When the IRS Forgives Tardiness

In the case in question, the service accepted the excuse that the company relied on a “qualified tax professional” who failed to make the filing.
Robert WillensNovember 10, 2011

If taxpayers were asked to think of the Internal Revenue Service as a character in a play, chances are that many would personify it as a stern teacher — the kind who would send you out of the classroom if you were late.

But when it comes to granting taxpayers extensions of time to make “regulatory elections,” it turns out that the IRS is generally quite liberal and regularly grants extensions. (Such choices by taxpayers are ones in which the due date is prescribed by a regulation, a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.)

The service’s leniency was certainly on display in a private letter ruling (LTR 201135003) it released in September. In the case under consideration, a parent company, which we’ll dub Parentis, is the common parent of an affiliated group of corporations that join in filing a consolidated income-tax return. In this particular return, Parentis sought to carry back a certain year’s net operating loss (NOL) for a certain number of years.

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But the election of an extended carryback period was due on the due date of the Parentis group’s consolidated return for a previous tax year, and for various reasons a valid election was not filed. Parentis requested a ruling for an extension of time to file the election.

The Internal Revenue Code generally permits a taxpayer to carry back a NOL to each of the two taxable years preceding the taxable year of the NOL. It also permits a taxpayer to elect to carry back an “applicable NOL” to each of the three, four, or five taxable years preceding the taxable year of the applicable NOL, in lieu of the two-year period provided by another section of the code.

In its ruling, the IRS noted that the information submitted established that Parentis “reasonably relied” on a “qualified tax professional” who had failed to make, or advise Parentis to make, the election, and that the request for relief was filed before the failure to make the election was discovered by the service. Thus, the IRS granted an extension of time until 60 days from the date of the letter ruling for Parentis to file the election. To judge by the service’s acceptance of Parentis’s excuse for its tardiness, the IRS is a liberal arbiter of such matters.

Robert Willens, founder and principal of Robert Willens LLC, writes a tax column for