If the taxpayer's understatement on the original return is due to fraud, however, the taxpayer will not avoid penalties by filing a qualified
amended return.
The Chief Counsel extended this interpretation by questioning in another scenario whether the penalty would apply if the preparer provided an
amended return that contained an understatement but (1) the taxpayer didn't file the return and (2) the IRS was unable to gather evidence to the effect that the preparer signed the return.
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.
6501(c)(7) to apply, the IRS must actually receive the
amended return before the normal assessment limitation period expires.
Both provisions are retroactive, so some qualifying taxpayers must file
amended returns to claim these tax breaks.
The Explanation to SSTS 6 expands upon the question of withdrawal from the engagement and explains that a CPA may opt to do so because a "taxpayer's decision not to file an
amended return or otherwise correct an error may predict future behavior that might require termination of the relationship" (para.
The ability to file an automatic Form 3115, either with an
amended return under the limited relief provisions of Rev.
If the
amended return is based on an audit, FTB collection staff will work with audit staff to determine the accuracy of the return.
For example, when a prior-year understatement of tax liability is discovered, notwithstanding your counsel, the client, being primarily responsible for the understatement, ultimately dictates whether to submit an
amended return.
This gives a taxpayer the option of immediately concluding an audit by signing and returning the 540X Easy Reply
Amended Return.
There is an exception for services rendered in connection with the Service's examination of, or challenge to, an original tax return or an
amended return or claim for refund if the
amended return or claim for refund was filed within 120 days of the taxpayer's receiving a written notice of the examination or a written challenge to the original return.
The following year, it filed yet another
amended return for 1991 carrying back more of the reclamation costs from 1997 and 1998.
