Is there a law that says if you discover an underpayment in your prior year tax return and file an amended return, then there are no penalties because you've discovered the error and fixed it on good honor code?
No penalties normally will be assessed if you pay the tax due with the amended return. By law, interest is due.
Condor
And even that interest due might not need be payable.
Last year (Tax year 2006), I realized I had not deducted the 'rebate' I received from NY State for my STAR property rebate, thus on Sch "A" I entered too much property taxes paid. So I filed an amended return which added additional taxes I owed over 6 months later.
I received a form from the IRS a few weeks later assessing me $1.30 in interest and immediately on the same form they wiped the slate clean stating they weren't going to charge me since it was "so low". Amazing! And who said they were heartless?
So they write it off as a loss :).
Anyway, I was also thinking about things like form 3520 to report distributions or gifts from foreign entities, where the penalty is up to 35% of the amount received.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.