In The Merry Wives of Windsor, William Shakespeare penned the famous line: “Better three hours too soon than a minute too late.” And such sentiments of time are certainly true in the tax world. One minute late may have certain consequences—particularly when there are so many deadlines for tax filings, payments, even claims for refund. In a recent decision by the Eighth Circuit Court of Appeals, the Court affirmed the lower court’s determination to dismiss the taxpayer’s lawsuit against the IRS. The taxpayer, the Court held, missed the period of limitation on filing a claim for refund, and, therefore, the Court did not have subject-matter jurisdiction
28 U.S.C. § 1346
Generally, federal district courts have original jurisdiction with respect to civil lawsuits brought against the United States for the recovery of taxes. Specifically, Section 1346(a)(1) provides as follows:
(a) The district courts shall have original jurisdiction, concurrent with the United States Court of Federal Claims, of:
(1) Any civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws . . . . [1]
Section 7422
However, a taxpayer may not maintain a lawsuit against the government unless (and until) a claim for refund has been filed with the Internal Revenue Services. Section 7422(a) describes the situation as follows:
(a) No suit prior to filing claim for refund
No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof.[2]
Section 6511
Further, the taxpayer must be cognizant of the limited time frame the taxpayer has to file a claim for credit or refund. This time frame is outlined in Section 6511(a):
(a) Period of limitation on filing claim
Claim for credit or refund of an overpayment of any tax imposed by this title in respect of which tax the taxpayer is required to file a return shall be filed by the taxpayer within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid. Claim for credit or refund of an overpayment of any tax imposed by this title which is required to be paid by means of a stamp shall be filed by the taxpayer within 3 years from the time the tax was paid.[3]
Anderson Tooling, Inc. v. United States[4]
On July 30, 2021, the Eighth Circuit Court of Appeals issued its decision, affirming the district court’s dismissal of Anderson Tooling, Inc.’s complaint based on lack of subject matter jurisdiction. Anderson Tooling, Inc. (“Anderson”) filed a civil lawsuit against the Internal Revenue Service in 2020, seeking the recovery of tax penalties and interest collected for certain tax periods.[5]
Anderson was assessed and paid penalties—a total of $193,270.28 in penalties—for failing to timely file its employment tax returns and pay its employment taxes for 17 tax periods involving 2008 through 2012. On October 30, 2017, Anderson filed Form 843, Claim for Refund and Request for Abatement, for each of the tax periods at issue. Nearly three years later, Anderson filed its complaint against the Internal Revenue Service under 28 U.S.C. § 1346(a)(1) and I.R.C. § 7422, seeking the recovery of tax penalties and interest. The government filed a motion to dismiss, and the district court granted the government’s motion. The district court’s decision was based, in part, on the following analysis:[6]
Plaintiff failed to clear this temporal hurdle by filing his administrative claim for refund with the IRS within the requisite time period. Plaintiff alleges it paid its final assessed late-payment penalty on January 8, 2013. Plaintiff was therefore required to file an administrative claim within two years of that date. Plaintiff did not file its Form 843 Claim for Refund and Request for Abatement until October 30, 2017, more than two years after the deadline. Therefore, Plaintiff’s administrative claim was untimely filed, the Government’s sovereign immunity is not waived, and the Court lacks jurisdiction over this matter.[7]
Conclusion
Anderson Tooling emphasizes the importance of Section 6511 with respect to a taxpayer’s claim for refund. The statute of limitations on a claim for refund is clear—the later of (a) three years from the time the return was filed, or (b) two years from the time the tax was paid. Here, the taxpayer failed under both thresholds, missing them by over two years. Further, this decision notes that informal refund claims (i.e., not using Form 843) must also fall within the statutory period and provide sufficient notice to the government regarding the assessment of taxes, penalties, and interest. Again, the taxpayer failed with respect to this issue as well. Taxpayers should ensure that basic threshold requirements are satisfied before bringing a claim against the Internal Revenue Service and plead facts sufficient to establish subject-matter jurisdiction.
Freeman Law aggressively represents clients in tax litigation at both the state and federal levels. When the stakes are high, clients rely on our experience, knowledge, and talent to help them navigate all levels of the tax dispute lifecycle—from audits and examinations to the courtroom and all levels of appeals. Schedule a consultation or call (214) 984-3000 to discuss your tax needs.
[1] 28 U.S.C. § 1346(a)(1).
[2] I.R.C. § 7422(a).
[3] I.R.C. § 6511(a).
[4] Anderson Tooling, Inc. v. United States, No. 21-1190, 2021 WL 3235872, at *1 (8th Cir. July 30, 2021).
[5] Anderson Tooling, Inc. v. United States, No. 4:20-CV-00187, 2020 WL 8299735, at *1 (S.D. Iowa Dec. 22, 2020), aff’d, No. 21-1190, 2021 WL 3235872 (8th Cir. July 30, 2021).
[6] Id.
[7] Id. at *2 (internal citations omitted).
