The United States Code of Federal Regulations Specificity Requirement with Respects to Internal Revenue Service Refund Claims

November 24, 2021

            While taxpayers may be familiar with their ability to claim a refund in instances they have overpaid towards their tax liability, taxpayers must understand that they need to give the Internal Revenue Service a fair opportunity to administratively determine whether it should grant a refund. It is established by case law and statutory law that the Internal Revenue Service is entitled to reject a refund claim when it is not given adequate direction for the premise underlying the refund claim. 

            While the refund claim specificity requirement has been longstanding, instances where the Internal Revenue Service had denied taxpayers’ refund claims on the basis that the refund claim was not specific enough have been more frequently litigated as of late.  United States federal courts have specifically heard three cases involving Internal Revenue Service objections to the taxpayers’ refund claims in 2021.  These cases include Premier Tech v. United States, No. 2:20-cv-890-TS-CMR (D. Utah 2021); Intermountain Electronics v. United States, No. 2:20-cv-00501-JNP (D. Utah 2021); and Harper v. United States, 847 F. Appx. 408 (9th Cir. 2021).

            The specificity requirement in which has been heavily litigated this year is set forth in the United States Title 26 Treasury Regulations.  The requirements for specificity are set forth in the United States 26 Code of Federal Regulations § 301.6402-2(b)(1) and states the following, “The claim must set forth in detail each ground upon which a credit or refund is claimed and facts sufficient to apprise the Commissioner of the exact basis thereof. The statement of the grounds and facts must be verified by a written declaration that it is made under the penalties of perjury. A claim which does not comply with this paragraph will not be considered for any purpose as a claim for refund or credit.”

            In addition to the fact that the Internal Revenue Service is more frequently denying refund claims based on taxpayers not meeting the specificity requirement, it is particularly significant that taxpayers are aware of the specificity requirements given the limited time allotted to taxpayers to claim a refund to the Internal Revenue Service.  Pursuant to United States Code § 6511(a), the period of limitation on a taxpayer filing a refund claim is the later of within three years from the date the return was filed or 2 years from the time the tax was paid.  Therefore, because of the period of limitation to file a refund claim, it is very important taxpayers do not fail the specificity requirements as they may run out of time to properly claim a refund after the Internal Revenue Service rejects their original claim. 

            While these requirements may on its face appear to be straight forward, there involves nuances with ensuring taxpayers meet the specificity requirements.  Taxpayers must ensure that they (1) use the proper form when claiming refunds, (2) adequately set forth the relevant facts underlying the situation giving rise to the refund, and (3) the legal grounds that entitle the taxpayers to a refund claim.  Failure to adhere to any of these requirements could deem the taxpayer’s refund claim inadequate.

            Ultimately, taxpayers can save a lot of money simply by being aware of this procedural requirement when making refund claims.  If you believe you qualify for a refund from the Internal Revenue Service, please do not hesitate to contact our firm if you have any questions. 

Author: Rami M. Khoury, Attorney