see discussion regarding NOL here

see Form 1045 & 1040-X instructions here

see NOL helpful hints here

see ASED & CSED here

Refund Statute Expiration Date (RSED) law (requires very careful reading to understand the tricks and traps):

§6511(a) 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* [e.g. this is referring to a situation when a Form 1040-X amended tax return showing an overpayment is filed no later than 3 years after timely filing or delinquently filing Form 1040.  But for a delinquently filed Form 1040 that shows an overpayment – that is a claim itself so in that situation the claim IS the Form 1040 and it IS filed within the 3-year period, because the Form 1040 and the claim are both one and the same and they are both filed on the same day – Reg. 301.6402-3(a)(1) and discussion here] 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.

* §6513(a)  Time return deemed filed and tax considered paid – generally says April 15^th or later.

§6511(b) Limitation On Allowance Of Credits And Refunds
§6511(b)(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.

§6511(b)(2) Limit On Amount Of Credit Or Refund
§6511(b)(2)(A) Limit Where Claim Filed Within 3-Year Period [e.g. filing a delinquent Form 1040 income tax return anytime or filing a Form 1040-X within three years of filing a Form 1040 (or three years from the unextended due date, for a Form 1040 filed before the unextended due date)]
If the claim was filed by the taxpayer during the 3-year period prescribed in subsection (a), [remember, a delinquently filed Form 1040 showing an overpayment – IS a claim itself and therefore it IS filed within the 3-year period, because the Form 1040 and the claim are both one and the same and they are both filed on the same day] 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  [this “3 years” period of time (immediately preceding the filing the claim) is not necessarily the same as the “3 years” (following the filing of the return) that is mentioned further above] 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.

§6511(b)(2)(B) Limit Where Claim Not Filed Within 3-Year Period [e.g. filing a Form 1040-X amended tax return more than three years after filing the original Form 1040 tax return – Reg. 301.6402-3(a)(2)]
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.

Special rule for 2016 RSED statute of limitations, normally running out on April 25, 2020 is postponed until July 15, 2020.

2016 unclaimed refunds – deadline extended to July 15
For 2016 tax returns, the normal April 15 deadline to claim a refund has also been extended to July 15, 2020. The law provides a three-year window of opportunity to claim a refund.  If taxpayers do not file a return within three years, the money becomes property of the U.S. Treasury. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by the July 15, 2020, date.     IRS extends more tax deadlines

§6511(d) Special Rules Applicable To Income Taxes
§6511(d)(1) Seven-Year Period Of Limitation With Respect To Bad Debts And Worthless Securities

§6511(d)(2) Special Period Of Limitation With Respect To Net Operating Loss Or Capital Loss Carrybacks
§6511(d)(2)(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.

§6511(d)(3) Special rules relating to foreign tax credit
§6511(d)(3)(A) 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.

§6511(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.

§6511(h) Running Of Periods Of Limitation Suspended While Taxpayer Is Unable To Manage Financial Affairs Due To Disability. —
§6511(h)(1) 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.

§6511(h)(2) Financially Disabled. —
§6511(h)(2)(A) 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.

§6511(h)(2)(B) 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.

From Form 1040-X Instructions:
When To File
File Form 1040-X only after you have filed your original return.
Generally, for a credit or refund, you must file Form 1040-X within
3 years (including extensions) after the date you filed your
original return or within 2 years after the date you paid the tax,
whichever is later. If you filed your original return early (for
example, March 1 for a calendar year return), your return is
considered filed on the due date (generally April 15). However, if
you had an extension to file (for example, until October 15) but
you filed earlier and we received it July 1, your return is
considered filed on July 1. The time limit for filing Form 1040-X
can be suspended for certain people who are physically or
mentally unable to manage their financial affairs.
For details, see Pub. 556, Examination of Returns, Appeal Rights,
and Claims for Refund.

