In order to file a proper claim for refund, the practitioner should use Form 1040X (individual return), Form 1120X (corporate income return), or Form 843 (refund of taxes other than income taxes), or whatever form the Service has designated. Although informal claims for a refund have been held to be sufficient, informal claims for refund must be in writing, apprising the IRS that the taxpayer is requesting a refund and identifying the relevant tax periods involved.
INFORMAL CLAIM FOR REFUND. An “informal claim” is generally considered adequate if it is in writing; includes a request for a refund/credit for certain years or periods; and informs the IRS of the basis for the overpayment and provides sufficient information as to the tax and year to allow the IRS to examine the claim. Claims filed on inappropriate forms or provided during an examination have sometimes been held to be valid, see United States v. Kales, 314 U.S. 186 (1941).[i] Such claims have also been held to be invalid.[ii]
INFORMAL CLAIM DOCTRINE. In PALA, Inc. Employees Profit Sharing Plan & Trust Agreement v. United States,[iii] the Court of Appeals for the Fifth Circuit explained the informal claim doctrine:[iv]
PALA argues that, although it never filed a 1041 refund claim within the limitations period, it presented a timely “informal claim.” While its theoretical underpinnings remain shrouded in some obscurity,[v] the informal claim doctrine has received the endorsement of the Supreme Court.[vi] According to this doctrine, an informal claim is sufficient if it is filed within the statutory period, puts the IRS on notice that the taxpayer believes erroneous tax has been assessed, and describes the tax and year with sufficient particularity to allow the IRS to undertake an investigation.[vii] Although an informal claim may include oral communications, it must have a written component.[viii] There are no “hard and fast rules” for determining the sufficiency of an informal claim, and each case must be decided on its own facts “‘with a view towards determining whether under those facts the Commissioner knew, or should have known, that a claim was being made.’”[ix] However, it is not enough that the IRS merely “has information somewhere in its possession from which it might deduce that the taxpayer is entitled to a refund. . . .”[x]
Even if PALA had filed a timely informal claim, this claim was not subsequently amended by a formal claim. Informal claims have been likened to pleadings, for which technical deficiencies generally can be corrected by amendment so as to relate back to the original date of filing suit.[xi] Similarly, courts will excuse “harmless noncompliance” with the formalities prescribed for refund claims.[xii] However, the doctrine is predicated on an expectation that these formal deficiencies will at some point be corrected.[xiii] Moreover, if the IRS rejects the informal claim after the statutory period has expired, the claim cannot be amended.[xiv]
Several other cases also have dealt with the informal claim doctrine. In Kaffenberger v. United States,[xv] the issue before the court was whether a Form 4868, “Automatic Extension Request,” for filing a Form 1040 could be used to satisfy the requirements of an informal claim. In holding that it could, the court provided an outstanding review of the law in this area, stating:
The Kaffenbergers argued to the jury, apparently successfully, that they had made an informal claim for refund when they designated that $26,700 of a prior credit be applied to their 1990 tax liability on the Form 4868 Automatic Extension Request, filed on April 15, 1991, well within three years and six months of April 15, 1990. On appeal, the government argues that there is no evidence to support the jury’s finding that the Kaffenbergers made an informal claim for refund. . . .
U.S. TREASURY REGULATIONS. Treasury regulations specify what is required of a taxpayer to file a valid claim for refund or credit of taxes previously paid. See 26 C.F.R. § 301.6402-2(b)(1); § 301.6402-3(a). Although the regulation states that a claim that fails to comply with the requirements will not be considered as a claim for refund, § 301.6402-2(b)(1), the Supreme Court has endorsed informal claims filed within the statutory period that have technical deficiencies, as long as a valid refund claim is subsequently made after the period has run. . . . In essence, an informal claim that puts the IRS on notice that a claim is being made tolls the statute of limitations until the deficiencies are corrected in a subsequent refund claim. . . . Generally, “an informal claim is sufficient if it is filed within the statutory period, puts the IRS on notice that the taxpayer believes erroneous tax has been assessed, and describes the tax and year with sufficient particularity to allow the IRS to undertake an investigation.” PALA, Inc. Employees Profit Sharing Plan and Trust Agreement v. United States, 234 F.3d 873, 877 (5th Cir. 2000).
