Can You Appeal a Denied IRS Refund?

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Can You Appeal a Denied IRS Refund?

 

Question

IRS denied issuing my refund because they said that I filed too late. I filed this tax return much earlier, but the IRS lost it. What can I do to appeal this?

 

What happens when you fail to claim an IRS tax refund within the 3-year or 2-year expiration dates? 

 

Generally, you cannot receive a refund (or even a credit) if you fail to file the tax return for the refund within 3 years of the normal tax return filing deadline, or within 2 years after paying the tax, whichever is later. This Department of Treasury (IRS) rule regarding late refunds is “hard-wired”.

However, this general rule has some exceptions, or maybe challenged:

  • If a tax return was previously timely filed, then your refund claim may be disputed in the U.S. Tax Court.

  • Refunds are also allowed if you meet an exception that allows you more time to file a claim.

    Can You Appeal a Denied IRS Refund? IRS Tax Attorney (Naperville IL)

What If You Timely Filed the Tax Return, But Were Still Denied a Refund?

 

In the case where a tax return was timely filed, but was denied anyway, there is an option to challenge the denial. This is especially true when the IRS is in error. You could even be refunded interest on your awaited refund.

For example, in 2021  the IRS accidentally shredded approximately 30 million tax returns.

You can re-request your refund by filing a Form 843, Claim for Refund and Request for Abatement. With this Form 843, you can describe the circumstances related to your earlier tax return filing. Remember to write and include a careful Statement that explains:

  • What should be the refund issued,

  • What happened you filed the return, and

  • Why do you believe the IRS’s denial was incorrect?

Be certain to also provide documents that support of your Statement.

If the IRS again denies your claim from Form 843, then the IRS will issue a Notice of Determination. This notice will give you the opportunity to appeal your claim with the U.S. Tax Court. Be aware that unless you represent yourself, you may need an attorney or other tax professional who is licensed to practice in the Tax Court.

Can I Have More Time to Claim a Refund?

 

Refunds are also allowed if you meet an exception allowing more time. Here are the main 4 exceptions:

 

Agree with the IRS in writing to extend the time limit to assess tax: The time limit is specified in your agreement, plus 6 months, to claim a credit or refund. There may be additional limits on the amount of credit or refund you can claim based on any limitations on the IRS’s ability to assess tax, as shown in the written terms of your signed agreement.

Are affected by a Presidentially declared disaster: You may have up to 1 more year to claim a credit or refund.

Serve in a designated combat zone or contingency operation: You may have additional time to file a claim for a credit or refund, but you must meet certain requirements to qualify. See Armed Forces Tax Guide, Publication 3, and combat zones.

File because of a bad debt deduction or a worthless security loss: You have 7 years from the return due date for that year to file the claim. See Tax Topic 453 Bad Debt Deduction.

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