From Pub 556:
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. 1. 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.

update April 2, 2019
The IRS and the Tax Court had claimed (see ROBERTA BORENSTEIN v. COMMISSIONER OF INTERNAL REVENUE) that in the case of a non-filer, that the 2-year rule of §6511(b)(2)(B) trumps the 3-year rule of §6511(b)(2)(A). On appeal this case confirmed that the 3-year rule, indeed was correct as long as the taxpayer eventually filed within the original 3-year period after the due date.

Rev Proc 99-21

Sec 6511(h)(2)(A)

https://www.thetaxadviser.com/issues/2017/nov/time-limits-refunds-credits.html

https://www.cpajournal.com/2019/11/04/the-elastic-statute-of-limitations-on-claims-for-refund/

State of CT PS 2001(14)
Financially Disabled: An individual is “financially disabled” if he or she is unable to manage his or her own financial affairs by reason of a medically determinable physical or mental impairment that can be expected to result in death, or that has lasted or can be expected to last for a continuous period of not less than 12 months.

An individual is not “financially disabled” during any period that his or her spouse or any other person is authorized to act on his or her behalf in financial matters.

Also see Correcting a CT Income Tax Return

Also see IRS Publication 536 for several exceptions to the 2-year carryback rule:
3-years for casualty losses, theft losses, Ponzi scheme losses, and certain federally declared disaster losses of a qualified small business losses or of certain qualified farming businesses.
5-years for farming losses and certain federally declared disaster losses.
10-years for certain losses pertaining to: product liability, reclamation of land, dismantling of a drilling platform, environmental contamination, workers compensation.

FAQs Related to Ponzi Scenarios for Clawback Treatment
Rev. Rul. 2009-09
Rev. Proc. 2009-20

§6501(c)(7) Special rule for certain amended returns
Where, within the 60-day period ending on the day on which the time prescribed in this section for the assessment of any tax imposed by subtitle A for any taxable year would otherwise expire, the Secretary receives a written document signed by the taxpayer showing that the taxpayer owes an additional amount of such tax for such taxable year, the period for the assessment of such additional amount shall not expire before the day 60 days after the day on which the Secretary receives such document.

From IRS Form 1040-X instructions:

When To File
File Form 1040-X only after you have filed your original return.  Generally, for a credit or refund, you must file Form 1040-X within 3 years (including extensions) after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. If you filed your original return early (for example, March 1 for a calendar year return), your return is considered filed on the due date (generally April 15).

However, if  you had an extension to file (for example, until October 15) but  you filed earlier and we received it July 1, your return is  considered filed on July 1.

Extension of time to file for refund: The time limit for filing Form 1040-X can be suspended for certain people who are physically or mentally unable to manage their financial affairs. For details, see Pub. 556, Examination of Returns, Appeal Rights, and Claims for Refund.

Per Pub. 556: 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.

Note: filing a refund claim or asking that an overpayment be credited to another year is a “tax position” which, if barred by IRC 6511, could lead to a penalty under IRC §6694. See Reg. §1.6694-1(c).

Argument for: §1.6694-1(c) Understatement of liability. For purposes of this section, an “understatement of liability” exists if, viewing the return or claim for refund as a whole, there is an understatement of the net amount payable with respect to any tax imposed by the Internal Revenue Code (Code), or an overstatement of the net amount creditable or refundable with respect to any tax imposed by the Code.

Argument against: The Statute of Limitations is an affirmative defense. The IRS has the burden of proving the statute of limitations For example, in theory, if a taxpayer were to sue the IRS for a refund and for some reason the IRS failed to answer the lawsuit in a timely manner, the taxpayer would be awarded a default judgment and the defense of statute of limitations would be deemed to have been waived. IRC §6694 would not apply since it is the IRS’s burden to prove the affirmative defense, albeit an easy burden to meet in this case, but nonetheless, their burden to raise it. Collection lawyers file suit all the time when the statute of limitations has expired on that hope that the defendant doesn’t bother to defend it. If they do, the Plaintiff invariably non-suits the case and moves on.

