2024 CA Counselor Reference Manual

• The deadline for getting a refund by filing an amended federal return is generally the later of (a) three years from the date the tax return was filed (if filed timely), or (b) two years after the date the taxpayer paid the tax on the originally-filed tax return.
• Note for CA returns:  The statute of limitations for getting a refund is generally four years after the regular filing deadline, or four years after filing the original tax return, whichever is later, if the tax return was filed on time. (FTB Claim for Refund) 
• Per page 85 of Pub 5683, VITA/TCE Handbook for Partners and Site Coordinators, Tax-Aide sites may prepare an amended return for a taxpayer even if they didn’t prepare the original return.

• The original return can be out-of-scope if the amendment brings it back into scope.

• An adjustment letter (CP2000) is not automatically a reason to amend a return.

• If there are no changes other than those proposed by the IRS, the taxpayer only needs to tell the IRS that they accept the proposed changes; no 1040-X is needed.
• Note for CA returns: Even if the federal adjustment proposed is correct and acceptable to the taxpayer, a CA amended return may be necessary so the CA information agrees with the IRS-adjusted 1040.

• CA policy: If a taxpayer discovers $200 or less of missed income after filing, don’t amend the return. Instead, the taxpayer should wait for a letter from the IRS. (As noted above, the taxpayer may have the option of simply accepting the IRS calculation of how much additional tax is owed, as stated on an adjustment letter from the IRS, and mailing a check for that amount.)

• Do not file an amended return until the IRS has had time to process the original return.
• If the taxpayer has filed a return showing a refund, an amended return should not be e-filed until that refund is received.
• The taxpayer should cash the refund check. (If the taxpayer expects to have to repay some or all of that refund, they shouldn’t spend it, of course.)
• If no refund is due and the return was e-filed, the amended return can be prepared at any time but should not be e-filed until at least four weeks after the date that the original return was e-filed, to give the IRS time to fully process the original return.
• Exception:  If tax is due with an amended return, file the amended return by the tax filing deadline.
• Taxpayers with newly issued SSNs or ITINs cannot retroactively claim certain credits if/when they file an amended return, or a return for a prior year. See Pub 4012 page M-10, “Prior Year Returns”, for details.
• Note for CA returns: When amending a federal return, it’s best to start with the assumption that the related CA return also needs to be amended.
• Use the TaxSlayer refund monitor to determine if the CA refund amount changes as you modify the federal return. If not, then an amended CA return isn’t needed.
• New in 2025:  TaxSlayer supports e-filing amended state returns.
• If a taxpayer is mailing multiple years’ amended returns, mail each amended paper return separately.

• An amended federal return can be e-filed, if the original return was e-filed, and only for years where the IRS and/or CA is accepting regular e-filed returns. Otherwise, the amended return must be paper filed.

• If the original return wasn’t prepared at your site, see Pub 4012 page M-9.
• You can e-file an amended return not originally prepared at your site, if the original return was e-filed. 
• Taxpayers can track the status of their amended tax return three weeks after they file, by going to irs.gov/filing/Where's-My-Amended-Return. This tool can track an amended return for the current year and up to three prior years.

Process

• The first 6 or 7 pages of Pub 4012 tab M discuss how to amend a previously filed federal tax return. The recommended steps in the process are listed below.

• Note: If you mistakenly tell TaxSlayer that you want an amended return, you can undo that:  on the Amended Tax Return – Form 1040X menu, select "Delete Amended Return".

• Note for CA returns: Amending a CA return is a different process, because Form 540X has been discontinued. Instead, after data entry (discussed below in detail), the result is a revised Form 540 (at the top of the form, the box for “Amended” is checked), plus a CA Schedule X, California Explanation of Amended Return Changes. 

