Refund Claims: Don't Leave Money on the Table.

• Author: Kovacev, Rob

The Expert: Rob Kovacev

Refund claims for open tax years are an often overlooked opportunity to ensure that a taxpayer takes advantage of tax benefits to which it is entitled. The recent tax reform legislation makes refund claims more valuable, particularly for tax benefits that will be reduced or eliminated beginning in 2018. It is important for taxpayers to understand the rules for filing a refund claim so valuable tax benefits are not overlooked.

Question: Now that corporate tax rates have been reduced starting in 2018, does it make sense to look for refund claims in earlier tax years?

Answer: It makes more sense than ever to look for refund claims for earlier tax years. The corporate income tax rate differential between 2018 and earlier years makes a potential refund claim for an earlier year more valuable in relative terms. The default statute of limitations is three years from the filing of the original return, so there is still time to identify potential refund claims for tax years going back to at least 2014.

Why Should Taxpayers Consider Filing a Refund Claim Now?

It is always a good idea to look for potential refund claims for previous tax years. Not doing so is leaving money on the table. This is truer now more than ever because of the enactment of the Tax Cuts and Jobs Act. Deductions and credits for 2017 and prior tax years just became more valuable, relatively speaking, because of the significant rate cuts starting in 2018.

In addition, the Tax Cuts and Jobs Act eliminated important tax benefits going forward, but they can still be claimed for past years. The most prominent example is the domestic production activities deduction (Section 199), which has been repealed for tax years beginning after December 31, 2017. Despite the repeal, at least three tax years (2014, 2015, and 2016) may still be eligible for a Section 199 refund claim (in addition to the 2017 tax year, which presumably will be filed in 2018). Corporate taxpayers that have not previously considered whether they could qualify for a Section 199 deduction still have a chance to take advantage of that deduction going back to 2014. The same is true for other deductions and credits that the Tax Cuts and Jobs Act has eliminated.

How Far Back Can Taxpayers Look for Potential Refund Claims?

A refund claim must be filed within the statutory limitations period. The default statute of limitations for a refund claim is three years from the date the original tax return was...