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TAX PRACTICE & PROCEDURES
Updates and guidance on key
IRS practice developments.
Author: The QAR: Handle with care for failure to adequately disclose a re-
Kip Dellinger, CPA The qualified amended income tax return turn position.
(QAR) is a useful instrument in the tax
Editor: professional’s procedural tool bag. But as Beware the limitations on filing
Uzell T. Williams-Freeman, CPA with a sharp tool, the tax adviser must en- a QAR
sure that it is handled with care to avoid Because the QAR is intended to provide
harming the taxpayer that utilizes it. penalty relief for voluntary compliance, its
utilization is subject to several limitations,
What the QAR accomplishes and the taxpayer and tax adviser must
A qualified amended The effect of and requirements for fil- carefully review the limitation rules to
ing a QAR are set forth in Regs. Secs.
ensure that one or more of the limiting
return can allow 1.6664-2(c)(2) and (3). The QAR is a provisions do not apply. The thrust of
taxpayers to avoid creature of administrative relief initially those rules is to disqualify an amended
instituted in the corporate tax shelter
return in situations where the taxpayer or
certain penalties, era of the late 1990s and modified and certain parties related to or advising the
but only in closely expanded in the early 2000s; it is not a taxpayer have been contacted pertaining
circumscribed statutory provision or a judicial doctrine. to an examination of or required
disclosure in a tax return on the date of or
Its purpose is to encourage taxpayers to
circumstances. voluntarily file amended returns to report prior to the filing of the amended return.
underpaid taxes on original returns or to Basically, to be “qualified,” the amended
disclose information that was or became return (or AAR) must be filed before the
required by law or regulatory author- earliest of:
ity — including in situations where no ■ The date the taxpayer is first contacted
additional taxes are due. For partnerships by the IRS regarding an examination
subject to examinations at the partner- of the return to be amended;
ship level, an Administrative Adjustment ■ The date that any person is contacted
Request (AAR) pursuant to Sec. 6227 is by the IRS concerning an examination
filed instead of a QAR. of that person relating to the
When a QAR is properly filed, the promotion of an abusive tax shelter for
amount shown as tax on the original re- which the taxpayer filing the amended
turn includes the additional tax shown on return claimed — directly or indirectly
the QAR for purposes of the accuracy- — any tax benefit;
related penalties of Sec. 6662, effectively ■ In the case of a passthrough item PHOTO BY SEAN GLADWELL/HEMERA/THINKSTOCK
reducing or eliminating an accuracy- reported by the taxpayer, the date the
related penalty. A QAR may also be passthrough entity is first contacted by
filed to satisfy the adequate-disclosure the IRS pertaining to an examination
provisions (see Regs. Sec. 1.6664-2(c)(4)), of the return to which the passthrough
which will similarly eliminate penalties item relates;
40 April 2023 The Tax Adviser
