Relevance of Amending Tax Returns to Dischargeability of Taxes; John Fauchet to the Rescue Again

Question:

My PC filed his timely 2007 tax returns.  Seven months ago, the returns were amended reducing the tax owed.  Does the amendment restart the three year statute of limitations for dischargeability?

Stella Havkin

Stella, The three year statute runs from the date the return was first due.  Filing a late return, no matter how late, cannot change the date the return was first due.   Maybe John can comment, but when I’m working a tax case with  tax attorneys, they will file late, late, late amended returns if they believe the first return was wrong and overstated the liability.  The IRS can say, sorry, too late, but in appeals, it is my understanding, the IRS can actually consider them.  John?

Dennis McGoldrick

Stella and Dennis, I’m unaware of any statute that prevents a taxpayer from amending an already-filed tax return at any time.  See, for instance, this section of the IRM, which posits an amended return filed six years late:

The complications usually arise from the date of payment.  You can’t amend a tax return that’s already five years old and get back your original withholdings.  But you can file that return and affect the amount you owed on that return; if your five-year-old return says you owed $20,000, you never paid it, and you amend to show that you actually owe $10, your assessment will change and you’ll owe $10 – assuming the IRS doesn’t use that as the opportunity to audit you and find out that you really owed the $20,000 all along.

In Stella’s case below: the amended return shows an amount owed.  That’s what he owes; the date of assessment is the date that the IRS receives his amended return.  Count 240 days from that date, and it’s dischargeable under that rule.  But that’s not the only dischargeability rule.

The amended return doesn’t change the three-year statute all over again; the return was originally due on either 4/15/2008 or 10/15/2008, dates long since past.

But this amended return does implicate the two-year rule at 523(a)(1)(B)(ii).  You’ll have to wait another 17 months to discharge the tax showing on it, even though it decreases the assessment.

John D. Faucher

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