IRS proposes housekeeping changes to regs governing refund
claims
Preamble to Prop Reg 06/09/2011 ; Prop Reg § 301.6402-2 ,
Prop Reg § 301.6402-3 , Prop Reg § 301.6402-4
New proposed regs on refund claims would provide guidance on
the proper place for filing a claim, remove outdated provisions and make other
housekeeping changes. The regs would apply to claims for credit or refund filed
on or after the date they are finalized.
Background. Code Sec. 6402 authorizes IRS to make credits or
refunds. Code Sec. 6511 provides the limitations period within which a taxpayer
must file a claim for credit or refund and restricts IRS's ability to issue a
credit or refund unless the claim is filed within that period. Code Sec. 7422
prohibits the maintenance of a suit for refund until a claim has been duly
filed with IRS.
Currently, Reg. § 301.6402-2(a)(2) provides generally that a
claim for credit or refund needs to be filed with the service center serving
the internal revenue district in which the tax was paid. As explained below,
the proposed regs would clarify that, unless otherwise directed, the proper
place to file a claim for credit or refund is with the service center at which
the taxpayer currently would be required to file a tax return for the type of
tax to which the claim relates, irrespective of where the tax was paid or was
required to have been paid.
Proper place to file claim. If a taxpayer is required to
file a claim for credit or refund on a particular form, then the claim must be
filed in a manner consistent with that form and the related instructions. For
example, a claim for refund of an overpayment of individual income taxes must
be filed on a Form 1040X at the location specified in the instructions provided
for the form. If filing instructions are not otherwise provided, a claim for
credit or refund must be filed with the service center at which the taxpayer
would be required to file a current tax return for the type of tax to which the
claim relates. The regs would be revised to clarify that claims should not be
filed at a different location based upon where the tax either was paid or was
required to have been paid. Nor would it be relevant if the tax was properly paid
at a different location in a prior year because the taxpayer had a change in
residence. ( Prop Reg § 301.6402-2(a)(2) ; Preamble to Prop Regs REG-137128-08,
06/09/2011 )
Proper form to file. IRS has prescribed various forms that
must be used to file a claim for credit or refund for a particular tax. The
proposed regs would specifically provide that taxpayers must use the form
prescribed for filing a particular claim for credit or refund. When there is no
alternative form prescribed, a claim for credit or refund would have to be
filed on a Form 843, “Claim for Refund and Request for Abatement.” ( Prop Reg §
301.6402-2(c) )
Claims for employment taxes under proposed regs. In 2008,
IRS issued final regs on employment tax adjustments and refund claims that modified
the process for making claims for refund of overpayments of employment taxes
under Code Sec. 6402 (see Weekly Alert ¶
19 07/03/2008 ). To file a claim to correct errors discovered on or
after Jan. 1, 2009, an employer now uses an X-designated form that corresponds
to the return being corrected. For example, to correct a Form 941, Employer's
QUARTERLY Federal Tax Return, a Form 941-X, Adjusted Employer's QUARTERLY
Federal Tax Return or Claim for Refund, is used. The proposed regs would
provide that when filing a claim for employment taxes, a separate claim must be
made for each taxable period. ( Prop Reg § 301.6402-2(d) )
Removal of obsolete references. The proposed regs would
remove references to internal revenue districts, district directors and director
of the regional service center as these terms were rendered obsolete by the
Internal Revenue Service Restructuring and Reform Act of 1998 ( P.L. 105-206 ).
( Prop Reg § 301.6402-2(a)(2) , Prop Reg § 301.6402-3 , Prop Reg § 301.6402-4 )
Removal of outdated provisions. The proposed regs would
remove outdated guidance concerning claims filed before and after certain dates
in '68 and '76. ( Prop Reg § 301.6402-2 , Prop Reg § 301.6402-3 )
Large refund claims. Code Sec. 6405 requires the advance
referral of a report to the Joint Committee on Taxation (as changed from the
Joint Committee on Internal Revenue Taxation by the Tax Reform Act of 1976 (
P.L. 94-455 )) regarding specified types of refunds or credits in excess of a
threshold amount (currently $2,000,000, as raised from $10,000 by the '76 Act).