Rev. Proc. 99-21 allows suspension of the statute of limitations period for filing for credit or refund for any period of an individual taxpayer’s life during which the taxpayer is unable to manage the taxpayer’s financial affairs because of a medically determinable mental or physical impairment.

Rev. Rul. 2003-41 Situation 2, Form 1040 was on extension until August 15, 1998. Form 1040 was not filed until August 2001. If Form 1040 was filed by August 15, 2001 the refund request is timely, but if Form 1040 was filed on August 17, 2001 the refund is barred pursuant to §6511(b)(2)(A).

Rev. Rul. 76-511 (alt) (alt)

Comr v. Lundy (1996)

Astrid E.A. Omohundro v. United States (CA-9, 2002)  (alt) (alt) (alt)

T.C. Summary Opinion 2004-15 Rabinovich v Comr.

Weisbart v. US Treasury July 2000 Weisbart received an extension of 4 months from the IRS, until August 17, 1992. Thus, the “look back” period prescribed by section 6511(b)(2)(A) is 3 years and 4 months. The IRS concedes that 3 years and 4 months from April 15, 1992 (the date Weisbart is deemed to have paid his taxes) is August 17, 1995. The Service also admits that if Weisbart’s refund claim is deemed to have been filed on August 17, 1995, he would be entitled to his refund under section 6511(b)(2)(A).

The question thus distills to whether Weisbart’s refund claim-mailed on August 17, 1995, but not received by the IRS until August 21, 1995 was nevertheless filed on August 17, 1995. We hold that it was. The Tax Code has a mailbox rule, which provides that a submission is deemed filed on the date it is postmarked, rather than the date it is received by the IRS. See 26 U.S.C. §7502. Section 7502(a)(2)(A) states, however, that the mailbox rule applies only if the postmark date falls on or before the “prescribed date for the filing” of the submission. The submission at issue here is Weisbart’s claim for a refund.

As already noted, however, that claim was incorporated in Weisbart’s untimely 1991 tax return which Weisbart did not mail until August 17, 1995, three years after the “prescribed date for [its] filing.” 26 U.S.C. §7502(a)(2)(A). The Service argues, and the district court held, that the “prescribed” period applicable to Weisbart’s tax return should also apply to the refund claim. Applying this construction, Weisbart’s refund claim would not enjoy the benefit of the mailbox rule, and would therefore be barred

The IRS’s argument is contradicted by its own regulations. Treasury Regulation §301.6402-3(a)(5) provides that: For purposes of section 6511, [a refund] claim shall be considered as filed on the date on which such return (or amended return) is considered as filed, except that if the requirements of § 301.7502-1, relating to timely mailing treated as timely filing are met, the claim shall be considered to be filed on the date of the postmark stamped on the cover in which the return (or amended return) was mailed.

(emphasis added). And the cross referenced Regulation § 301.7502-1 provides:

[A] return may constitute a claim for refund or credit.   In such a case, section 7502 is applicable to the claim for refund or credit if the conditions of such section are met, irrespective of whether the claim is also a return.

Taken together, these two Treasury Regulations provide that the applicability of the mailbox rule to the refund claim should be analyzed independently of the timeliness of the tax return itself, regardless of whether they are in the same document.   See Anderson v. United States, 746 F.Supp. 15, 18 (E.D.Wash.1990) (holding that although the “return qua return” was untimely, “the return qua claim for refund” was timely), aff’d, 966 F.2d 487 (9th Cir. 1992).   As such, even though Weisbart’s tax return was untimely filed, his refund claim enjoys the benefit of the mailbox rule, and is deemed filed on August 17, 1995.   Because that date is within 3 years of the date when Weisbart is deemed to have paid his withheld employment taxes, he may recover any overpayment included in those taxes under the look back provisions of section 6511(b)(2)(A).

http://www.taxalmanac.org/index.php/Category_Statute_of_Limitations.html

Are amended tax return required to be filed:

• While there is no requirement to correct a prior year if more tax would be due.  (Broadhead v. Commissioner / Chief Counsel Advice Memorandum 201052003, 12/30/2010)
• There is a requirement to adjust carryforwards whether the PY was amended or not.  (IRM Section 4.11.11.6(10)
• There is a requirement to correct a prior year if less tax would have been due AND it would be eligible for refund OR less unpaid tax would still be due. (Treas. Reg. §§ 301.6402-3(a)(5)2 and 301.7502-1(b)(2).)

