Background: I came to US in Jan2008 and my family (wife & 2 kids) joined me in April 2008. Since all of us have lived more than 183 days, I think we come under the category 'US Resident Alien'. I prepared federal tax return - Married filing jointly using form 1040A. Myself and my spouse had SSN# and did not have ITIN for my kids. So, I filled W7 for my kids and took the forms to IRS - Taxpayer assistance center and asked them to review for correctness and file the returns. The IRS consultant did not verify the forms I submitted and filed the returns immediately. After two days when I checked the forms, I found that I made a big mistake in federal tax returns and I need your help here.

1). I forgot to deduct the exemption amount ($14000) from AGI and the refund amount mentioned in the original return (1040a) is very less than what I should be getting. Will the IRS figure out this mistake and send me the actual refund amount (or) will they refund only the amount mentioned in the form 1040A?

2). Is there a penalty for the above mentioned mistake?

3). I have not filed my state tax return yet. Can I file (or) should I wait?

Usually, I would say that you should file 1040X to amend the tax return, but because you are applying for ITINs for your children, you should probably wait a bit to let the IRS process the tax return. You may want to call the IRS and ask them if the tax return has been processed and if they noted the mistake. They may or may not find and correct the error.

I would probably get an extension for the state tax return until the federal return is cleaned up and then file the state tax return.

Hi Intltax - Thanks for the suggestion. Sure, I'll get the extension for State and file when the federal tax issues are cleaned up.