Step 1: Start with the Original Return

• If the original return was created in TaxSlayer at your site, you can open it and amend it. 
• To generate a copy of the return as accepted by the IRS and by CA computers, even if the return has been changed:
• From the Client Search (Office Client List) page, find the taxpayer’s return [make sure you have the right year].
• From the Tools drop-down list, select “Client Status.”  Note:  This only works if you’ve been given access to the Client Status feature in your site permissions.
• In the section of the page showing transmissions, you’ll see print icons on the far right for the federal and state transmissions.
• If you have access to the original return, but the taxpayer doesn’t have a printed copy, print a copy.  It isn’t needed for filing, but it’s helpful for the QR process and the taxpayer should keep a copy of the original return. 
• If you don’t have access to the original return, the taxpayer must provide a printed copy of the return as filed and any correspondence from the IRS showing adjustments they have made.
• Start a new return in the correct year, which usually won’t be the current year.
• From the Main Menu, use “Change Tax Year” (upper right) to select a prior year.
• Enter the corrected return based on all information the taxpayer provides. It isn’t necessary to recreate the original (erroneous) return before entering corrected information. 
• You need to paper-file an amended return only (a) if it’s a current-year amended return and the original return was paper-filed, or (b) an amended return has already been e-filed (the IRS allows three e-filed amended returns, but TaxSlayer only handles one), or (c) it’s older than the prior 2 years. Otherwise, e-filing is better.
• For amended federal returns that will be mailed, see Pub 4012 page M-9, “Original Return Not Created by the Site Preparing the Amended Return”, for suggestions on consolidating information to minimize TaxSlayer input.

Step 2: Create the Federal Amended Return

• From inside the return, click “20xx Amended Return” on the left navigation bar. TaxSlayer asks if you want to complete an amended return. Click the “Get Started” button to open the menu page Amended Tax Return - Form 1040X.
• Click “Original Federal Return Information.”
• If the original return was e-filed at your site, TaxSlayer automatically fills in the original amounts using the data transmitted to the IRS, except for the amount paid or amount refunded.
• If the original return wasn’t e-filed at your site, enter the dollar amounts from the taxpayer’s Form 1040 into TaxSlayer.
• It is critical to enter either the amount the taxpayer paid (“Amount of tax paid with original return plus additional tax paid after it was filed”), or the amount refunded (“Overpayment, if any, as shown on original return or as previously adjusted by the IRS”), in order for the figures at the bottom of Form 1040-X page 1 to be correct when the 1040-X is created.
• If the IRS adjusted the return, then change the (summary) amounts of the original return to account for the IRS adjustment. (This is adjusting column A on the Form 1040-X.)
• When all the required information has been entered, click “Continue.”

Step 3: Make Changes to the Original or Adjusted Return

• If the IRS adjusted the return, then before proceeding with the amendment, update the return, print it, and mark the printed return, at the top, “Revised by the IRS”. (This sets the return to match what will be in column A on Form 1040-X.)
• If you are amending a return that was created at your site, make all necessary changes to the return, based on the new information from the taxpayer. 
• If you are amending a return that was not created at your site, there should be no additional changes needed since you created the correct return in Step 1 above.
• Note: TaxSlayer has no way to revert changes that you make, should you want to go back to the original version of the return. As you make changes, the only place where the information on the original (filed) tax return is available is the taxpayer’s printed copy, unless (see Step 1, above) a copy of the e-filed return is available via Client Status.

Step 4: Explain Changes 

• Click “Explain Changes”, enter text, and click “Continue.”
• The explanation entered in TaxSlayer appears on Form 1040-X page 2. 
• The explanation should contain line numbers and/or schedule information; such as: “Line 1: A missing W-2 was added to the return” or “Sch A line 1: Amount of medical and dental expenses was increased.”
• Note that the maximum number of characters that can be entered is 100.

