A Form 4868 extension listing an overpayment was not a valid "informal claim" for refund because it never stated the basis for the refund

Plain-English summary

To get a tax refund you generally have to file a claim within a deadline. Courts sometimes accept an "informal claim" that is imperfect, as long as it put the IRS on notice that a refund is sought and described the basis for it. Here a field office wanted to treat a taxpayer's Form 4868 (an automatic extension request) filed on 4/15/16 showing an overpayment as a timely informal claim for the 2015 year, relying on the Kaffenberger case. This Chief Counsel email advises that it does not qualify: the Form 4868 never told the IRS the basis for the refund, which is an essential part of the informal-claim doctrine. Kaffenberger is distinguishable because there the IRS already knew the basis and amount (it had sent the taxpayers a refund notice). Because there is no valid, timely claim, Appeals cannot sign a Form 907 (agreement extending the period to allow the claim). The lawyer also explains why the Action on Decision (AOD) in Kaffenberger does not help, and notes the importance of hiring a qualified return preparer.

Ruling snapshot

• Question: Was a Form 4868 showing an overpayment a valid informal
  claim for refund that would support signing a Form 907?
• Outcome: Advice given (no valid informal claim; no timely claim exists)
• Key authorities: IRC §§ 6402, 6511; Kales v. U.S., 314 U.S. 186
  (1941); Kaffenberger, 314 F.3d 944 (8th Cir. 2003)

Full text (IRS public release)

ID: CCA_2022070118142704

UILC: [6402.00-00, 6511.00-00]

[Third Party Communication:
Date of Communication: Month DD, YYYY]

Number: 202306008
Release Date: 2/10/2023

From: ---------------------
Sent: Friday, July 1, 2022 6:14:27 PM
To: -----------------
Cc: -------------------------------------------------------------------------------------------------------- Bcc: Subject: F907 for 7509982 - advice from ----------

I have now read your multiple emails and attachments and unfortunately do not have good news for you. In order to get Appeals to sign a Form 907, there needs to be a timely claim for refund (or in this case a timely informal claim for refund). You want to advocate that the Form 4868 filed by the taxpayer on 4/15/16 reflecting an overpayment of $----------was a timely informal claim for refund for the 2015 tax year, and you want to rely on Kaffenberger 314 F.3d 944 (Ct. Cl. 2003) plus the accompanying AOD.

Kaffenberger is somewhat contrary to many long-standing decisions involving the informal claim for refund theory. A valid informal claim has multiple components – 1) it must put the IRS on notice that the taxpayer is claiming a refund; 2) the claim must describe the basis for the refund; and 3) the claim must have a written component. See, e.g., Kales v. U.S., 314 U.S. 186 (1941). See also New England Electric System v. U.S., 32 Fed.Cl. 636, 641 (1995) (citation omitted). In the current case, the taxpayer's Form 4868 did not inform the IRS of the basis of the claim for refund. That is a critical component of the claim for refund theory. And I believe your situation is not analogous to the facts in Kaffenberger. Despite the lack of detail on the Form 4868 filed by the Kaffenbergers, the IRS had sufficient background information to understand the nature of the taxpayers' claim; in particular, the IRS knew at the time it received the Form 4868 that the taxpayers were entitled to a refund of $26,770.00 and the basis of that refund, as the IRS sent the taxpayers a notice informing them that they were entitled to a refund, and then the taxpayers subsequently filed the Form 4868. In the current case, however, I see nothing to suggest that the IRS knew the basis for any overpayment claimed by the taxpayer. So the Form 4868 by itself isn't a valid informal claim for refund. I consulted with one of the informal claim for refund experts in Counsel and he concurs. And to be clear – I am not saying that a Form 4868 could never be an informal claim for refund, as it is a facts and circumstances analysis. But based on the facts and circumstances as I understand them, no valid informal claim exists.

Let me also give a little background about the AOD, as I'm sure you saw that --------------
--------. Per CCDM 36.3.1, "[a]n AOD generally is not prepared on issues decided favorably to the Government, on issues conceded by the Government, or on insignificant issues decided adversely to the Government." The issue in Kaffenberger of whether the taxpayers had filed a valid informal claim for refund falls into the

2

"insignificant issues" category, as the issue of whether an informal claim has been filed is so fact-specific. So if that had been the only issue in the case, no AOD would have been issued. But the other issue in the case (whether you can extend the 2-year period for filing suit AFTER the period for filing suit has expired) was a big deal, as the 8th circuit's decision was contrary to Revenue Ruling 71-57. So Counsel felt it was necessary to publish an AOD. But Counsel wasn't prepared to say that the 8th circuit was wrong on the informal claim for refund issue, as again it was so fact-specific, and even the 8th circuit acknowledged in its decision "that this was a close case and may border on the outer reaches of the informal claim doctrine. It was by no means clear that the Kaffenbergers made an informal claim."

Again, I wish I had better news for you. (On a side note, I have to say that this is a good example of the importance of selecting a qualified return preparer – the return preparer should have known the importance of filing a timely claim for refund for 2015).

Have a great holiday weekend. We can talk more next week if you have any questions.

--------– please post in Form 4868 as Informal Claim for Refund, and close. Thanks.

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