FORMS FOR 1927.-Form 1040 will be used in 1927 by individuals whose net income exceeds $5,000; for the separate returns of husband and wife when the combined net incomes exceed $5,000; for returns covering less than a year when the net income placed on an annual basis exceeds $5,000; and when the individual's net income exceeds $4,000 and the entire family exemption is taken in a separate return filed by husband or wife.

Form 1040A, with the exceptions noted above, will be used in cases where the net income of individual taxpayers is less than $5,000. In the interest of simplification, no place is provided for several items which appear on form 1040. However, the use of form 1040A is not compulsory. It may be adapted to include items not provided for, or form 1040 may be used if more convenient. (C. B. III-1, 231; Mim. 3177.)

Form 1041 will be used for filing returns of fiduciaries,27 form 1065 for partnerships, and form 1120 for corporations.

Failure to make return-Collector to supply deficiency.— If any person,

LAW. Section 1103. [Section 3176, Rev. Stat.] corporation, company, or association fails to make and file a return or list at the time prescribed by law or by regulation made under authority of law, or makes, willfully or otherwise, a false or fraudulent return or list, the collector or deputy collector shall make the return or list from his own knowledge and from such information as he can obtain through testimony or otherwise. In any such case the Commissioner of Internal Revenue may, from his own knowledge and from such information as he can obtain through testimony or otherwise, make a return or amend any return made by a collector or deputy collector. Any return or list so made and subscribed by the Commissioner, or by a collector or deputy collector and approved by the Commissioner, shall be prima facie good and sufficient for all legal purposes. . . .

In cases where the collector or Commissioner makes a return, the amount of tax determined under the substitute return is payable upon notice and demand. See Volume II, Chapter 6.

It has been held that internal revenue agents and inspectors have no authority to make delinquent returns. (C. B. IV-1, 49; S. M. 3389.)

Penalties for failure to file return.-A discussion of the subject of penalties will be found in Volume II, Chapter 8.

See Chapter 43 for the use of other fiduciary forms, and Chapter 41

for use of nonresident alien forms.

Imperfect returns not acceptable.

REGULATION. Each taxpayer should carefully prepare his return so as fully and clearly to set forth the data therein called for. Imperfect or incorrect returns will not be accepted as meeting the requirements of the statute. In lack of a prescribed form a statement made by a taxpayer disclosing his gross income and the deductions therefrom may be accepted as a tentative return, and if filed within the prescribed time a return so made will relieve the taxpayer from liability to penalties, provided that without unnecessary delay such a tentative return is replaced by a return made on the proper form. (Art. 407.)

Amended returns.-The necessity for an amended return or its equivalent formerly arose from an examination by the Treasury or from a discovery by the taxpayer of some item which required correction. Examinations by the Treasury and additional assessments resulting therefrom are fully treated in Volume II, Chapters 4 and 5. It is no longer the practice of the Treasury to require taxpayers to file formal amended returns to correct errors found by the Treasury in the course of the audit. The procedure now is for the Treasury itself to prepare the equivalent of an amended return on which the adjusted tax is based and to inform the taxpayer of the reasons for the additional assessment or overassessment. See Volume II, Chapters 4, 5 and 7.

Since it holds that the acceptance or rejection of amended returns is merely a matter of internal administration of the Bureau, the Board will not pass upon the action of the Commissioner in refusing to accept amended returns. [Kunkel & Co.'s Appeal, 3 B. T. A. 133 (A).] Taxpayers have a right to be taxed on their true net income; it is immaterial whether that income is reflected on an original or amended return. If the income is proved before the Board the Commissioner must use it. As was said in Weaver's Appeal [4 B. T. A. 15 (NA)]: "Such forms of return are simply amendments of the original joint returns and relate back to and become a part of the original joint return." See also New York Trust Co.'s Appeal (3 B. T. A. 583), in which the Board reiterated its position regarding amended returns.

In cases where adjustments are necessary but where the items. are few, a statement showing the recomputation of tax is sufficient. If the adjustments show an additional tax, the Commissioner will in due course make an assessment. Where an overpayment is shown,28

28

There is no provision in the 1926 act for filing a claim for abatement when an overstatement in tax is discovered in the current return before all in

the statement should be attached to a claim for refund. See Volume

II, Chapter 7.

The regulations specifically permit amended returns in certain. contingencies.

REGULATION. . . . . If subsequent to its occurrence, however, a taxpayer first ascertains the amount of a loss sustained during a prior taxable year which has not been deducted from gross income, he may render an amended return for such preceding taxable year including such amount of loss in the deductions from gross income and may file a claim for refund of the excess tax paid by reason of the failure to deduct such loss in the original return. (Art. 112.)

The better practice is to file a claim for refund in which the tax is recomputed omitting amended returns. Quite often, collectors treat the tax shown to be due on amended returns as additional to the original tax.

AMENDED RETURNS COMMUNITY PROPERTY.-Those taxpayers who have not taken advantage of the decisions on community property are still entitled to file amended returns so as to give effect to the treatment of community property as separate property of husband and wife. (C. B. 3, 309; O. D. 708.)

Taxpayers should not wait for the Treasury to notify them of their rights. An official ruling holds that it is not incumbent upon the Bureau to inform taxpayers of their privilege to file separate returns.29

AMENDED RETURNS TO BE MADE BY OFFICERS OF CORPORATION IN

HANDS OF TRUSTEES.

RULING. In the return of the M Company for the year 1920 no depreciation was claimed on the buildings and machinery. The plant of the company has not been operated for over a year and is now in charge of trustees under a trust deed securing a bond issue which is being foreclosed. Inquiry is made whether the trustees may file an amended return for 1920 showing depreciation and also file claim for refund.

Held, that an amended return for 1920 can not be filed by the trustees, but must be submitted by the principal officers of the corporation, who may also file a claim for refund of any overpayment of tax made in 1920. (C. B. I-2, 200; I. T. 1450.)

stallments have been paid. Until this situation is remedied by Congress it will be necessary to pay the original tax in full and file a claim for refund, unless the allowance of a credit against the first installment of the succeeding year's tax can be obtained.

"C. B. I-2, 174; I. T. 1530; see Chapter 4 for criticism of ruling.

TAX SHOWN BY AMENDED RETURNS-PAYABLE WHEN?-Generally speaking, additional taxes shown by an amended return are not payable until they have been assessed by the Commissioner. Collectors forward the returns to the Commissioner, and after the returns have been audited, assessments, if any, are sent to the collector, who in due course demands payment. In view, however, of the fact that under the present law interest runs on all additional taxes (contrary to the practice under the laws antedating the 1921 law) immediate payment of any additional tax shown by an amended return is advisable.

EFFECT OF AMENDED RETURNS ON ADDITIONAL ASSESSMENTS AND CLAIMS FOR REFUND.-For a discussion of the effect of amended returns on the statutory period during which additional assessments may be made by the Treasury and during which claims for refund may be filed by taxpayers, see Volume II, Chapters 5 and 7 respectively.

The preceding chapter explains who must make returns, when they must be made, the period they must cover, and other related matters. A detailed description of the specific procedure to be followed by individuals, partnerships, and corporations in filing their annual returns now follows.1

Annual Returns by Individuals

Who shall make returns.

LAW. Section 223. (a) The following individuals shall each make

1A discussion of returns of affiliated corporations appears in Chapter 5. Fiduciary returns are discussed in Chapter 43.