An emailed memorandum (Chief Counsel Email 202504016) analyzes the IRS’s obligation to process amended tax returns, noting that while there’s no statutory requirement to do so, the IRS has established procedures for processing them.

Here’s a breakdown of the reasoning:

No Statutory Obligation: The memorandum emphasizes that the Internal Revenue Code (IRC) does not explicitly require the IRS to accept or process amended tax returns. This point is supported by case law:
- Goldring v. Commissioner, 20 T.C. 79, 81 (1953), states that the acceptance or rejection of an amended return is solely at the discretion of the Commissioner.
- Badaracco v. Commissioner, 464 U.S. 386, 393 (1984), reinforces that amended returns are “a creature of administrative origin and grace,” not a statutory requirement.
- Ramsay v. Commissioner, T.C. Memo. 2017-223, 2017 WL 5503163 (Nov. 15, 2017) reiterates the same principle.
Administrative Procedures: Despite the lack of a legal mandate, the IRS has created an administrative framework for processing amended returns. The Internal Revenue Manual (IRM) provides detailed guidance for IRS employees:
- IRM 3.11.6 outlines procedures for processing Form 1040-X, Amended U.S. Individual Income Tax Return.
- IRM 3.11.6.2(10) specifies that employees should process an amended return if it meets certain criteria:
  - Routing criteria are met;
  - The claim is complete;
  - The claim is allowable; and
  - The claim is processable.
- IRM 4.10.11.1.1(3) guides examiners on identifying the nature of an amended return to determine applicable examination procedures. This section provides guidance for determining if an amended return is a claim for refund, request for abatement, or audit reconsideration. It also provides guidance for examination and report writing for each.
- IRM Exhibit 4.10.11-3 provides information on taxable amended returns.
IRS Policy: The memorandum notes that it is the IRS’s general policy to process amended returns if they are valid, timely, complete, and processable.
Taxpayer Guidance: The IRS also provides detailed instructions to taxpayers on its website regarding amending a return.

In summary, the memorandum explains that while the IRS is not legally required to process amended returns, it has established administrative procedures and a policy to do so if the returns meet specific criteria. This is supported by both legal precedent and the IRS’s internal guidance.

Taxpayer’s Recourse to Obtain Payment of a Claim

Although the email does not discuss the options taxpayers have with regard to getting their claim paid, especially if the IRS decides to just not process the claim or is very slow in processing it, the law does provide relief to the taxpayer in this case, but only if they can afford the legal fees to avail themselves of it or are very successful representing themselves in court.

Under IRC § 6532, a taxpayer must take specific steps before initiating a suit against the IRS for a tax refund. These steps primarily involve filing a claim for a refund and adhering to certain time limitations.

Here’s a breakdown of the required actions:

File a Claim: A taxpayer must first file a formal claim for a refund with the IRS. This claim is a prerequisite before any legal action can be taken. The filing of the amended return will serve as this claim. So even though the IRS may have no legal obligation to process it, the taxpayer will still need to file the claim.
Waiting Period: The taxpayer must then wait at least six months from the date of filing the refund claim before starting a suit, unless the Secretary makes a decision on the claim before that time. This allows the IRS time to review the claim. The right to file suit after the six month waiting period is the relief offered to the taxpayer should the IRS fail to act on the claim for refund.
Statute of Limitations: A suit for a refund must be started within two years from the date the IRS mails a notice of disallowance of the claim via certified or registered mail. Being able to start the running of this statute is one key reason why the IRS has some incentive beyond simple public relations benefits to acting on the claim for refund.
Waiver of Notice: If the taxpayer files a written waiver of the requirement to receive a notice of disallowance, the two-year period begins on the date the waiver is filed. IRC §6532(a)(3)
Reconsideration: Any action taken by the IRS to reconsider the claim after mailing the notice of disallowance does not extend the two-year period to file suit. IRC §6532(a)(4)
Extension of Time: The two-year period can be extended only if there is a written agreement between the taxpayer and the Secretary of the Treasury. IRC §6532(a)(2)

In summary, a taxpayer must file a claim for refund, wait six months (unless the claim is decided earlier), and then file suit within two years of the notice of disallowance of the claim. Failing to follow these steps will preclude the taxpayer from legally pursuing a refund from the IRS.

The text of this email can be read at https://www.irs.gov/pub/irs-wd/202504016.pdf

Analysis prepared with assistance from Notebook LM.