Are you wondering if you can still claim deductions after the tax filing deadline? Here’s your one-word, CPA-approved answer: Yes.
If you already filed your business tax return but realized you missed deductions, you still have a chance to claim them and get your money back. It’s part of a process called amending your returns, and the Internal Revenue Service (IRS) doesn’t have a problem with it so long as you amend within three years.
Now, there’s a little bit more to amended returns and late deductions than that. So, let’s get into it: Here’s what you need to know to claim deductions and credits for your small business after the tax filing deadline.
A missed credit or deduction is not a cause for panic, but it may be a reason to amend a return.
Let’s say you are not working with a tax professional, or your bookkeeper misclassified marketing-related expenses, leading to a missed deduction for marketing and advertising expenses. Perhaps a responsible party did not file the correct paperwork to qualify for the small business health care tax credit or research and development tax credit when you submitted your taxes.
These oversights are not good because they mean higher tax liability this year, which means money out of your pocket. However, the credits and deductions are not “lost.” We can amend returns to claim deductions from past years and apply them to the present year or, in some cases, simply receive a check from the IRS.
If it’s been less than three years, you can amend your return after the tax filing deadline.
The IRS allows you to file an amended return within three years of the original filing date. You can also file two years after you paid the tax, whichever date is later. After that, you may not be able to claim a credit or deduction.¹
The form you need depends on your business structure.
If you’re a sole proprietor or single-member LLC, you need Form 1040-X to update your deductions and credits. C corporations use Form 1120-X to amend previously filed returns. Partnerships use Form 1065-X.
Instead of a new form, S corporations file a corrected Form 1120-S. Just make sure to mark it as “Amended.”
You can file electronically, usually.
If you’re amending a 1040 from more than two years ago, you have to file it on paper. Also, if you originally filed a paper return this year, the amended return has to be a hard copy, too.²
There are reasons to adjust your accounting method or correct errors.
Some deductions aren’t available through a simple amended return, so you may need to change your accounting method. To do this, you’ll need to file Form 3115: Application for Change in Accounting Method.
Let’s get specific on when to use Form 3115.
There are two main reasons:
- Responding to a mistake or error pointed out by the IRS: incorrect income reporting, misclassifying an expense, or just using poor accounting methods and practices, in general.
- Pursuing savings by selecting an alternate accounting method that will save you tax dollars. (For example, maybe you want to switch from straight-line depreciation to an accelerated depreciation method. Or, you want to alter the timing of when you recognize certain revenue.)
If you’re not sure whether any of these situations apply to you, talk to a CPA.
Getting a refund is possible.
Amended returns may result in a refund, depending on the changes made. Corporations that need to recover overpaid taxes use Form 1139 to request a refund; that is, unless you overpaid estimated taxes. If you want a refund before filing your final return, use Form 4466.
Pass-through entities amend individual returns for refunds.
Since they’re pass-through entities, S corps and partnerships cannot claim deductions after the tax filing deadline or before at the business level. If there is any potential for a deduction or refund, it will be sent to the owners, who may need to amend the member’s or shareholder’s individual tax returns.³
Not all missed deductions after the tax filing deadline require an amended return.
Just because you made a mistake on your taxes doesn’t mean you should necessarily go through the trouble of amending your return.
If you want to change depreciation, it can be simpler and less time-consuming to do so in later filings. Also, some tax credits and deductions, like net operating losses or capital losses, can be carried forward to lower your taxable income in future years.
Before filing an amended return, check if the deduction or credit can be used later instead.
Did you miss a deduction or need to make big corrections? We do TAS & CAS.
Remember, if you missed deductions on your business tax return, you still have options. You can file an amended return or adjust your accounting method. There’s potential money you’re leaving on the table, so this isn’t an opportunity to miss.
We’re a business advisory firm that helps small businesses grow through strategic tax planning and financial partnerships. Schedule a discovery call with us today.
Talk soon,
Jeremy A. Johnson, CPA
References
- Internal Revenue Service. Publication 556: Examination of Returns, Appeal Rights, and Claims for Refund. [Internet]. Irs.gov. Rev. September 2013. Available from: https://www.irs.gov/pub/irs-pdf/p556.pdf
- Internal Revenue Service. Amended return frequently asked questions [Internet]. Irs.gov. October 2024. Available from: https://www.irs.gov/filing/amended-return-frequently-asked-questions
- Internal Revenue Service. Flow-through entities [Internet]. IRS.gov. October 2024. Available from: https://www.irs.gov/individuals/international-taxpayers/flow-through-entities