Updates and guidance on key IRS practice developments.

• Date: 01 April 2023
• Author: Dellinger, Kip

The QAR: Handle with care

The qualified amended income tax return (QAR) is a useful instrument in the tax professional's procedural tool bag. But as with a sharp tool, the tax adviser must ensure that it is handled with care to avoid harming the taxpayer that utilizes it.

What the QAR accomplishes

The effect of and requirements for filing a QAR are set forth in Regs. Secs. 1.6664-2(c)(2) and (3). The QAR is a creature of administrative relief initially instituted in the corporate tax shelter era of the late 1990s and modified and expanded in the early 2000s; it is not a statutory provision or a judicial doctrine. Its purpose is to encourage taxpayers to voluntarily file amended returns to report underpaid taxes on original returns or to disclose information that was or became required by law or regulatory authority--including in situations where no additional taxes are due. For partnerships subject to examinations at the partnership level, an Administrative Adjustment Request (AAR) pursuant to Sec. 6227 is filed instead of a QAR.

When a QAR is properly filed, the amount shown as tax on the original return includes the additional tax shown on the QAR for purposes of the accuracyrelated penalties of Sec. 6662, effectively reducing or eliminating an accuracyrelated penalty. A QAR may also be filed to satisfy the adequate-disclosure provisions (see Regs. Sec. 1.6664-2(c)(4)), which will similarly eliminate penalties for failure to adequately disclose a return position.

Beware the limitations on...