TaxProTalk.com

Dear TaxProTalk community,

I have an interesting case here regarding a new client of mine. His 2013 Tax Return was filed on 9/24/14. He got an extension on 4/15/14 so his tax return was filed timely with an approved extension. He got a notice in the mail saying that additional tax would be assessed and my client ended up paying the additional tax with penalties and interest.

Fast forward to 8/30/16 and he decided he wants to amend his return. As a result of him amending his return, the IRS decides that they will assess more tax which my client pays.

On 2/20/18, my client decides he wants to amend again. This time he claims on the 1040X that his second schedule C business was not included and that there needed to be more schedule A deductions. The IRS fires back saying they will deny his claim because "he is outside of the 2 year window for paid tax". My client argues since he paid an assessment of more tax in 2016 as a result of amended examination he should be fine.

Who is right? I have researched this topic and I dont know what to do. Does the two year of paid tax SOL start from with what he paid originally in 2014 or with his amended return in 2016? Any and all input is greatly appreciated.

RR 72-311 has the answer and it's not good.

Thank you Nilodop for your help. Unfortunately not what my client wants to hear but its the law.

I don't understand. Why isn't the tax paid during the 2-year period 2/20/2016 to 2/20/2018 refundable? That's what Rev. Rul. 72-311 concluded.

Yes that's correct. He should be able to get a refund up to the amount of the 2016 payment but none of the 2014 payment. Unclear from OP's facts whether that is the only amount he is claiming, and certainly unclear from my response above that he can get the 2016 payment (or less) back.

And it doesn't matter, does it, if the claim is based on an overstatement of the income reported for 2013 in the original return (and tax paid in 2014) or an overstatement of the income reported for 2013 in the first amended return filed in 2016 (and tax paid in 2016)?