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Publication 556
Examination of Returns, Appeal Rights, and Claims for Refund
(Revised: 7/2002)

District Court and Court of Federal Claims

Generally, the District Court and the Court of Federal Claims hear tax cases only after you have paid the tax and filed a claim for a credit or refund. As explained later under Claims for Refund, you can file a claim with the IRS for a credit or refund if you think that the tax you paid is incorrect or excessive. If your claim is totally or partially disallowed by the IRS, you should receive a notice of claim disallowance. If the IRS does not act on your claim within 6 months from the date you filed it, you can then file suit for a refund. You must file suit for a credit or refund no later than 2 years after the IRS informs you that your claim has been rejected.

You can file suit for a credit or refund in your United States District Court or in the United States Court of Federal Claims. However, you cannot appeal to the United States Court of Federal Claims if your claim is for credit or refund of a penalty that relates to promoting an abusive tax shelter or to aiding and abetting the understatement of tax liability on someone else's return.

For information about procedures for filing suit in either court, contact the Clerk of your District Court or of the United States Court of Federal Claims.

Refund or Credit of Overpayments Before Final Determination

Any court with proper jurisdiction, including the Tax Court, can order the IRS to refund any part of a tax deficiency that the IRS collects from you during a period when the IRS is not permitted to assess, or to levy or engage in any court proceeding to collect that tax deficiency. In addition, the court can order a refund of any part of a tax deficiency that is not at issue in your appeal to the court. The court can order these refunds before its decision on the case is final.

Generally, the IRS is not permitted to take action on a tax deficiency during:

  1. The 90-day (or 150-day if outside the United States) period that you have to petition a notice of deficiency to the Tax Court, or
  2. The period that the case is under appeal.

Claims for Refund

Once you have paid your tax, you usually have the right to file a claim for a credit or refund if you believe the tax is too much. You can claim a credit or refund by filing Form 1040X.

File your claim by mailing it to the Internal Revenue service center where you filed your original return. File a separate form for each year or period involved. Include an explanation of each item of income, deduction, or credit on which you are basing your claim.

Corporations should file Form 1120X, Amended U.S. Corporation Income Tax Return, or other form appropriate to the type of credit or refund claimed.

TAXTIP: See Publication 3920 for information on filing claims for tax forgiveness for individuals affected by terrorist attacks.

Requesting a copy of your tax return.   You can obtain a copy of the actual return you filed with the IRS for an earlier year. Use Form 4506 to make your request. You will be charged a fee, which you must pay when you submit Form 4506.

You may also use Form 4506 to request free copies of a tax return transcript, verification of nonfiling, or Form(s) W-2 information. The transcript will give you the following information:

  • Type of return filed,
  • Marital status,
  • Tax shown on return,
  • Adjusted gross income,
  • Taxable income,
  • Self-employment tax, and
  • Number of exemptions.

Requesting a copy of your tax account information.   You can also obtain a free copy of the tax account information for your individual income tax return. Tax account information lists certain items from your return and includes any later changes made by you or the IRS. To get your tax account information, call or write to your local Internal Revenue Service office.

Time for Filing a Claim for Refund

Generally, you must file a claim for a credit or refund within 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. If you do not file a claim within this period, you may no longer be entitled to a credit or a refund.

If the due date to file a return or a claim for a credit or refund is a Saturday, Sunday, or legal holiday, it is filed on time if it is filed on the next business day. Returns you filed before the due date are considered filed on the due date. This is true even when the due date is a Saturday, Sunday, or legal holiday.

Nonfilers can get refund of overpayments paid within 3-year period.   The Tax Court can consider taxes paid during the 3-year period preceding the date of a notice of deficiency for determining any refund due to a nonfiler. This means that if you do not file your return, and you receive a notice of deficiency in the third year after the due date (with extensions) of your return and file suit with the Tax Court to contest the notice of deficiency, you may be able to receive a refund of excessive amounts paid within the 3-year period preceding the date of the notice of deficiency.

TAXTIP: The IRS may postpone for up to 1 year certain tax deadlines, including the time for filing claims for refund, for taxpayers who are affected by a terrorist attack occurring after September 10, 2001. For more information, see Publication 3920.

