Claims for Refund (excerpt from Publication 556)

If you believe you have overpaid your tax, you have a limited amount of time in which to file a claim for a credit or refund. You can claim a credit or refund by filing Form 1040X. See Time for Filing a Claim for Refund, later.

File your claim by mailing it to the Internal Revenue Service Center where you filed your original return. File a separate form for each year or period involved. Include an explanation of each item of income, deduction, or credit on which you are basing your claim.

Corporations should file Form 1120X, Amended U.S. Corporation Income Tax Return, or other form appropriate to the type of credit or refund claimed.

See Publication 3920 for information on filing claims for tax forgiveness for individuals affected by terrorist attacks.

Requesting a copy of your tax return.   You can obtain a copy of the actual return and all attachments you filed with the IRS for an earlier year. This includes a copy of the Form W-2 or Form 1099 filed with your return. Use Form 4506 to make your request. You will be charged a fee, which you must pay when you submit Form 4506.

Requesting a copy of your tax account information.   Use Form 4506-T, Request for Transcript of Tax Return, to request free copies of your tax return transcript, tax account transcript, record of account, verification of nonfiling, or Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript. The tax return transcript contains most of the line items of a tax return. A tax account transcript contains information on the financial status of the account, such as payments, penalty assessments, and adjustments. A record of account is a combination of line item information and later adjustments to the account. Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript contains data from these information returns.

Time for Filing a Claim for Refund

Generally, you must file a claim for a credit or refund within 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. If you do not file a claim within this period, you may no longer be entitled to a credit or a refund.

If the due date to file a return or a claim for a credit or refund is a Saturday, Sunday, or legal holiday, it is filed on time if it is filed on the next business day. Returns you filed before the due date are considered filed on the due date. This is true even when the due date is a Saturday, Sunday, or legal holiday.

Disaster area claims for refund.   If you live in a Presidentially declared disaster area or are affected by terroristic or military action, the deadline to file a claim for a refund may be postponed. This section discusses the special rules that apply to Presidentially declared disaster area refunds.

A Presidentially declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Disaster Relief and Emergency Assistance Act.

Postponed refund deadlines.  The IRS may postpone for up to 1 year the deadlines for filing a claim for refund. The postponement can be used by taxpayers who are affected by a presidentially declared disaster. The IRS may also postpone deadlines for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. For more information, see Publication 547.   If any deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin.

A list of the areas eligible for assistance under the Disaster Relief and Emergency Assistance Act is available at the Federal Emergency Management Agency (FEMA) website at www.fema.gov and at the IRS website at www.irs.gov.

Nonfilers can get refund of overpayments paid within 3-year period.   The Tax Court can consider taxes paid during the 3-year period preceding the date of a notice of deficiency for determining any refund due to a nonfiler. This means that if you do not file your return, and you receive a notice of deficiency in the third year after the due date (with extensions) of your return and file suit with the Tax Court to contest the notice of deficiency, you may be able to receive a refund of excessive amounts paid within the 3-year period preceding the date of the notice of deficiency.

The IRS may postpone for up to 1 year certain tax deadlines, including the time for filing claims for refund, for taxpayers who are affected by a terrorist attack occurring after September 10, 2001. For more information, see Publication 3920.

Claim for refund by estates electing the installment method of payment.

 In certain cases where an estate has elected to make tax payments through the installment method, the executor can file a suit for refund with a Federal District Court or the U.S. Court of Federal Claims before all the installment payments have been made. However, all the following must be true before a suit can be filed.

• The estate consists largely of an interest in a closely-held business.

• All installment payments due on or before the date the suit is filed have been made.

• No accelerated installment payments have been made.

• No Tax Court case is pending with respect to any estate tax liability.

• If a notice of deficiency was issued to the estate regarding its liability for estate tax, the time for petitioning the Tax Court has passed.

• No proceeding is pending for a declaratory judgment by the Tax Court on whether the estate is eligible to pay tax in installments.

• The executor has not included any previously litigated issues in the current suit for refund.

• The executor does not discontinue making installment payments timely, while the court considers the suit for refund.

If in its final decision on the suit for refund the court redetermines the estate's tax liability, the IRS must refund any part of the estate tax amount that is disallowed. This includes any part of the disallowed amount previously collected by the IRS.      

Limit on Amount of Refund

If you file your claim within 3 years after filing your return, the credit or refund cannot be more than the part of the tax paid within the 3 years (plus the length of any extension of time granted for filing your return) before you filed the claim.

Example 1.    You made estimated tax payments of $1,000 and got an automatic extension of time from April 15, 2001, to August 15, 2001, to file your 2000 income tax return. When you filed your return on that date, you paid an additional $200 tax. Three years later, on August 15, 2004, you file an amended return and claim a refund of $700. Because you filed within 3 years after filing your return, you could get a refund of any tax paid after April 15, 2001.

Example 2.    The situation is the same as in Example 1, except that you filed your return on October 31, 2001, 2½ months after the extension period ended. You paid an additional $200 on that date. Three years later, on October 27, 2004, you file an amended return and claim a refund of $700. Although you filed your claim within 3 years from the date you filed your original return, the refund is limited to $200. The estimated tax of $1,000 was paid before the 3 years plus the 4-month extension period.

Claim filed after the 3-year period.   If you file a claim after the 3-year period, but within 2 years from the time you paid the tax, the credit or refund cannot be more than the tax you paid within the 2 years immediately before you filed the claim.