Reg. § 301.6204-4 currently provides that “[t]he provisions of section 6405
(relating to reports of refunds of more than $100,000 to the Joint Committee on
Internal Revenue Taxation) are not applicable to the overpayments described in
this section caused by timely payments of tax which exceed the amount of tax
shown on a timely return.” The proposed regs would change “Joint Committee on
Internal Revenue Taxation” to the “Joint Committee on Taxation” and remove the
parenthetical reference to the specific amount required for the referral. The
latter would make it unnecessary to amend the regs again if the threshold is
increased. ( Prop Reg § 301.6402-4 )
§ 6511 Limitations on credit or refund.
(a) WG&L Treatises
Period of limitation on filing claim.
Claim for credit or refund of an overpayment of any tax
imposed by this title in respect of which tax the taxpayer is required to file
a return shall be filed by the taxpayer within 3 years from the time the return
was filed or 2 years from the time the tax was paid, whichever of such periods
expires the later, or if no return was filed by the taxpayer, within 2 years
from the time the tax was paid. Claim for credit or refund of an overpayment of
any tax imposed by this title which is required to be paid by means of a stamp
shall be filed by the taxpayer within 3 years from the time the tax was paid.
(b) Limitation on
allowance of credits and refunds.
(1) Filing of claim within prescribed period.
No credit or refund shall be allowed or made after the
expiration of the period of limitation prescribed in subsection (a) for the
filing of a claim for credit or refund, unless a claim for credit or refund is
filed by the taxpayer within such period.
(2) Limit on amount
of credit or refund.
(A) Limit where claim filed within 3-year period. If the
claim was filed by the taxpayer during the 3-year period prescribed in
subsection (a) , the amount of the credit or refund shall not exceed the
portion of the tax paid within the period, immediately preceding the filing of
the claim, equal to 3 years plus the period of any extension of time for filing
the return. If the tax was required to be paid by means of a stamp, the amount
of the credit or refund shall not exceed the portion of the tax paid within the
3 years immediately preceding the filing of the claim.
(B) Limit where claim
not filed within 3-year period. If the claim was not filed within such 3-year
period, the amount of the credit or refund shall not exceed the portion of the
tax paid during the 2 years immediately preceding the filing of the claim.
(C) Limit if no claim
filed. If no claim was filed, the credit or refund shall not exceed the amount
which would be allowable under subparagraph (A) or (B) , as the case may be, if
claim was filed on the date the credit or refund is allowed.
(c) Special rules
applicable in case of extension of time by agreement.
If an agreement under the provisions of section 6501(c)(4)
extending the period for assessment of a tax imposed by this title is made
within the period prescribed in subsection (a) for the filing of a claim for
credit or refund—
(1) Time for filing claim.
The period for filing claim for credit or refund or for
making credit or refund if no claim is filed, provided in subsections (a) and
(b)(1) , shall not expire prior to 6 months after the expiration of the period
within which an assessment may be made pursuant to the agreement or any
extension thereof under section 6501(c)(4) .
(2) Limit on amount.
If a claim is filed, or a credit or refund is allowed when
no claim was filed, after the execution of the agreement and within 6 months
after the expiration of the period within which an assessment may be made
pursuant to the agreement or any extension thereof, the amount of the credit or
refund shall not exceed the portion of the tax paid after the execution of the
agreement and before the filing of the claim or the making of the credit or
refund, as the case may be, plus the portion of the tax paid within the period
which would be applicable under subsection (b)(2) if a claim had been filed on
the date the agreement was executed.
(3) Claims not
subject to special rule.
