Time Limit to File Amended Tax Return With the IRS
You may think the term “return” means the check you are getting back from the IRS. Tax pros do not use the word in this fashion. To a tax pro, the term “return” refers to the actual tax return. It’s the form(s) you submit to the IRS.
The correct term for the IRS check is a “refund.”
To get a refund, you generally have to file a tax return. This may be a refund reported on an originally-filed tax return or on a corrected or amended tax return.
We are focusing on the amended federal tax returns in this article. If you need to know when and how to file an amended tax return or a claim for a refund, this article is for you.
What is an Amended Return?
An amended tax return is a tax return filed after another tax return was already filed.
The amended tax return is usually filed to correct an error or something omitted on the previously-filed tax return.
The previously filed tax return is usually referred to as the “original tax return.” But any number of amended tax returns can be filed. Each amended tax return amends the previous original or amended tax return.
What Does Amend Taxes Mean?
To amend a tax return, you are asking the IRS to make some changes to your prior tax filing. To amend taxes refers to the process of asking the IRS to make the changes to your tax account.
The IRS maintains a set of accounts for taxpayers. These accounts are usually set up when you, the taxpayer, file a tax return. The IRS then “assesses” your tax balance. This means that the IRS records your tax liability in your tax account or record with the IRS. Your amended taxes are you asking the IRS to change the amount of tax assessed, usually.
The amendment is usually made on a special tax return form. Let’s focus on individual income taxes as an example. Individual income tax returns are filed on Form 1040. The amended return for this type of tax return is Form 1040X. Form 1040X is more of a summary or cover sheet that goes with Form 1040. It has a column that reports many of the numbers from the prior tax return, a column that shows the difference between these same numbers on the amended tax return and the prior tax return, and a column that shows the amended tax return numbers.
Other tax returns have a checkbox near the top to note that the tax return is an “amended tax return.” These tax returns just show the correct amount of tax given the changes. They do not compute the refund that is due as a result of the changes. You have to compare the prior tax return and the amended tax return and subtract the tax reported on both, to determine what the change in tax is.
Do I Need to File an Amended Tax Return?
The short answer is usually, no, you do not need to file an amended tax return if you have correctly reported your taxes.
You may need to file an amended tax return to correct a mistake or error. This is the primary reason to file an amended tax return. This may be due to new information or even just an honest mistake.
This is usually advisable if the mistake or error is significant. The significance of the mistake or error is relative to you, your tax positions, and what you have on your tax return.
For example, if you are a celebrity, politician, accountant, or attorney, the IRS expects more of you. You should correct even minor mistakes by filing an amended return.
If you are not a person in these categories, then you might look at the amount of the mistake. A few hundred dollar error is one thing. Anything over $100,000 is quite another.
Most amended tax returns are filed to take omitted tax deductions (such as bad debt deductions or to deduct college tuition), tax credits (such as foreign tax credits), change filing status, These are the most common reasons for filing amended returns. If you have any of these issues, it is usually a good idea to file an amended return. This is true even if the amended return results in an increase in tax.
You may also find that you have to file an amended tax return to make certain tax elections. These elections may not impact your taxes in the year at issue, but they may be needed to reduce your taxes in later years. This is an example of when you may need to file an amended tax return.
What is a Superseding Tax Return?
An amended tax return does not include a superseding tax return. They are not the same.
Before explaining the difference, let’s pause to consider Section 6513. This law says that a tax return that is filed early is deemed to be filed on the due date for the tax return. So if the tax return is due on April 15th and you file it on April 1st, the tax return will be deemed to be filed on April 15th.
With that rule in mind, a “superseding tax return” is an updated tax return that is filed before the due date for the tax return. For example, individual income tax returns are generally due on April 15th of the following year. If you were to file an original tax return in February, two months prior to the due date, and then file a corrected tax return a month later, the second tax return is referred to as the “superseding tax return.”
The IRS will only process the superseding tax return and treat it as your original tax return. The first return is ignored. It is as if you did not file the prior tax return. This is a product of the IRS treating any tax return filed before the due date as filed on the due date.
Note: A superseded return differs from a qualified amended return. You can read about what a qualified amended return is here.