The sufficiency of an informal claim depends on the individual facts of each case, “with a view towards determining whether under those facts the Commissioner knew, or should have known, that a claim was being made.” Id. (internal quotations omitted). Failure to specify the year does not necessarily defeat the informal claim if other facts suffice to put the IRS on notice of the specific refund sought. See id. at 878 (“The fact that PALA’s letter does not specifically mention the year 1991 is irrelevant. . . .”). . . . An informal claim which is partially informative may be treated as valid even though “too general” or suffering from a “lack of specificity”—at least where those defects have been remedied by a formal claim filed after the lapse of the statutory period but before the rejection of the informal request.
At a bare minimum, the Kaffenbergers’ informal claim had to contain a written component within the statute of limitations, and must have been followed by a formal claim that remedied any defects in the informal claim. The Form 4868 Automatic Extension Request, which reflected “other payments and credits” of $26,700 and which was filed on April 15, 1991, satisfies the written component. Further, Form 4868 contained the Kaffenbergers’ signatures and declarations under penalties of perjury that the information was correct. . . . There is no dispute that the 1989 Form 1040, which was filed on July 29, 1994, and requested a refund of $38,309, and the 1989 Form 1040X, which was filed on September 26, 1995, and requested a refund of an additional $3,286, made formal claims for refund, albeit untimely ones. These forms satisfy the minimum requirements for an informal refund claim.
Whether the remaining facts and circumstances satisfy the informal claim doctrine is highly fact intensive. “No hard and fast rules can be applied because it is a combination of facts and circumstances which must ultimately determine whether or not an informal claim constituting notice to the Commissioner has been made. Necessarily each case must be decided on its own peculiar set of facts. . . .” Newton v. United States, 143 Ct. Cl. 293, 163 F. Supp. 614, 619 (Ct. Cl. 1958) (rejecting Commissioner’s application of “guiding principles” distilled from prior cases).
In making this factual inquiry, it is important to note that the written component within the statutory period—Form 4868 in this case—need not contain all of the information necessary to put the IRS on notice that a refund was being sought. The written component “should not be given a crabbed or literal reading, ignoring all the surrounding circumstances which give it body and content. The focus is on the claim as a whole, not merely the written component.” Estate of Hale v. United States, 876 F.2d 1258, 1262 (6th Cir. 1989). . . .
Shortly after filing Form 1040 for the 1988 tax period, directing that a $26,794 overpayment be applied to 1989, the Kaffenbergers received a notice dated April 15, 1991, that they were entitled to a refund of $26,770. Evidence introduced at trial revealed that that type of notice normally is not sent when a refund is to be applied to the following year’s tax liability. The Kaffenbergers filed Form 4868 the same day, notifying the IRS that they wanted $26,700 of “other payments or credits” to be applied to their 1990 liability. The IRS also had Form 4868 for 1989 on file, with which the Kaffenbergers had paid $35,000 for estimated payments toward their 1989 tax liability. Thus, at the time the IRS received Form 4868 for 1990 in April 1991, the IRS knew that the Kaffenbergers were entitled to a refund of $26,770, that the Kaffenbergers had requested that the refund from 1988 be applied to their 1989 liability, that the Kaffenbergers had paid $35,000 in estimated payments toward their 1989 liability, that the IRS had recently sent the Kaffenbergers a notice of refund for the same $26,770 the Kaffenbergers had asked to be applied to their 1989 liability, and that the Kaffenbergers had requested $26,700 from “other payments and credits” be applied to their 1990 liability.
The government argued that the Kaffenbergers’ failure to include the $26,700 amount on the line for “1989 overpayments allowed as a credit” on the Form 4868 contradicts the Kaffenbergers’ assertion that they were claiming a refund from 1989. The jury apparently did not buy that argument, however. We believe that the jury’s implicit finding that there is no inconsistency is supported by the evidence, particularly in light of the fact that as of April 15, 1991, the Kaffenbergers had not filed their 1989 Form 1040, so that the exact amount of the overpayment for 1989 was unknown at that time.
