5 Reasons to Amend a Previously Filed Tax Return

The most recent data from the IRS on individual tax returns indicates that of 131 million returns filed, about 5 million were expected to be amended. This comes to less than 4 percent, but that projection still affects a significant number of taxpayers. Filing an amended tax return can be a hassle that you definitely want to avoid if possible. But there are some situations where you’ll have to do so, and it’s prudent to seek out the help of a tax advisor who can guide you through the process. Here’s why you may need to file an amended tax return. 

1. You made a math or data entry mistake and didn’t realize it until after you submitted your tax return. 

For example, you added up your charitable deductions, and after filing your return, you realize you added them up incorrectly, and the difference was sizeable. Filing an amended return can correct that math error and get a refund.

Perhaps you were entering your gross income from your self-employed business into your software while it was late and you were tired, and you inadvertently transposed the numbers and entered the gross income as $78,000 when it was really $87,000. You will need an amended return to correct that error.

However, you would not usually amend a return if you incorrectly entered W-2 income since the IRS receives a copy of the W-2 and will compare it with what you reported and if there was an error, they will automatically make a correction and send you a bill or a refund as the case might be. The IRS website instructs taxpayers not to amend a return in such a situation.

The statute of limitations for refunds is three years for the due date the tax return and if the IRS has not automatically made the correction and you have a refund coming don’t let the statute of limitations expire before filing an amended return. That holds true for any situation were an amended return will result in a refund.

2. You used an incorrect filing status.

Single parents, caregivers of elderly parents, and recently married or divorced people often make the mistake of using “Single” status when it’s the wrong one. “Heads of Household” miss out on crucial tax benefits, while married people will generally need to use “Married Filing Separately” if they don’t wish to file a joint return with their spouse. Because filing status affects so many elements of your tax return, you need to file an amended return to pay additional taxes you owe or receive a refund once the correct one is used. 

3. You didn’t realize that there was a tax benefit you qualified for, and you’d like to claim it now.

There are many frequently overlooked tax benefits a tax professional would be aware of that the average DIY person wouldn’t, such as the ability for most individuals and small business owners to make pension and profit-sharing contributions in a new year before the tax-filing deadline and still have it count for the current filing season. 

This also works in reverse in that people accidentally claim benefits they weren’t actually entitled to. Often, the best way to know for sure is to consult a tax professional. 

4. You had investing activities that affect your tax return. 

Typically, you don’t realize a capital gain or loss until you actually sell an asset. But if securities become worthless, this results in a capital loss that needs to be reported the year it was deemed worthless, and not the year you discovered the fact. If this security was deemed worthless a long time ago, you may have to amend prior year returns to account for the capital loss.

This can be significant since you are limited to deducting $3,000 in capital losses from all of your other income and result in capital loss carryovers that last several years. If you have any other investment losses that were forgotten or miscalculated on your original tax return, filing an amended return is the next logical stop to ensure your carryovers are done correctly for future tax returns. 

5. You received tax forms after filing your tax return. 

If you were due a W-2 or 1099 form, you might not receive it when you’re initially preparing your taxes. It could be a surprise corrected form or the payer was just late sending it to you. But if you already filed your tax return, then got additional forms later on, amending your tax return becomes inevitable. 

Amending your tax return can be a cumbersome process, especially if you’re self-employed and/or have a great deal of investing activity. Asking a tax professional to assist you with filing amended returns can eliminate the headaches that come with the process. Many even offer a free review of self-prepared returns and ask the right questions to determine if it’s worth it to amend this year’s return and any prior years’. You may also have to amend your state tax return(s), which can grow more complex if your residency is or was multistate.


Isler Northwest LLC is a firm of certified public accountants and business advisors based in Portland, Oregon. Our local, regional, and global resources, our expertise, and our emphasis on innovative solutions and continuity create value for our clients. Our service goals at Isler Northwest is to earn our clients trust as their primary business and financial advisors.

