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September 18, 2019

Obtaining a Claim for Refund from the IRS or Ohio Department of Taxation

Form_1040

As a tax attorney in Columbus, Ohio, I routinely assist businesses with representation in tax examinations, audits, appeals, and civil litigation with the Internal Revenue Service (the “IRS”) and state tax agencies. As part of that representation, I try to keep individuals and businesses informed about new information and guidance provided by the IRS and the Ohio Department of Taxation (the “ODT”), as well as taxpayer rights. This article will detail the timeframe that an individual Taxpayer has to claim a refund.

Overview

For individual taxpayers, a tax refund commonly comes from overpayments made by their employer via W-2 withholdings. To the extent that these withholdings exceed the tax liability assessed by the IRS or another tax agency, the taxpayer is due a refund.  Overpayments may also occur when an error is discovered that results in a lower tax liability. This can be found by the taxpayer (in which case the taxpayer should file an amended return), or it can be discovered by the IRS or another tax agency (in which case the taxpayer should review the notice provided by the agency to determine the next step).

Refunds per the IRS

For individual taxpayers filing a federal tax return (the Form 1040), the limits on refunds are described in the Internal Revenue Code, Section 6511(a) and 6511(b). In general:

Refunds must be claimed within 3 years from the time the return was filed, or 2 years from the time the tax was paid, whichever is later.

Additionally, even if the above rule is followed, refunds can only be claimed on payments within the last three years of when the return was filed. For purposes of this calculation, taxes paid via an employer’s W-2 withholdings are considered paid as of the due date of the return.

In effect, an individual taxpayer will only be permitted a tax refund on payments made through their W-2 withholdings if the return is filed within three years of the filing due date, including extensions. In the case of amended returns resulting in a lower tax liability, a taxpayer has three years from when their return was filed to submit a corrected return to be eligible for a refund.

Refunds per the State of Ohio

For individual taxpayers filing a state tax return (the Ohio IT 1040), the limits on refunds are described in the Ohio Revised Code, Section 5747.10 and 5747.11. In general:

Refunds must be claimed within four years of the date of payment to be eligible for a refund. For the purposes of this rule, taxes paid via an employer’s W-2 withholdings are considered paid as of the due date of the return.

Even if outside the four-year limit, if the adjustment is due to changes made by the IRS (meaning outside of the taxpayer’s control), the taxpayer is granted 60 days from the IRS’s notice to file an amended return with the State and obtain a refund. Note that this limitation only applies to the portion of the return amended by the IRS and does not allow refund balances that have previously expired to once again become refundable.

This stresses the importance of filing timely tax returns, especially when the Taxpayer is due a refund. Please note that rules will differ when considering other tax forms as well as taxes filed in other states.  If you have any questions or would like more information, contact me at vnardone@nardonelimited.com and I would certainly be happy to discuss.

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« FBAR Penalty and Impact of Taxpayer’s Failure to Disclosure Foreign Assets and IRS’s Assessment of Penalties | Main

September 18, 2019

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