Amended returns that change a carry forward are “required to be filed” In Rev. Rul. 81-88, a taxpayer failed to claim a deduction it was entitled to, but did not realize this until after the statute of limitation had expired for the year the deduction should have been claimed. The IRS ruled that because the deduction increased an NOL carryforward to an open tax year, the taxpayer was allowed to use the NOL carryforward to reduce the taxpayer’s income in that open tax year.

IRM Section 4.11.11.6(10 A carryover from a carryback year with barred items provides for the carryover of the correct taxable income. In essence, errors in a closed year are corrected for purposes of determining the taxable income of an open year.

1. For the application of this rule to the year that an NOL should have arisen except a now barred deduction was not claimed by the taxpayer, see Situation 2 of Rev. Rul. 81-88, 1981-1 CB 585 (a taxpayer who failed to take a deduction of $220x in a closed year in which it had $100x of taxable income could use the $220x to generate an NOL carryforward of $120x).
2. For the application of this rule to the year that an NOL arose, but a now barred deduction was overstated, see Rev. Rul. 56-285, 1956-1 CB 134 (an NOL carryover to an open year was reduced by the amount of erroneous excess depreciation a taxpayer had claimed in the closed loss year).

https://www.taxlitigator.com/perennial-nol-question-with-answer-by-edward-m-robbins-jr/


Amended returns that show additional tax due are not “required to be filed” by any internal revenue laws. Cf., Estate of Lewis v. Commissioner, T.C. Memo, 1988-36 (consent form to extend time to assess is an agreement and is not a document “required to be filed”; section 7502 timely mailing rule does not apply) ; Myers v. Commissioner, T.C. Memo. 1988-306 (same).

§1.451-1(a) …If a taxpayer ascertains that an item should have been included in gross income in a prior taxable year, he should, if within the period of limitation, file an amended return and pay any additional tax due. Similarly, if a taxpayer ascertains that an item was improperly included in gross income in a prior taxable year, he should, if within the period of limitation, file claim for credit or refund of any overpayment of tax arising therefrom.

§1.461-1(a)(3) Effect in current taxable year of improperly accounting for a liability in a prior taxable year. Each year’s return should be complete in itself, and taxpayers shall ascertain the facts necessary to make a correct return. The expenses, liabilities, or loss of one year generally cannot be used to reduce the income of a subsequent year. A taxpayer may not take into account in a return for a subsequent taxable year liabilities that, under the taxpayer’s method of accounting, should have been taken into account in a prior taxable year. If a taxpayer ascertains that a liability should have been taken into account in a prior taxable year, the taxpayer should, if within the period of limitation, file a claim for credit or refund of any overpayment of tax arising therefrom. Similarly, if a taxpayer ascertains that a liability was improperly taken into account in a prior taxable year, the taxpayer should, if within the period of limitation, file an amended return and pay any additional tax due. However, except as provided in section 905(c) and the regulations thereunder, if a liability is properly taken into account in an amount based on a computation made with reasonable accuracy and the exact amount of the liability is subsequently determined in a later taxable year, the difference, if any, between such amounts shall be taken into account for the later taxable year.

Amended returns that include a claim for refund are “required to be filed” under the internal revenue laws to file a claim in such cases. I.R.C. § 65111 ; see also Treas. Reg. §§ 301.6402-3(a)(5)2 and 301.7502-1(b)(2).

