Preamble to Prop Reg 06/09/2011; Prop Reg §301.6402-2, Prop Reg §301.6402-3, Prop Reg §301.6402-4
New proposed regs on refund claims would provide guidance on the proper place for filing a claim, remove outdated provisions and make other housekeeping changes. The regs would apply to claims for credit or refund filed on or after the date they are finalized.
Background. Code Sec. 6402 authorizes IRS to make credits or refunds. Code Sec. 6511 provides the limitations period within which a taxpayer must file a claim for credit or refund and restricts IRS's ability to issue a credit or refund unless the claim is filed within that period. Code Sec. 7422 prohibits the maintenance of a suit for refund until a claim has been duly filed with IRS.
Currently, Reg. §301.6402-2(a)(2) provides generally that a claim for credit or refund needs to be filed with the service center serving the internal revenue district in which the tax was paid. As explained below, the proposed regs would clarify that, unless otherwise directed, the proper place to file a claim for credit or refund is with the service center at which the taxpayer currently would be required to file a tax return for the type of tax to which the claim relates, irrespective of where the tax was paid or was required to have been paid.
Proper place to file claim. If a taxpayer is required to file a claim for credit or refund on a particular form, then the claim must be filed in a manner consistent with that form and the related instructions. For example, a claim for refund of an overpayment of individual income taxes must be filed on a Form 1040X at the location specified in the instructions provided for the form. If filing instructions are not otherwise provided, a claim for credit or refund must be filed with the service center at which the taxpayer would be required to file a current tax return for the type of tax to which the claim relates. The regs would be revised to clarify that claims should not be filed at a different location based upon where the tax either was paid or was required to have been paid. Nor would it be relevant if the tax was properly paid at a different location in a prior year because the taxpayer had a change in residence. (Prop Reg §301.6402-2(a)(2); Preamble to Prop Regs REG-137128-08, 06/09/2011)
Proper form to file. IRS has prescribed various forms that must be used to file a claim for credit or refund for a particular tax. The proposed regs would specifically provide that taxpayers must use the form prescribed for filing a particular claim for credit or refund. When there is no alternative form prescribed, a claim for credit or refund would have to be filed on a Form 843, “Claim for Refund and Request for Abatement.” (Prop Reg §301.6402-2(c))
Claims for employment taxes under proposed regs. In 2008, IRS issued final regs on employment tax adjustments and refund claims that modified the process for making claims for refund of overpayments of employment taxes under Code Sec. 6402. To file a claim to correct errors discovered on or after Jan. 1, 2009, an employer now uses an X-designated form that corresponds to the return being corrected. For example, to correct a Form 941, Employer's QUARTERLY Federal Tax Return, a Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, is used. The proposed regs would provide that when filing a claim for employment taxes, a separate claim must be made for each taxable period. (Prop Reg §301.6402-2(d))
Removal of obsolete references. The proposed regs would remove references to internal revenue districts, district directors and director of the regional service center as these terms were rendered obsolete by the Internal Revenue Service Restructuring and Reform Act of 1998 (P.L. 105-206). (Prop Reg §301.6402-2(a)(2), Prop Reg §301.6402-3, Prop Reg §301.6402-4)
Removal of outdated provisions. The proposed regs would remove outdated guidance concerning claims filed before and after certain dates in '68 and '76. (Prop Reg §301.6402-2, Prop Reg §301.6402-3)
Large refund claims. Code Sec. 6405 requires the advance referral of a report to the Joint Committee on Taxation (as changed from the Joint Committee on Internal Revenue Taxation by the Tax Reform Act of 1976 (P.L. 94-455)) regarding specified types of refunds or credits in excess of a threshold amount (currently $2,000,000, as raised from $10,000 by the '76 Act). Reg. §301.6204-4 currently provides that “[t]he provisions of section 6405 (relating to reports of refunds of more than $100,000 to the Joint Committee on Internal Revenue Taxation) are not applicable to the overpayments described in this section caused by timely payments of tax which exceed the amount of tax shown on a timely return.” The proposed regs would change “Joint Committee on Internal Revenue Taxation” to the “Joint Committee on Taxation” and remove the parenthetical reference to the specific amount required for the referral. The latter would make it unnecessary to amend the regs again if the threshold is increased. (Prop Reg §301.6402-4)
References: For refund claims, see FTC 2d/FIN ¶T-5601; United States Tax Reporter ¶64,024; TaxDesk ¶802,001; TG ¶70751.