Also note: This same early filing rule applies to early payments. As discussed below, there are timing rules that are based on the date of filing and payment. These dates, filing or payment, both look to the due date–even if the return or payment is made early.
What is an Informal Refund Claim?
The IRS provides tax forms for most amended tax returns. You do not always have to use these tax forms.
In fact, the courts have said that several other documents sent to the IRS are “informal refund claims.” This even includes a letter sent to the IRS.
The courts have put limits on what counts as an informal refund claim. Generally, the claim has to be in writing and it has to provide sufficient information as to your tax liability for the year to allow the IRS to decide whether it wants to conduct an audit. This means that it has to state the factual and legal bases for the refund claim.
With that said, you should not plan on submitting an informal refund claim. The risk is too great that the IRS and/or courts may conclude that it was insufficient. It is better practice to simply use the IRS’s forms where possible.
You can see how this goes in court cases that address informal refund claims. These cases usually cite various letters and documents sent to the IRS prior to the IRS making an unfavorable adjustment (the IRS’s own audit report has even been considered an informal refund claim and a protest filed by a taxpayer has as well). The taxpayers then go back and try to sue the IRS for a refund, and have to argue that these prior documents were refund claims that were denied by the IRS. This is required as an amended tax return is a prerequisite to being able to sue the IRS for a refund.
Time Refund Claims are Deemed Filed
The refund claim is deemed to be filed when it is actually received by the IRS. This received date differs from the rule for originally filed tax returns.
Originally filed tax returns have the benefit of the mailbox rule. This rule says that the tax returns are deemed filed when you put them in the post office or mail carrier’s possession with the appropriate address and postage.
This is why you absolutely have to send amended returns to the IRS by certified mail. This is one of the only viable ways to know if the IRS actually received the amended return and when.
The IRS makes mistakes in processing returns, including amended returns. It also loses tax returns. This proof of receipt is critical in situations like this.
It is beyond the scope of this article, but tax lawyers have had some success in raising equitable tolling to say that the time period does not start to run until the taxpayer discovers the error or mistake. You can read about an example of equitable tolling here.
How far Back Can You Amend a Tax Return?
The time limit to file an amended tax return with the IRS is three years after filing the original tax return or two years from the time the tax is paid. It is the latter of these two dates.
This means that you can generally go back and file an amended tax return for three years.
There are numerous exceptions and special rules in addition to these general rules. So if you are wondering “Can I amend a tax return from 5 years ago” or “Can you amend a tax return after 3 years,” the answer is “maybe.”
Exception for Unfiled Tax Returns
If you did not file an original tax return, then you do not need to file an amended tax return. You can just file an original tax return and there is no time limit for doing this. Thus, you can file an original tax return 10, 15, 20 years late if one was not originally filed. The filing of the original tax return starts the three-year period running. If no return is filed, there is no time limit that starts running.
Exception for IRS Adjustments
Note that if the IRS audits your tax return and makes an adjustment, you have three years from the date of the adjustment to file a refund claim for an amount up to the amount of the IRS adjustment.
Exception for IRS Extensions
The IRS is often really slow in conducting audits. If you are audited by the IRS, the IRS agent may ask you to sign a form or waiver to extend the period they have to assess tax. If you sign this form, it extends the three-year period. This also extends the time you have to file a refund claim. Taxpayers often have to file amended returns after an audit. This is common, particularly if the taxpayer wants to sue the IRS in district court to obtain a refund.
Exception for Financial Disability
Congress amended Section 6511 to allow for an extended period to file refund claims if the taxpayer is unable to manage his financial affairs. To get this relief, you generally have to have a physician sign and letter and include the letter with your refund claim. There are nuances, of course. You should read Rev. Proc. 99-21, 1999-1 C.B. 960 if you need to know more about this exception.
Exception for Net Operating Losses
A net operating loss (“NOL”) is basically a loss that is computed by adding up all of the income less the allowable deductions reported on your tax return. Congress has changed the rules over the years, but generally, net operating losses have been allowed to be carried back to prior years. This allows you to use the NOL to recoup taxes you paid in prior years.
