August 6, 2019 - Douglas Myser

  Court rules in favor of late tax filer. In our ongoing series designed to keep abreast of case related to Tax Court issues, we want to focus on a case in the Second Circuit.  This federal appeals court overruled the Tax Court and sided with a taxpayer who overpaid her taxes and later filed for a refund. The Second Circuit Court of Appeals, considering an issue of first impression, reversed a Tax Court decisions that denied a taxpayer seeking a refund of her over payments of 2012 income taxes.. The IRS did not dispute that she overpaid the amount of her tax bill but argued==and the Tax Court agreed== that the Tax Court lacked jurisdiction to order a refund or credit of the over payment. Court rules in favor of late tax filer.

   Code Section 6512(b)(3) limits the jurisdiction of the Tax Court to order refunds or credits of over payments. On appeal, the taxpayer argued that the Tax Court's interpretation of section 6512(b)(3) is unreasonable and inconsistent with congressional intent. Rebecca Borenstein filed a petition with the Tax Court on September 16th, 2015, seeking a re-determination of her 2012 deficiency and a refund of her over payment. The Tax Court ruled that it lacked jurisdiction, since under section 6512 (b)(3) of the tax code, Borenstein was only entitled to a two year back period for any refund. Since the over payment occurred more than two years prior to the mailing of the notice of deficiency, the Tax Court said it lacked jurisdiction to order a refund. Court rules in favor of late tax filer.

A taxpayer who files a tax returns, and within three years after that filing is mailed a notice of deficiency from the Commissioner, is entitled to a look back period of at least three years. However, prior to Congress's amendment of the governing statute, a taxpayer who had not filed a return before the mailing of a notice of deficiency--like Borenstein--was entitled only in a default two year look back period. Accordingly, Congress, seeking to extend the look back period available to such non-filing taxpayers, provided that if a notice of deficiency is mailed "during the third year after the due date (with extensions) for filing the return," and if no return was filed before the notice of deficiency was mailed, the applicable look back period is three years. This is called the "Bush language" of 26 U.S.C. Section 6512 (b)(3).

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