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“Tax Refunds and the Statute of Limitations”
I recently had a client that had faced some hardships for a few years, and as a result didn’t file her income tax returns for several years going back to 2010. Now, after we prepared the tax returns she had refunds coming back to her for every year. After the returns were filed, the IRS sent letters disallowing the refund claims for 2010, 2011 and 2012. It totaled about $ 6,000. My client needed the money and she didn’t understand why the IRS wouldn’t return her refunds.Her question is can we help her get these refunds back?”

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Dear Friends and Associates,

Unfortunately my magic wand will not fix this situation for her. Her story was heartbreaking to hear of the hardships. However it did not meet the exception to the rule.

Here is the rub. Even the IRS doesn’t have discretionary control over this matter. These refunds that have expired, due to the 3 year statute of limitations for claiming a refund, are controlled by laws passed by Congress – they are the folks you vote for.

The tax code doesn’t provide a way to get those refunds from closed years. When we talk about a” statute of limitations,” the word “statute” means LAW – in this case IRC 6511 which states that a taxpayer must file a tax return within 3 years of the due date (including extensions) to claim the refund.

For future reference, please don’t put off filing your tax returns – no matter how sick or depressed you are. Family and friends, please keep an eye on those you love and help file their tax returns. They don’t need to be totally accurate. If some information is frustratingly elusive – make good estimates and attach a statement to the tax return that this has been done. We have done this on several occasions. After all, you have three years to correct the tax return. In the meantime, you save the refund for that year – which would otherwise be lost forever.

What can you do if it IS lost? There IS one thing I would try. You have nothing to lose.
Contact the Taxpayer Advocate Service and see if they will open a case and advocate on your behalf. Sometimes, in extreme situations, they can pull a rabbit out of a hat. We have had several successful cases go through the local Taxpayer Advocate Office here in Detroit.