Adjustments of Federal Individual Income Tax

015.01 Any changes made by the Internal Revenue Service in the taxpayer's federal income tax return must be reported to the Nebraska Department of Revenue by filing the appropriate Amended Nebraska Individual Income Tax Return for the taxable year involved. The amended return for Nebraska must be filed within ninety days of the final determination of the change. Reportable changes include all changes made to the federal return by the Internal Revenue Service Processing Center or any other Internal Revenue Service office.

015.02 Any adjustments made on federal amended returns which do not result in a federal refund or credit must be reported to the Nebraska Department of Revenue within ninety (90) days of the filing of the federal amended return. Any adjustments made on federal amended returns which result in a federal credit or refund must be reported to the Nebraska Department of Revenue within ninety (90) days of the taxpayer's receipt of proof that the federal credit or refund was accepted by the Internal Revenue Service or within any other applicable period provided by law, whichever is later.

015.02A Adjustments made on federal amended returns or by the Internal Revenue Service shall be reported to the Tax Commissioner by filing an Amended Nebraska Individual Income Tax Return, Form 1040XN, for the taxable year involved.The amended return for Nebraska must include copies of the federal amended return, Internal Revenue Service report, or other document which substantiates the adjustments claimed. 015.02B A taxpayer who files an amended return with the Internal Revenue Service as a protective claim is not required to file an amended return with Nebraska. The acceptance of the claim, or the payment of the refund, constitutes a federal change that must be reported. A protective claim is a claim filed to protect the taxpayer from the expiration of the statute of limitations while a separate action challenging a position of the Internal Revenue Service is pending.

015.03 The amended return for Nebraska must be filed separately and should not be attached to or filed with a return for another taxable year. Payment of any additional tax must accompany the amended return. In reporting any change to or amendment of the federal income tax return, the taxpayer must furnish the Nebraska Department of Revenue complete information regarding the amount of income reported and taxes paid to the United States. The report must also concede the accuracy of the final determination or give a statement outlining the specific errors of the final determination.

015.04 For the purpose of determining when adjustments in federal income tax constitute a final determination, the following acts will be considered to be a final determination even though the taxpayer and the Internal Revenue Service may still be contesting the amount due:

015.04A A decision by the tax court or a judgment, decree, or other order by a court of competent jurisdiction which has become final. 015.04B A closing agreement authorized by Section 7121 of the Internal Revenue Code which relates either to the total tax liability of the taxpayer for a particular taxable year or years or to one or more separate items affecting tax liability. A closing agreement becomes final for purposes of this regulation on the date of its approval by the Internal Revenue Service. 015.04C The final disposition by the Internal Revenue Service of a taxpayer's claim for a refund. 015.04D Any informal agreement between the taxpayer and the Internal Revenue Service made for the express purpose of serving as a determination in respect to the adjusted gross income, taxable income, or tax liability of the taxpayer. Such an agreement must include a waiver by the taxpayer of restrictions on assessment and the collection of any deficiencies resulting from the agreement. 015.04E The acceptance of an examining officer's findings in regard to the income of a partnership or a fiduciary. 015.04F The payment of any additional tax by the taxpayer. Any deposit made with the IRS that can be returned at the request of the taxpayer is not considered a payment of the tax by the taxpayer until the deposited amount is applied. The additional tax will be considered paid when the IRS applies the deposit. 015.04G Any other final judgment effecting changes in reported federal taxable income.

015.05 If a taxpayer fails to file an amended Nebraska return, the Nebraska Department of Revenue may mail to the taxpayer a notice of deficiency at any time. If a taxpayer properly files an amended return and reports any change in his or her federal adjusted gross income, taxable income, or tax liability, the Nebraska Department of Revenue may make an assessment relating only to the change at any time within two years after the report or amended return was filed.

015.06 Any change in the federal adjusted gross income, taxable income, or tax liability which has not been reported to the Internal Revenue Service cannot be used as the basis for a reduction in the Nebraska liability.

015.07 The amended return reporting a change that results in an overpayment of tax for Nebraska is a claim for credit or refund.

015.07A The amount of the credit or refund shall not exceed the amount of the Nebraska tax attributable to such federal change, correction, or the items amended on the federal return. 015.07B If the amended return is not filed within ninety days of the final determination of the change, interest shall not accrue after the ninetieth day. 015.07C If the amended return is not filed within two years and ninety days from the final determination of the change, no credit or refund shall be granted.

(Section 77-2793(4), R.R.S. 2003, and sections 77-2775(1), (3), and (4), and 77-2786(4), and (5), R.S.Supp., 2005. March 7, 2006.)