Odd 1040X Notice

[geekgirldany]

I had prepare a 1040X for TY 2010. Clients received notice today that states:

"We received the amended tax return and payment you submitted. However, the law provides a limited time for us to charge and collect additional tax on Form 1040. This legal period has expired for the tax period above."

So it continues that the IRS will not assess tax for the additional income reported and they will return the payment.

Huh? What is going on?

The 1040X form I used was from my 2010 tax software. I double checked with the current revision and everything is the same except the years at the top. It starts with 2010 instead of 2013.

Could this have caused the error? The client does owe the amount show and the tax period is correct on the letter.

Sheesh... another time to get POA and call the IRS.

[FEDUKE404]

Outside of time period for 1040X ?

For a calendar year 2010 tax return, it may be related to unstated facts about your amended return that would relate to the following:

"File Form 1040X only after you have filed your original return. Generally, for a credit or refund, you must file Form 1040X within 3 years (including extensions) after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. If you filed your original return early (for example, March 1 for a calendar year return), your return is considered filed on the due date (generally April 15). However, if you had an extension to file (for example, until October 15) but you filed earlier and we received it July 1, your return is considered filed on July 1."

Your client's proverbial line in the sand for the 2010 return could well have been April 15, 2014. We will assume there is no issue as to fraud and/or responding to a CP2000 notice.

These rules have been in place for a looooong time, although I have noted various comments on these boards related to the need/reason to file older 1040Xs. I've often wondered what their success rate was.

Of course, there is that "generally" in the above guidelines.

FE

[geekgirldany]

Well, I've learned something new... looks like (maybe) that after the 2-3 year time frame they will not accept the 1040X even on taxes owed. No CP2000 notice. I caught the error when preparing the 2013 return and also amended the 1120S.

Since the "generally" applies, I think I would still file the amended return and let the IRS make the decision.

Thanks FE

[buzzardbreath]

Statute of Limitations

Neither the IRS nor the taxpayer may change a tax return beyond a 3-year statute of limitations.

However 2010 returns and even older (a month ago I filed a 2005) are still commonly filed. Not because they are outside the 3-year limit, but because the IRS raised an issue WITHIN the 3 years. If this happens the 3-year limit is ignored until the matter is rectified. At that time ANOTHER 3-year clock is started.

If a tax position is questionable, and 3 years pass without any question by the IRS, the taxpayer is off the hook.

[New York Enrolled Agent]

Neither the IRS nor the taxpayer may change a tax return beyond a 3-year statute of limitations.

That's the general rule but §6501 does provide exceptions - two notable exceptions are the six year rule for substantial omission of income and the unlimited rule for fraudulent returns.