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E-filing of amended returns, elimination of Form 1040X among TIGTA recommendations

BY SALLY P. SCHREIBER, J.D.

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Taxpayers should be allowed to use Form 1040 to amend their returns and should be able to e-file amended returns, according to recommendations made by the Treasury Inspector General for Tax Administration (TIGTA) on Wednesday (TIGTA Rep’t No. 2014-40-028). 

Although individual tax returns in the Form 1040 series may all be filed electronically, the IRS can only accept Form 1040X, Amended U.S. Individual Income Tax Return, on paper. According to TIGTA, more than 4 million amended returns were filed in 2012. Because these amended returns are on paper, they must be processed manually, which, TIGTA claims, leads to “potentially erroneous refunds” being paid.

In the statistical sample of 259 amended returns TIGTA examined, it found 44 returns with refunds totaling $103,270 that TIGTA believed could have been incorrect. From that number, TIGTA concluded that the IRS could pay out a potential $2.1 billion in erroneous refunds claimed on amended returns over the next five years and that the IRS could protect against this revenue loss by using the same systemic processes used to verify claims on originally filed tax returns to verify amended tax return claims. However, the IRS disagreed with these figures, stating that the flagged returns had been processed correctly and the validity of the claims on them could only be determined by an examination.

The IRS did agree with TIGTA’s suggestion that it accept e-filed amended returns, explaining that the ability to accept such returns has been a long-term goal. Nonetheless, the IRS pointed out that its ability to convert to e-filing amended returns depended on its receiving enough funding to implement the program, which is beyond the Service’s control.

TIGTA also was critical of the format and appearance of Form 1040X and recommended that the IRS revise Form 1040 to allow taxpayers to amend their returns using it instead of Form 1040X. Although the IRS did not agree with the recommendation, it did agree to consider revising Form 1040X so that the form provided more information to the IRS to use to verify refund claims. 

—Sally P. Schreiber (sschreiber@aicpa.org) is a JofA senior editor.