Dear Tax Talk,
The IRS demanded that I file 2010 taxes a couple of times. On the last request, I filed the 2010 return and had expected a refund. Instead of getting a letter from the IRS stating a check was on the way, I received a letter stating it cannot be paid because it was outdated. They were willing to fine me, but are not willing to refund me.
— Gloria

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Dear Gloria,
I am sorry to hear that you were not able to receive your refund. Unfortunately, this is one of those life learning experiences that in retrospect would not have happened if you had filed your return within three years of the due date. And yes, if you had owed tax with your late return, then you would have been hit not only with interest, but also penalties for late filing and late payment. The lesson to learn is, file your taxes on time!

How the U.S. tax system works

Our tax system is based on “voluntary tax compliance,” which means that it is your responsibility to file your tax return, report your income and calculate the amount of taxes that are due. Because the IRS has the right to audit tax returns to ensure that everyone is paying the taxes that are due, Congress instituted what is known as the IRS statutes of limitations. This means there is a deadline for the IRS on how long they can assess additional taxes and penalties once a return is due or filed, whichever is later. The time period is generally three years.

So what does all of this have to do with you not receiving your refund on your taxes for 2010?

The statutes of limitations not only limits the IRS in assessing additional tax on returns filed, but it also limits the amount of time you have to claim a refund or credit due. If the three-year deadline for filing has passed, the IRS, by law, cannot issue your refund. As you can see, the statutes of limitations go both ways for the taxpayer and the IRS.

The difference is that while the IRS has three years from when the return is due or filed, whichever is later, the taxpayer only has three years from when the return is due. In your case, if you had owed the IRS additional tax, then it would have been due. Since you were due a refund and the return was not filed within three years of the due date, then the IRS could not issue your refund.

Your 2010 Form 1040 was due on April 15, 2011, and three years from then would have given you until April 15, 2014 to file the 2010 return and claim your refund.

Exception to the IRS statutes of limitations rule

Sometimes three years is not long enough for either the taxpayer or the IRS, so there are instances where the statutes of limitations can be extended with the IRS. But everyone has to agree to this before the statutes of limitations expire.

Thanks for the great question and all the best to you going forward on receiving your tax refunds.

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