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IRS To Lengthen The Lookback Period For Taxpayer’s Refund Claims

In Notice 2023-21, the Agency announced on Monday that it’s going to lengthen the lookback period for refund claims for returns with due dates that were postponed by two earlier notices in 2020 and 2021. This is a positive sign for taxpayers who need more time to file any tax refund claims for returns they filed earlier in the pandemic.

Notices in Response to the Pandemic

The IRS issued those two notices in response to COVID-19, operating under a provision in the Tax Code that allows it to postpone certain deadlines in the event of a federally declared disaster. There was a postponement of certain tax return filing deadlines in Notice 2020-23 and Notice 2021-21, but neither notice lengthened the lookback period for refund claims for these returns under Section 6511(b)(2)(A), the limitation period on filing a refund claim. If taxpayers file their returns after April 15, some payments they made – such as estimated and withheld income taxes deemed paid on April 15 each year – will fall outside the lookback period.  Despite filing a timely refund claim, a taxpayer cannot receive a refund if the payments fall outside of the lookback period.

National Taxpayer Advocates Speak Out

National Taxpayer Advocate Erin Collins welcomed the move by the IRS but believes more needs to be done. “Without IRS intervention, any claims for credit or refund filed during the postponed period three years later that included withholding or estimated taxes would have been denied because the withheld amount(s) would have been credited to the taxpayer’s account as of April 15, outside the three-year lookback period,” she wrote in a blog post.

She thinks the IRS notice is a positive thing for taxpayers, however, it doesn’t do a good job in other areas of filing postponements “Issuing Notice 2023-21 has remedied an unintended consequence of the IRS’s good deed of providing taxpayers with more time to file their 2019 and 2020 returns during the COVID-19 pandemic. This will prevent unwary taxpayers from being denied credit or refund to which they otherwise would have been entitled,” she wrote.

Wrap Up

It seems as though the IRS is trending in the correct direction with these issued notices, and are giving many a chance to have some more time to get those refunds filed that they previously missed out on because of the pandemic.

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