Most U.S. citizens are familiar with the concept of filing an income tax return. As with any other work product, errors and omissions can occur in tax returns. Once a tax return has been filed, the taxpayer can generally only correct the return by filing an amended tax return. The IRS recently published a third-party email as CCA 202504016 (the “CCA”), which provides a short summary of the IRS’s obligations regarding amended tax returns.[1] Those obligations can be further simplified to one word, “nonexistent”. Fortunately, while the IRS may have no obligation to process amended returns, the IRS still chooses to process many of them, and the Internal Revenue Manual (“IRM”) provides the internal procedures for processing and examining an amended return.
Amended Returns
Many individuals, and even some tax practitioners, may think that amended returns are virtually the same as original returns. However, the term “amended return” does not appear anywhere in the Internal Revenue Code, although it does appear in the regulations thereto.[2] Thus, there is no statutory procedure whereby taxpayers may submit, or IRS employees may process, amended returns. The U.S. Supreme Court ruled in Badaracco that an amended return is “a creature of administrative origin and grace”.[3] Taxpayers are relying on the grace of the IRS, since they are not technically required to process an amended return. Since there is no requirement for the IRS to process an amended return, a taxpayer has limited legal standing to contest the rejection of an amended return by the IRS. In Miskovsky, the U.S. Court of Appeals for the Third Circuit held that the rejection of an amended return could only be upset upon a showing that the IRS abused its discretion.[4]
Even though there is no statutory requirement, are there other rules that require a taxpayer to amend a return? For example, the regulations provide that a taxpayer should file an amended return when they discover that items of gross income were improperly excluded or liabilities were improperly included on a prior year return, assuming that the statute of limitations for the return has not run.[5] However, the U.S. Supreme Court held that these provisions do not require the filing of an amended return.[6] Although it should be noted that tax advisors have certain obligations under Treasury Circular 230 to adequately advise their client promptly of the noncompliance, error, or omission and its consequences upon discovery by the tax advisor.[7]
Taxpayers have no obligation to file amended returns, and the IRS is not required to process or accept them. Why do amended returns exist? The simple answer is that mistakes happen, and taxpayers are often incentivized to correct those mistakes. For example, if the taxpayer determines that they neglected to include a large deduction on a prior year return, which should have properly been included, the taxpayer generally would be entitled to claim a refund if the IRS accepts the amended return. On the other hand, where a taxpayer determines that their tax liability was understated, filing an amended return and paying the additional tax due may protect the taxpayer from accuracy related penalties under Section 6662 and associated interest on said penalties. At the end of the day, it is the taxpayer’s decision whether they would like to file an amended return, since they are the ones who will ultimately be held responsible for the return.
IRS General Procedure
The Taxpayer Bill of Rights is a cornerstone document that highlights the ten fundamental rights taxpayers have when dealing with the IRS.[8] Key among those rights is the right to pay no more than the correct amount of tax. As a part of its compliance with the Taxpayer Bill of Rights, the IRS has developed internal policies and procedures for processing and examining amended returns. These are generally more robust where the IRS has developed actual amended tax return forms (for example, Form 1040-X, Amended U.S. Individual Income Tax Return) or methods for designating other forms as amended (for example, by checking box H (4) “Amended return” on page 1 of Form 1120S, U.S. Income Tax Return for an S Corporation).
The CCA states that it is generally the policy of the IRS to process amended returns if they are “valid, timely, complete, and processable.” It points to specific sections of the IRM that provide additional details. The CCA cites to IRM 3.11.6 for the IRS procedures for processing an amended individual income tax return. Similarly, the CCA states that “IRM 3.11.6.2(10) explains that when receiving an amended return, employees who are responsible for processing amended returns should proceed with processing the return if they determine that (1) routing criteria are met; (2) the claim is complete; (3) the claim is allowable; and (4) the claim is processable.”[9] Likewise, the CCA directs readers to IRM 4.10.11 for the IRS examination procedures for an amended return, which varies depending on whether the amended return fits the criteria for a taxable amended return (increasing the previously assessed tax), claim for refund, request for abatement, or audit reconsideration.
Conclusion
The CCA serves as a good reminder that the IRS is not required to process or accept amended returns. Likewise, there is no requirement that taxpayers file an amended return. However, there are many reasons why a taxpayer may desire to change or correct something on a filed tax return. Fortunately, the IRS will generally process amended returns that are valid, timely, complete, and processable, but it does so as a matter of administrative grace. The CCA also directs readers to some of the key IRM sections related to amended returns.
[1] The text of the CCA can be accessed at https://www.irs.gov/pub/irs-wd/202504016.pdf.
[2] Note that Section 6213(g)(1) does define a “return”, for purposes of that section, to include any return, statement, schedule, or list, and any amendment or supplement thereto. For an example of the use of the term “amended return” in the regulations, see the qualified amended income tax return requirements set forth in Regs. Sections 1.6664-2(c)(2) & (3).
[3] Badaracco v. Comm’r, 464 U.S. 386 (1984).
[4] Miskovsky v. U.S., 414 F.2d 954 (3d Cir. 1969).
[5] Regs. Sections 1.451-1(a) & 1.461-1(a)(3).
[6] Badaracco v. Comm’r, 464 U.S. 386 (1984).
[7] Section 10.21 of Treasury Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.F.R. Part 10).
[8] The Taxpayer Bill of Rights can be accessed at https://www.irs.gov/taxpayer-bill-of-rights.
[9] Note that in the version of the IRM updated as of January 2, 2025, this should refer to IRM 3.11.6.2(11).
