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Errors in multiple years

Forum|Forum|2 years ago
July 2, 2023
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My elderly (95) dad received a letter from the IRS indicating that he miscalculated his 2021 AGI because he omitted his IRA RMDs. The IRS is correct, and he owes more taxes. I went over his previous years' returns with him, and he made the same mistake for multiple years (for some reason, he thought that his RMDs were not taxable -- I think he mistakenly thought that he had Roth accounts, which he does not). Should we wait until he gets letters for the prior years from the IRS or proactively file 1040X returns for the prior years? TYIA.

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Best answer by dmertz

How many years? If he thought the RMDs were not taxable from the beginning, that could be as many as 25 years. For omissions of up to 25% of taxable income the statute of limitations on the IRS assessing the additional tax is three years from the regular due date of the tax return or the date of filing, whichever is later. If the omission is more than 25%, the assessment period is six years instead of three years. Filed by the regular due date, a 2019 tax return would be beyond the three-year deadline and a 2016 tax return would be beyond the six-year deadline for the IRS to assess additional taxes.

VolvoGirl

Employee

Better amend and add them asap. Interest could be accruing. And he should have got IRS letters for the previous years by now too.

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dmertzAnswer

Employee

How many years? If he thought the RMDs were not taxable from the beginning, that could be as many as 25 years. For omissions of up to 25% of taxable income the statute of limitations on the IRS assessing the additional tax is three years from the regular due date of the tax return or the date of filing, whichever is later. If the omission is more than 25%, the assessment period is six years instead of three years. Filed by the regular due date, a 2019 tax return would be beyond the three-year deadline and a 2016 tax return would be beyond the six-year deadline for the IRS to assess additional taxes.

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NCPERSON1

@Socket1021 - simple, "do the right thing", whether your father gets a letter from the IRS or not.

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Anonymous_

Employee

@Socket1021 simple, read @dmertz's post and consult with tax counsel before you go firing off amended returns (which could open up other tax issues and, potentially, subject your father to allegations of evasion or fraud).

See https://www.avvo.com/tax-lawyer.html