This article examines the decision of the United States Court of Federal Claims in Quinones v. United States, No. 24-810 (Fed. Cl. Nov. 21, 2025), focusing on the government’s successful recovery of an erroneously issued tax refund based on fraudulent reporting practices. The memorandum order and opinion issued by Judge Tapp provides crucial clarity regarding the application of the erroneous refund recovery standard and the weight accorded to fraudulent taxpayer representations under the self-assessment system.

Factual Background and Taxpayer Filing

The dispute centers on the 2020 tax year of the Plaintiffs, April Harry N. Quinones and Janeth R. Quinones, who were proceeding pro se. The context of this case is significant, as the Court had previously found that the Quinoneses "actively attempted to defraud the Internal Revenue Service, the United States, and this Court" by submitting a fraudulent joint tax return for the subsequent 2021 tax year, resulting in the forfeiture of their underlying claim pursuant to 28 U.S.C. § 2514.

The pattern of misrepresentation used in 2021 was also applied to the 2020 tax return. The Quinoneses employed a technique referred to as "intangibles," which originated from Mr. Quinones’ vague understanding of an operating "margin" used decades earlier. After discarding the assistance of a tax professional in 2018, the Plaintiffs began using multipliers to inflate their actual income and withholdings. For the 2020 tax year, they increased the multiplier to eighteen.

Based on this methodology, the Quinoneses filed their 2020 Form 1040 on December 6, 2021. They reported a taxable wage income of $3,659,528 and federal income tax withheld of $470,902, leading to a request for a refund of $904,325.

A comparison of the Plaintiffs’ self-reported figures against the actual 2020 W-2s reveals the scale of the fabrication:

Mr. Quinones’ Actual Wages and Withholding: $95,169.21 in taxable wages and $14,773.90 in federal income tax withheld.
Mrs. Quinones’ Actual Wages and Withholding: $108,138 in taxable wages and $11,387 in federal income tax withheld.

The IRS subsequently issued an erroneous refund in the amount of $444,323.86 (which included a refund of $431,973 plus $12,350.86 in overpayment interest), which the Quinoneses received on March 30, 2022.

Taxpayer Request for Relief and Defenses

The current action involves the United States’ motion for summary judgment on its counterclaim to recover the erroneously issued 2020 refund, plus statutory interest. The Quinoneses did not contest any material facts related to the figures filed on their 2020 return but defended their claim by arguing the refund was proper based on their “intangibles” theory.

The Plaintiffs raised several defenses:

Implicit Approval by IRS: They argued that communications received from the IRS, such as a letter noting the agency was verifying accuracy or a CP12 Notice, constituted an implicit approval of their 2020 refund amount. A CP12 Notice is used by the IRS specifically to correct a “mathematical or clerical error” pursuant to I.R.C. § 6213(b)(1) (West). The Court dismissed this interpretation as "wishful thinking".
Honest Mistakes and Statutory Interpretation: The Plaintiffs claimed they made "honest mistakes" stemming from errors in their interpretation of the law, and that their negative Adjusted Gross Income (AGI) entitled them to refundable credits, including the Recovery Rebate Credit (I.R.C. § 6428 (West)). They asserted they were entitled to separate refundable credits under I.R.C. § 31 and § 37.
Lack of Intent to Defraud: They generally stated they did not intend to defraud the United States, posing hypothetical questions suggesting they acted prudently.

Court’s Analysis of Law

The Court analyzed the case under the requirements for recovery in an erroneous refund action and the standard for summary judgment under RCFC 56.

Erroneous Refund Recovery Standard

To prevail in an erroneous refund action, the United States must establish four elements, drawing on precedent from multiple circuits:

A refund of a sum certain was made to a taxpayer.
The tax refund was erroneously issued.
The lawsuit to recover the erroneously issued taxes was timely filed.
The taxpayers were not entitled to the refund which the government seeks to recover (citing United States v. Dean, 945 F. Supp. 2d 1110, 1114 (C.D. Cal. 2013)).

Summary Judgment Standard

The Court utilized the summary judgment standard established by the Supreme Court. The moving party (the United States) bears the initial burden to demonstrate the absence of any genuine issue of material fact (Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). A genuine dispute of material fact exists only if the evidence is sufficient for a reasonable jury to find for the nonmoving party (Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–50 (1986)). Summary judgment is warranted when the record "could not lead a rational trier of fact to find for the non-moving party" (Matsushita Elec. Indus. Co., Ltd. v. United States, 475 U.S. 574, 587 (1986)).

The Court underscored that the federal tax system "largely relies on each taxpayer’s self-assessment" (Farhy v. Comm’r., 100 F.4th 223, 226 (D.C. Cir. 2024)), meaning the IRS incorrectly relied on the Quinoneses’ bogus documents when issuing the refund.

Application of Law to Facts and Conclusion

The Court concluded that the United States met its burden to demonstrate the absence of any issues of material fact.

Absence of Genuine Factual Dispute

The Quinoneses failed to raise any genuine disputes of material fact relating to their 2020 tax return. Their assertions that they made "honest mistakes" were untenable, as they readily admitted that the numbers were based on "intangibles" designed to inflate income and withholdings. The plain comparison of the Quinoneses’ self-reported W-2 data and their actual W-2s made it impossible to conclude anything other than that they misrepresented material facts to the IRS.

The Plaintiffs’ disagreements regarding statutory interpretation (I.R.C. §§ 31, 37) and their alleged entitlement to refundable credits were deemed questions of law, not fact, and thus held no bearing on the motion. Furthermore, the Court explicitly ruled that even if the Quinoneses had acted in good faith, which the Court could not conclude under the facts, good faith is not a defense to the United States’ counterclaim for the recovery of an erroneous refund.

The Court found that because the IRS based its refund calculation on imaginative but false documents, executed under the penalty of perjury, the refund was erroneously issued.

Final Judgment and Order

The Court GRANTED the United States’ Motion for Summary Judgment on its 2020 Tax Year Counterclaim.

The Quinoneses were ORDERED to pay the United States $444,323.86, plus statutory interest. Statutory interest is to be calculated from March 30, 2022, the date of the payment of the refund, in accordance with I.R.C. §§ 6602 and 6621 (West). The Court confirmed that an award of statutory interest is appropriate because the refund was directly caused by the Quinoneses’ false self-reported numbers (See I.R.C. § 6404(e)(2) (West); I.R.C. § 6602 (West)).

This case serves as a reminder that while the U.S. tax system relies heavily on taxpayer self-assessment, the filing of bogus documents that result in an erroneous refund places the liability for repayment, along with statutory interest, squarely on the taxpayer, irrespective of whether the taxpayer claims "honest mistakes" or intent to defraud. The successful extraction of funds based on false figures does not create an entitlement to those funds.

Prepared with assistance from NotebookLM.