Treating a refund request made on an incorrect form as an informal refund claim.

• Author: Keenan, John

To obtain a refund of taxes, a taxpayer must timely file a refund claim with the IRS within the refund statute of limitation. A refund claim must set forth in detail each ground on which the refund is claimed and include facts sufficient to apprise the IRS of the exact basis thereof. Occasionally, taxpayers have failed to satisfy the formal claim requirements within the refund statute of limitation but nevertheless assert they have made timely "informal claims" that put the IRS on notice of their desire to seek a refund. The informal-claim doctrine has been recognized and applied by both the courts and the IRS.

Certain factors dictate whether a taxpayer is considered to have made a timely informal refund claim. Most courts require that, to be valid, an informal claim must inform the IRS that a refund is sought, give notice of the tax and year at issue, and include a written component. This item discusses some situations in which taxpayers have argued that a refund request made on an incorrect form is a valid informal refund claim.

Background

Before discussing the factors used to determine whether a taxpayer has made a valid informal refund claim, it is important to understand the basic principles of refund claims and the time frames for filing them.

Refund claims: Sec. 6511(a) requires taxpayers to file their claim for a refund within three years from the time of filing the relevant return or two years from the time of payment of the tax, whichever period expires later.

Regs. Sec. 301.6402-2 contains the basic requirements for a valid claim for refund. The claim must:

1. Set forth in detail each ground upon which the refund is claimed and facts sufficient to apprise the IRS of their exact basis;

2. Be verified by a written declaration made under penalties of perjury;

3. Be submitted on the appropriate form;

4. Be filed with the service center serving the district in which the tax was paid; and

5. In the case of income, gift, and unemployment taxes, be filed as a separate claim for each type of tax for each tax period.

   Although the regulations set forth the formal requirements for making a refund claim, courts have held that under certain circumstances, it is sufficient that the taxpayer submits an informal claim within the refund limitation period, and then, outside the refund limitation period, submits a formal claim.

   Informal refund claims: A timely filed informal refund claim will toll the refund statute of limitation until the taxpayer can file a formal refund request. To be valid, an informal claim must apprise the IRS that a refund is sought, give notice of the tax and year at issue, and include a written component.

   A leading case in the area of informal refund claims is Kales, 314 U.S. 186 (1941). In Kales, the informal claim took the form of a letter, along with the taxpayer's course of dealing with the IRS. The taxpayer obtained a ruling from the IRS (then called the Department of Internal Revenue) establishing the value of stock she owned as of March 1,1913, and the value was used in reporting the amount of gain on the sale of the stock in 1919, reflected in taxes paid in 1920.

   Subsequently, the IRS decided the value in the ruling was too high and asserted a deficiency for 1919 based on an increase in the gain. The taxpayer paid the additional tax, but at the same time wrote a letter to the IRS protesting that the IRS was not entitled to reopen the question of value and was bound by the value in the ruling. The taxpayer added that "if for any reason a...