This subsection shall not apply in the case of a claim
filed, or credit or refund allowed if no claim is filed, either—
(A) prior to the execution of the agreement or
(B) more than 6
months after the expiration of the period within which an assessment may be
made pursuant to the agreement or any extension thereof.
(d) Special rules
applicable to income taxes.
(1) Seven-year period of limitation with respect to bad
debts and worthless securities.
If the claim for credit or refund relates to an overpayment
of tax imposed by subtitle A on account of—
(A) The deductibility by the taxpayer, under section 166 or
section 832(c) , of a debt as a debt which became worthless, or, under section
165(g) , of a loss from worthlessness of a security, or
(B) The effect that
the deductibility of a debt or loss described in subparagraph (A) has on the
application to the taxpayer of a carryover,
in lieu of the 3-year period of limitation prescribed in
subsection (a) , the period shall be 7 years from the date prescribed by law
for filing the return for the year with respect to which the claim is made. If
the claim for credit or refund relates to an overpayment on account of the
effect that the deductibility of such a debt or loss has on the application to
the taxpayer of a carryback, the period shall be either 7 years from the date
prescribed by law for filing the return for the year of the net operating loss
which results in such carryback or the period prescribed in paragraph (2) of
this subsection , whichever expires the later. In the case of a claim described
in this paragraph the amount of the credit or refund may exceed the portion of
the tax paid within the period prescribed in subsection (b)(2) or (c) ,
whichever is applicable, to the extent of the amount of the overpayment
attributable to the deductibility of items described in this paragraph.
(2) Special period of
limitation with respect to net operating loss or capital loss carrybacks.
(A) Period of limitation. If the claim for credit or refund
relates to an overpayment attributable to a net operating loss carryback or a
capital loss carryback, in lieu of the 3-year period of limitation prescribed
in subsection (a) , the period shall be that period which ends 3 years after
the time prescribed by law for filing the return (including extensions thereof)
for the taxable year of the net operating loss or net capital loss which
results in such carryback, or the period prescribed in subsection (c) in
respect of such taxable year, whichever expires later. In the case of such a
claim, the amount of the credit or refund may exceed the portion of the tax
paid within the period provided in subsection (b)(2) or (c) , whichever is
applicable to the extent of the amount of the overpayment attributable to such
carryback.
(B) Applicable rules.
(i) In general. If the allowance of a credit or refund of an
overpayment of tax attributable to a net operating loss carryback or a capital
loss carryback is otherwise prevented by the operation of any law or rule of
law other than section 7122 (relating to compromises), such credit or refund
may be allowed or made, if claim therefor is filed within the period provided
in subparagraph (A) of this paragraph .
(ii) Tentative
carryback adjustments. If the allowance of an application, credit, or refund of
a decrease in tax determined under section 6411(b) is otherwise prevented by
the operation of any law or rule of law other than section 7122 , such
application, credit, or refund may be allowed or made if application for a
tentative carryback adjustment is made within the period provided in section
6411(a) .
(iii) Determinations
by courts to be conclusive. In the case of any such claim for credit or refund
or any such application for a tentative carryback adjustment, the determination
by any court, including the Tax Court, in any proceeding in which the decision
of the court has become final, shall be conclusive except with respect to—
(I) the net operating loss deduction and the effect of such
deduction, and
(II) the
determination of a short-term capital loss and the effect of such short-term
capital loss, to the extent that such deduction or short-term capital loss is
affected by a carryback which was not an issue in such proceeding.
(3) Special rules
relating to foreign tax credit.
(A) New Law Analysis Special period of limitation with
respect to foreign taxes paid or accrued. If the claim for credit or refund
relates to an overpayment attributable to any taxes paid or accrued to any
foreign country or to any possession of the United States for which credit is
allowed against the tax imposed by subtitle A in accordance with the provisions
of section 901 or the provisions of any treaty to which the United States is a
party, in lieu of the 3-year period of limitation prescribed in subsection (a)
, the period shall be 10 years from the date prescribed by law for filing the
return for the year in which such taxes were actually paid or accrued.
