline had been met. The IRS processed the amendment and sent him his additional refund on 4 June 2006.
- Third Example: Same as the Second Example, only the taxpayer did not read the letter of instruction carefully. He signed the Form 1040X and had his wife sign it, but then he mailed the envelope by depositing it in the mail box outside of the building where he worked. Unfortunately, the mail had already been collected that day, so his envelope was not collected by the mailman until the following day, which means the envelope was post-marked on 16 April 2006, the day after the third anniversary of the initial filing deadline. The filing deadline had NOT been met, and the amendment was rejected by the IRS.
- Sometimes, an amended return is required to pay additional tax! The three-year deadline specified above does not apply if you owe additional tax. If you discover that you owe additional taxes from five years ago, you should amend the return as soon as possible, as you will also owe a late-payment penalty of 25% of the tax owed, PLUS compounding annual interest on the tax. In cases of taxes not paid for 5-7 years, the combination of the penalties and interest often causes the final tax bill to be 2-3 times what the initial tax had been.
- If you come forward voluntarily to amend your return and pay additional taxes, you can request that the late-payment penalty of 25% be waived. Normally, the IRS will waive this penalty. However, the compounding interest, by law, cannot be waived!
- Please note that while you have to pay interest on back taxes owed, the IRS will also pay you interest on your refund from an amended return. It is NOT as much as you would have to pay on back taxes, but it is enough to be noticeable
- As a practical matter, if three years have passed and the IRS has not notified you of an error on your return, it is likely that they will never discover the error unless someone notifies them of the error.
- However, questions about whether you paid taxes and filed the required tax returns are asked when you apply for a Green Card. As part of the process, your tax returns are routinely reviewed to determine if you filed correctly. For this reason, if you determine that you filed incorrectly (for example, you filed as a resident alien filing Form 1040EZ when you should have file as a non-resident alien filing Form 1040NR-EZ), you should go ahead and correct this error, even if additional taxes are due, because you would not want your Green Card Application denied because you failed to file correctly.
By Tax Expert February 20th, 2020