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IRS Extends Lookback Period for Certain Refund Claims

S.J. Steinhardt
Published Date:
Feb 28, 2023

Taxpayers will now have more time to file tax refund claims for tax returns they filed earlier in the pandemic, according to a notice from the IRS.

Notice 2023-21 states that the period of time for refund claims for returns with due dates that were postponed by two earlier notices has been extended. 

Those two previous notices, Notice 2020-23 and Notice 2021-21, were issued under a section of the Tax Code that gives the IRS the authority to postpone certain deadlines in case of federally declared disasters—the COVID-19 pandemic in this case.

That section, 7508A(a), provides that “a period of up to one year may be disregarded in determining under the internal revenue laws, in respect of any tax liability of such taxpayer, whether the performance of certain acts is timely; the amount of any interest, penalty, additional amount, or addition to the tax for periods after such date; and the amount of any credit or refund,” according to the new notice.

Neither of the previous notices lengthened the lookback period for refund claims for such returns under the section of the Tax Code governing the limitation period on filing a claim for a credit or refund of any tax overpayment. The IRS explained, "Although Notice 2020-23 and Notice 2021-21 postponed certain return filing due dates, those notices did not extend the time for filing the returns because a postponement is not an extension. As a result, the postponements did not lengthen the lookback periods under § 6511(b)(2)(A)."

Without the new notice, some payments that taxpayers made that were deemed to have been paid on April 15 of each year for calendar-year taxpayers would have fallen outside of the lookback period if taxpayers filed their returns after April 15.  In such cases, a taxpayer couldn't be refunded those payments despite having filed a timely refund claim.

To remedy that situation, the new notice disregards the periods from April 15, 2020, to July 15, 2020, and from April 15, 2021 to May 17, 2021, in determining the beginning of the lookback period. This was done to align the lookback periods with the postponed return filing due dates.

National Taxpayer Advocate Erin Collins, in a blog post, hailed the decision, writing, "Good news: Earlier today the IRS issued Notice 2023-21 addressing the mismatch between the time for filing a claim for credit or refund and the three-year lookback period caused by postponing certain filing deadlines for filing seasons 2020 and 2021, which would result in the denial of timely claims for credit or refund for those taxpayers who took advantage of the postponed deadlines and who had withholding or estimated payments. Taxpayers will never know this was a potential problem as the IRS did the right thing and proactively fixed the lookback period to eliminate challenges and refund denials for taxpayers."

But she also opined that "this relief needs to be made permanent by amending IRC § 6511(b)(2)(A) in anticipation of any future circumstances in which the IRS exercises its authority and postpones filing deadlines for all disaster relief. This will provide a permanent solution every time the IRS provides disaster relief by postponing the filing deadline and thus ensure that taxpayers’ future claims for credit or refund won’t be denied for having taken advantage of this relief."

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