Isler Northwest

(503) 224-5321

1300 SW 5th Avenue
Suite 2900
Portland, Oregon 97201

Disabled Taxpayer Tax Benefits 

Article Highlights:

 Increased Standard Deduction

  • Tax-Exempt Income
  • Impairment-Related Work Expenses
  • Financially Disabled
  • Earned Income Tax Credit
  • Child or Dependent Care Credit
  • Special Medical Deductions
  • Qualified Medicaid Waiver Payments
  • ABLE Accounts

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SALT Deduction – Battle Lines Have Been Set and Swords Have Been Drawn

Article Highlights:

• SALT Tax Limits
• State Work-arounds
• Converting Tax Deductions to Charitable Contributions
• IRS Regulations
• Taxpayer Beware

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Kiddie Tax No Longer Based on Parents’ Tax Rate

Article Highlights:

  • Parents Attempting to Shift Income to Children
  • Kiddie Tax
  • Tax Reform Changes
  • Tax on Child’s Unearned Income
  • Tax on Child’s Earned Income

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accounting firm, portland, oregon

Do You Need to Renew Your ITIN?

The IRS has announced that more than 2 million Individual Taxpayer Identification Numbers (ITINs) are set to expire at the end of 2018. An ITIN is a nine-digit number issued by the IRS to individuals who are required for U.S. federal tax purposes to have a U.S. taxpayer identification number but who do not have and are not eligible to get a Social Security number (SSN).

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accountants, isler northwest, portland

Tax Reform Eases the Alternative Minimum Tax – But It’s Still There

Although Congress has been promising to repeal the alternative minimum tax (AMT), they failed to do that when they passed tax reform in 2017. Instead, they lessened the effects of the AMT by increasing AMT exemptions (an amount of income exempt from AMT taxation) and raising the income thresholds for when the exemptions are phased out. These two steps and some other changes covered below lessen your chances of being hit by the AMT, but it is still there, so it is wise to be aware of how the AMT is determined and the things that might trigger it.

There are two ways to determine your tax: the regular way, which most everyone is familiar with, and the alternative method. Your tax will be the higher of the two.

So, what is the alternative tax and why might you get hit with it? Well, many, many years ago, Congress, in an effort to curb tax shelters and tax preferences of wealthy taxpayers, created an alternative method for computing tax that disallows certain deductions and adds preference income and called it the AMT. Although originally intended to apply to the wealthy, years of inflation caused more than just wealthy taxpayers to be caught up in the tax.

What Triggers the AMT? The list of tax deductions and preferences not allowed when computing the AMT is substantial and, at times, complicated. However, the typical taxpayer does not encounter most of them. In the past, the seven following items routinely caused taxpayers to be hit by the AMT. As you will note, tax reform has lessened or eliminated the impact of some of these.

  1. Medical Deductions – For many years, medical deductions were allowed to the extent they exceeded 7.5% of a taxpayer’s income for regular tax purposes and 10% for the AMT computation. The 2.5% difference was one of the items that added to the AMT tax. (For 2013 through 2016, the percentage for taxpayers under age 65 was 10% for both regular tax and AMT, and they had no AMT adjustment.) For 2017 and 2018, tax reform made the medical limit 7.5% for both regular and AMT purposes. After 2018, the percentage of income that reduces medical expenses will be 10% for both regular tax and AMT. Therefore medical expenses also will not impact the AMT in 2019 and later years.
  2. Deduction for Taxes Paid – When itemizing deductions on a federal return, a taxpayer is allowed to deduct a variety of state and local taxes, including real property, personal property, and state income or sales tax. But, for AMT purposes, none of these taxes is deductible, thus creating an AMT adjustment. However, tax reform imposed a $10,000 limit on state and local tax deductions, lessening the difference in the regular tax and AMT adjustment, especially for higher income taxpayers and those living in states with high taxes. However, when combined with other triggering items, the state and local taxes deducted for regular tax can still create an AMT.
  3. Home Mortgage Interest – For both the regular tax and AMT computations, interest paid on a debt to acquire or substantially improve a main home or second home is deductible as long as the $1 million debt limit ($750,000 for loans incurred after 2017) isn’t exceeded. Prior to 2018, for regular tax purposes, the interest on up to $100,000 of equity debt on first and second homes was also deductible, creating a difference between the regular tax and AMT deduction, as equity debt interest is not allowed for AMT purposes. Additionally, interest on debt to acquire a motor home or boat that is used as a taxpayer’s home or second home is deductible for regular tax purposes but not for AMT purposes.

