Deadline for Refund Claim: Not the Same as a Deadline for an Amended Tax Return

By: Tyler B. Korn, Esq.

A common question from our clients – corporate, partnership and individual alike — is “how far back can we go” in order to amend a return or obtain a refund. This simple question belies a common, and understandable, misunderstanding. Although refunds are often the result of amending a tax return, there exists an important distinction between a taxpayer’s ability to file a claim for credit or refund and a taxpayer’s filing of an amended return. Most particularly, it is often important for various reasons to file an amended return even if the deadline has already passed for a claim for refund.

In general, a claim for credit or refund of a tax paid by a tax return must be filed within the later of (a) three years from the date that the return was timely or untimely filed (or the due date if filed earlier), or (b) two years from the date the tax was paid. If the required tax return was not filed, the claim for refund must be filed within two years from when the tax was paid. Certain exceptions do exist. For example, the claim period is seven years for an overpayment resulting from a bad debt or from worthless securities. And for an overpayment resulting from the payment or accrual of foreign taxes for which a foreign tax credit is allowed, the claim period is ten years.

Surprising to many taxpayers is the fact that there exists no provision in the Internal Revenue Code or Treasury Regulations requiring the Internal Revenue Service to accept an amended return in place of a previously filed original return. There accordingly is no deadline for the filing of an amended return.

The Service will generally recognize amended returns filed after the return due date for the purpose of correcting clear errors or plain mistakes in original returns. But the acceptance or rejection of an amended return is in fact a matter that is within the Service’s administrative discretion, and the Service’s refusal to accept an amended return may be reviewed by a court only for abuse of discretion.

From the taxpayer’s perspective, there is more than a tincture of unfairness to the fact that the Service is not required by law to accept an amended return. On the other hand, a broad requirement for the Service to accept amended returns could be disruptive of tax administration because a taxpayer could disregard his original tax return and automatically change an assessment by filing an amended return in his favor after the expiration of time for filing the original return.

If you have questions about the filing of a refund claim or amendment to a return, please feel free to call our office.

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