Step 5: Create the State Amended Return, IF NEEDED

• Note for CA returns: It’s possible that a change in the federal tax return won’t affect the balance due or the refund amount on the state return, particularly if the refund amount was originally zero. If the state refund amount, or amount owed, hasn’t changed [compare the refund monitor to the amount on the original state return], then don’t prepare a state amended return.
• CONCEPTUALLY, California takes a very different approach to its amended return from the IRS’s.
• California basically says “Send us a revised Form 540 and a cover sheet (Schedule X) that states the difference in the amount owed, or to be refunded.” That’s all; there is no (complicated) three-column form, as with a federal amended return.
• If you do need to amend the CA return, and you’re not at the Amended Tax Return - Form 1040X page, click “20xx Amended Return” in the left navigation bar.
• The TaxSlayer interface for amending state returns varies from year to year. The following text describes the 2023 software which was streamlined a bit from earlier versions. Note:  If you are amending older returns, you may find some variations in the questions or the order that they are asked. 
• Click “Amend State Return(s).”
• Click “Amend State”. This adds “Amended Return” to the bottom of the California Return page.
• From the main state menu, use the regular menu items, such as “Credits”, to edit any state-specific information that has changed. (This is uncommon; normally all changes will have already been made in the Federal section.) 
• After making any needed changes to state-specific information, scroll down on the main menu of the State Section to the line “Amended Return”. Click “Begin”.
• If you clicked the edit icon, rather than “Amend State” or “Edit Amended”, you may not see the “Amended Return” item at the bottom of the menu. In that case, click “Exit California Return”, use the left navigation bar to go back into the amended return process, to get back to the Amended State Return page, where you can click “Amend State” or “Edit Amended”.
• Complete all relevant information – this is what goes on the CA Schedule X.
• Enter either the amount actually paid, or the refund expected to be received if no amended return was filed.
• Click “BEGIN” for Reasons for Amending. (You normally select the sixth radio button, “Error on original return”.) Click “CONTINUE”.
• Click “BEGIN” for Explanation of Changes. (You can enter up to 50 characters on each of six lines.) Click “CONTINUE” twice, then “BACK” to get to where you can exit the CA return.

Step 6A: Electronically File the Amended Return

• Federal 1040-X amended tax returns for the current year and two prior years can (and should be) e-filed. Amended returns for three or four years ago can’t be e-filed.
• The IRS allows up to three e-filed amended returns for any given tax year.  However, TaxSlayer supports only one e-filed amended return for any given tax year.
• Note: Unfortunately, e-filed amended returns do not have priority over paper-filed amended returns, they simply reduce IRS clerical work.  Thus, advise taxpayers that amended returns take several months for the IRS to process.
• Once the amended federal information has been entered in TaxSlayer, you can select Amended Return in the E-file section and proceed to enter the bank information as usual for direct deposit or direct debit. 
• Direct deposit can be requested on an e-filed amended return, for tax years 2022 and later. 
• Direct debit can be requested on an e-filed amended return for tax year 2022 and later.  If the amended return is filed after the normal filing deadline for that tax year, IRS computers process the direct debit immediately.
• If the taxpayer owes additional tax and wants to pay by check, print 1040-V (from the return’s PDF) for the taxpayer to accompany the check.
• Warning: The amount on the 1040-V is quite likely wrong -TaxSlayer doesn’t adjust the amount for any prior taxpayer payment. Line through the amount on the form and write in the correct amount.
• Counselors who are not EROs can only Save & Exit at this point.  There is no way to mark an amended return as Ready for Review, so follow your site’s procedures for having a second counselor review the amended return. 
• In order to e-file an amended return, the ERO must open the return in TaxSlayer.  At the bottom of the Submission Page in the E-file section, EROs will see a new button, “Save and Transmit Amended Return.”

Step 6B: Print and Assemble any Federal Amended Return(s) to be Mailed 

• Federal (again, e-filing amended federal returns is preferred and faster to process)
• For mailing by the taxpayer: In addition to printing Form 1040-X, print any form or schedule that differs from the return as originally filed, to be attached to the amended federal.
• For example, if the return is amended because the taxpayer is reporting additional expenses for their business:

1. Federal – print and mail the following to the IRS: the 1040-X, Schedule C, and Schedule SE; and if credits such as EIC were also affected, the related forms.
2. CA: amended 540, CA Schedule X, federal Schedule C, federal Schedule SE

