PDF Suppose you knew you owed some tax. And suppose the IRS agreed that you owed the tax.
Now suppose you paid the tax but the IRS returned the check and told you to keep the money.
Would you:
- Faint?
- Pinch yourself?
- Look for a hidden camera?
- All of the above?
That is essentially what the IRS told an unnamed taxpayer in a letter made public Dec. 30, 2010.
Normally, the IRS has three years after you file your return to assess additional tax, and normally you have the same three-year period to request a refund. The facts in the letter indicate that the taxpayer filed an amended return and paid the additional tax a few days after the three-year period expired. Actually, the taxpayer mailed the amended return on the last day of the period; but the IRS received it a few days later.
The IRS said that, because they received the money too late, they could not keep it.
This ruling can set up an ethical dilemma. Suppose you discover, after the fact, that you should have paid more tax. Would you file an amended return? Or would you wait out the three years, hoping the IRS doesn’t notice?