debdoestaxes wrote:But will filing the incomplete, imperfect return before 10/15, followed up by a return reporting several newly acquired rentals preclude the failure to file penalty?
Assuming that the taxpayer has satisfied the Beard test, the penalty for failure to timely file the return presumably would not be applicable. (Of course, the IRS could always argue that one or more elements of the Beard test was not met, but that's a separate problem.)
Amended returnsAnother note: "Common sense" might seem to dictate that the taxpayer is required to file an amended return.
This is an area where "common sense" would be wrong.
Technically, under the Internal Revenue Code, a taxpayer has
no legal obligation to file an amended return, even where the taxpayer knows of an error or omission in the original return. For CPAs who are members of the AICPA:
7. While performing services for a taxpayer, a member may become aware of an error in a previously filed return or may become aware that the taxpayer failed to file a required return. The member should advise the taxpayer of the error and the potential consequences, and recommend the measures to be taken. Similarly, when representing the taxpayer before a taxing authority in an administrative proceeding with respect to a return containing an error of which the member is aware, the member should advise the taxpayer to disclose the error to the taxing authority and of the potential consequences of not disclosing the error. Such advice and recommendation may be given orally.
8. It is the taxpayer’s responsibility to decide whether to correct the error. If the taxpayer does not correct an error, a member should consider whether to withdraw from the engagement and whether to continue a professional or employment relationship with the taxpayer. Although recognizing that the taxpayer may not be required by statute to correct an error by filing an amended return, a member should consider whether a taxpayer’s decision not to file an amended return or otherwise correct an error may predict future behavior that might require termination of the relationship.
--from paragraphs 7 & 8, Statement on Standards for Tax Services No. 6,
Knowledge of Error: Return Preparation and Administrative Proceedings, Tax Executive Committee, American Institute of Certified Public Accountants (Nov. 2009; effective Jan. 1, 2010) (emphasis added).
From
Tax Notes:
The Internal Revenue Code does not require a taxpayer to file an amended return to correct a mistake discovered after the filing of the original tax return. The words ‘‘amended return’’ scarcely appear in the code.
--from T. Keith Fogg and Calvin H. Johnson, “Amended Returns — Imposing a Duty to Correct Material Mistakes”, 120 Tax Notes 979, Tax Analysts (Sept. 8, 2008).
Fogg and Johnson use the phrase "discovered after the filing of the original tax return." However, the rule might apply regardless of when the error was discovered.
Also, from an article on the AICPA-related web site:
Legally, taxpayers are required to accurately compute and report their income, deductions, credits and tax liability on a timely filed return. However, there appears to be no authority in the Internal Revenue Code (IRC), the regulations or case law that imposes a legal duty on a taxpayer to file an amended return to correct an error or omission on a return previously filed. This is true regardless of whether the error omission has resulted in an understatement of tax due or whether the statute of limitations is still open with respect to that year.
---Thomas Wechter, J.D., L.L.M., “Obligations of Taxpayers and Tax-Return Preparers Regarding Amended Returns”, from AICPA-related web site (Oct. 15, 2009).