In Broadhead v. Commissioner, the Tax Court held that Treasury regulations do not require a taxpayer to file an amended return, even after being advised to do so by an accountant.[5] In Broadhead, the taxpayer’s accountant advised the taxpayer that his closing inventory accounts were in error under accounting principles after the filing of the taxpayer’s original income tax return.[6]

The IRS argued that Broadhead “willfully and deliberately attempted to evade and defeat his income taxes when he refused to file the amended return after being advised to do so by his accountant.”[7] The Tax Court held that the taxpayer “was not required by statute to file an amended return, and if one had been tendered for filing, [the IRS] could have declined to accept it.”[8]

In Badaracco v. Commissioner, the Supreme Court implicitly accepted Broadhead, saying that “the Internal Revenue Code does not explicitly provide either for a taxpayer’s filing, or for the Commissioner’s acceptance, of an amended return; instead, an amended return is a creature of administrative origin and grace.”[9]

[5]Broadhead v. Commissioner, 14 T.C.M. (CCH) 1284 (1955).
[6]Id.
[7]Id.
[8]Id.
[9]Badaracco v. Commissioner, 464 U.S. 386, 393 (1984).

http://taxblog.com/cjohnson/amended-returns-imposing-a-duty-to-correct-material-mistakes/

https://tax.network/cjohnson/amended-returns-imposing-a-duty-to-correct-material-mistakes/

https://www.journalofaccountancy.com/issues/2010/jun/20102524.html/

Deadline for filing Amended Tax Return – Chief Counsel Advice Memorandum 201052003, 12/30/2010
Refunds follow the timely mailed/timely filed rule.
But if tax is due, then it follows the date received by the IRS rule.

Delinquently filed original returns that include a claim of refund will follow the timely mailed = timely filed rule Treas. Reg. §301.7502-1(f)(3).

(ii) Even though the date of the postmark on the envelope is after the due date of the return, the claim for refund and the late filed return are treated as filed on the postmark date for purposes of this paragraph (f). Accordingly, the return will be treated as filed on April 15, 2005. In addition, the claim for refund will be treated as timely filed on April 15, 2005. Further, the entire amount of the refund attributable to withholding is allowable as a refund under section 6511(b)(2)(A).

Internal Revenue Manual 4.90.7.2 Statute of Limitations (§ 6511)

1. The Specialist must always check claims to verify that they were timely filed. Generally, a claim must be filed by the customer within three years from the time the original return was filed, or two years from the time the tax was paid (or applied from another return), whichever period expires later. See IRM 25.6.6.
   1. If a claim for refund is filed within three years from the time the return was filed, only the tax paid within the three years preceding the filing of the claim, plus the period of any extension of time for filing the return, can be refunded. (IRC 6511(b)(2)(A))
   2. If a claim is not filed within the three year period, then only the tax paid within the two years preceding the filing of the claim can be refunded. (IRC 6511(b)(2)(B))
   3. If no claim is filed, then only the tax paid that would have been allowable, under (a) or (b) above, if the claim was filed on the date the credit or refund was allowed can be refunded. (IRC 6511(b)(2)(C))The fact that a claim has been filed never extends the statute for assessing an additional deficiency. Taxable amended returns have the same statute of limitations as the original returns.
      
      
2. When a customer files a claim timely, the statute remains open for the IRS to examine it. If the IRS takes no action on the claim within six months from the time it was filed, the customer can file suit in court to recover the amount claimed. The period for filing suit lasts until two years after the date a certified notice of claim disallowance is mailed to the taxpayer or the date the taxpayer signed Form 2297, Waiver of Statutory Notification of Claim Disallowance. On the other hand, if the Service allows the claim (this could be done by the Service Center prior to the case being sent to the field for examination), any further action on that year’s return creates a barred statute situation if that year is a closed year.
   
