Tax Refund Statute of Limitations
In some cases, taxpayers do not claim their tax refunds from the IRS or pay more than they actually owe to the federal government. There is a statute of limitations on how long people are allowed to request this money.
Code Section 6511 defines the period of time a taxpayer has to claim a credit or a refund of an overpayment of taxes. It is not as simple as some make it out to be. Sec 6511 serves two purposes:
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Defines how long an individual has to file a claim or amended return after an original return was filed or the tax paid, and
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Provides limits on claims depending on certain circumstances.
The following flow chart provides the general rules for both the amount of time one has to file for a refund or credit (green boxes) and the limits on the amount of refund or credit that can be claimed (grey boxes).
References:
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IRC Code Sec 6511
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Reg 301.6511(b)-1
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Pub 17 (2022) Page 19
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IRS Website: Refund Statute Expiration Date (RSED)
This chart does not take into consideration the following exceptions to the general rule: bad debts1, worthless securities1, foreign tax paid or accrued2, carryback of NOLs3 and certain business credits4, or a claim based on an agreement with the IRS extending the period for assessment of tax.
1 The later of 7 years from due date of original return or 2 years from the date tax paid (Pub 550).
2 See IRS Pub 514
3 See IRS Pub 536
4 See Form 3800 instructions
Financially Disabled
The time periods for claiming a refund are suspended for the period in which a taxpayer is financially disabled. For a joint income tax return, only one spouse need be financially disabled for the time period to be suspended. A taxpayer is financially disabled if they are unable to manage their financial affairs because of a medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months. However, a taxpayer is not treated as financially disabled during any period their spouse, or any other person is authorized to act on their behalf in financial matters. See Pub 17 Page 19 for details of how to claim financial disability on the tax return.
