Timely Mailing Rule Does Not Apply to Amended Returns Reporting Tax Due, Does Apply to Amended Returns Asking for Refund

In a Chief Counsel Advice (CCA 201052003) the IRS decided that the timely mailing rule of §7502 does not apply to amended tax returns reporting tax due, but does apply to amended returns that are claims for refund or credit.

The corporation in question had filed a Form 1120X that showed adjustments that both served to increase and decrease the tax due on its return.  The amended return was mailed 3 years to the day after the original return had been filed on extension.  The original return was mailed one day before the extended due date.  The amended return showed an increase in tax due and the taxpayer sent payment along with the 1120X.

The IRS sent a letter stating that it could not assess the tax shown on the return because the statute of limitations on assessment had expired.  The taxpayer protested that the return had been postmarked timely within the assessment period. 

The memorandum concludes that the IRS letter was correct.  IRC §7502(a)(1) covers “any return, claim, statement, or other document required to be filed” that is received by the IRS after the date prescribed for filing.  The memorandum argues that an amended return reporting tax due is not required to be filed under any provision of the IRC, with the key issue being a requirement.  As such, the timely mailing equals filing rule would not apply.

However, the memorandum points out that an amended return asking for a refund would be covered, arguing that IRC §6511 imposes a requirement to file such a claim and provides time limitations for the filing.  While not discussed in the memorandum, the key difference is that it is the taxpayer that must act in a claim for refund and file a document, while it is the IRS that faces a time limitation in assessing tax.

The memorandum went on to conclude that because the timely mailing rule did not apply to the amended return showing a balance due, the statute for assessing tax by the IRS was not extended by sixty days under §6501(c)(7), as the statute expired prior to the filing of the document where the taxpayer indicated additional tax was due.  Under §6401(a) the payment submitted with the amended return should be treated as an overpayment of tax, entitling the taxpayer to an offset or refund under IRC §6402(a).

As well, the IRS is not allowed to bifurcate the amended return into two parts, one representing the changes that increased taxes (which would not be timely filed) and one representing the changes that decreased taxes (a claim that would be covered by the timely mailing rule).  The memorandum rules the IRS has to accept the amended return as a single package, as the amended return adjustments are simply “components of a single tax liability.”

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