In these unique factual circumstances, we cannot say that any error by the district court in entering judgment based on the jury’s special verdict was obvious. See Gustin v. United States Internal Rev. Serv., 876 F.2d 485, 488 (5th Cir. 1989) (“There are no hard and fast rules for evaluating the sufficiency of an informal claim, and each case must be decided on its own particular set of facts. . . .”). We believe these facts were sufficient to put the IRS on notice, as of April 1991, that the Kaffenbergers were claiming a refund of $26,700 and that the information held by the IRS described the refund sought with sufficient particularity to allow the IRS to investigate the claim. These facts are not so different from other factual scenarios in which courts have found an informal claim that we could say that the jury’s verdict was plainly erroneous. See, e.g., Penn Mut. Indemn. Co. v. Commissioner, 277 F.2d 16, 18, 19 (3d Cir. 1960) (holding that a letter attached to a return protesting the constitutionality of the tax and refusing to pay the tax shown due on the return was an informal claim); Cumberland Portland Cement Co. v. United States, 122 Ct. Cl. 580, 104 F. Supp. 1010, 1013–14 (Ct. Cl. 1952) (finding an informal claim where Commissioner notified taxpayer of overassessment and informed taxpayer of need to file Form 843 to protect itself against the running of the statute of limitations, where taxpayer sent letter asking that “a prompt settlement be made in this matter of overassessment” with its signed “Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment,” but did not timely file Form 843, as instructed by the Commissioner); Night Hawk Leasing Co. v. United States, 84 Ct. Cl. 596, 18 F. Supp. 938, 941 (1937) (finding that notation on the back of a check stating “This check is accepted as paid under protest pending final decision of the higher courts” was a valid informal claim). Because we affirm the jury’s determination that the Kaffenbergers made a sufficient informal claim for refund within the statute of limitations, they are entitled to a refund of $26,700 from 1989.[xvi]
In Mobil Corporation v. United States,[xvii] the United States Court of Federal Claims was presented with the question as to whether a taxpayer’s discussion with the IRS about interest calculation could constitute an informal claim. In holding that such discussion could not, where the discussions took place after the statute of limitations had expired, the court stated:
TIMELY FILING OF INFORMAL CLAIM REQUIRED. The informal claim doctrine permits a taxpayer to rely upon informal submissions to the IRS in some circumstances, but they must be made within the period established by I.R.C. § 6511 for filing refund claims. The Court of Claims stressed that although an informal claim may lack the requisite formality, it must be filed within the statutory period for filing a formal claim. . . .
Any other approach would favor informal claims over formal claims. A formal claim must be filed timely. It follows that an informal claim providing the same information also would be subject to the applicable statute of limitations. The informal claim doctrine does not apply in these circumstances.[xviii]
In Commissioner v. Ewing,[xix] it has been held that submission of Form 8857, “Request for Innocent Spouse Relief,” cannot be deemed to be an informal claim. The court stated: Ewing contends in her cross-appeal that the Tax Court erred in failing to grant her a refund. We reject her contention because she failed to raise it below, and she has failed to demonstrate any exceptional circumstances why we should consider it. See Kochansky v. Commissioner, 92 F.3d 957, 959 (9th Cir. 1996) (declining to consider an argument not raised in the Tax Court); Monetary II Ltd. P’ship v. Commissioner, 47 F.3d 342, 347 (9th Cir. 1995) (deeming an argument waived where the petitioner did not raise it in the Tax Court and provided no justification for the failure to do so).
Ewing did not raise the issue of a refund in the Tax Court. Her Form 8857, Request for Innocent Spouse Relief, contained no request or claim for a refund. We disagree with Ewing’s contention that her request for relief in Form 8857 constituted an informal claim for a refund. Unlike Washington v. Commissioner, 120 T.C. 137, 2003 WL 1905643 (2003), on which she relies, Ewing’s statement attached to her Form 8857 merely stated that her tax liability for 1995 was zero. By contrast, the petitioner in Washington specifically requested tax refunds with interest for each of the tax years in question. See id. at 162.