   
3. An executed consent extends the time to file a claim. If a customer does not file for a claim within the time limits prescribed by IRC section 6511(a), the customer may still file a claim if the statute of limitation for assessment has been extended by agreement of the Service and the customer (IRC 6511(c)). This filing period will last until six months after the expiration of the extension period.
   
   
4. If, after the execution of a consent and within six months after the expiration of the extension period, a claim is filed, or a credit or refund is allowed when no claim is filed, the amount of credit or refund is limited. This limit is the portion of the tax paid after the execution of the consent and before the filing of the claim (or making of the credit or refund), PLUS the portion of the tax paid
   
   

Exhibit B – RC Refund Claims Limitation Periods (Published 5/2008)

2013 update
Finally the IRS has admitted the complexity of the RSED wording and at the urging of the taxpayer community, their CP518 non-filer letters have been partially rewritten in plain English as follows [referring to a non-filer’s 2011 Form 1040, which was due April 17, 2012]:

“If you are owed a refund, you must file a return by April 17, 2015, or 2 years from the date the tax was paid, whichever is later.”

We feel that this is a step in the right direction, though we suggest that the following sentence be added for clarity: “After April 17, 2015 (or 2 years from the date the tax was paid, whichever is later) any overpayment or refund that would have been owed to you will instead be forfeited to the U.S. Treasury as a non-filer penalty.”

Related technical discussion, that likely has no bearing on practical day-to-day procedures.

Code §6404 – Abatements
(b) No claim for abatement of income, estate, and gift taxes
No claim for abatement shall be filed by a taxpayer in respect of any assessment of any tax imposed under subtitle A or B.

Due to §6404(b) – it is a matter of administrative grace that audit reconsideration is granted – processing of an amended return would be tantamount to audit reconsideration.

It’s important to note than an overpayment doesn’t occur until payment is, in fact, made (thus, the 2-year rule)

The statutes for assessment and for refund or credit were not intended to be symmetrical. And abatement and credit are not the same tax animal.

1. Assessment = the tax you admit
2. Deficiency = the tax the IRS says you owe that is more than the amount you admit to.
3. Refund claim = a claim for refund of a tax that has been paid
4. Abatement = a claim to abate (forgive) a tax or other related charge due

6404(b) is telling you, you have no statutory right to request an abatement of a tax assessed. – The correct procedure would be to pay the tax and then file a refund claim (i.e. Form 843). If that is rejected you can then sue. – As a matter of administrative discretion the IRS should abate excessive taxes, but they are not statutorily required to.

This is not necessarily exactly the same as audit redetermination as an audit that results in an increased tax liability that you don’t agree with, is actually a deficiency and can be challenged in tax court once a 90 day letter is issued (if it was simply an assessment, the 90 day rule would not apply. See 6201 for what can be assessed, which is what 6404(b) is referring to).

6511(a) is telling you the time to make a refund claim (for taxes that you paid already, as otherwise you are asking for an abatement of an assessment, which you cannot sue for).

Therefore, you can file a 1040-X, before the tax is paid, in which case it is an abatement request and subject to IRS discretion. This means you can’t statutorily challenge the assessment of tax unless you first pay it. There may be some scenarios where you have some legal protection from collection, even in a case of an assessed tax, but in general you have to pay the assessed tax first before filing a refund claim.

If you pay the tax and then file 1040-X, it is a refund claim. While the IRS does not have to accept the refund claim, you then have statutory rights to sue for refund. Similarly, you don’t have to file a 1040-X if you owe more tax, but the IRS has the right to audit and assess a deficiency which you can then challenge in court and depending on the outcome there will be a new mandatory assessment of tax.

IRS Will Consider Informal Abatement Claims Despite Code Sec. 6404(b) Limitation: In CCA 201550042, the IRS advised that it can consider informal abatement claims when a taxpayer files an amended return showing a decrease in the tax assessed, despite the Code Sec. 6404(b) limitation stating no claim for abatement may be filed by a taxpayer for any income, estate, or gift tax assessment. The IRS also noted that, for claims made after the assessment statute expiration date, the tax cannot be reassessed if it is determined that the decrease in tax is erroneous.

