A Tax Return Do-Over?

COL. COLUMNS I tax practice & procedure
A Tax Return Do-Over?
By Michael Sardar
It is not often in life that one is able to hit pause, rewind, accepted and recognized by the IRS. Such a filing takes the
and redo something that has already happened. To many
taxpayers’ surprise, however, taxes are just one such area. Knowing the various options for correcting an error on a tax filing can help mitigate the many consequences of an erroneous tax return, including the elimination of penalties.
The Ordinary Amended Tax Return
It is common knowledge that a taxpayer can file an amended return to correct items on a previously filed return. While there is no statutory authority for amending a return, it is widely
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form of a new return that generates a corrective entry in the IRS’s records reflecting the change or changes made. For example, if a taxpayer files an individual income tax return reporting a tax liability of $20,000 and thereafter files a return reflecting a tax liability of $25,000, the amended return gen- erates a corrective entry of $5,000 in additional tax due. The original return remains on the IRS’s records and will continue to be treated as the taxpayer’s original return. Generally, a tax- payer has three years from the original filing date to file an amended tax return reporting any changes in income.
The Superseding Tax Return
In certain situations, a taxpayer can effectively undo the filing of the original return and file a revised, or superseding, return. When a superseding tax return is filed, it is as if the original return were never filed. Thus, in the example above, a superseding return would establish a single $25,000 tax due entry on the taxpayer’s account. The ability to file a superseding tax return is limited, but where available it is often the best way to correct a previously filed return.
A taxpayer can file a superseding tax return at any time after filing an original return and before the due date for filing such a return has passed. Thus, a taxpayer whose return is due on April 17, 2017, but who decides to file on February 10, 2017, can file a superseding return anytime between February 10 and April 17, making any necessary adjustments. The superseding return will be treated as the taxpayer’s original return for all purposes. Thus, if the original return underreported the tax- payer’s tax liability, the superseding return can correct that underreporting while avoiding the accuracy-related penalty nor- mally imposed. This is so even if the taxpayer does not have reasonable cause for the omission, as the superseding return effectively removes the omission from the record. Despite seeming too good to be true, there are logical reasons for this result. By filing a correct superseding return before the due date, the taxpayer has complied with the law and has provided