Applying an overpayment to another liability is not a refund-claim disallowance

Plain-English summary

Chief Counsel Advice clarified that the IRS did not disallow a taxpayer's refund claim when it determined that an overpayment existed and applied the overpayment to an outstanding liability for another tax year. The taxpayer may have believed the claim was denied because no refund was received, but the advice distinguishes a credit of an overpayment from a claim disallowance. The advice states that the question about notice of claim disallowance and the related refund-suit period was therefore moot. It also notes that IRC section 6402(l) requires notice when the IRS actually disallows a claim.

Ruling snapshot

• Question: Did applying an overpayment to another outstanding tax liability disallow the taxpayer's refund claim?
• Outcome: Advice given
• Key authorities: IRC § 6402(l)

Full text (IRS public release)

ID: CCA_2011011214284722 Number: 201115018
Release Date: 4/15/2011
Office: -----------
UILC: 6402.00-00

From: ---------------------
Sent: Wednesday, January 12, 2011 2:28:50 PM
To: -----------------
Cc: --------------------------------------
Subject: FW: RESPONSE: TAO issued on 12/15/2010

Per our discussion, I would like to clarify the following two sentences in ----------- advice:

The IRS effectively denied that refund claim when it instead credited the overpayment to -------. (A side
question is whether the IRS notified the taxpayer of the denial so as to start the 2 year period for filing a
refund suit? )

While the taxpayer may have thought the IRS denied his refund claim for tax year -------
because he didn't receive a refund for that year, the IRS did not disallow the claim;
rather, the IRS determined that an overpayment did exist for that year, and then applied
that overpayment to the outstanding tax liability for tax year -------. (----------had used the
words "effectively denied" to try to convey that point, but I wanted to be sure you weren't
mislead by the sentence). In addition, because the IRS did not disallow the claim, the
parenthetical with the side question is moot. (Note, however, that when the IRS does
disallow a claim, IRC section 6402(l) requires that the IRS give the taxpayer a notice of
claim disallowance to explain the disallowance).

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Let me know if you have any questions.

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