IRS will consider informal abatement claims despite Sec. 6404(b) limitation The Office of Chief Counsel advised that, as a policy, the IRS will consider informal abatement claims despite the Sec. 6404(b) limitation that states no claim for abatement can be filed by a taxpayer for any income, estate, or gift tax assessment. There is no period of limitation on an abatement of an assessment (and Sec. 6404(a)(2) explicitly authorizes abatements to be made after the assessment statute expiration date (ASED) expires). However, special care should be taken with claims made after the ASED because the tax cannot be reassessed if it is determined that the decrease in tax is erroneous. CCA 201550042 (12/11/15).

25.6.1.10.1.2 (10-01-2013)
Requests for Abatement
2. Although IRC Section 6404(b) provides that taxpayers have no right to file a claim for abatement of income, estate, or gift tax, the Service will consider a taxpayer’s request for an abatement of such taxes where the taxpayer files an amended return with the IRS that shows a decrease in the tax that was assessed.

Note:
If an amended return is received either before or after the ASED requesting an abatement of tax and there are conditions which meet Examination criteria, you must send to Exam for review before making the abatement.

Refund Claim Inexplicably Delayed by IRS Allowed to Proceed: In Stephens v. U.S., 2015 PTC 435 (Fed. Cl. 2015), a district court refused to dismiss as untimely a couple’s claim for refund, finding the IRS was the reason for the taxpayers’ delayed claim and dismissing the claim would grant the IRS a windfall. The IRS did not issue a notice of deficiency disallowing passive losses for certain years, which would have given the taxpayers a credit for the following year, until after the statute of limitations for filing an amended return expired.

Protective Claim
On March 2, 2020 the U.S. Supreme Court agreed to hear a third major challenge to the Affordable Care Act, setting up likely arguments this fall in a case that could wipe out President Barack Obama’s signature domestic achievement.

NIIT assessed for year 2016 could be refunded depending on the outcome.  It could be advisable to file a Protective Claim by July 15, 2020 in any case where NIIT is material. Unlike normal errors on returns subject to deficiency assessments where a plaintiff cannot recover the tax amount, in the case of lost refund litigation the tax is clearly recoverable.

A Protective Claim can be filed on a Form 1040-X marked “Protective Claim – Do Not Process” prominently across the top. The entire tax can be shown as refundable and a full replacement Form 1040 does not need to be attached. What does need to be included is a complete and clear explanation of why and about what legal issue the clam rests and a description of the contingent issue that must be resolved to validate the claim.

If it ensues that the claim is merited, then an actual claim for refund can be filed along with proof of filing and receipt by IRS of the (placeholder) earlier Protective Claim.

State of California, Claim for Refund

Overview

A claim for refund is a request for reimbursement of amounts previously paid. Generally, if you have paid your balance in full you will file a formal claim. If you have not paid your balance in full, you will file an informal claim.

We accept claims for refunds through:

• Amended returns
• Letters
• Reasonable cause forms

To be valid, your claim must be:

• In writing
• Signed by you or your authorized representative
• Include the specific reason for your claim
• Filed within the statute of limitations (SOL)

Statute of limitations

Generally, you must file your claim for refund by the later of:

• 1 year from the date of overpayment
• 4 years after the original return due date.
  • If you filed before the due date, you have 4 years from the original return due date to file a claim.
  • If you filed after the extension, the return is late. You have 4 years from the original return due date to file a claim.
  • If you made payments and never filed a tax return, you have 4 years from the original return due date to file a claim.
• 4 years after the date of a timely filed return, if filed within the extension period.
• Generally, you have 2 years from the date the IRS makes a change to file your claim.

https://www.ftb.ca.gov/help/disagree-or-resolve-an-issue/claim-for-refund.html