For years that NOL carrybacks are allowed, the time period for filing amended returns for the prior years to take the NOL is measured by the year that generated the NOL. For example, an NOL generated in 2020, can be carried back to 2015. The three years for amending the 2020 tax return controls the timing for amending the 2015 tax return to report the NOL.
Because Congress has changed the NOL years so often, this is one area where you should definitely consult with a tax attorney.
Claim of Right, Mitigation, and Equitable Recoupment
If these circumstances do not fit, then, usually as a last resort, you can consider the claim of right, mitigation, and/or equitable recoupment rules. These rules are not really an exception and may not require the filing of an amended return. They are similar in concept, however. These rules may apply if the statute for filing the return was missed. Generally, these rules can allow you to take a tax benefit or recover taxes in a later tax year. These rules are nuanced and often problematic (You can read an example of a case where the rules did not apply here). You will likely need to hire a tax attorney to assist with applying these rules to your fact pattern.
Exception for Deposits
There is also an exception for deposits. A deposit is not the same as a payment. There are rules involved, but suffice it to say that there is no time limit for asking the IRS to return a deposit.
What Happens if I Miss the Filing Deadline?
It is important to file an amended return within the timeframe allowed by law. If you don’t file your amended tax return timely, any refund you would have received will be forfeited. You are not entitled to get the money back. Chances are good that you will not get it back.
The reason why I say “chances are good,” is that the IRS does make mistakes. We have seen instances where the IRS makes a mistake and issues refund checks in response to amended returns that were filed late. It is not that common, but it happens. It is more likely that you will receive a form letter from the IRS advising you that your amended return was late and that the monies cannot be refunded to you. This is why filing an amended tax return after 3 years is usually not helpful.
If the IRS processes your late-filed amended tax return, the refund that should have been paid to you will be credited to “excess collections.” This is the unspecified government account that holds windfalls for the government. It is said that this account is what enables the government to spend lavishly on projects without any oversight, as this account is not reported on the government’s books and no one apparently has any oversight over it. This is what I was told while working for the IRS (yes, I used the opportunity while working for the IRS to ask all sorts of questions like this…). I have not done any investigation to see if it is true or not. For you, the important part is that your funds are gone if you miss the refund filing deadline.
How Much Can the IRS Refund for Timely Filed Returns?
Generally, the IRS can only refund amounts paid within the prior three years leading up to the amended return. This includes tax, penalties, and interest that you paid within this time period.
This usually comes up with late-filed tax returns. Say, for example, you did not file your 2016 individual income tax return until 2020. Then in 2020, you file your individual income tax return. Then in 2022, you file an amended income tax return. The amended income tax return is timely. But if you were an employee in 2016 and your employer withheld taxes from your wages, you would be deemed to have paid those withholdings to the IRS in 2017 (the due date for your 2016 tax return). The timely amended tax return in 2022 will not entitle you to a refund of the 2017 payments. They are credited to the government’s excess collections account.
What if My Refund Claim is Overstated?
The IRS has the ability to impose penalties if you file an amended return that overstates the amount of refund you are entitled to. The IRS may impose an excessive refund penalty in this situation. This penalty is set out in Section 6676. The penalty is equal to 20% of the “excessive amount,” which is the amount by which your claim for refund or credit exceeds the amount allowable for the tax year at issue.
An “excessive amount” is the portion that exceeds the allowable amount of the claim. In other words, the excessive amount is the disallowed portion of the claim for refund or credit. The penalty typically applies to the not yet refunded/non-deficiency amount determined to be the excessive amount of the claim.
Under the prior law, the penalty did not apply if there was a “reasonable basis for the excessive amount.” The reasonable basis exception applies only to claims filed before December 18, 2015.
For claims filed on or after December 18, 2015, a reasonable cause exception applies. The reasonable cause standard considers all pertinent facts and circumstances, including whether the taxpayer exercised ordinary business care and prudence in light of the nature of the tax benefit, the issue’s complexity, and the sophistication of the taxpayer. Note that any excessive amount attributable to noneconomic substance transactions described in Section 6662(b)(6) are treated as lacking reasonable cause.
Get Help With Your Amended Tax Returns
An experienced tax attorney can help you prepare and file amended tax returns.
Please call us at (713) 909-4906 or schedule an appointment to discuss whether you should file an amended tax return.
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