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IRS Clarifies Pandemic Effect on Refund Claims

Posted on Jan. 4, 2021

Refund claims made in 2023 for tax returns filed during the pandemic won’t get an additional grace period, but claims made early in the crisis for prior years will, according to the IRS.

On December 31, 2020, the IRS released two emailed chief counsel advice memoranda — dated September 25, 2020 (ECC 202053013), and October 15, 2020 (ECC 202053015) — describing the interaction between the COVID-19 pandemic filing relief and the statute of limitations on taxpayer refund requests.

The IRS invoked section 7508A to extend the deadlines for a variety of taxpayer actions, including filing their tax returns and initiating tax litigation between April 1, 2020, and July 15, 2020.

Section 6511 contains the rules on when taxpayers can file refund claims. Taxpayers normally have three years from when any tax is paid to file a refund claim, and withheld or estimated taxes are treated as paid on the return due date.

The September emailed chief counsel memorandum notes that Notice 2020-23, 2020-18 IRB 742, wasn’t an extension as contemplated in section 6511, but a postponement. Therefore, even though taxpayers could have waited until July 15, 2020, to file their 2019 tax returns, the estimated and withheld portions of those taxes are still treated as paid on April 15, 2020.

In other words, when taxpayers start thinking about last-minute refund requests for their 2019 taxes in 2023, those requests will be due by April 17, 2023, not July 17, 2023 (those dates are Mondays), according to the IRS.

Taxpayers who requested tax year 2016 refunds in summer 2020 will not face the same consequence, according to the October emailed chief counsel memorandum. The back end of the statute of limitations, unlike the deemed paid front end, is subject to postponement, according to the IRS.

Thus, requests for refunds of 2016 taxes made between April 15, 2020, and July 15, 2020, can be timely — the example in the emailed chief counsel memorandum was a request made in June.

Despite the complementary nature of the questions presented, the IRS’s redactions prevent comparison of who asked and who answered the two questions in the chief counsel memoranda.

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