Email Analyzes Due Date for Claim for Refunds for Forms 1040 Filed on July 15, 2020
With the pushing back of many filing deadlines in 2020 to July 15, 2020, a question has arisen about how that relief will impact the statute of limitations to file a refund claim. For instance, for a calendar year form 1040 filed on July 15, 2020, will the time period to file a claim for refund on that return end three years from April 15, 2020 or three years from July 15, 2020?
In a Chief Counsel Email,[1] the IRS concludes that the answer is both—but, from a practical standpoint, the earlier date will quite often control. The logic of the email gets deep into the various subsections under IRC §6511.
The date for filing the 2019 Form 1040 for a taxpayer was delayed from April 15, 2020 to July 15, 2020 under Notice 2020-23, using the IRS’s authority under IRC §7508A. The date for a taxpayer to file a claim for refund is governed by IRC §6511. IRC §6511(a) provides a general rule and reads:
(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 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.
The IRS memo concludes that under this provision, the 3-year period begins on July 15, 2020:
Under IRC § 6511(a), a taxpayer would have 3 years from the filing of the 2019 return to claim a refund. So suppose a taxpayer files the 2019 return pursuant to Notice 2020-23 on July 15, 2020. The taxpayer would have until July 17, 2023 (3 years would be July 15, but that is a Saturday, so under IRC § 7503, the taxpayer would have until Monday July 17) to file a timely claim for refund.[2]
But the IRS finds another portion of §6511 will pose a problem that will effectively move the date back three months. The IRS takes note of the date that withheld and estimated taxes on that 2019 return are deemed paid.
Pursuant to Notice 2020-23, taxpayers had until July 15, 2020 to file their 2019 returns. Notice 2020-23 did not affect the date on which any withheld tax or estimated tax for 2019 is deemed paid. So any withheld tax or estimated tax for 2019 is deemed paid on April 15, 2020 for calendar year taxpayers. See IRC § 6513(b)(1) (withheld tax) and IRC § 6513(b)(2) (estimated tax).[3]
Now the IRS looks at IRC §6511(b)(2) which reads:
(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.
And the memorandum concludes that this section would require the claim to be paid by the date 3 years from the date the withholding and estimates are deemed paid:
Yet IRC § 6511(b)(2)(A) limits any refund to amounts paid within the 3 years prior to the filing of the claim plus any period of extension (the 3-year lookback period). Unfortunately, the additional time prescribed by Notice 2020-23 is not an “extension” within the meaning of the 3-year lookback period. Thus, if the taxpayer is trying to claim a refund of estimated tax or withheld tax for 2019, the taxpayer cannot wait until July 17, 2023 to file a claim, as those payments would be outside the 3-year lookback period. Instead, the taxpayer must file a claim for refund on or before April 17, 2023. (3 years from April 15, 2020 would be April 15, 2023, but that is a Saturday, so under IRC § 7503, the taxpayer would have until Monday April 17) .… We recognize this is a harsh result for many taxpayers, but section 7508A operates as a “postponement” not an “extension.”[4]
But we aren’t done yet—the memorandum goes on in a parenthetical comment to note that the answer changes again, going back to 3 years from July 15, 2020, if the taxpayer had filed for an extension of time to file the return even if he/she went ahead and filed the return on July 15, 2020:
(If, however, the taxpayer had filed an extension request and then filed on July 15, 2020, the taxpayer would have until July 17, 2023 to claim a refund of estimated tax or withheld tax, as then the payments would have been made within the period of extension).[5]