Sometimes, it is in the best interest of the taxpayer to make a refund claim instead of file a deficiency action in the Tax Court. The goal of a refund claim is to have the IRS refund the taxpayer for an overpayment of tax. The IRS has the authority to do so, along with any interest and penalties related to the overpayment. The refund is due to “the person that made the overpayment,” and the refund claim “of any overpayment of any tax” must be made by the taxpayer. In order to properly file a refund claim, the taxpayer must state specific legal grounds and the underlying factual basis for the claimed overpayment. The refund claim process is also essential to form the jurisdiction for a refund action in United States district court or the United States Court of Federal Claims if the refund claim happens to be disallowed.

How to File a Refund Claim for Overpayment

A claim for refund for overpayment of taxpayer can be made on the initial income tax return prepared for the tax year or on an appropriate amended tax return. Where an amended tax return is used, the taxpayer should use Form 1040X, “Amended U.S. Individual Income Tax Return.” Where the taxpayer seeking a refund is a corporation, Form 1120X, “Amended U.S. Corporation Income Tax Return” is the proper form to use. There are several other types of taxpayers who may qualify for a refund claim, and specific amended tax return forms should be used for those classes of taxpayers. Using the proper form is extremely important; failure to do so can result in the loss of any recovery if the mistake was not discovered and corrected before the expiration of the period of limitations for filing a refund claim.

What Information Should be Included in a Refund Claim for Overpayment?

If the taxpayer uses the proper amended tax return form to complete his or her refund claim, that form will typically satisfy the informational requirements imposed on the taxpayer by the Code and Regulations. However, it is important to remember that the information provided in the refund claim must be provided in sufficient detail to satisfy the requirements. The claim for refund “must set forth in detail each ground on which a credit or refund is claimed and the facts sufficient to apprise the Commissioner of Internal Revenue of the exact basis thereof” (1). For this reason, the taxpayer and his or her counsel should be aware of the basic elements of a claim for refund.

First, the claim for refund must be signed under penalty of perjury. It should state information sufficient to identify the taxpayer seeking the refund, along with the taxpayer’s current address and identification number. If someone other than the taxpayer is filing the refund claim on behalf of the taxpayer, the claim must also provide some documentary evidence demonstrating that person’s relationship to the taxpayer and right to operate under a power of attorney. The refund claim should list the tax year for which the overpayment is being asserted. In addition, if the taxpayer intends to make refund claims related to income, gift, and federal unemployment taxes, a separate claim should be filed for each type of tax for each tax year at issue.

The refund claim should list the amount of overpayment the taxpayer is asserting, with computations showing how that amount was determined. It is also wise to indicate whether the taxpayer wishes the overpayment amount to be refunded or applied as a credit against the taxpayer’s estimated tax amount for the subsequent taxable year.

The Statement of Facts in the Claim for Refund

As stated above, the taxpayer’s refund claim must include a statement of facts upon which the taxpayer relies for asserting the overpayment. With respect to this statement of facts, the Regulations state the following:

“No refund or credit will be allowed after the expiration of the statutory period of limitation applicable to the filing of a claim therefor except upon one or more of the grounds set forth in a claim filed before the expiration of such period. The claim must set forth in detail each ground upon which a credit or refund is claimed and facts sufficient to apprise the Commissioner of the exact basis thereof. The statement of the grounds and facts must be verified by a written declaration that is made under the penalties of perjury. A claim which does not comply with this paragraph will not be considered for any purpose as a claim for refund or credit.”

The purpose of this thorough statement of facts is to apprise the IRS of the taxpayer’s position, and give the Service the possibility to correct any errors administratively. The statement of facts does not necessarily need to include a detailed legal theory on which the claim is based, but some legal authority is helpful. Thus, you do not need to refer to Code provisions or specific case law as long as the claim is adequately explained.

How a Tax Attorney Can Help with Your Tax Litigation

If you are contemplating a refund claim, then you must consult with an experienced tax attorney. San Diego Tax Attorney William D. Hartsock has been successfully helping clients with tax issues since the early 1980s. Mr. Hartsock offers free consultations with the full benefit and protections of attorney client privilege to help people clearly understand their situation and options based on the circumstances of their case. To schedule your free consultation simply fill out the contact form found on this page, or call (858) 481-4844.

Tax Law References:

  1. Reg. § 301.6402-2(b).


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