(B) Exception in the
case of foreign taxes paid or accrued. In the case of a claim described in
subparagraph (A) , the amount of the credit or refund may exceed the portion of
the tax paid within the period provided in subsection (b) or (c) , whichever is
applicable, to the extent of the amount of the overpayment attributable to the
allowance of a credit for the taxes described in subparagraph (A) .
(4) Special period of
limitation with respect to certain credit carrybacks.
(A) Period of limitation. If the claim for credit or refund
relates to an overpayment attributable to a credit carryback, in lieu of the
3-year period of limitation prescribed in subsection (a) , the period shall be
that period which ends 3 years after the time prescribed by law for filing the
return (including extensions thereof) for the taxable year of the unused credit
which results in such carryback (or, with respect to any portion of a credit
carryback from a taxable year attributable to a net operating loss carryback,
capital loss carryback, or other credit carryback from a subsequent taxable
year, the period shall be that period which ends 3 years after the time
prescribed by law for filing the return, including extensions thereof, for such
subsequent taxable year) or the period prescribed in subsection (c) in respect
of such taxable year, whichever expires later. In the case of such a claim, the
amount of the credit or refund may exceed the portion of the tax paid within
the period provided in subsection (b)(2) or (c) , whichever is applicable, to
the extent of the amount of the overpayment attributable to such carryback.
(B) Applicable rules.
If the allowance of a credit or refund of an overpayment of tax attributable to
a credit carryback is otherwise prevented by the operation of any law or rule
of law other than section 7122 , relating to compromises, such credit or refund
may be allowed or made, if claim therefor is filed within the period provided
in subparagraph (A) of this paragraph . In the case of any such claim for credit
or refund, the determination by any court, including the Tax Court, in any
proceeding in which the decision of the court has become final, shall not be
conclusive with respect to any credit, and the effect of such credit, to the
extent that such credit is affected by a credit carryback which was not in
issue in such proceeding.
(C) Credit carryback
defined. For purposes of this paragraph , the term “credit carryback” means any
business carryback under section 39 .
(5) Special period of
limitation with respect to self-employment tax in certain cases.
If the claim for credit or refund relates to an overpayment
of the tax imposed by chapter 2 (relating to the tax on self-employment income)
attributable to an agreement, or modification of an agreement, made pursuant to
section 218 of the Social Security Act (relating to coverage of State and local
employees), and if the allowance of a credit or refund of such overpayment is
otherwise prevented by the operation of any law or rule of law other than section
7122 (relating to compromises), such credit or refund may be allowed or made if
claim therefor is filed on or before the last day of the second year after the
calendar year in which such agreement (or modification) is agreed to by the
State and the Commissioner of Social Security.
(6) Special period of
limitation with respect to amounts included in income subsequently recaptured
under qualified plan termination.
If the claim for credit or refund relates to an overpayment
of tax imposed by subtitle A on account of the recapture, under section 4045 of
the Employee Retirement Income Security Act of 1974 , of amounts included in
income for a prior taxable year, the 3-year period of limitation prescribed in
subsection (a) shall be extended, for purposes of permitting a credit or refund
of the amount of the recapture, until the date which occurs one year after the
date on which such recaptured amount is paid by the taxpayer.
(7) New Law Analysis
Special period of limitation with respect to self-employment tax in certain
cases.
If—
(A) the claim for credit or refund relates to an overpayment
of the tax imposed by chapter 2 (relating to the tax on self-employment income)
attributable to Tax Court determination in a proceeding under section 7436 ,
and
(B) the allowance of
a credit or refund of such overpayment is otherwise prevented by the operation
of any law or rule of law other than section 7122 (relating to compromises),
such credit or refund may be allowed or made if claim
therefor is filed on or before the last day of the second year after the
calendar year in which such determination becomes final.
