Magazine article Medical Economics

Better Late Than Never Doesn't Always Cut It When Claiming a Refund

Magazine article Medical Economics

Better Late Than Never Doesn't Always Cut It When Claiming a Refund

Article excerpt

The Supreme Court has reaf firmed a long-held deadline for claiming federal income tax refunds. In general, to claim a refund, you must request it within three years from the date when you should have filed your tax return, or two years from the time you actually paid your tax, whichever is later.

Taxpayer David H. Baral thought that he qualified for a refund based on the second stipulation. He filed his tax return for 1988 on June l, 1993-almost four years after it was due-and claimed a refund for $1,175, based on excessive withholding and estimated taxes. (His taxes had been due on Aug. 15, 1989, because he had previously filed for an extension.)

The IRS refused to refund the money because the "look-back" period had expired. In Baral's case, that period stretched from June 1,1993, back to Feb. 1,1990. It did not reach back to 1989.

Baral disagreed, arguing that withholding taxes and estimated tax payments are not income taxes until a return is filed. Therefore, payment of his taxes did not occur until June 1, 1993, when he filed his return (thus he had until June 1, 1995, to claim the refund). He appealed the IRS's decision to Federal District Court, then the Court of Appeals, and finally the Supreme Court.

The high court agreed with the lower ones, ruling that withheld and estimated tax payments are considered made on the date that taxes are due, which in Baral's case was April 15, 1989.

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