Example.    You filed your 2000 tax return on April 15, 2001. You paid $500 in tax. On November 2, 2002, after an examination of your 2000 return, you had to pay $200 in additional tax. On May 2, 2004, you file a claim for a refund of $300. Your refund will be limited to the $200 you paid during the 2 years immediately before you filed your claim.

Exceptions

The limits on your claim for refund can be affected by the type of item that forms the basis of your claim.

• A bad debt,

• A worthless security,

• A payment or accrual of foreign tax,

• A net operating loss carryback, and

• A carryback of certain tax credits.

    The limits discussed earlier also may not apply if you have signed an agreement to extend the period of assessment of tax.                  

For information on special rules on filing claims for an individual affected by a terrorist attack, see Publication 3920,

Periods of financial disability.   If you are an individual (not a corporation or other taxpaying entity), the period of limitations on credits and refunds can be suspended during periods when you cannot manage your financial affairs because of physical or mental impairment that is medically determinable and either:

• Has lasted or can be expected to last continuously for at least 12 months, or

• Can be expected to result in death.

The period for filing a claim for refund will not be suspended for any time that someone else, such as your spouse or guardian, was authorized to act for you in financial matters.   To claim financial disability, you generally must submit the following statements with your claim for credit or refund:      

1. A written statement signed by a physician, qualified to make the determination, that sets forth:

   1. The name and a description of your physical or mental impairment,

   2. The physician's medical opinion that your physical or mental impairment prevented you from managing your financial affairs,

   3. The physician's medical opinion that your physical or mental impairment was or can be expected to result in death, or that it has lasted (or can be expected to last) for a continuous period of not less than 12 months, and

   4. To the best of the physician's knowledge, the specific time period during which you were prevented by such physical or mental impairment from managing your financial affairs, and

2. A written statement by the person signing the claim for credit or refund that no person, including your spouse, was authorized to act on your behalf in financial matters during the period described in paragraph (1)(d) of the physician's statement. Alternatively, if a person was authorized to act on your behalf in financial matters during any part of the period described in that paragraph, the beginning and ending dates of the period of time the person was so authorized.

The period of limitations will not be suspended on any claim for refund that (without regard to this provision) was barred as of July 22, 1998.      

Processing Claims for Refund

Claims are usually processed shortly after they are filed. Your claim may be denied, accepted as filed, or it may be examined. If a claim is examined, the procedures are almost the same as in the examination of a tax return.

However, if you are filing a claim for credit or refund based only on contested income tax or on estate tax or gift tax issues considered in previously examined returns and you do not want to appeal within the IRS, you should request in writing that the claim be immediately rejected. A notice of claim disallowance will then be promptly sent to you. You have 2 years from the date of mailing of the notice of disallowance to file a refund suit in the United States District Court or in the United States Court of Federal Claims.

Explanation of Any Claim for Refund Disallowance

The IRS must explain to you the specific reasons why your claim for refund is disallowed or partially disallowed. Claims for refund are disallowed based on a preliminary review or on further examination. Some of the reasons your claim may be disallowed include the following.

• It was filed late.

• It was based solely on the unconstitutionality of the revenue acts.

• It was waived as part of a settlement.

• It covered a tax year or issues which were part of a closing agreement or an offer in compromise.

• It was related to a return closed by a final court order.

If your claim is disallowed for these reasons, or any other reason, the IRS must send you an explanation.

Reduced Refund

Your refund may be reduced by an additional tax liability. Also, your refund may be reduced by amounts you owe for past-due child support, debts you owe to another federal agency, or past-due legally enforceable state income tax obligations. You will be notified if this happens. For those reductions, you cannot use the appeal and refund procedures discussed in this publication. However, you may be able to take action against the other agency.

Offset of past-due state income tax obligations against overpayments.

  Federal tax overpayments can be used to offset past-due, legally enforceable state income tax obligations. For the offset procedure to apply, your federal income tax return must show an address in the state that requests the offset. In addition, the state must first:

• Notify you by certified mail with return receipt that the state plans to ask for an offset against your federal income tax overpayment,

• Give you at least 60 days to show that some or all of the state income tax is not past due or not legally enforceable,

• Consider any evidence from you in determining that income tax is past due and legally enforceable,

• Satisfy any other requirements to ensure that there is a valid past-due, legally enforceable state income tax obligation, and

• Show that all reasonable efforts to obtain payment have been made before requesting the offset.

• Established by a court decision or administrative hearing and no longer subject to judicial review, or

• That is assessed, uncollected, can no longer be redetermined, and is less than 10 years overdue.

• Offset priorities.   Overpayments are offset in the following order.

1. Federal income tax owed.

2. Past-due child support.

3. Past-due, legally enforceable debt owed to a federal agency.

4. Past-due, legally enforceable state income tax debt.

5. Future federal income tax liability.

Note.

If more than one state agency requests an offset for separate debts, the offsets apply against your overpayment in the order in which the debts accrued. In addition, state income tax includes any local income tax administered by the chief tax administration agency of a state.

Note.

The Tax Court cannot decide the validity or merits of the credits or offsets (for example, collection of delinquent child support or student loan payments) made that reduce or eliminate a refund to which you were otherwise entitled.

Injured spouse exception.   When a joint return is filed and only one spouse owes past-due child and spousal support or a federal debt, the other spouse can be considered an injured spouse. An injured spouse can get a refund for his or her share of the overpayment that would otherwise be used to pay the past-due amount.   To be considered an injured spouse, you must have:

• Filed a joint return,

• Received income (such as wages, interest, etc.),

• Made tax payments (such as federal income tax withheld from wages or estimated tax payments) or claimed a refundable credit (such as the earned income credit), and

• Reported the income and tax payments on the joint return.