Selwyn Karp and Barbara Adams-Karp v. The United States, Case No. 1:23-cv-00926-MRS, filed May 21, 2026

The U.S. Court of Federal Claims issued a significant opinion in Selwyn Karp and Barbara Adams-Karp v. The United States, Case No. 1:23-cv-00926-MRS, filed May 21, 2026. This ruling provides crucial guidance on the interplay between statutory requirements for tax refund claims (26 U.S.C. § 7422(a)), the validity of automatic filing extensions under Treasury regulations, and whether a technical error in estimating liability can invalidate a taxpayer’s claim when adequate funds are already available to the government.

Here is a detailed breakdown of the facts, applicable law, analysis, and holdings for tax professionals.

I. Facts of the Case (The Dispute)

Selwyn Karp and Barbara Adams-Karp (the Plaintiffs) sought a refund for a substantial overpayment made on their 2016 federal tax return. The core dispute centered on whether their request for an automatic six-month extension to file their 2016 taxes was valid, which the Government argued would render their eventual filing untimely and thus invalidate their claim.

Key factual points included:

The Karps repeatedly overpaid their taxes in prior years (including 2014, 2015, and 2016).
To obtain an automatic extension, the couple used Form 4868 and reported a total estimated tax liability of $0, citing that previous overpayments were sufficient to cover their expected tax burden.
The Government argued that the estimate was flawed because the Karps failed to account for all sources of income, thus making the extension request—and subsequently the refund claim—void.
Critically, the Court noted that the IRS had initially acted in a way that supported the Karps: "While the case was pending, the IRS agreed that the Karps had filed their 2016 taxes by the October 2020 deadline... The IRS mailed the Karps a refund check for $154,720.45 and credited a portion of the 2016 overpayment to the taxes the Karps owed for 2022."

II. Applicable Law (The Legal Framework)

The opinion required reviewing several layers of tax law:

A. Right to Refund Action

Before litigation can occur, a taxpayer must follow statutory procedures under 26 U.S.C. § 7422(a), which mandates that "No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected... until a claim for refund or credit has been duly filed with the Secretary" of the Treasury.

B. Extension and Estimation

The ability to receive an automatic extension is governed by 26 C.F.R. § 1.6081-4. The IRS advises that Form 4868 requires a specific estimate: "Line four requires an ‘[e]stimate of total tax liability for’ the tax year in question," and its instructions warn that if the estimate is not reasonable, "the extension will be null and void."

C. Summary Judgment Standard

The Court utilized the standard set forth by the Rules of the Court of Federal Claims: A motion for summary judgment must show that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law. If "the evidence is such that a reasonable jury could return a verdict for the nonmoving party," the court must deny summary judgment.

III. Court’s Application of Law (The Analysis)

The Judge, Molly R. Silfen, analyzed the dispute by addressing three main points: the standard for a reasonable estimate, the effect of prior overpayments on current estimates, and the availability of alternative extension methods.

1. The Standard for Estimate

While acknowledging that Form 4868 requires an estimate, the Court noted that the standard is not rigid. Citing precedent, the court reiterated the principle established in Crocker v. Commissioner, 92 T.C. 899, 907 (1989), stating that a taxpayer must make a "bona fide and reasonable estimate of his tax liability based on the information available to him at the time he makes his request for extension."

2. The Error vs. Intent

The Government argued that the Karps' zero estimate was materially wrong, as their gross tax liability was actually $131,201. However, the Court found this argument insufficient:

"While the Karps made a technical error in estimating net rather than gross tax liability, they correctly estimated that they would owe zero, and the technical error was not unreasonable enough to make the automatic extension void."

3. The Critical Role of Overpayments (Deemed Payments)

The most decisive factor in the ruling was the Karps' history of overpaying taxes. For years prior to 2016, the Karps consistently paid large amounts that were carried forward to cover subsequent year’s tax liabilities.

The Court held that this carryover payment provided crucial context for the estimate:

"Once the Karps filed their 2015 return, the carryover payment would be available for the 2016 tax year and deemed paid on April 15, 2017... Thus, the Karps’ estimate that they would owe zero for 2016, once they filed their tax return, was correct."

The Court further countered the Government's reliance on FleetBoston Financial Corp. v. United States, 483 F.3d 1345 (Fed. Cir. 2007), by noting that unlike FleetBoston, the Karps were not attempting to offset a deficiency in a different year, but were simply accounting for their expected carryover payments toward their current tax liability.

4. The Alternative Extension Methods

Crucially, the Court dismantled the premise of the Government's argument—that the Form 4868 estimate is necessary for an extension. The Judge pointed out that "The IRS website provides three ways a taxpayer can request a six-month extension... Two options are electronic... [and] At least one of those methods—paying online—requires no estimate at all as long as the taxpayer’s liability is covered by payments and credits."

The Court concluded:

"It would be unreasonable for the Karps to be penalized only because they chose an older method of payment that still includes a line requesting their estimate of their total tax liability. The law disfavors setting that sort of trap for the unwary taxpayer."

IV. Ultimate Holdings (The Judgment)

Based on these findings, the Court reached two definitive holdings:

The automatic six-month extension was valid: "The court agrees with the Karps that they should have received the six-month extension to file their 2016 taxes."
The refund claim is timely and payable: Consequently, the Karps are "entitled to a refund of their tax overpayment for the 2016 tax year."

In summary judgment terms: "The court grants the Karps’ cross-motion for summary judgment... The court denies the government’s motion for summary judgment."

V. Takeaways for Tax Professionals

Due Diligence on Extension Methods: When advising clients, always clarify which extension mechanism is being used (Form 4868 vs. online payment). If a client's tax liability is already covered by credits or overpayments, the online method may be preferable as it removes the requirement for an explicit tax estimate.
The Deemed Payment Principle: The ruling underscores the practical application of deemed payments and carryover credits within tax planning. Demonstrating that substantial prior payments were successfully carried forward to cover a current liability is powerful evidence supporting the reasonableness of a client’s tax estimates.
Reasonableness Standard: While taxpayers must make a "bona fide and reasonable estimate" (per Crocker v. Commissioner, 92 T.C. at 907), this standard is contextual. If alternative, non-estimating methods exist that the IRS itself promotes, courts may view an overreliance on the older, form-based method as procedurally disadvantageous to the taxpayer rather than substantively flawed for the government.

Prepared with assistance from Gemma 4 E4B on a MacBook Air AI - LM Studio.