IRS and California Tax Refund Claims

Most would agree that few things are as demoralizing as watching their hard-earned income being handed over to the IRS or state tax agencies. However, there are times when ponying up one’s fair share can feel even worse; that is particularly so, when you pay MORE in taxes, interest or penalties than you have to.

Overpayments can occur for a number of reasons: Basic accounting errors, tax law ignorance or simply forgetting what payments are due and when. In the end, it doesn’t really matter how it happens – only that you receive credit or reimbursement for what’s rightfully yours.

If you feel that you may be entitled to a state or federal tax refund, contact Rex Halverson & Associates. We’ve been helping Californians with tax advice and tax appeals for almost four decades. Utilizing an in-depth knowledge of both state and federal tax codes and regulations, we’ve helped hundreds of clients in cases just like yours.

Call our offices today at (916) 444-0015 to talk about the specifics of your situation and learn what options may be available. Don’t wait until it’s too late – you only have a limited amount of time to file a claim. Contact us today and get the process started.

FILING A CLAIM

Although the exact rules and forms required to file a claim vary (depending on the tax agency and nature of the claim), most tend to follow fairly similar guidelines:

  • A claim notification has to be sent to the responsible agency (in writing or by way of an amended return).
  • It must contain the name, address of the taxpayer(s) plus their social security number or employer identification number, the type of tax and the tax period involved.
  • The notification must be signed – either by the actual taxpayer(s) or their designated representative.
  • Must include a detailed explanation of why the refund is being requested, the facts and the legal authority being relied on.
  • It must be filed in a timely manner (according to the statute of limitations).

It’s important to note that filing a claim does not stop any existing collection efforts that are already underway. The filing initiates the review process, but until the case is formally investigated, settled or denied, taxes owed are still due.

TYPES OF CLAIMS

For most tax agencies – such as the Internal Revenue Service (IRS), Franchise Tax Board (FTB), Board of Equalization (BOE) or Employment Development Department (EDD) – there are four different types of refund claims that can be filed: Informal, Formal (General), Protective and Reasonable Cause. The rules for when and how to use each depend on the nature of the claim and the amount of taxes (if any) that have already been paid.

Informal – Some taxpayers are unaware that they may file a refund claim even if they have NOT paid the full amount of taxes, interest or penalties due. In cases such as these, an informal claim is the best option.

Informal claims can be thought of as temporary placeholders. They preserve your right to file a claim while still making payments on the amount owed. Once the account is settled, an informal claim is automatically converted to a formal claim and the ensuing investigation begins.

Formal (General) – This is the most common type of refund claim. If all monies owed have already been paid, formal claims can be used to recover taxes, interest or penalties that were overpaid or not required to be paid in the first place.

Protective – If an account is part of an active California or federal audit (or other formal investigation) a protective claim may apply. This option helps to delay further action on a case until the secondary investigation has been completed.

Reasonable Cause – Sometimes a taxpayer may claim “reasonable cause” for his or her actions. If the taxpayer is successful in raising “reasonable cause” arguments, interest and penalties may be waived or refunded. In California income tax cases, FTB Form 2917 is used to request and explain the reasonable cause refund claim request.

The key point here is that the accounting, return filing or tax payment error must have occurred despite following otherwise sound business practices.

Because of the complexity of the various tax codes, it’s often best to consult with a qualified tax attorney or tax professional before deciding to file. The professionals at Rex Halverson & Associates can answer any questions you may have regarding tax refunds and the tax appeals and are happy to help guide you through the process. Call us today at (916) 444-0015 to setup your initial consultation.

STATUTES OF LIMITATION FOR FILING REFUND CLAIMS

Filing a timely claim for refund is critical in achieving a successful outcome. Even if you are legally due a refund, you may forfeit your entitlement if you wait too long to act. Although state and federal guidelines differ, here are some general rules of what you can expect:

Federal Income Tax Returns:  Refund claims must be filed no later than three years from the date the return was filed, or within two years from the date the tax was paid, whichever is later.

In order to bring suit on a federal income tax refund claim, one of the following must have taken place:

  1. The IRS has disallowed or denied the refund claim; or
  2. Six months have passed since the date of filing the refund claim.

Additionally, a suit based upon a refund claim has to be filed with the courts within two years from the date the IRS mails by registered or certified mail, a Notice of Disallowance of the claim.

California Income Tax Returns: Taxpayers have up to four years after the original due date of an income tax return to file a claim for refund or one year from the date of an overpayment, whichever is later.

California Quarterly Sales and Use Tax Returns: California refund claims must be filed within

  • three years and one month following the close of the quarterly period for which the overpayment was made; or,
  • with respect to determinations, within six months from the date the determination becomes final; or
  • within six months from the date of overpayment, whichever period expires later.

California Payroll or Employment Tax Returns: The California EDD requires that a refund claim be filed within three years of the last timely filing date of the year being adjusted.

County Property Tax Returns: Taxpayers have four years from the date of payment or within one year after the mailing of a notice of overpayment by the County Tax Collector, or in the case of an escape assessment, the period agreed to by the County Assessor and the Taxpayer for making an assessment, correction or claim for refund, whichever is later.

As in the case of protective claims, these time limits may be extended if waivers of the statute of limitations have been signed by taxing authorities conducting an audit.

WE CAN HELP

Although these are general guidelines for refund claims, there are many other factors that come into play. Each scenario is unique and requires a comprehensive understanding of the law and how it applies to individual situations. Your best option is to speak with a qualified tax attorney or tax professional regarding the details of your case.

If you feel that you may be due a refund for these or any other reasons, contact Rex Halverson & Associates today to discuss your case. Our experts have many years of experience in California refund claims and tax appeals and we will fight aggressively to protect the rights of our clients. We are extremely-proficient in almost every area of tax law including, income, franchise, sales and use, payroll, property, fuel and business license taxes and serve individuals, small businesses and Fortune 500 corporations.

Don’t let time expire on your case! Call our offices today at (916) 444-0015 to find out more about how we can help.