Timing of Amended Return for 2015

[bobcobb7]

Hey all,

Question on timing of an amended return. I assume it should be done ASAP, but have never had to amend a return before.

I was working on my 2016 taxes and after going through both federal and state, I noticed something in my Maryland State return. As a teacher, my wife contributes to the pension plan. It shows up on her W-2 under box 14 as STPICKUP and from my quick reading, is tax deferred for Federal income tax, but not for state.

The STPICKUP number is an addition for the state income on top of our federal AGI. I noticed the number for 2016 was much larger than 2015 and after a quick check, I entered the number incorrectly on our 2015 taxes. As a result, we received an extra couple hundred dollars in our state refund. Therefore, this impact on the state refund we received for 2015 in turn impacts our federal income taxes for 2016 (should reduce them ever so slightly). Our state taxes will also be impacted as the smaller state refund will decrease our subtractions on the 502 form.

All that said, do I amend our 2015 federal and state returns and just sit tight waiting to file 2016 until I hear back? I think I send payment for the difference to Maryland with the amended return.

Any advice appreciated. Thanks

[SeattleCPA]

I would amend 2015 ASAP... and then I'd do 2016.

I think I get what you're saying about the state tax refund. But for 2016, I think you report the actual (incorrectly large) refund since you're a cash basis tax payer.

[bobcobb7]

Thanks SeattleCPA. Yes, that is the gist of my question. To clarify,  when I amend my 2015 return, my state tax refund I received will be reduced. Therefore, when I file 2016, I will have the incorrect state refund number which is "in the system"  and I will also know the correct refund number from the amended 2015 return.

Which state income tax refund number should I use for 2016? If I use the old incorrect number, won't I then have to amend my 2016 return later?

Thanks

[SeattleCPA]

I think you use the value from the 1099-G... i.e., if I understand, you'll report as income an amount that's too high by amount of your error.

This may work itself out by the time you do your 2017...

[Drifterrider]

As I understand your post you under reported the state pick up in tax year 2015 on your MD state return, resulting in a refund that was too much, which you will now have to return to MD.

File an amended return to MD via Ifile (I'm in MD also).  This will show the IRS (in the event you get an audit letter) that you caught your error and are taking corrective action.

File your 2016 return using the numbers you know to be correct (after you Ifile an amendment).

In the event you get an audit letter about your federal 2016 return, you can provided a copy of your amended state return and that will probably satisfy the feds.

[bobcobb7]

As I understand your post you under reported the state pick up in tax year 2015 on your MD state return, resulting in a refund that was too much, which you will now have to return to MD.

File an amended return to MD via Ifile (I'm in MD also).  This will show the IRS (in the event you get an audit letter) that you caught your error and are taking corrective action.

File your 2016 return using the numbers you know to be correct (after you Ifile an amendment).

Hi Drifterrider,

That is correct that it was under reported due to a typo on my end. I just did some recalculations and my state tax refund for 2015 will be a few hundred less. Therefore I can amend my 2015 state return and send a check for the difference.

Two questions. I used Turbotax and it appears I have to submit amended returns in paper since I didnt use Ifile in MD last year. Also, I still think I need to amend my 2015 Federal Return as well since that number is a tax deferment for Federal income tax and they will need the correct basis when the time comes. Right?

I ended up calling the MD state tax office and they agreed with you that I should use the corrected state refund on my 2016 Federal/State return and if any questions arise I can direct them to the amended returns.

Thanks for the help.