How difficult is it to file a 1040X?

Question

I have some additional IRA/104K information from my old employer that I forgot to include.

I forgot to include the distribution amount and the federal tax withheld -- 2 simple items only.

The IRS gave sent me a CP2000 notice and they caught the extra income part but they left out the federal tax withheld part (sneaky little devils). It strikes me as odd that they made this error since it's plain knowledge that IRA/401K distrubutions are "automatically" subject to 20% federal tax withholding. I made about $400 in payments before I realized my error and the IRS agent said that if everything works out then they'll refund my payments. Is this true?

How tough do you guys see this task as being?

Answer 1

I'm surprised that the CP2000 "left out the federal tax withheld"--are you sure? The CP2000 is computer generated using the form 1099-R. This is not usually an area open to question.

Remember, if they held out 20%, 10% was for the penalty and 10% was for taxes. If you had any other income, it was probably already in the 15 or 25% tax brackets and that's what cause you to be short. By the way, the 20% is common, but not true in all cases.

At any rate, here's the tip that several of us use:

1. Get a blank copy of the tax return for that year at irs.gov, enter the year in the search box and use the first link to get all forms for that year.

2. Fill out the return as if you would have if you had included all income/withholding. Find your copies of the forms; if you don't have them, request them from the IRS by phone or by form 4506-T.

3. Using the CP2000, fill out column A of the 1040X. (The critical lines are there, AGI, taxable income, total tax and total payments. You can figure out the rest. Do not give add in interest; put the payments you've made on line 17.) Use the dummy return to fill out columc C of the 1040X. Get out your calculator and manually calculate columnb, one line at a time. Negative numbers go in (). Don't forget to include the 10% penalty on line 9.

4. Determine if you actually have missing withholding anywhere. Be sure to attach a copy of the form showing that withholding to the 1040X.

I think you will be disappointed. On the other hand, it may get you to understand how the math worked.

Answer 2

Form 1040-X can be fussy. The best way to prepare it is to prepare a new "dummy" return as it should have been filed in the first place. Then lay it next to a copy of original return and compare the lines. This will make it considerably easier to complete the 1040-X properly. Don't attach a copy of the "dummy" return, but do attach copies of any new forms and schedules that should have accompanied the original return to the 1040-X before you file it.

Answer 3

Do what bostonian said. If you are due a refund, it should take about 6-8 weeks. Be sure to include the $400 in additional payments that you made.

Answer 4

It's easy. Just make sure you use the tax forms and tables from the proper year.

Answer 5

Its not hard - file the 1040X.