Furthermore, Ewing is not entitled to a refund because she failed to comply with the requirements of I.R.C. §§ 6015(g) and 6511. We reject Ewing’s contention, raised for the first time in her reply brief as cross-appellant, that the doctrine regarding an informal claim for a refund, described in United States v. Kales, 314 U.S. 186, 62 S. Ct. 214, 86 L. Ed. 132 (1941), applies to her case. The doctrine addresses whether an informal claim for a refund should stop the running of the statute of limitations for a refund claim. First Sec. Bank of Idaho, N.A. v. Commissioner, 592 F.2d 1046, 1049 (9th Cir. 1979). It is concerned with claims that are “deficient merely in one or two of the technical requirements imposed by the Treasury regulation [26 C.F.R. § 301.6402-2(b)(1)].” BCS Fin. Corp. v. United States, 118 F.3d 522, 524 (7th Cir. 1997); see also Kaffenberger v. United States, 314 F.3d 944, 954 (8th Cir. 2003) (citing Kales and stating that “the Supreme Court has endorsed informal claims filed within the statutory period that have technical deficiencies, as long as a valid refund claim is subsequently made after the period has run”). There is no evidence that Ewing made a technically-deficient claim within the statutory period. Furthermore, any such informal claim “must have been followed by a formal claim that remedied any defects in the informal claim.” Id. at 955. The informal claim doctrine accordingly does not apply. For all of these reasons, we dismiss Ewing’s cross-appeal.[xx]
Similarly, in Barker v. United States,[xxi] another claim founded on being an innocent spouse, when the taxpayer filed after the statutory period of time, although the court recognized the informal claim doctrine, that doctrine could not apply on the instant facts: Plaintiff cannot overcome this lack of timeliness by pointing to the fact (alleged in her complaint) that she first contacted the IRS in 1995 to inquire about the refund of her 1994 overpayment. Although the case law recognizes that a claim for refund may be informal, i.e., the refund claim need not meet all of the requisites specified by regulation in order to be considered legally sufficient, at a minimum the taxpayer must demonstrate that through his or her dealings with the IRS, the agency was put on notice, either actually or constructively, that a refund was being sought and the grounds therefor. Mobil Corp. v. United States, 67 Fed. Cl. 708, 716 [96 AFTR 2d 2005-6230] (2005). In addition, an informal claim for refund must have a documentary component—some form of writing that is probative of the intention to pursue a refund. Arch Eng’g Co. v. United States, 783 F.2d 190, 192 [57 AFTR 2d 86-1178] (Fed. Cir. 1986). Assessed against these requirements, plaintiff’s alleged contact with the IRS in 1995 is insufficient to qualify as an informal claim for refund. Yuen, 825 F.2d at 245 (holding that plaintiff’s verbal notice to the local IRS office that she was claiming innocent spouse relief did not constitute a valid refund claim).
It goes without saying, that relying on a properly filed formal claim for refund is infinitely better than relying on an informal claim. Nevertheless, the practitioner may sometimes be forced to rely on the informal claim doctrine to obtain a refund.
EDWARD M. ROBBINS, Jr. – For more information please contact Edward M. Robbins, Jr. –EdR@taxlitigator.com Mr. Robbins is a principal at Hochman, Salkin, Rettig, Toscher & Perez, P.C., the former Chief of the Tax Division of the Office of the U.S. Attorney (C.D. Cal) and represents clients throughout the United States and elsewhere involving federal and state, civil and criminal tax controversies and tax litigation. Additional information is available at www.taxlitigator.com
[i]. United States v. Kales, 314 U.S. 186 (1941); Watson v. United States, 246 F. Supp. 755 (E.D. Tenn. 1965). For a case regarding an informal claim where the taxpayer’s complaint withstood a legal challenge to the district court’s jurisdiction, see Salah v. United States, 87 A.F.T.R.2d 2001-1462 (7th Cir. 2001).
[ii]. Livermore v. Miller, 94 F.2d 111 (5th Cir.), cert. denied, 304 U.S. 582 (1938). Kaetz v. IRS, 83 A.F.T.R.2d 99-2536 (D. Pa. 1999), aff’d without published opinion, 225 F.3d 649 (3d Cir. 2000); Mobile Med. Support Servs. v. United States, 86 A.F.T.R.2d 2000-6760 (D. Conn. 2000). For a case involving an allegation of an informal claim where the taxpayer did not prevail, see Jackson v. Comm’r, T.C. Memo 2002-44 (letter in which the taxpayer informed the IRS that he believed he overpaid his taxes and was entitled to a refund did not qualify as an informal claim).
