Filing within 60 days before the assessment period ends

A special rule, found in Sec. 6501(c)(7), gives the IRS an additional 60 days to assess tax if the taxpayer files an amended return reporting additional tax within 60 days of the end of the limitation period. The 60-day extension is designed to allow the IRS to process the amended return and assess and collect the additional tax, and therefore the extension applies only to the additional tax reported on the return.

This means that for any other issue that the IRS identifies on the return that would increase the taxpayer’s liability, the IRS must assess that additional tax before the normal limitation period expires (unless, of course, some other exception, such as fraud, applies to extend the period).

Note that the IRS does not apply the mailbox rule to returns reporting additional tax that are mailed near the end of the limitation period—in this case, timely mailing does not equal timely filing. The IRS takes the position that the mailbox rule of Sec. 7502 applies only to returns “required to be filed,” while “amended returns that show additional tax due … are not ‘required to be filed’ by any internal revenue laws” (Chief Counsel Advice 201052003). Thus, if in particular circumstances a taxpayer wishes the additional tax to be assessed, the taxpayer must arrange for the IRS to actually receive the amended return before the normal assessment limitation period expires.

TREATMENT OF PAYMENTS

In the situation where a taxpayer mails the amended return and payment before the end of the limitation period, but the IRS actually receives the return and payment after the period has expired, the payment is treated as a statutory overpayment under Sec. 6401(a) and must be refunded because (since the limitation period has expired) the additional tax cannot be assessed. However, if the IRS received the payment before the limitation period expired and then received the return later, after the period was closed, the taxpayer cannot obtain a refund just because the IRS cannot assess the additional tax. The IRS’s position in this case is that there is no overpayment to be refunded if the taxpayer did not pay more than it owed as shown on the amended return. Under Rev. Rul. 85-67, the IRS can retain payments it has already received that are less than the amount it might otherwise have properly assessed and demanded.

For a detailed discussion of the issues in this area, see “Special Deadline: Filing Amended Returns Reporting Tax Due Within 60 Days of Assessment Limitation,” by Michael A. Urban, J.D., in the July 2015 issue of The Tax Adviser.

—By Alistair M. Nevius, editor-in-chief, The Tax Adviser

The Tax Adviser is the AICPA’s monthly journal of tax planning, trends, and techniques.

Also in the July issue:

• A discussion of tax planning strategies for nonresident individuals.
• An analysis of business deductions for marijuana businesses.
• A look at handling last-minute changes for clients.

AICPA members can subscribe to The Tax Adviser for a discounted price of $85 per year. Tax Section members can subscribe for a discounted price of $30 per year.