A claim is for refund only if allowance would return money to the taxpayer

Plain-English summary

Chief Counsel explained how to distinguish a refund claim from a claim that merely seeks to reduce an unpaid assessment. A balance due when the claim is filed does not decide the issue. The key question is whether allowing the claim would eliminate the balance and require the IRS to return part of what the taxpayer already paid. If allowance would only reduce a remaining balance, the request is an abatement claim and cannot support a later refund suit. If later payments create an overpayment, the taxpayer can file a new refund claim subject to the deadlines applicable to those payments.

Ruling snapshot

• Question: Is a request filed while tax remains unpaid a refund claim or only an abatement claim?
• Outcome: Advice given (the result after allowance controls; a claim seeking returned money is a refund claim).
• Key authorities: IRC § 6402.

Full text (IRS public release)

ID: CCA_2021043011153740
UILC: 6402.00-00

Number: 202137009
Release Date: 9/17/2021
From: ---------------------
Sent: Friday, April 30, 2021 11:15:38 AM
To: -----------------------------------
Cc:
Bcc:
Subject: FW: Possible 105C letter discrepancy

Hi ----------------. Here is guidance from --------. Let me know if you still have questions,
and then perhaps we should have a call.

If the claim asks for a refund, then it is a claim for refund. A balance-due at the time of
the claim is irrelevant. What matters is if there would be a balance-due even if the claim
is allowed.

Example I

$10k liability reported and assessed.
$8k paid
$2k balance-due
Claim filed alleging the liability is actually $7k

This is a claim for refund. If allowed, the $2k balance -due would be abated as being
excessive. Further, $1k would be refunded as an overpayment ($8 paid - $7k liability =
$1k overpayment)

Example II

$10k liability reported and assessed.
$8k paid
$2k balance-due
Claim filed alleging the liability is $8k

This is a claim for abatement. If allowed, $1k of the $2k balance -due would be abated
as being excessive. The claim does not seek any refund.

In both situations there was a balance-due. That is not relevant. The distinguishing
feature between the two claims is that in the first, the taxpayer is asking for a
refund. The denial of this claim can form the basis of jurisdiction in a later court
2

action. In the second, the taxpayer is not asking for a refund. This second claim would
not form the basis of a justiciable controversy. However, that is not a problem. The
taxpayer will ALWAYS be able to sue for refund if he/she/it is ever put into an
overpayment situation, because that could only happen prospectively, and there will be
new claim-filing deadlines with respect to any claims that seek the return of prospective
payments (whether voluntary or not).