Interest & Penalties on an Amended Tax Return

The IRS generally will not waive interest even if your amended return changes your tax liability.

The IRS generally will not waive interest even if your amended return changes your tax liability.

The IRS allows taxpayers to amend their tax returns by filing Form 1040X within three years of the original due date. An amended return allows you to correct errors, such as income you may have neglected to report or deductions the IRS does not allow. You may be entitled to a refund with an amended return, or you may owe more tax -- which will mean an assessment of interest and penalties by the tax authorities.

Interest Ground Rules

Filing an amended return does not allow you to avoid the payment of interest and penalties on overdue taxes. The due date of the original return was also the due date of your tax payment, and interest starts to accrue on this payment as soon as it's 30 days late. Even if you filed a request for an extension of time to file that year, interest would have been charged on any late payments. For that reason, the IRS advises that even if you can't get a return in on time, you should still make an estimated payment of tax owed.

Rates of Interest and Penalties

The IRS also charges penalties on overdue tax payments, with or without an amended return. A penalty also may be assessed for failure to file the original return, for a substantial misstatement of your income, or for fraud. As of 2014, the penalty amount was one half of one percent of the total tax owed for every month the payment is late. Interest on underpayments varies and is adjusted each quarter; through tax year 2013 the rate was three percent.

Common Errors

If you've simply forgotten a W-2 or made a math error on your return, you don't normally have to file an amended return. The IRS reviews all returns for math errors and missing forms, and will send a notice correcting your return or requesting the forgotten form. If the correction results in tax due, interest will still accrue from the original due date. If you turn up the error more than 90 days after filing, however, it's a good idea to contact the agency and explain your situation. Simply letting things slide will eventually result in even more interest and penalties if you do owe additional tax.

Refund of Interest Paid

You have the right to request a refund of interest you've already paid on overdue taxes. This is accomplished with Form 843, Claim for Refund and Request for Abatement. In general, the IRS will not refund interest unless the agency made a mistake in processing your return. This is unlikely but possible, since manual data entry by IRS agents using hardcopy returns can still lead to errors. The IRS also will allow a refund of interest if the error on your return resulted from erroneous advice given by one of its agents or for some other "reasonable cause," which you will have to explain in full.


About the Author

Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.

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