The US tax laws have various deadlines that can cause problems for taxpayers, as late submissions may result in paying more tax than they owe. However, there are also timing rules that apply to the IRS, such as the timeframe for issuing a refund to the taxpayer. The tax code sets the limits for taxpayers to file for a refund claim, which is generally two years from the date of payment or three years from the date of the original tax return, whichever is later. The IRS also has a time limit for issuing a refund once a claim has been filed, as outlined in Sections 6532 and 6514. One solution for extending the two-year period for the taxpayer or the IRS to bring a suit is the Form 907 Agreement to Extend Time. This form has to be signed by both the taxpayer (or their attorney) and the IRS before the two-year period lapses. However, the taxpayer has to know about this form and track the time limit to find an IRS employee who is able to sign the form. In cases where the taxpayer has filed an administrative protest and is waiting for the IRS Office of Appeals, they may not have filed a refund claim. Instead, they may have only filed an original return and the IRS conducted an audit and proposed adjustments, but the taxpayer had other issues that required a refund that was not included on the original return. There have been cases where the courts have recognized some writings as refund claims, even though they did not comply with the formalities outlined by the IRS. The Kaffenberger case, for example, involved a tax refund for the year 1989, and the court held that an informal claim depends on the individual facts of each case and whether the IRS knew or had reason to know of the taxpayer's intent to claim a refund. In conclusion, the US tax laws have various deadlines and rules that can create difficulties for taxpayers and the IRS. The Form 907 Agreement to Extend Time is one solution for extending the two-year period for bringing a suit, but taxpayers have to be aware of the form and track the time limit. Informal refund claims can also be recognized by the courts if the IRS knew or had reason to know of the taxpayer's intent to claim a refund.

1. Kreig Mitchell JD LLM
The IRS Refund Claim Payment Rules

2. Kreig Mitchell JD LLM
Krieg D. Mitchell is an attorney based in Houston,
Texas. He has extensive experience in the tax field,
having worked as an attorney and appeals officer for
the IRS, as well as in the tax departments of two
Fortune 500 companies, a Big Four accounting firm,
and a tax consulting firm. He has also managed a tax
law firm.
Kreig D. Mitchell
https://mitchelltaxlaw.com

3. Refund Claim Filing Rules
I.R.C. § 6511(a) sets out the time limits for taxpayers to file for a refund claim.
General rule for most income tax claims:
1. If a tax return was filed, the taxpayer has two years from the date of payment
or three years from the date the original tax return was filed, whichever is
later, to file a refund claim.
2. If no tax return was filed, the taxpayer has two years from the date of the
payment to the IRS to file a refund claim.

4. Refund Claim Payment Rules
I.R.C. § 6532 provides the rules for taxpayers to bring a suit for a refund of taxes,
penalties, or other sums.
General rule is that no suit or proceeding under I.R.C. § 7422(a) can be started
before the expiration of six months from the date of filing the claim, unless the IRS
renders a decision within that time, nor after the expiration of two years from the
date of mailing by certified or registered mail by IRS to the taxpayer of a notice of
the disallowance of the part of the claim.
The two-year period can be extended by agreement in writing between the
taxpayer and the IRS.

5. Refund Claim Payment Rules (Continued)
I.R.C. § 6514 bars the IRS from making refunds or credits after the two year
period to bring suit has lapsed.
This is true even if the taxpayer file a timely refund claim and the IRS just did not
get around to processing the refund claim timely.

6. The Two Options When Time Has Not Expired
If the IRS has not yet made payment on a refund claim within two years after the
IRS has issued a claim disallowance notice, the taxpayer has two options:
1. Bring suit in district court or the Federal court of claims.
2. Get a Form 907 signed by the IRS.

7. The Form 907 Agreement to Extend Time
The Form 907 is the form the taxpayer has to get signed by the IRS to extend the
two year period to file suit.
Potential problems with the Form 907:
1. The taxpayer has to know of the form and know when the two year period will
expire.
2. The taxpayer has to find someone at the IRS who can and will sign the Form
907.

8. Refund Claims in IRS Appeals
This issue often comes in cases that have been sent to the IRS Office of Appeals.
IRS Appeals may not work the case timely (or may be given a case late in the two
year period).
IRS Appeals can sign the Form 907 if the issue is discovered prior to the two year
period expiring.
Problematic cases involve refunds in which a refund claim was not filed. IRS
Appeals can still sign the Form 907 if there is a valid “informal refund claim” that
was submitted. The protest submitted to IRS Appeals may even be treated as an
“informal refund claim.”

9. Consequences
Refund claims that are not paid by the IRS before the expiration of the two year
period to file suit may be lost.
Taxpayers have to be vigilant and proactive in extending the two year period if the
IRS owes a refund and is not working the case diligently.

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