Statutes of Limitations on Claims for Refund or Credit
This is the second in a series of four articles on Statutes of Limitations (SOLs) that relate to California tax law. This month's article addresses common SOLs for claims for refund or credit that are unrelated to federal action. Future articles will cover SOLs for assessments resulting from federal actions and refund/credit claims resulting from federal actions, and miscellaneous SOLs for assessment and refund/credit.
- What is the general SOL for a taxpayer to claim a refund or credit?
R&TC Section 19306 specifies that a claim for refund or credit must be filed no later than (a) four years from the original due date of the return or (b) four years from the date the return is filed if the return was filed within the "automatic extension" period. Additionally, a claim for refund or credit is timely with respect to payments made within one year of the claim filing date (the "look back" provision).
The postmarked date of the claim is the date it is considered "filed," and the taxpayer has the burden of proving the claim is timely filed.
- How does the "look back" provision work?
The following example illustrates the "look back" provision of R&TC Section 19306. An individual taxpayer files a claim for refund for tax year 2003 on May 12, 2010. Since the taxpayer filed the claim more than four years after the original due date of the taxpayer's return (April 15, 2004), and more than four years after the latest date the taxpayer could have filed his return during the automatic extension period (October 15, 2004), the claim could not be allowed under the " four year" provision. However, if the taxpayer made any payments for tax year 2003 during the year prior to the date the claim for refund was filed, the claim, if meritorious, could be allowed to the extent of payments made during that one year period.
- What is an "informal claim for refund?" How does the statute of limitations apply to an "informal claim
Generally, a taxpayer must pay all tax and interest for a tax year before filing a claim for refund. If, however, a taxpayer files a claim for refund before all tax and interest for that tax year are fully paid, the claim may be considered an " informal claim for refund." (R&TC Section 19322.1). The statute of limitations will be tolled (paused) as of the date the informal claim is filed. The claim will not be deemed "perfected" and filed until all of the tax and interest for that year are paid. If the informal claim is perfected, the amount of a refund or credit is limited to the total payments made within seven years of the date the claim is "perfected."
- Are there any other circumstances under which the statute of limitations for claims for refund or credit will be
Yes. An individual taxpayer who (a) suffers from a medical condition that is either terminal or expected to last at least one year, and (b) is unable to manage his financial affairs, and (c) has not authorized anyone to act on his behalf may be considered a "financially disabled" taxpayer. If a taxpayer has established that he or she is "financially disabled," the statute of limitations will be tolled during the period of the taxpayer's financial disability. (R&TC Section 19316.) The taxpayer must submit documentation of the condition, along with a physician's statement, to meet his burden of proof as to financial disability. This statute applies to claims for refund where the statute of limitations had not expired by September 23, 2002. FTB 1564, Financially Disabled – Suspension of the Statue of Limitations, provides more detailed information and forms concerning financial disability.