Claim for refund by estates electing the installment method of payment.   The executor does not need to wait until all the installment payments have been made before filing a suit for refund with a Federal District Court or the U.S. Court of Federal Claims, for an estate:

  • That consists largely of an interest in a closely-held business, and
  • That elected to make tax payments through the installment method.

However, all the following must be true before a suit can be filed.

  • All installment payments due on or before the date the suit is filed have been made.
  • No accelerated installment payments have been made.
  • No Tax Court case is pending with respect to any estate tax liability.
  • The time for petitioning the Tax Court has passed if a notice of deficiency was issued to the estate regarding its liability for estate tax.
  • No proceeding is pending for a declaratory judgment by the Tax Court on whether the estate is eligible to pay tax in installments.

In addition, the executor must:

  • Not include any previously litigated issues in the current suit for refund, and
  • Not discontinue making installment payments timely, while the court considers the suit for refund.

TAXTIP: If in its final decision on the suit for refund the court redetermines the estate's tax liability, the IRS must refund any part of the estate tax amount that is disallowed. This includes any part of the disallowed amount previously collected by the IRS.

Limit on Amount of Refund

If you file your claim within 3 years after filing your return, the credit or refund cannot be more than the part of the tax paid within the 3 years (plus any extension of time for filing your return) before you filed the claim.

Example 1.   You made estimated tax payments of $1,000 and got an automatic extension of time to August 15, 2000, to file your 1999 income tax return. When you filed your return on that date, you paid an additional $200 tax. Three years later, on August 15, 2003, you file an amended return and claim a refund of $700. Because you filed within the 3 years plus the 4-month extension period, you could get a refund of $700.

Example 2.   The situation is the same as in Example 1, except that you filed your return on October 31, 2000, 2½ months after the extension period ended. You paid an additional $200 on that date. Three years later, on October 27, 2003, you file an amended return and claim a refund of $700. Although you filed your claim within 3 years from the date you filed your original return, the refund is limited to $200. The estimated tax of $1,000 was paid before the 3 years plus the 4-month extension period.

Claim filed after the 3-year period.   If you file a claim after the 3-year period, but within 2 years from the time you paid the tax, the credit or refund cannot be more than the tax you paid within the 2 years immediately before you filed the claim.

  

Example.   You filed your 1999 tax return on April 17, 2000. You paid $500 in tax. On November 2, 2001, after an examination of your 1999 return, you had to pay $200 in additional tax. On May 2, 2002, you file a claim for a refund of $300. Your refund will be limited to the $200 you paid during the 2 years immediately before you filed your claim.

Exceptions

The limits on your claim for refund can be affected by the type of item that forms the basis of your claim.

Special refunds.   If you file a claim for refund based on one of the items listed below, the limits discussed earlier under Time for Filing a Claim for Refund may not apply. These special items are:

  • A bad debt,
  • A worthless security,
  • A payment or accrual of foreign tax,
  • A net operating loss carryback, and
  • A carryback of certain tax credits.

The limits discussed earlier also may not apply if you have signed an agreement to extend the period of assessment of tax.

TAXTIP: For information on special rules on filing claims for an individual affected by a terrorist attack, see Publication 3920.

Periods of financial disability.   The period of limitations on credits and refunds (3 years from the time you file your return or 2 years from the time you paid your tax) can be suspended during periods when you, an individual taxpayer, cannot manage your financial affairs because of physical or mental impairment that is medically determinable and either:

  • Has lasted or can be expected to last continuously for at least 12 months, or
  • Can be expected to result in death.

CAUTION: The period for filing a claim for refund will not be suspended for any time that someone else, such as your spouse or guardian, was authorized to act for you in financial matters.

To claim that you were financially disabled, the following statements are to be submitted with the claim for credit or refund of tax:

  1. A written statement signed by a physician, qualified to make the determination, that sets forth:
    1. The name and a brief description of your physical or mental impairment,
    2. The physician's medical opinion that your physical or mental impairment prevented you from managing your financial affairs,
    3. The physician's medical opinion that your physical or mental impairment resulted in or can be expected to result in death, or that it has lasted (or can be expected to last) for a continuous period of not less than 12 months, and
    4. To the best of the physician's knowledge, the specific time period during which you were prevented by such physical or mental impairment from managing your financial affairs, and
  2. A written statement by you or the person signing the claim for credit or refund that no person, including your spouse, was authorized to act on your behalf in financial matters during the period described in paragraph (1)(d) of this section. Alternatively, if a person was authorized to act on your behalf in financial matters during any part of the period described in paragraph (1)(d), the beginning and ending dates of the period of time the person was so authorized.