(8) Special rules
when uniformed services retired pay is reduced as a result of award of
disability compensation.
(A) New Law Analysis Period of limitation on filing claim.
If the claim for credit or refund relates to an overpayment of tax imposed by
subtitle A on account of—
(i) New Law Analysis the reduction of uniformed services
retired pay computed under section 1406 or 1407 of title 10 , United States
Code, or
(ii) New Law Analysis
the waiver of such pay under section 5305 of title 38 of such Code,
as a result of an award of compensation under title 38 of
such Code pursuant to a determination by the Secretary of Veterans Affairs, the
3-year period of limitation prescribed in subsection (a) shall be extended, for
purposes of permitting a credit or refund based upon the amount of such
reduction or waiver, until the end of the 1-year period beginning on the date
of such determination.
(B) New Law Analysis
Limitation to 5 taxable years. Subparagraph (A) shall not apply with respect to
any taxable year which began more than 5 years before the date of such
determination.
(e) Repealed.
(f) Special rule for
chapter 42 and similar taxes.
For purposes of any tax imposed by section 4912 , chapter
42, or section 4975 , the return referred to in subsection (a) shall be the
return specified in section 6501(l)(1) .
(g) Special rule for
claims with respect to partnership items.
In the case of any tax imposed by subtitle A with respect to
any person which is attributable to any partnership item (as defined in section
6231(a)(3) ), the provisions of section 6227 and subsections (c) and (d) of
section 6230 shall apply in lieu of the provisions of this subchapter.
(h) Running of
periods of limitation suspended while taxpayer is unable to manage financial
affairs due to disability.
(1) New Law Analysis In general.
In the case of an individual, the running of the periods
specified in subsections (a) , (b) , and (c) shall be suspended during any
period of such individual's life that such individual is financially disabled.
(2) Financially
disabled.
(A) New Law Analysis In general. For purposes of paragraph
(1) , an individual is financially disabled if such individual is unable to
manage his financial affairs by reason of a medically determinable physical or
mental impairment of the individual which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not less
than 12 months. An individual shall not be considered to have such an
impairment unless proof of the existence thereof is furnished in such form and
manner as the Secretary may require.
(B) New Law Analysis
Exception where individual has guardian, etc. An individual shall not be
treated as financially disabled during any period that such individual's spouse
or any other person is authorized to act on behalf of such individual in
financial matters.
(i) Cross references.
(1) For time return deemed filed and tax considered paid,
see section 6513 .
Caution: Code Sec. 6511(i)(2), following, was amended by
Sec. 532(c)(11), P.L. 107-16, the Economic Growth and Tax Relief Reconciliation
Act of 2001 (EGTRRA). These provisions generally sunset for tax years beginning
after 12/31/2012. For specific sunset provisions, see Sec. 901, P.L. 107-16 (as
amended) reproduced in history notes for this Code Sec.
(2) For limitations with respect to certain credits against
estate tax, see sections 2014(b) and 2015 .
(3) For limitations
in case of floor stocks refunds, see section 6412 .
(4) For a period of
limitations for credit or refund in the case of joint income returns after
separate returns have been filed, see section 6013(b)(3) .
(5) For limitations
in case of payments under section 6420 (relating to gasoline used on farms),
see section 6420(b) .
(6) For limitations
in case of payments under section 6421 (relating to gasoline used for certain
nonhighway purposes or by local transit systems), see section 6421(d) .
(7) For a period of
limitations for refund of an overpayment of penalties imposed under section
6694 or 6695 , see section 6696(d)(2) .
Reg §301.6402-2.
Claims for credit or refund.
Effective: Reg.
§301.6402-2 predates P.L. 99-514, 10/22/1986, the Tax Reform Act of 1986.
(a) Requirement that claim be filed.
