So you overpaid your federal income taxes, life got busy, and you forgot to file a return to claim your refund. You’ll get around to it — but will you get around to it in time to get your money back?
The time limit for claiming your refund is called the statute of limitations. The general rule for your federal income tax return is that you have either two or three years to file a refund claim. Specifically, you have to file the claim within three years from the time you filed the tax return or within two years from the time you paid the tax, whichever period expires later.
Worse, there’s a wrinkle you may not expect: When you haven’t filed a return, the two-year period applies.
And more bad news: Even if you file your claim within the proper two-year time period, your refund could be limited further by a “lookback rule.” This rule says you can only get a refund for the tax actually paid during those two years. The outcome? Estimated taxes or withheld federal income taxes may fall outside the time period. That means those amounts might not be recoverable.
Be aware that other time limits apply in certain circumstances, such as when your overpayment is due to a bad debt.
Give us a call. We’ll help you sort out the rules.