Filing an amended return used to mean completing a paper form, regardless of how taxpayers submitted the original return to the Internal Revenue Service. During the pandemic, paper-filed returns presented processing challenges that contributed to a historic backlog at the Internal Revenue Service.

Nearly two years after the IRS first began allowing electronic filing for Forms 1040-X, there is more good news for the roughly 3 million taxpayers expected to amend this year. Last week, the IRS announced that direct deposit is now available for refunds issued to taxpayers who file an amended return.

Why is the IRS now able to offer direct deposit for amended returns?

The IRS says recent system updates made the implementation of direct deposit for amended tax returns possible. This development represents the agency’s continued push to improve customer service, an effort ultimately bolstered by increased funding from legislation like the Inflation Reduction Act.

“Those filing amended returns can now enjoy the same speed and security of direct deposit as those filing an original Form 1040 tax return,” the IRS explains. “Taxpayers filing an original tax return using tax preparation software can file an electronic Form 1040-X if the software manufacturer offers that service.”

Will electronic filing and direct deposit help the IRS process amended returns faster?

The short answer is “no.”

The IRS is required to manually process all amended returns, which takes an average of 20 weeks, irrespective of the chosen filing method. However, the IRS says choosing e-file and direct deposit “cuts out the mail time” and “provides a convenient and secure way to receive refunds faster.”

Can I electronically file amended returns with Drake Tax®?

Drake Software customers do not have to wait for a program update to provide direct-deposit services to clients filing Forms 1040-X. Drake Tax has supported direct deposit for amended returns since the IRS announced its availability.

Source: IR-2023-22