(1) Credits or refunds of overpayments may not be allowed or
made after the expiration of the statutory period of limitation properly
applicable unless, before the expiration of such period, a claim therefor has
been filed by the taxpayer. Furthermore, under section 7422, a civil action for
refund may not be instituted unless a claim has been filed within the properly
applicable period of limitation.
(2) In the case of a claim filed prior to April 15, 1968,
the claim together with appropriate supporting evidence, must be filed in the
office of the Internal Revenue officer to whom the tax was paid. Except as
provided in paragraph (b) of § 301.6091-1 (relating to hand-carried documents),
in the case of a claim filed after April 14, 1968, if the tax was paid to the
Director of International Operations, the claim, together with appropriate
supporting evidence, must be filed with him; otherwise, the claim with
appropriate supporting evidence must be filed with the service center serving
the internal revenue district in which the tax was paid. As to interest in the
case of credits or refunds, see section 6611. See section 7502 for provisions
treating timely mailing as timely filing and section 7503 for time for filing
claim when the last day falls on Saturday, Sunday, or legal holiday.
(b) WG&L Treatises Grounds set forth in claim.
(1) WG&L Treatises No refund or credit will be allowed
after the expiration of the statutory period of limitation applicable to the
filing of a claim therefor except upon one or more of the grounds set forth in
a claim filed before the expiration of such period. The claim must set forth in
detail each ground upon which a credit or refund is claimed and facts
sufficient to apprise the Commissioner of the exact basis thereof. The
statement of the grounds and facts must be verified by a written declaration
that it is made under the penalties of perjury. A claim which does not comply
with this paragraph will not be considered for any purpose as a claim for
refund or credit.
(2) Neither the district director nor the director of the
regional service center has authority to refund on equitable grounds penalties
or other amounts legally collected.
(c) Form for filing claim. Except for claims filed after
June 30, 1976 for the refunding of overpayment of income taxes, all claims by
taxpayers for the refunding of taxes, interest, penalties, and additions to tax
shall be made on Form 843. For special rules applicable to income tax, see §
301.6402-3. For other provisions relating to credits and refunds of taxes other
than income tax, see the regulations relating to the particular tax.
(d) Separate claims for separate taxable periods. In the
case of income, gift, and Federal unemployment taxes, a separate claim shall be
made for each type of tax for each taxable year or period.
(e) Proof of representative capacity. If a return is filed
by an individual and, after his death, a refund claim is filed by his legal
representative, certified copies of the letters testamentary, letters of
administration, or other similar evidence must be annexed to the claim, to show
the authority of the legal representative to file the claim. If an executor,
administrator, guardian, trustee, receiver, or other fiduciary files a return
and thereafter a refund claim is filed by the same fiduciary, documentary
evidence to establish the legal authority of the fiduciary need not accompany
the claim, provided a statement is made in the claim showing that the return
was filed by the fiduciary and that the latter is still acting. In such cases,
if a refund is to be paid, letters testamentary, letters of administration, or
other evidence may be required, but should be submitted only upon the receipt
of a specific request therefor. If a claim is filed by a fiduciary other than
the one by whom the return was filed, the necessary documentary evidence should
accompany the claim. A claim may be executed by an agent of the person
assessed, but in such case a power of attorney must accompany the claim.
(f) Mailing of refund check.
(1) Checks in payment of claims allowed will be drawn in the
names of the persons entitled to the money and, except as provided in
subparagraph (2) of this paragraph, the checks may be sent direct to the
claimant or to such person in care of an attorney or agent who has filed a
power of attorney specifically authorizing him to receive such checks.
(2) Checks in payment of claims which have either been
reduced to judgment or settled in the course or as a result of litigation will
be drawn in the name of the person or persons entitled to the money and will be
sent to the Assistant Attorney General, Tax Division, Department of Justice,
for delivery to the taxpayer or the counsel of record in the court proceeding.
(3) For restrictions on the assignment of claims, see
section 3477 of the Revised Statutes (31 U. S. C. 203).
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