CAUTION: The period of limitations will not be suspended on any claim for refund that (without regard to this provision) was barred as of July 22, 1998.

Processing Claims for Refund

Claims are usually processed shortly after they are filed. Your claim may be denied, accepted as filed, or it may be examined. If a claim is examined, the procedures are almost the same as in the examination of a tax return.

However, if you are filing a claim for credit or refund based only on contested income tax or on estate tax or gift tax issues considered in previously examined returns and you do not want to appeal within the IRS, you should request in writing that the claim be immediately rejected. A notice of claim disallowance will then be promptly sent to you. You have 2 years from the date of mailing of the notice of disallowance to file a refund suit in the United States District Court or in the United States Court of Federal Claims.

Explanation of Any Claim for
Refund Disallowance

The IRS must explain to you the specific reasons why your claim for refund is disallowed or partially disallowed. Claims for refund are disallowed based on a preliminary review or on further examination. Some of the reasons your claim may be disallowed include the following.

  • It was filed late.
  • It was based solely on the unconstitutionality of the revenue acts.
  • It was waived as part of a settlement.
  • It covered a tax year or issues which were part of a closing agreement or an offer in compromise.
  • It was related to a return closed by a final court order.

If your claim is disallowed for these, or any other reason, the IRS must send you an explanation.

Reduced Refund

Your refund may be reduced by an additional tax liability. Also, your refund may be reduced by amounts you owe for past-due child support, debts you owe to another federal agency, or past-due legally enforceable state income tax obligations. You will be notified if this happens. For those reductions, you cannot use the appeal and refund procedures discussed in this publication, but you may be able to take action against the other agency.

Offset of past-due state income tax obligations against overpayments.   Federal tax overpayments can be used to offset past-due, legally enforceable state income tax obligations. For the offset procedure to apply, your federal income tax return must show an address in the state that requests the offset. In addition, the state must first:

  • Notify you by certified mail with return receipt that the state plans to ask for an offset against your federal income tax overpayment,
  • Give you at least 60 days to show that some or all of the state income tax is not past due or not legally enforceable,
  • Consider any evidence from you in determining that income tax is past due and legally enforceable,
  • Satisfy any other requirements to ensure that there is a valid past-due, legally enforceable state income tax obligation, and
  • Show that all reasonable efforts to obtain payment have been made before requesting the offset.

Past-due, legally enforceable state income tax obligation.   This is an obligation (debt):

  1. Established by a court decision or administrative hearing and no longer subject to judicial review, or
  2. That is assessed, uncollected, can no longer be redetermined, and is less than 10 years overdue.

Offset priorities.   The amounts owed by you must be offset against your overpayments in the following order.

  1. Federal income tax owed.
  2. Past-due child support.
  3. Past-due, legally enforceable debt owed to a federal agency.
  4. Past-due, legally enforceable state income tax debt.
  5. Future federal income tax liability.

Note.   If more than one state agency requests an offset for separate debts, the offsets apply against your overpayment in the order in which the debts accrued. In addition, state income tax includes any local income tax administered by the chief tax administration agency of a state.

Note.   The Tax Court cannot decide the validity or merits of the credits or offsets (for example, collection of delinquent child support or student loan payments) made that reduce or eliminate a refund to which you were otherwise entitled.

Injured spouse exception.   When a joint return is filed and only one spouse owes past-due child and spousal support or a federal debt, the other spouse can be considered an injured spouse. An injured spouse can get a refund for his or her share of the overpayment that would otherwise be used to pay the past-due amount.

To be considered an injured spouse, you must have:

  1. Filed a joint return,
  2. Received income (such as wages, interest, etc.),
  3. Made tax payments (such as federal income tax withheld from wages or estimated tax payments) or claimed a refundable credit (such as the earned income credit), and
  4. Reported the income and tax payments on the joint return.

If you are an injured spouse, you can obtain your portion of the joint refund by completing Form 8379. Follow the instructions on the form.

Relief from joint and several liability on a joint return.   Generally, joint and several liability applies to all joint returns. This means that both you and your spouse (or former spouse) are liable for any tax shown on a joint return plus any understatement of tax that may become due later. This is true even if a divorce decree states that a former spouse will be responsible for any amounts due on previously filed joint returns.

