Originally published on Forbes.com.
It’s nice to see people inside the IRS rooting for the little guy who has gotten a raw deal. That is one of the reasons I am covering CCA 201822027 even though I can’t construct the story behind the story as well as I would like. There is also an important lesson in there.
CCA stands for Chief Counsel Advice and the IRS Office of Chief Counsel is where the knotty problems end up. The advice is short so I will reproduce most of it.
Hi ———- Thanks for your patience. I’ve closely studied this case, as well as discussed the facts with several of my Counsel colleagues who have extensive experience with ID theft cases. Unfortunately, we agree with SBSE Counsel that the taxpayers are not entitled to a refund. Because they had no filing requirement, the “3 years from the time the return was filed” timeframe in section 6511(a)” isn’t applicable. Consequently, their claim must have been filed within 2 years from the date the tax was paid. In this case, the tax was paid on ——————————— —————————————————————————————————————————————————————————-, when the IRS offset their ——— refund to the ——— balance due. So any claim for refund would have had to be filed by ——————————-.
Two points of clarification: (1) The last paragraph in the SB/SE Counsel opinion is perhaps a little confusing, as it assumes that the return filed by the thief was really the taxpayers’ return and applies the section 6511 analysis accordingly. Yet it is my understanding that these taxpayers did not have a filing requirement. In addition, SB/SE Counsel doesn’t explai n that the taxpayers get the longer of the 3-year/2-year timeframe in section 6511(a). (2) Before you close out this case, be sure you have explored with the taxpayers whether there is anything that could be a timely informal claim for refund. Did the taxpayers contact the IRS between the date of the offset and ——————————, to indicate they wanted a refund of the amount offset§ There needs to be something in writing; the writing requirement can be satisfied in certain circumstances by IRS records (e.g., suppose the taxpayers called the IRS and any case history documented by the IRS reflects the taxpayers wanted the offset amount back – that could be sufficient – I would want to see the documentation).
I’m sorry this isn’t the result for which you were hoping, but section 6511 bars relief for these taxpayers unless you can advocate that they filed a timely informal claim for refund by ————- — —————-.
Please let me know if you have any questions.
So what happened here is that the victim had some money due from the IRS, but no requirement to file a tax return. I’m having trouble coming up with a plausible scenario that accounts for that. Maybe they applied a refund to the subsequent year which turned out to be an awful year. Regardless, an identity thief managed to grab that money and apply it to their own tax or have it refunded.
Of course, the victim has the right to get the money back from the IRS as long as the request it in time, but that is where the glitch is. The statute of limitations on amending a return is three years, but the statute on requesting refunds generally is two years. For example you file your return and the IRS has three years to adjust it (which might be extended in various ways). If you decide to pay rather than appeal to Tax Court, you have two years from then to file for a refund, Since they had no required return the victim fell under the two year rule rather than the three year rule.
The larger lesson there is a variation on Reilly’s Seventeenth Law of Tax Planning – Don’t cut your deadlines close and use the US Mail with proof of mailing. Of course there is not enough information here to figure out what the drama that created this situation is.
What I really like is the way that they are endeavoring to find something that will let them do the right thing by the victim – “suppose the taxpayers called the IRS and any case history documented by the IRS reflects the taxpayers wanted the offset amount back – that could be sufficient – “. I wonder if that is a subtle hint to look really, really carefully through your desk drawer for a phone message or something. Maybe not. That would be above and beyond.