Many taxpayers and tax practitioners have been rushing to file claims for refund by July 10, 2026, in order to take advantage of recent case law —Kwong v. United States (Court of Federal Claims) and Abdo v. Commissioner (U.S. Tax Court)—which suggests that, under I.R.C. section 7508A, certain tax penalties and interest should not have accrued during the entire declared COVID-19 emergency.
In a recent Tax Notes Procedurally Taxing article, Kostelanetz associate Michael Waalkes outlines another potential legal avenue for taxpayers to pursue as they seek to take advantage of this recent case law: the superseding return.
As Mike explains, many tax practitioners have argued that Kwong—if it survives appeal—allows for a 2019, 2020, 2021, or 2022 tax return for a qualified taxpayer to be deemed timely filed if it was filed before July 10, 2023. But he poses the question of what the case law may mean for those who filed tax returns “in the ordinary course during the COVID-19 pandemic but subsequently filed an amended return at some point before July 10, 2023?”
Mike argues that taxpayers may be able to take advantage of a “little-used exception” to the IRS rules for amended returns: the superseding return. While the IRS has generally held that amended returns submitted after the deadline to file do not necessarily eliminate the prospect of penalty assessments on underpayment of tax, the IRS and the courts have recognized that superseding returns, where a taxpayer files an amended return before the deadline, may have significant taxpayer-favorable effects, such as negating fraud on the first-filed return or deeming timely a late election not made on the first-filed return.
The U.S. Tax Court has weighed in on the question of how second returns filed during an extended relief period should be handled in the 1962 case Houston v. Commissioner. Though the Tax Court sided with the IRS in finding that the petitioner’s second tax return was “at best an amended return” and thus the petitioner was subject to an extended limitations period for a substantial omission of income, Mike argues that Houston, which was decided under an older disaster relief statute, “may not constitute persuasive authority today in interpreting section 7508A.”
“One could convincingly argue that Houston was wrongly decided to the extent it failed to characterize the second return as superseding rather than amended,” Mike writes. “The text of section 7508A speaks broadly of timeliness relief for the filing of ‘any return’ – not just the operative return. … Nothing in section 7508A’s expansive text or remedial purpose suggests that only the first-filed return is subject to timeliness relief or that a taxpayer should be unable to self-correct via a superseding return within the disaster period.”
Read the full article here.
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