• Write “as amended” at the bottom of each page that is being re-filed as part of the amended return, except the 1040-X and the amended 540.
• For taxpayers: 
• Give the taxpayer a copy of all pages being mailed to the IRS or FTB; mark these at the top “Amended” so they cannot be confused with the forms submitted with the original return.  Mark the original return “Original—Later Amended”.
• A copy of a changed Form 1040 should be printed for the taxpayer even if this is not being submitted to the IRS; this should similarly be marked “Amended – Copy.”
• Instructions to generate a printable PDF are in the section Printing Returns, page 127; additional information for printing paper returns is on page 129.
• Federal filing: The taxpayer must sign and mail one copy of the 1040X with all revised supporting forms and schedules.
• Staple to the front of the return any W-2 or W-2c that supports the changes made; also attach any Form W-2G or 1099-R involved with the change if tax was withheld on such a form.
• Assemble any needed schedules and forms behind Form 1040X in order of the “Attachment Sequence No.” shown in the upper-right corner of the schedule or form (again, these are schedules and forms that support the change, not all schedules and forms in the original return).
• Do not send the IRS the revised Form 1040 (the taxpayer does get a copy of this, of course), even if a change appears only on Form 1040, because the explanation on the 1040-X should specify exactly which lines were changed, and, if only lines on the 1040 were changed, the explanation should include the dollar amounts changed from and to.
• Do not include a 1040-V, payment voucher. If TaxSlayer includes the payment voucher in the PDF, either don’t print it, or – if printed – shred it or give it to the taxpayer to be shredded (clearly marked, or torn, to indicate it is not to be used).
• If the amended return is the result of a letter or notice from the IRS, mail the amended return with a copy of the letter or notice enclosed, to the address shown on the letter; else, mail the amended return to the address on page iv.

Step 6C: Print and Assemble any California Amended Return(s) to be Mailed

• Print the amended 540 (easiest to do from the state section), plus CA Schedule X, California Explanation of Amended Return Changes (two copies of each – one to mail, one as a taxpayer copy).
• Also print or include (one copy, to be mailed):

• Documents supporting the changes discussed on the federal Schedule X, such as corrected or previously missing W-2, 1099s, and K-1s
• Any federal (1040) schedules that have changed
• A copy of the federal Form 1040 (amended version), only if something changed.
• The taxpayer(s) must sign (page 5) and mail to the FTB one copy of the amended 540, together with the documents listed immediately above.  If amending a return originally filed at your site, you must manually correct TaxSlayer’s printed date on the signature page (because it’s the date of the original return).
• If the amended return is the result of a letter or notice from the FTB, mail the amended return with a copy of the letter to the address shown on the letter; else, mail the amended return to the address on page iv.

Checking the Status of an Amended Return

• A mailed amended return can take up to 3 weeks to show in the IRS system.  Full processing takes at least 16 weeks; six months or longer is unfortunately not unusual.
• Note: Any payment accompanying an amended return is deposited immediately upon receipt, and the payment therefore shows up in the taxpayer’s account quite quickly.
• Taxpayers can check the status of a federal amended return by calling 866-464-2050, or online at irs.gov/filing/wheres-my-amended-return.
• Note for CA returns:  There is no online way to check the status.
• The FTB estimates that amended returns take 4 to 6 months to process.

Same-Year Amendments Involving Payments

• If a current year tax return is amended before the end of the tax season, the original return showed that the taxpayer owed money, and the taxpayer has not submitted a payment for the original return, then:
• The amended return should not show the taxpayer as having paid the original amount due.
• If the taxpayer still owes, they should pay the corrected/amended amount due, not the original amount due. (If the taxpayer is now due a refund, they should pay nothing.)
• If/when contacted by the IRS for what appears to be an underpayment, the taxpayer should respond to the letter by sending the IRS a copy of the amended return, stating that they paid (or did not pay, if due a refund) based on that amended return. This response should result in the taxpayer case being closed once the amended return is processed and accepted.

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