Starting in 2018, tax reform no longer allows homeowners to deduct the interest on equity debt, which eliminates another difference between what is deductible for regular tax and the AMT and reduces the chances of being saddled with the AMT.

  1. Miscellaneous Itemized Deductions – The category of miscellaneous deductions, which includes employee business expenses and investment expenses, is not deductible for AMT purposes. For certain taxpayers with deductible employee business expenses or high investment advisor fees, this has created a significant AMT. Here again, tax reform has eliminated these same miscellaneous deductions for regular tax beginning in 2018, thus eliminating another difference between the AMT and the regular tax computation.
  2. Personal Exemptions – Through 2017, a deduction for personal exemptions was allowed for regular tax but not for the AMT, creating a difference in the computation and adding to the chance of being subject to the AMT. As of 2018, exemptions are no longer allowed for regular tax, which eliminates yet another difference.
  3. Standard Deduction – For regular tax purposes, a taxpayer can choose to itemize their deductions or use the standard deduction. However, for the AMT, only itemized deductions are allowed. Tax reform substantially increased the standard deduction used to figure regular tax, and this can increase chances of being affected by the AMT. There is a strategy that can be used to mitigate the AMT for taxpayers who would normally use the standard deduction, which is forcing itemized deductions even if they total an amount that is less than the standard deduction amount. Even the smallest of charitable deductions will benefit at a minimum of 26% (the lowest bracket for the AMT). This strategy is tricky and best left to a tax professional to figure out.
  4. 7. Exercising Incentive Stock Options and Holding the Stock – Many employers offer stock options to their employees. One type of option is called a qualified or incentive stock option. The taxpayer does not recognize income when the options are exercised and becomes qualified for long-term capital gain treatment upon sale of the stock acquired from the option if the stock is held more than a year after the option was exercised and two years after the option was granted. However, for AMT purposes, the difference between the option price and the exercise price is AMT income in the year the option is exercised, which frequently triggers an AMT tax when large blocks of stock are exercised. Tax reform did not change this provision.

Although your chances of being snagged by the AMT have significantly diminished, there is still a possibility you can be affected by it, especially if you have investment or business interests that are subject to AMT adjustments not encountered by the average taxpayer (and not discussed in this article). The AMT is an extremely complicated area of tax law that requires careful planning to minimize its effects. Please contact this office for further assistance.


Isler Northwest LLC is a firm of certified public accountants and business advisors based in Portland, Oregon. Our local, regional, and global resources, our expertise, and our emphasis on innovative solutions and continuity create value for our clients. Our service goals at Isler Northwest is to earn our clients trust as their primary business and financial advisors.

Isler Northwest

(503) 224-5321

1300 SW 5th Avenue
Suite 2900
Portland, Oregon 97201

133,000 Injured Veterans Entitled to Tax Refunds

133,000 Injured Veterans Entitled to Tax Refunds

As a result of the 2016 Combat-Injured Veterans Tax Fairness Act, more than 133,000 injured veterans may qualify for a federal tax refund. The minimum refund is estimated at $1,750, meaning the government will be paying out an estimated minimum of $228 million.

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Offer in Compromise

Offer in Compromise

Offer in Compromise FAQs

We’re all responsible for paying our fair share of taxes each year. But what happens when the amount that you owe is simply out of reach? What happens if you failed to make payments in a timely manner and your financial circumstances have shifted to the point where your cumulative debt is beyond your ability to pay? In the face of this untenable position, your best option for paying the IRS may be what is known as an Offer in Compromise.

The Goal of the Offer in Compromise

The Offer in Compromise, or OIC, was created to accomplish two goals: it allows American taxpayers who are unable to pay the full amount of their tax debt a way to negotiate a payment that is in keeping with their ability to pay, while at the same time providing the IRS with the ability to collect at least a portion of the amount that is owed to them. The process is neither simple nor fast: it generally takes at least one to two years for both sides to come to an agreement on an amount to be paid.

