Tax Refund Statute of Limitations

Requirement of an Administrative Claim

A taxpayer must file an administrative claim for a refund with the IRS before filing a refund suit or the court will dismiss the case due to a lack of jurisdiction. See IRC §6532(a)(1).

What Constitutes a Claim under IRC §6511

The regulations provide that a claim for a refund should be made on a tax return, an amended tax return, or Form 843. See Treas. Reg. §§301.6402-3 and 301.6402-2. A claim for a refund must provide each ground upon which a refund is sought and facts sufficient to apprise the IRS of the basis for the refund. A demand for payment should be expressly made on any claim for a refund.  Taxpayers may sometimes be unaware if a future event may result in the right to a refund, so in these instances taxpayers can file a protective claim for a refund.

Protective Claim for a Refund

A protective claim is different than a formal claim because in the protective claim the taxpayer does not wish to have the IRS act immediately, but rather at a later date if a certain conditions are met.   There is no statutory authority for a protective claim, but federal courts have generally acknowledged that such a right exists. Since there is no statutory framework and the courts have varied in their opinions, the exact requirements for a protective claim are uncertain, but clearly the closer a taxpayer approaches a formal claim the more likely the protective claim will be considered valid by a court.

How Long Does a Taxpayer Have to File a Claim for a Refund?

A taxpayer has the longer of three years from the date the return was filed, or two years after the tax (or addition to tax) was paid, to file a claim for a refund or credit. See IRC §6511(a). If the IRS credits the taxpayer's account within the IRS, the credit is treated as a payment. See IRC §7422(d). In the absence of a timely claim for a refund, the refund is barred and all courts are prohibited from hearing the claim. See Axtell v. U.S., 860 F.Supp 795, 798 (1994).

Equitable Tolling

Equitable tolling allows claims to be made after the relevant statute of limitations has expired based on equitable grounds.  The Supreme Court held in U.S. v. Brockamp, 519, U.S. 347 (1997) that it would be too burdensome for the IRS and therefore there is no equitable tolling of the statute of limitations for tax refunds.
 

Congress recognized the harshness of the rule and therefore it added section 6511(h) that provides that when an individual is unable to manage their financial affairs due to a medically determinable physical or mental impairment that will last for at least 12 months, the statute of limitations is suspended. The individual must also not have a spouse, or guardian, that is able to take care of their finances.

Filing a Lawsuit for a Tax Refund

A taxpayer is barred from filing a lawsuit until the IRS renders a decision on their claim for a refund, or six months have passed from the date of the claim. If the IRS sends a notice of disallowance by registered or certified mail, the taxpayer has two years from the date of mailing to file a suit in the Federal Court of Claims, or Federal District Court. See IRC §6532(a)(1).