KPMG report: Taxpayer options for fixing federal tax return mistakes

A report that discusses how to handle tax mistakes in a variety of contexts.

A report that discusses how to handle tax mistakes in a variety of contexts.

One of the first questions that government attorneys ask testifying taxpayers at trial is whether they closely reviewed their tax returns before signing them. Taxpayers often squirm at this question on the stand, especially when the tax return contains mistakes. The question, inevitable as it may be, seems unfair in certain contexts. Tax positions and tax returns can be so complicated that they require teams of professionals to prepare and file them. The data and analysis summarized and presented on returns are sometimes beyond any one individual’s ability to comprehend, given tiered partnerships and corporate consolidated groups. This is not necessarily anyone’s fault; this is the reality of modern life and business combined with the complexity of the tax rules and standards.

Mistakes happen. Some errors are only identified as a taxpayer prepares a subsequent year’s return or prepares for an examination by the IRS. Upon discovering errors, taxpayers often want to be forthcoming and transparent—they want to correct and disclose the error quickly. Self-correction is encouraged under our system of tax administration, which depends on voluntary compliance. Adjustments made by taxpayers save the IRS enforcement resources.

For all those reasons, when material mistakes are found, tax professionals generally counsel their clients to fix them.

Read a February 2024 report* [PDF 1 MB] prepared by KPMG LLP that discusses how to handle tax mistakes in a variety of contexts. 

*This article appears in Tax Notes Federal (February 19, 2024) and is provided with permission.

 

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.