claim for refund

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Properly navigating the IRS labyrinth of rules and regulations is difficult and sometimes taxpayers fail to dot every “i” and cross every “t”. The results can sometimes be devastating for both individuals and small businesses. Especially if the IRS chooses to assess penalties for the unknown failures and then pay those penalties from other funds the taxpayer submits through its offset power. The recent case of Special Touch Home Care Services v. United States, provides an example of how this can sometimes occur.

Dealing with the IRS can be a dangerous labyrinth for the untrained taxpayer or their non-tax advisors. In a recent Federal court case, E. John Rewwer, et al. v. United States, the taxpayers filed the wrong form claiming a refund and both the IRS and the DOJ Tax Division cried foul and tried to dismiss their case.  Fortunately, the court found that the taxpayer’s filing met the “informal refund claim” requirements and denied the government’s motion.

The taxpayers received an unfavorable audit determination increasing their tax liabilities for 2007, 2008 and 2009.  All amounts were paid and the taxpayers then filed IRS Form 843 (Claim for Refund and Request for Abatement) for all three years. The taxpayer’s attorney, not the taxpayers, signed the requests for refund but didn’t include IRS Form 2848 (Power of Attorney). The IRS allowed the 2008 claim but then denied the 2007 and 2009 claims, so the taxpayers appealed within the IRS.  A taxpayer generally has two years from the date of the determination to file a refund suit in federal district court.  The taxpayers didn’t hear from IRS Appeals, and the two years was expiring, so they filed their refund suit.

Tax forms, close up

Once a taxpayer overpays a tax, it is necessary to file a claim for refund before any action can be undertaken to seek a refund of such tax from the government. The purpose of the claim for refund is to place the IRS on notice of an alleged overpayment.  A taxpayer cannot require the IRS to make a credit or refund without filing the claim.  In addition, a claim for refund is a prerequisite for suing in the U.S. District Court or the U.S. Court of Federal Claims.  It also protects the overpayment of taxes if the statute of limitations expires.  Claims for refund take many forms, but most typically are Forms 1040X and 1120X, amended returns for individual and corporate income taxes.  Refund of other taxes requires regular forms which should be marked “amended” and show an overpayment.  The courts have recognized many forms of claims for refund, including informal letters from taxpayers to the IRS.  Form 843 should be used when filing claims for refunds for any taxes other than income taxes.

The preparing and filing of a claim for refund should be handled with care.  Only one taxable period and one type of tax should be set forth on any claim. The claim may cover several different issues for the same taxable period and type of tax.  The claim must be in writing under the penalties of perjury, and each and every ground upon which the taxpayer relies must be set forth in detail, plus sufficient facts to place the IRS on notice as to the taxpayer’s claim.  The claim should demand the dollar amount sought as a refund, plus any other amounts which are legally refundable – including interest.  In addition, the claim must be signed by the person who signed the return or, if a corporate return, by an officer of the corporation.  To file a claim for refund there must have been an overpayment of tax, which could include:

Safely mailing an application for ballot for 2020 election at a drive-up mailbox at the US Post OfficeDeadlines are important in legal matters, especially when it relates to tax issues.  There are estimated tax deadlines, tax return filing deadlines, and a host of deadlines if a return is audited and any adjustments are challenged. Once you get to court in a tax dispute – more deadlines. Anytime a taxpayer misses a deadline they usually lose some portion, if not all, of the rights associated with that deadline. Imagine, however, that a taxpayer attempts to meet the deadline by mailing a document that the IRS claims they never received.