In general, the ordinary IRS statute of limitations for the IRS to complete its audit and assess additional taxes is not changed by the filing of an amended return. That means that, if the original return was subject to a 3-year statute of limitations, then the time for the IRS to audit and assess additional tax still ends 3-years from the date of the filing of the original return or the ordinary April 15 due date, whichever was later. However, if the original return was subject to an exception to the ordinary 3-year time period, that exception would still apply even if the amended return corrects the issue. For example, if the original return is found to be fraudulent, an amended return correcting the misstatements does not reinstate the 3-year period in place of the indefinite period applicable to the civil fraud penalty. A minor exception is found in 26 U.S.C. Section 6501(c)(7), which extends the IRS statute of limitations just 60 days from the filing of an amended return for the IRS to assess the additional income tax on the amended return, if the amended return was filed within the statutory period but less than 60 days left.
26 U.S.C. Section 6501(a) provides the general rule:
Except as otherwise provided in this section, the amount of any tax imposed by this title shall be assessed within 3 years after the return was filed (whether or not such return was filed on or after the date prescribed) or, if the tax is payable by stamp, at any time after such tax became due and before the expiration of 3 years after the date on which any part of such tax was paid, and no proceeding in court without assessment for the collection of such tax shall be begun after the expiration of such period. For purposes of this chapter, the term “return” means the return required to be filed by the taxpayer (and does not include a return of any person from whom the taxpayer has received an item of income, gain, loss, deduction, or credit).
Section 6501 contains other exceptions to this rule, for example, allowing more time where there is a substantial understatement (6 years) or an indefinite period where there is fraud on the return. The rule that an amended return does not change the IRS’s statute of limitations period has been well-established through a number of court cases, mainly based on the phrase in the statute “the return.”
“The phrase the return has a definite article and a singular subject; therefore, it can only mean one return, and that the return contemplated by the act under which it was filed.” Goldring v. Commissioner, 20 T.C. 79, 82 (1953) (quoting National Refining Co. of Ohio v. Commissioner, 1 B.T.A. 236, 240 (1924); Philadelphia v. Commissioner, 8. B.T.A. 864, 865 (1927) (same). Thus, once the statutory return commencing the statute of limitations has been filed, a subsequent amended return has no effect on the statute of limitations. See Badaracco v. Commissioner, 486 U.S. 386, 394-396 (disagreeing with Dowell v. Commissioner, 614 F.2d 1263 (10th Cir. 1980), and noting that “courts consistently had held that the operation of § 6501 and its predecessors turned on the nature of the taxpayer’s original, and not his amended, return”); Goodwin v. Commissioner, 73 T.C. 215, 234 (1979) (“amended returns are not the statutory return, although recognized by [the Commissioner’s] regulations…”); Zellerbach Paper Co. v. Helvering, 293 U. S. 172, 180 (an amendment or supplement reporting additional tax does not toll a limitations period that has already begun); Kaltreider Construction, Inc. v. United States, 303 F.2d 366, 368 (3rd Cir., 1962) (“the date of the original return governs”); Mabel Elevator Co. v. Commissioner, 2 B.T.A 517, 519 (1925) (“the filing of an amended return does not toll the period of limitations”).
It should be noted that the above only applies to the IRS’s ability to assess additional tax beyond that stated in the original return. The law discussed here does not affect the IRS’s ability to consider whether to allow or deny a claim for refund submitted by way of an amended return or to make a claim for an erroneous refund issued to the taxpayer under 26 U.S.C. Section 7405.
The IRS statute of limitations for an amended return claiming a refund is under 26 U.S.C. § 6511(a) which provides, in relevant part:
Claim for credit of refund of an overpayment of any tax imposed by this title in respect of which tax the taxpayer is required to file a return shall be filed by the taxpayer within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid.
There are exceptions within that section for bad debt loss carrybacks, NOL an capital loss carrybacks, foreign tax credits, qualified plan recaptures, credit carrybacks, and uniformed service retirement pay reductions. But, the carryback provisions are heavily mitigated by the Trump tax law changes in 2018.
Daniel Layton, the author of this post, is a former IRS trial attorney and former DOJ tax attorney, now in private practice in Newport Beach, Orange County, California. The above article is not intended to constitute legal advice. Individuals with tax law issues should consult with a tax law professional to obtain advice tailored to their specific circumstances.
Post updated on 04/04/2020