There’s nothing worse when a taxpayer unintentionally forfeits their tax refund. Many are unaware that the U.S. tax law has a statute of limitations for someone to claim their tax refund. Forfeiture usually happens unintentionally because taxpayers file their returns late, after the statute of limitations.
The Internal Revenue Code forfeiture statutes are codified in section 6511 of the Internal Revenue Code, and any regulations the IRS has written to clarify these rules. The general rule is a taxpayer must claim the refund for their return within three years of the due date of the return, or two years after payment of the tax.
The three-year period of the due date means that you must file and claim the refund within three years of the original due date, or the extended date (in the event you file an extension).
For the 2018 tax year, you file on the due date of April 15, 2019. In this case, you must make a refund claim by April 15, 2022.
For the 2018 tax year, you file an extension for October 15, 2019 - you also file your return on the extended due date of October 15, 2019. In this case, you have three years after the extended due date, or October 22, 2022, to claim a refund.
For the 2018 tax year, you file an extension for October 15, 2019 - however, you also file your return on the prior to the extended due date of October 15, 2019, filing your return on September 10, 2019. Since the IRS has received your return on September 10, 2019, the three-year period to claim a refund begins on this date. Therefore, you must claim a refund on or prior to September 10, 2022.
For the 2018 tax year, you file on April 1, 2019, before the due date of April 15, 2019. In this case, you must make a refund claim by April 15, 2022, three years after the original due date. In this example, let’s say the IRS audits your return on October 1, 2021 and makes additional assessments against you, which you pay on November 1, 2021. If you later realize the IRS has made a mistake on their additional assessment, you have until two years (i.e. November 1, 2023) after the payment date to make a claim for a refund, although November 1, 2023 is after April 15, 2022.
Unless you can prove severe mental or physical disability (under Code section 6511(h)(2)), the three-year limit would apply and you will be denied your applicable refund. Code section 6511(h)(2) keeps the time to claim a refund open, but the taxpayer has a tough burden of proof under this section of the Code.
You may wonder why taxpayers unintentionally forfeit their refunds, which happens more often than you would think. In most cases, it’s due to non-filing until three years after the due date of the original return. In any case, we urge you to always file your taxes timely to avoid forfeiture of a refund, if you’re owed one. And remember, it is the taxpayer’s burden to prove timely filing of their claim for a refund. This is accomplished by an e-file receipt or courier tracking receipt.