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Dear Tax Talk,
I am a senior tax adviser working for H&R Block. I prepared a tax return for 2003 for a gentleman who got
notification from the IRS that they did not have a tax return from him for that year.
He had overpaid his taxes for that year in excess of $5,000. He told me this year when he came
back to me that he received a letter from the IRS telling him that because he had waited so long to file for
2003, he would not be receiving that money. The IRS only pays for returns filed three years back. My question
is, can he use that amount as a deduction for this year's return, and if he can, where on the return can he
deduct it?
-- Yolanda
Dear Yolanda,
It's a shame your client lost all that money for
waiting around too long. It's also a shame that
you wasted your time, and his, preparing a return
for a closed year. Federal income taxes are never
tax-deductible for IRS purposes (some states do
allow a deduction for IRS taxes). Another way
of looking at it is he cannot claim a deduction
for the lost refund, as it would not have been
income if received.
There is a statute of limitations for claiming your overpaid taxes, and that is three years from the
due date of the original return. This generally means that if you did not file for 2004, you have until April 15 of
this year to claim any refund of taxes for that year.
If you miss this deadline, you can forget about any refund due to you. If you filed a first extension
for 2004, you have until August 15, 2008 to claim a refund for 2004. If you filed a second extension for 2004, you
have until Oct. 15, 2008 to claim that 2004 refund.
There is no statute of limitations when you owe the IRS. If the same client had owed for 2002 or any
other year, any refund that is barred by the statute of limitations for 2003 could not offset the balance owed. If
you're waiting around to file your taxes believing one year will offset another year, beware of the limitations
period.
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