LO57 On April 3 2015 Luis filed his 2014 income tax return w

LO.5,7 On April 3, 2015, Luis filed his 2014 income tax return, which showed a tax due of $75,000. On June 1, 2017, he filed an amended return for 2014 that showed an additional tax of $10,000. Luis paid the additional amount. On May 18, 2018, Luis filed a claim for a 2014 refund of $25,000. a. If Luis\'s claim for a refund is correct in amount, how much tax will he recover? b. What is the period that govermment-paid interest runs with respect to Luis\'s claim for a refund? How would you have advised him differently? c.

Solution

a.       Only $10,000. Because the refund claim was not filed within three years of the filing of the return, Luis is limited to the amount he actually paid during the last two years (i.e., $10,000). § 6511(b)(2)(B).

b.      Luis is not entitled to interest on the $10,000 unless the IRS failed to make the refund within 45 days of the amended-return filing date (May 18, 2018). If the refund is not made by July 2, 2018, interest accrues from the date of the now-discovered overpayment (June 1, 2017) through the refund payment date. § 6611(e), Reg. § 301.6611-1(j).

c.       The amended return should have been filed by April 3, 2018, to allow a refund of the full $25,000 and interest thereon.