Small Business Taxes & Management

Special Report

IRS Updates Regulations on Filing Refund Claims


Small Business Taxes & ManagementTM--Copyright 2011, A/N Group, Inc.



If you're filing a claim for credit or refund of tax paid, failure to follow procedures could result in a rejection of your claim. Section 6402 authorizes the IRS to make credits or refunds. The IRS has just issued proposed amendments (REG-137128-08) to this section. Section 6511 provides the limitations period within which a taxpayer must file a claim for credit or refund and restricts the ability of the IRS to issue a credit or refund unless the claim is filed by the taxpayer within that period. Section 7422 prohibits the maintenance of a suit for refund until a claim has been duly filed with the Secretary. Currently, Reg. Sec. 301.6402-2(a)(2) provides generally that a claim for credit or refund needs to be filed with the service center serving the internal revenue district in which the tax was paid. The proposed regulations clarify that, unless otherwise directed, the proper place to file a claim for credit or refund is with the service center at which the taxpayer currently would be required to file a tax return for the type of tax to which the claim relates, irrespective of where the tax was paid or was required to have been paid.


The Proper Place to File a Claim for Credit or Refund

If a taxpayer is required to file a claim for credit or refund on a particular form, then the claim must be filed in a manner consistent with that form and the related instructions. For example, to correct an amount reported on a Form 1040, "U.S. Individual Income Tax Return," Treasury regulation 301.6402-3(a)(2) requires that the taxpayer file the claim on a Form 1040X, "Amended U.S. Individual Income Tax Return." Accordingly, a claim for refund of an overpayment of individual income taxes would need to be filed on a Form 1040X at the location specified in the instructions provided for the form. If filing instructions are not otherwise provided, a claim for credit or refund must be filed with the service center at which the taxpayer would be required to file a current tax return for the type of tax to which the claim relates. Section 301.6402-2(a)(2) is revised to clarify that claims should not be filed at a different location based upon where the tax either was paid or was required to have been paid. Nor would it be relevant if the tax was properly paid at a different location in a prior year because the taxpayer had a change in residence.


The Proper Form for Filing a Claim for Credit or Refund

The IRS has prescribed various forms that must be used to file a claim for credit or refund for a particular tax. For example, an individual taxpayer must use a Form 1040X to file a claim for refund of income tax. The proposed regulations would revise Reg. Sec. 301.6402-2(c) to provide that taxpayers must use the form prescribed for filing a particular claim for credit or refund. When there is no alternative form prescribed, a claim for credit or refund is to be filed on a Form 843, "Claim for Refund and Request for Abatement."


Claims for Employment Taxes

On July 1, 2008, final regulations (T.D. 9405) relating to employment tax adjustments and employment tax refund claims were published. Those final regulations modify the process for making claims for refund of overpayments of employment taxes under Section 6402. To file a claim to correct errors discovered on or after January 1, 2009, an employer now uses the form that corresponds to the return being corrected. The new forms correspond with Form 941, "Employer's QUARTERLY Federal Tax Return"; Form 943, "Employer's Annual Federal Tax Return for Agricultural Employees"; Form 944, "Employer's ANNUAL Federal Tax Return"; Form 945, "Annual Return of Withheld Federal Income Tax"; and Form CT-1, "Employer's Annual Railroad Retirement Tax Return." For example, Form 941-X, "Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund," is used by employers instead of Form 843, "Claim for Refund and Request for Abatement." The new "X" forms are used to claim refunds, make adjustments, and request abatements of employment taxes. In addition, Reg. Sec. 301.6402-2(d) is revised to provide that when filing a claim for employment taxes, a separate claim must be made for each taxable period. For example, if an employer overpaid social security taxes on Forms 941 filed for the third and fourth quarters in 2009, then the employer must file a separate Form 941-X for each quarter.


Internal Revenue Districts

The proposed regulations make technical revisions that remove the reference to "internal revenue districts" in Reg. Sec. 301.6402-2(a)(2), because such reference has been made obsolete by the enactment of the Internal Revenue Service Restructuring and Reform Act of 1998. The technical revisions also remove the references to a district director or director of the regional service center in Reg. Secs. 301.6402-3 and 301.6402-4, as those positions no longer exist within the IRS.


Payments in Excess of Amounts Shown on Return

In certain cases, a taxpayer's payments in respect of a tax liability, made before the filing of the return, may exceed the amount of tax shown on the return. For example, such payments may arise in the case of income tax if the estimated tax payments or the credit for income tax withheld at the source on wages exceeds the amount of tax shown on the return, or if the installment payments based on a corporation's estimate of its tax liability on an application for an extension of time to file its return exceeds the tax liability shown on the return subsequently filed. In any case in which the Secretary determines that the payments by the taxpayer (made within the period prescribed for payment and before the filing of the return) are in excess of the amount of tax shown on the return, the IRS may make credit or refund of such overpayment without awaiting examination of the completed return and without awaiting filing of a claim for refund. The provisions of Reg. Secs. 301.6402-2 and 301.6402-3 are applicable to such overpayment, and taxpayers should submit claims for refund (if the income tax return is not itself a claim for refund, as provided in Reg. Sec. 301.6402-3) to protect themselves in the event the IRS fails to make such determination and credit or refund.


Proposed Effective Date

These rules, when they are promulgated as final regulations, will apply to claims for credit or refund filed on or after the date that the final regulations are published in the Federal Register. The rules in these proposed regulations may be relied upon by taxpayers making claims for credit or refund before publication of the Treasury decision.



Copyright 2011 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536

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--Last Update 06/15/11