SOL on individuals' refund claims.

• Author: Parker, Kenneth M.
• Position: Statute of limitation

Taxpayers lose millions of dollars annually because they do not file returns timely. Generally, taxpayers must file a claim for a credit or refund within three years from the date they filed their original return or two years from the date they paid the tax, whichever is later. If taxpayers do not file a refund claim within this period, they will not he entitled to a refund. If taxpayers do not file a return, they must file a refund claim within two years from the time they paid the tax; see Sec. 6511 (a).

The Tax Court can consider taxes paid during the three-year period preceding a deficiency notice's date in determining any refund due to nonfilers. This means that if taxpayers do not file a return, receive a deficiency notice in the third year after the return's due date (including extensions) and file in Tax Court to contest the notice, they might be able to receive a refund of excess amounts paid within the three-year period preceding the notice's date; see Sec. 6512(b)(3).

Exceptions

There are exceptions to these rules. For example, if the President declares a location as a disaster area eligible for Federal assistance, the IRS may postpone, for up to one year, the refund claim filing deadline for taxpayers in that area. It may also delay deadlines for filing income and employment tax returns and for contributing to regular or Roth IRAs; see IRS Pub. 547, Casualties, Disasters, and Thefts, for details. The IRS will publicize deadline postponements and publish a news release, revenue ruling, revenue procedure, notice, announcement or other guidance in the Internal Revenue Bulletin.

The IRS may also postpone the filing deadline for a tax refund for up to one year for taxpayers affected by terrorist acts occurring after Sept. 10, 2001. (For further information, see IRS Pub. 3920, Tax Relief for Victims for Terrorist Attacks).

Examples

A refund may be limited for taxpayers who file a refund claim within three years after filing their return. The refund is limited to the tax paid within the three years (plus extensions) before taxpayers made the claim.

Example 1: Individual G made estimated tax payments of $1,000 and received an automatic extension to Aug. 16, 2004, to file her 2003 income tax return. When G filed her return on that date, she paid $200 additional tax due. On Aug. 15, 2007, she files an amended return and claims a $700 refund. Because G files the refund claim within three years of her return filing, plus the four-month...