Refund after the suit deadline would be erroneous

Plain-English summary

A taxpayer apparently filed a timely refund claim because Section 7503 extended the filing date, but the IRS incorrectly denied the claim as late. The taxpayer then did not bring a refund suit within the applicable period after disallowance. The IRS advised that Section 6514(a)(2) makes a refund erroneous if it is issued after the suit deadline expires without a timely suit, even when the IRS originally misread the claim-filing deadline under Section 6511. A late refund might still be possible only if the suit period was never validly triggered, such as when the disallowance notice was not sent by the method required by Section 6532.

Ruling snapshot

• Question: Could the IRS issue a refund after the refund-suit period expired when the underlying claim had been wrongly denied as untimely?
• Outcome: Advice given: no, unless the suit period was never validly triggered.
• Key authorities: IRC §§ 6511, 6514(a)(2), 6532, and 7503

Full text (IRS public release)

ID: CCA_2020111814425340
UILC: 6514.00-00

Number: 202125017
Release Date: 6/25/2021
From: ---------------------
Sent: Wednesday, November 18, 2020 2:42:53 PM
To: ------------------
Cc: ----------------------
Bcc:
Subject: RE: TAS Case Guidance Memo 07/28/2020 on 907 Agreements

Hi -------------. Take a look at IRC section 6514(a)(2). Here’s the language:

(A) CREDITS OR REFUNDS AFTER PERIOD OF LIMITATION
A refund of any portion of an internal revenue tax shall be considered erroneous and a credit of any
such portion shall be considered void-

2) Disallowance of claim and expiration of period for filing suit
In the case of a claim filed within the proper time and disallowed by the Secretary, if the
credit or refund was made after the expiration of the period of limitation for filing suit, unless
within such period suit was begun by the taxpayer.

The taxpayer in this case is out of luck based on my reading of the facts below. Yes, it appears
the IRS was wrong in denying the claim, as your facts suggest the claim was timely because of
the impact of IRC § 7503. But IRC § 6514(a)(2) is clear – if the IRS issues the refund after the
period for filing suit has expired and the taxpayer didn’t file a timely suit, then such refund is
erroneous. So it doesn’t matter if the IRS was wrong in its interpretation of IRC § 6511
regarding the timeliness of the claim. The only way I could see issuing a refund after the period
for filing suit has expired is if somehow the 2-year period for filing suit wasn’t actually triggered
(e.g., the 105C was invalid because it wasn’t sent by certified or registered mail as required by
IRC § 6532).

Can you send me the case guidance memo to which you are referring, as I don’t recall seeing any
such memo.

Sorry but I think this is a case where TAS can’t provide any help.

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