How to Complete Form 1040X for Schedule C Changes
You filed your Schedule C for your small business taxes along with your personal tax return and now you have discovered a mistake. Now what do you do? Here's the process for making corrections to Schedule C.
Because Schedule C is part of your personal tax return, you must first make the changes to Schedule C and then file an amended Form 1040, on Form 1040X. This article explains the proces.
When to File Form 1040X
You must have filed your original personal tax return before you file Form 1040X.Make sure you have received the confirmation from the IRS before sending the amended form.
The IRS says you have three years (including extensions) from the date you filed your original return or two years from the date you paid the tax, whichever is later.
If your business tax return is not on Schedule C, see this article on how to file an amended business tax return for information on amended returns for your business type.
What Kind of Mistake Did You Make?
If you made one of these mistakes, you don't need to amend your Schedule C:
- Math errors
- You forgot a form or schedule
The IRS will fix the math errors and they will contact you to send in a missed form.
You DO need to amend your Schedule C to correct your business income, deductions, or credits.
How to Correct Errors on Schedule C
Correcting an incorrect Schedule C and sending the changes to the IRS is a two-step process.
First, you must make the changes on Schedule C. You will need to prepare a new Schedule C. You don't need to mark it in any way as amended.
Second, you will need to transfer changes to your personal 1040.
To make changes to Schedule C, you will need to re-calculate everything following the changes. For example, if your cost of goods sold must be corrected, check to make sure that the total for net income is correct.
How to Transfer the Schedule C Changes to Your Personal Tax Return
The most important thing to remember about completing Form 1040X is that you are only including information about changes, not everything from the original form.
Of course, if those changes result in new totals, you'll have to make sure you do the calculations for those new totals. But you aren't filing a complete new return.
Here's the process for amending your personal tax return for changes to your Schedule C
- After you have made the changes to Schedule C, you will need a copy of Form 1040X. Complete the top part of the form.
- If the error changed the net profit or loss on Line 31, transfer this amount to Line 12 of your 1040. Then recalculate your adjusted gross income on your 1040.
- Transfer the information on the change in adjusted gross income from your 1040 to Line 1 of your 1040x.
- Be sure to include detailed information in Section III of the 1040x, explaining exactly what changes were made to Schedule C and why they were made. Use a separate sheet of paper, if necessary.
- Attach the revised Schedule C to Form 1040, along with any explanations. Check to make sure everything is completed and the form is signed.
Follow the instructions on where to send your amended tax return.
Your changes to Form 1040X may result in interest and penalties, if you underpaid your taxes. Don't include any interest or penalties on Form 1040X; the IRS will calculate these amounts and send you the bill.
If you have other errors on your personal tax return, you can make those corrections at the same time.
Where to Send Your Amended Schedule C and Form 1040X
You cannot e-file an amended return. Depending on the reason for sending the amended return, and your address, you must send the return and amended Schedule C to a specific location. See the Instructions for Form 1040X for details and a list of addresses. You may also send your amended forms by private delivery service. A list of these services is also in the Instructions.
For More Information on Amending Your Personal Tax Return
If you are using personal tax software or an online tax preparation system, check to see if your software has Form 1040X. If it does, you could save a lot of time in making the changes and re-calculating. You will still need to go through the process of preparing a new Schedule C and then Form 1040X.
For more detailed information on preparing Form 1040X, read this article by William Perez, Guide to Taxes.
The IRS has a list of common tax return errors in Tax Topic 303.