In some cases, a spouse will be relieved of the tax, interest, and penalties on a joint tax return. Three types of relief are available.

  • Innocent spouse relief.
  • Separation of liability.
  • Equitable relief.

Form 8857.   Each kind of relief is different and has different requirements. You must file Form 8857 to request relief. See the instructions for Form 8857 and Publication 971 for more information on these kinds of relief and who may qualify for them.

How To Get Tax Help

You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.

Contacting your Taxpayer Advocate.   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate.

The Taxpayer Advocate represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review.

To contact your Taxpayer Advocate:

  • Call the Taxpayer Advocate at 1-877-777-4778.
  • Call the IRS at 1-800-829-1040.
  • Call, write, or fax the Taxpayer Advocate office in your area.
  • Call 1-800-829-4059 if you are a TTY/TDD user.

For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS.

Free tax services.   To find out what services are available, get Publication 910, Guide to Free Tax Services. It contains a list of free tax publications and an index of tax topics. It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics.

COMPUTE: Personal computer. With your personal computer and modem, you can access the IRS on the Internet at www.irs.gov. While visiting our web site, you can:

  • Find answers to questions you may have.
  • Download forms and publications or search for forms and publications by topic or keyword.
  • View forms that may be filled in electronically, print the completed form, and then save the form for recordkeeping.
  • View Internal Revenue Bulletins published in the last few years.
  • Search regulations and the Internal Revenue Code.
  • Receive our electronic newsletters on hot tax issues and news.
  • Get information on starting and operating a small business.

You can also reach us with your computer using File Transfer Protocol at ftp.irs.gov.

FAX: TaxFax Service. Using the phone attached to your fax machine, you can receive forms and instructions by calling 703-368-9694. Follow the directions from the prompts. When you order forms, enter the catalog number for the form you need. The items you request will be faxed to you.

For help with transmission problems, call the FedWorld Help Desk at 703-487-4608.

PHONE: Phone. Many services are available by phone.
 
 

  • Ordering forms, instructions, and publications. Call 1-800-829-3676 to order current and prior year forms, instructions, and publications.
  • Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040.
  • TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications.
  • TeleTax topics. Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics.


Evaluating the quality of our telephone services. To ensure that IRS representatives give accurate, courteous, and professional answers, we evaluate the quality of our telephone services in several ways.

  • A second IRS representative sometimes monitors live telephone calls. That person only evaluates the IRS assistor and does not keep a record of any taxpayer's name or tax identification number.
  • We sometimes record telephone calls to evaluate IRS assistors objectively. We hold these recordings no longer than one week and use them only to measure the quality of assistance.
  • We value our customers' opinions. Throughout this year, we will be surveying our customers for their opinions on our service.

WALKIN: Walk-in. You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, grocery stores, copy centers, city and county governments, credit unions, and office supply stores have an extensive collection of products available to print from a CD-ROM or photocopy from reproducible proofs. Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes.

ENVELOPE: Mail. You can send your order for forms, instructions, and publications to the Distribution Center nearest to you and receive a response within 10 workdays after your request is received. Find the address that applies to your part of the country.

  • Western part of U.S.:
    Western Area Distribution Center
    Rancho Cordova, CA 95743-0001
  • Central part of U.S.:
    Central Area Distribution Center
    P.O. Box 8903
    Bloomington, IL 61702-8903
  • Eastern part of U.S. and foreign addresses:
    Eastern Area Distribution Center
    P.O. Box 85074
    Richmond, VA 23261-5074

CDROM: CD-ROM. You can order IRS Publication 1796, Federal Tax Products on CD-ROM, and obtain:
 

  • Current tax forms, instructions, and publications.
  • Prior-year tax forms and instructions.
  • Popular tax forms that may be filled in electronically, printed out for submission, and saved for recordkeeping.
  • Internal Revenue Bulletins.

The CD-ROM can be purchased from National Technical Information Service (NTIS) by calling 1-877-233-6767 or on the Internet at www.irs.gov. The first release is available in mid-December and the final release is available in late January.

IRS Publication 3207, Small Business Resource Guide, is an interactive CD-ROM that contains information important to small businesses. It is available in mid-February. You can get a free copy by calling 1-800-829-3676 or visiting the IRS web site at www.irs.gov.