Although most people that go to the trouble of filing a 1040X amended return do so in order to claim a tax credit or refund that they overlooked on their original 1040 filing, you are also expected to do so if you find a mistake resulting in owing the IRS additional money. In fact, this may be well worth the effort if you have a complicated tax situation or have other factors that make you more likely to face scrutiny or an IRS audit.
At the same time, filing a 1040 amended return will likely bring you to the attention of the IRS much more forcefully than not acting at all. Depending on your situation, you should carefully weigh the think through the consequences before filing an amendment.
By filing a 1040X amended return, you are essentially admitting to the IRS that a mistake was made on your previously filed return. The result is that any 1040X filed is manually reviewed and researched by a human being as opposed to being processed by computer as is the case the basic 1040 forms.
This is why 1040X forms cannot be filed electronically, instead they have to be submitted on paper either in person of through the mail and also why it usually takes about three months for a 1040X amended return to be processed. The review is not just of the amendment, but of the previously filed return, all the backing documentation, the 1040X amended return and all of the associated documentation for that as well.
If a problem arises during this review the IRS may respond in one of two ways. First, assuming nothing appears to be wrong, but the amendment is documented as thoroughly as the IRS would like, they may send a letter asking for more information.
Generally, they will ask for exactly what additional information and documentation they require and you will be expected to send it to them within a fixed time frame. Assuming your amendment is legitimate; this should pose no real problem but will stretch out the length of time before your 1040X amended return is acted upon.
The other alternative that may arise if problems are detected or the amendment is viewed as suspicious by the reviewer is an audit. As is always the case, an full audit does not just concern itself with the year that the amendment was filed for, but for all your tax filings over the last few years.
Some tax professionals swear that filing a 1040X amended return automatically trigger audits, while others completely disagree. What is certain is that the scrutiny that comes as a result of filing a 1040X significantly increases the chance of being audited. Therefore, if there are shady things recorded in previous 1040 filings, submitting a 1040X amended return is a very bad idea.