Even so, it has certain advantages for both sides.

An Offer in Compromise generally allows for resolution to be accomplished outside of court, with the agreed-to payment reflective of income and assets rather than the actual amount of debt that has accrued. Though it may seem a loss for the IRS, the agency ends up recovering more as a result of settling than they are likely to through a strong-arm collection process.

Understanding the Available Offer in Compromise Options

Taxpayers interested in pursuing an Offer in Compromise generally have three different options available to them under federal law. They are to suggest that they do not actually owe the tax debt that they are being charged with; to indicate that there simply are not enough assets or income to make a payment on the debt that has accrued; or to pursue a compromise based on either exceptional circumstances or economic hardship. This last option falls under the category of “effective tax administration,” and is notable because the taxpayer makes no argument as to either their ability to pay or whether they, in fact, owe the named amount.

Applying for an Offer in Compromise

The OIC process is both time-consuming and complicated. Applications require specific forms as well as extensive documentation, and all must be accurately prepared in keeping with IRS regulations. When mistakes are made or forms are incomplete the applications are quickly returned without the benefit of a review. To minimize both delay and frustration, it is strongly suggested that taxpayers looking to avail themselves of an OIC employ tax professionals for both the preparation of their paperwork and the negotiation of its terms.

Not Every OIC Application is Approved

It is also important to remember that an application for an OIC by no means guarantees the desired outcome. Submitting the specifics of your situation to a qualified tax professional will provide you with the ability to have your case reviewed by an expert who understands the process and the IRS criteria for approval, and who will be able to give you a reasoned perspective on the viability of your request.

Working with a professional will also provide you with reasonable expectations regarding the amount of time that the process will take and what your chances are of having your initial offer accepted. The program generally takes about two years from start to finish, and it is common for the IRS to make a counteroffer when the agency believes it will be able to collect more than the amount proffered by the applicant.

In evaluating your case, the Internal Revenue Service will likely pay less attention to the actual amount that is owed than the amount that the taxpayer is able to pay. This determination will be made on the basis of numerous factors, including income, assets, previous earnings capacity and anticipation of your earnings capacity in the future. Living expenses will also be taken into consideration.

The good news is that from the time that an application is sent in and while an IRS evaluation is taking place, most collection efforts are frozen. This generally provides tremendous relief from stress for taxpayers who have fallen behind in their payments and who feel unable to submit the amount that they owe.

If you have found yourself in this situation, contact us today to discuss your options. An experienced and knowledgeable tax expert will help you to understand, anticipate, and prepare for all aspects of the Offer in Compromise process, and will act as your advocate during sensitive negotiations.


Isler Northwest LLC is a firm of certified public accountants and business advisors based in Portland, Oregon. Our local, regional, and global resources, our expertise, and our emphasis on innovative solutions and continuity create value for our clients. Our service goals at Isler Northwest is to earn our clients trust as their primary business and financial advisors.

Isler Northwest

(503) 224-5321

1300 SW 5th Avenue
Suite 2900
Portland, Oregon 97201

IRS Clergy Tax Changes

Clergy Tax Benefits Under Fire

Section 107 of the Internal Revenue Code provides that a minister of the gospel’s gross income doesn’t include the rental value of a home (parsonage) provided; if the home itself isn’t provided, a rental allowance paid as part of compensation for ministerial services is excludable. The benefit is generally referred to as a parsonage allowance. Thus, a minister can exclude the fair rental value (FRV) of the parsonage from income under IRC Sec. 107(1), or the rental allowance under Sec. 107(2), for income tax purposes. The Sec. 107(2) rental allowance is excludable only to the extent that it is for expenses such as rent, mortgage payments, utilities, repairs, etc., used in providing the minister’s main home, and only up to the amount of the FRV of the home.

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Big Changes to the Kiddie Tax

Big Changes to the Kiddie Tax

Years ago, to prevent parents from transferring their investment accounts into their children’s name to avoid taxes, Congress created what is referred to as the kiddie tax. This counteracted the strategy of taking income from the parents’ higher tax bracket and shifting it to their children’s lower tax bracket.

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