A claim for refund of an overpayment of any tax imposed must be filed within 3 years from the time the return was filed or 2 years from the time the tax was paid. IRC § 6511. No refund will be granted to a claim made after the expiration of the statute of limitation. An overpayment is any payment in excess of the tax due.
When tax is considered paid:
- A tax is considered paid when the IRS levies on funds of the taxpayer.
- Seized property is not considered payment until it is sold.
- Withheld income tax and estimated tax payments are considered to be paid on the date the tax return is due.
- Taxes paid through garnishments on wages and assets are considered paid on the various dates the garnishments were applied to the taxes.
- Payments made through the application of the refund for another year is considered paid when the offset was made.
Filing a Claim for Refund
Most taxpayers file a refund claim for the current year by filing a federal tax return on IRS Form 1040. Refund claims for overpaid income taxes for previous years are made by filing IRS Form 1040X for individuals or IRS Form 1120X for corporations. Refund claims for taxes other than income taxes are made on IRS Form 843. The claim must include a statement of the facts and issues as to why the taxpayer is entitled to a refund.
Refund claims for prior years will usually be examined by the Examination Division of the IRS. If the IRS denies the claim for refund by sending a statutory notice of claim disallowance or if six months pass without any action, the taxpayer may file a refund suit in either the Federal Claims Court or a U.S. District Court.
The taxpayer must file a claim for a refund within 3 years from the date the return was filed or 2 years from the date the tax was actually paid, whichever is later. IRC § 6511(a). A return is deemed filed on the due date if it was filed early. IRC § 6513(a). If no return was filed, the refund claim must be made within two years of when some portion of the tax was paid (see above for what is considered a payment).
Taxpayers may file protective claims before the expiration of the statute of limitations to preserve their right to make a claim for refund. Protective claims and real claims have the same legal effect. If a sudent attorney has any question as to whether a refund should be claimed, a protective claim should be filed.
The LITP Newsletter
IRC §6402: Authority to make credits or refunds
IRC §6511: Limitations on Credit or Refund
IRC §6513: Time Return Deemed Filed and Tax Considered Paid