Strategy 47 of 107
Amend the last three years of returns for missed deductions and credits
What it is
Have a tax preparer review your last three returns for missed credits, deductions or filing status errors.
Steps
- Have a tax preparer review your last three returns for missed credits, deductions or filing status errors.
- File Form 1040-X for any year that shows a refund; generally within 3 years of filing or 2 years of paying the tax, whichever is later.
- Send each refund to principal.
Repeat: Once, then each year as a check.
Measure: Refunds received (enter as a one-time amount).
Try it in the calculator Enter its amount in "One-time amount to principal". Add a payoff goal of 5 years to see what is still needed.
Risks
- An amended return can also show you owe more.
- Preparer fees; pick a preparer who does not charge a percentage of the refund.
Who it fits
Average household, Married couples, Single, Business owners, Higher earners, No high school diploma, No college degree, Grandmas and grandpas (62 and over)
Needs
Any homeowner with a mortgage.
How predictable
Depends on people or program rules (tenants, family, IRS records, lenders)
A worked example (hypothetical, not guaranteed)
Picture a hypothetical household (average household). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.
They follow the steps: have a tax preparer review your last three returns for missed credits, deductions or filing status errors.
Suppose it brings a one-time $30,000 on principal. The loan would be paid off in 22 years 10 months instead of 30 years, saving about $134,798 in interest. To finish in five years, they would still need about $3,387 a month more from other strategies. That is why the five-year sequences stack several at once.
The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.
Sequences that use it
- Tax refund harvest: Claim what you are owed this year and the last three, then stop overpaying going forward. Every refund goes to principal.
Sources and more information
Where to get help
Related strategies
- 46. Claim every tax credit you qualify for and send the refund to principal
- 48. Rent out a car, trailer, tools or gear you rarely use
- 45. Run childcare and commuting through pre-tax workplace benefits
- 49. Pet sitting and boarding from home
- 44. Run a licensed family child care home
- 50. Sell baked goods or preserves from your kitchen under your state's cottage food law