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Refund Claim Denied Because The Taxpayer Was Not Financially Disabled


Posted on May 05, 2015

In a recent case, the United States District Court of Federal Claims denied a taxpayer’s claim for a refund in the amount of $48,489.00 because the refund statute of limitation for the taxable year 2001 had expired and the taxpayer was found not to be financially disabled.

Normally, a claim for refund must be filed with the IRS within three years from the due date of the tax return or two years from the date tax was paid, whichever is later. Because the refund statute of limitation for 2001 had expired, the IRS refused to release the refund in the amount of $48,489.00.

Because the taxpayer had since died, the Estate made the argument that the taxpayer was financially disabled. Under the Internal Revenue Code, financially disabled actually means mentally or physically impaired. Although the taxpayer suffered from certain age-related ailments including memory loss, the Court held in favor of the IRS and denied the claim for refund. Because the taxpayer engaged in a full range of activities during his final years, including cooking meals, clothing himself, handling his financial and personal affairs including banking, grocery shopping and laundry, the Court took the position that the taxpayer was not financially disabled under the Internal Revenue Code.

Tax Law Lessons Learned:
The IRS definition of financially disabled is physically or mentally disabled, not elderly.
Be sure your file your taxes in a timely manner (3 years from due date or 2 years of date they were paid) to avoid losing your refund.

Has the IRS denied one of your refunds because the refund statute of limitation expired? Were you or a loved one ill during that time?

Call us, we can help.


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