Income tax deductions, federal income tax arena, limitation of actions


Individual taxpayers frequently realize that a tax return filed with the IRS needs to be changed for various reasons that may include: previously estimated amounts may later be discovered to have been in error, prior ignorance may have been rectified, or new interpretations of law may have been rendered by the courts or the IRS. The need to adjust a previously filed return may be discovered in the year of filing, or several years later.

State and federal laws generally create statutes of limitation that let the parties to litigation know when the deadlines for bringing the suit expire. Sometimes these statutes are procedural or jurisdictional, such that the court has no jurisdiction to hear the case if the limitations period has passed. At other times, the statute simply bars the recovery. However, in tax law, it may be necessary to litigate the entire case before it can be ascertained which statute of limitations applied. Once it is determined, it may turn out that the statute was jurisdictional, thus, the court never had jurisdiction to hear the case, or it may bar the recovery. This article discusses the unusual maze that must be navigated by a taxpayer desiring to file a claim for refund resulting from a change in a previously filed return. The scope is limited to an individual and an unusual specific set of facts. However, the general principles illustrate the problems that may be encountered by practitioners and taxpayers in this otherwise seemingly straight forward area.

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