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Appeals Court Holds

Claim for Tax Refund Held Not Time-Barred

A U.S. Court of Appeals, 2d Circuit(located in NY) case, Weisbart v. U.S. Department of Treasury, No. 99-6134. July 28, 2000 rejected a long-standing IRS position. Even though a taxpayer filed his tax return late, his claim for a refund was not time-barred.

The taxpayer did not timely file his 1991 tax return. Normally, the return would have been due April 15, 1992, with extensions up until October 15, 1992. The taxpayer did not file his return until 1995 - 3 years late. The taxpayer then filed for a refund from the IRS.

Under the Sect. 6511(a) of the Internal Revenue Code, a refund claim must be filed "within 3 years from the time the return was filed orů2 years from the time the tax was paid," whichever is later. A U.S. District Court sided with the IRS argument that in order to take advantage of the three-year window, the original tax return must have been timely filed. Fortunately for the taxpayer, the Appeals Court disagreed!

"[A] central aim of section 6511(a) is not to bar stale refund claims, but to ensure that a taxpayer give the IRS notice of such claims before suing in federal courtů.[T]o be timely under section 6511(a), a refund claim need only be filed within 3 years of the filing of a tax return, irrespective of the timeliness of that return." Here, the taxpayer's "1991 tax return disclosed an overpayment, and therefore constituted a refund claim. And since the tax return and refund claim were in the same document, and were necessarily filed simultaneously, [the] refund claim was clearly filed 'within 3 years from the time the return was filed.'"

The court cited similar holdings from the First, Fourth and Seventh Circuits, while noting a contrary decision from the Ninth Circuit. There are no decisions in other important Circuits such as the 3rd Circuit (which includes NJ.)

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