Statute of Limitations on Refunds

One of the most confusing topics that comes up when I speak with tax practitioners deals with the statute of limitations on refunds. While at OPR, numerous practitioners would say they have three years from April 15 to file their tax return. Our response would be that they are confusing the statute of limitations on refunds and the filing deadline.

The statute of limitations on refunds is the later of three years after the return is filed or two years after the tax is paid.

For example, taxpayer files his return on 4/15/16. His tax due is $50,000, but he is unable to pay the tax. On 1/1/17, he pays $20,000 and on 9/25/18, he pays the remaining $30,000.

Had the taxpayer paid his taxes timely, he would have until 4/15/19 to file a claim for refund. Since he did not pay his taxes timely, he has until 1/1/19 to file a claim for refund up to $50,000. If he files a claim between 1/1/19 and 9/25/20, he can only claim a refund of $30,000.

Relevant Cites:
IRC 6511(a) - Statute of Limitations for Refunds
IRC 6072 - Tax Return Due Date