[iii]. PALA, Inc. Employees Profit Sharing Plan & Trust Agreement v. United States, 234 F.3d 873 (5th Cir. 2000).
[iv]. Id. at 877, 879. For the sake of consistency, footnote numbering follows the sequence already established in this text, not the actual sequence that is in the opinion. Also for the sake of consistency, although the cases cited in the opinion are in italics, roman type is used herein. Further, in the interest of brevity, some citations have been edited, and these are indicated by use of ellipses. Other minor modifications have also been adopted for purposes of style.
[v]. For an excellent discussion of the theoretical difficulties associated with the informal claim doctrine, see BCS Fin. Corp. v. United States, 118 F.3d 522, 524–27 (7th Cir. 1997) (Posner, C.J.).
[vi]. See United States v. Kales, supra.
[vii]. See Kales, 314 U.S. at 194–95; Gustin v. United States, 876 F.2d 485, 488; Bauer v. United States, 594 F.2d 44, 46 (5th Cir. 1979); Am. Radiator & Standard Sanitary Corp. v. United States, 162 Ct. Cl. 106 (1963).
[viii]. See Gustin v. United States, 876 F.2d 485, 489; Am. Radiator, 318 F.2d at 920. As the Court of Claims has stated, the informal claim must provide “clear and explicit” notice. Mo. Pac. R.R. Co. v. United States, 214 Ct. Cl. 623 (1977). See Bauer, 594 F.2d at 46.
[ix]. See Gustin, 876 F.2d at 488–89 (quoting Newton v. United States, 143 Ct. Cl. 293 (1958)).
[x]. Gustin, 876 F.2d at 489; see Am. Radiator, 318 F.2d at 920.
[xi]. See Fed. R. Civ. P. 15(c); United States v. Memphis Cotton Oil Co., 288 U.S. 62, 72–73 (1933) (Cardozo, J.). However, while the Supreme Court has embraced the pleadings analogy, it has also cautioned that this analogy “is not to be so slavishly followed as to ignore the necessities and realities of administrative procedure.” United States v. Andrews, 302 U.S. 517, 524 (1938).
[xii]. BCS Fin. Corp. v. United States, 118 F.3d 522, 524 (7th Cir. 1997) (Posner, C.J.).
[xiii]. See Kales, 314 U.S. 186; Memphis Oil Co., 288 U.S. at 72–73; BCS Fin. Corp., 118 F.3d at 524; Am. Radiator, 318 F.2d at 921–22; Tobin v. Tomlinson, 310 F.2d 648, 652 (5th Cir. 1962); Night Hawk Leasing Co. v. United States, 18 F. Supp. 938, 941–42; Hollie v. Comm’r, 73 T.C. 1198, 1216; Boris I. Bittker & Lawrence Lokken, Federal Taxation of Income, Estates and Gifts § 112.5.2 (2000).
[xiv]. See Tobin, 310 F.2d at 652; Hollie, 73 T.C. at 1216; Bittker & Lokken, supra, § 112.5.2.
[xv]. Kaffenberger v. United States, 314 F.3d 944 (8th Cir. 2003).
[xvi]. Id. at 954–56 (some citations and quotations omitted); acq. in part, A.O.D., 2004-35 I.R.B. 350.
[xvii]. Mobil Corp. v. United States, 52 Fed. Cl. 327 (2002).
[xviii]. Id. at 334–35. See also Goldin v. Comm’r, T.C. Memo 2004-129 (series of letters taxpayer sent to IRS did not give Service sufficient notice that she sought a refund of taxes paid). See also Mobil Corp. v. United States, 67 Fed. Cl. 708 (2005) (summary of informal claim doctrine and other administrative aspects of the problem).
[xix]. Comm’r v. Ewing, 439 F.3d 1009 (9th Cir. 2006).
[xx]. Id. at 1014–15 (footnote omitted).
[xxi]. Barker v. United States, 98 A.F.T.R.2d 2006-5741, 2006-5743 (Fed. Cl. 2006). See also Frontier Chevrolet Co. v. United States, 98 A.F.T.R.2d 2006-7321 (D. Mont. 2006) (discussing requirements for informal claim).