Informal Refund Claim Allowed

Taxpayers seeking a refund must file a claim within the time frames set out in IRC 6511.  The Johnsons did not file a formal refund claim for 2009 and 2010 before the time for filing a claim expired.  For some time, however, they worked with the local LTA office in an effort to resolve a number of account discrepancies.  One piece of correspondence with the LTA office focused on 2009.  The discussions about the situation and related correspondence gave the district court comfort in determining that taxpayers had put the IRS on notice of their claim for 2009.  These informal claim cases require scrutiny of the facts surrounding taxpayers’ interaction with the IRS.  The claim process exists to provide the IRS with an opportunity to consider a taxpayer’s request before litigation begins. The court framed the arguments of the parties:

The Government argues the January 28, 2015 fax is insufficient for an informal claim for a tax refund because Plaintiffs have not met the statutory requirements to invoke this Court’s jurisdiction. The Government contends Plaintiffs fail to allege their counsel requested a refund of any specific amount for the 2010 tax year, the January 28, 2015 fax is regarding the 2009 tax year but is not signed under penalty of perjury, and Plaintiffs’ conversations with TAS do not sufficiently inform the IRS of the factual basis for their tax refunds for 2009 and 2010. The Government maintains Plaintiffs’ failure to do either “deprives this Court of subject matter jurisdiction to hear the lawsuit.”

In opposition, Plaintiffs appear to argue the January 28, 2015 fax meets the requirements for the informal claim doctrine because the claim was submitted to Arndt (the case advocate in the LTA office who was working on the case), the amounts listed by year were specific, the TAS is a part of the IRS that works with all of the agency’s components, and Arndt was specifically working with account services to attempt to resolve Plaintiffs’ case.

We wrote a few years ago about a 9^th Circuit case, the controlling circuit here, in which the taxpayer filed an informal claim by making an injured spouse request.  I was a little surprised that the court in the Johnson’s case did not cite to the Palomares case but it did cite to numerous other cases involving the informal claim doctrine.

Courts have held that an “informal claim” is sufficient to meet the requirements of 26 U.S.C. §§ 6511 and 7422(a) and generally have allowed the taxpayer to file suit for a tax refund if the claim: (1) gives notice to the Commissioner of the IRS that the taxpayer is asserting a right to a credit or refund; (2) states the legal and factual basis for the claim or at least indicate the grounds for the claim; and (3) must be in writing or have a written component. Rhodes v. United States, 552 F. Supp. 489, 492 (D. Or. 1982) (“[T]he focus is on the claim as a whole, not merely the written component . . . the only essential is that there be available sufficient information as to the tax and the year to enable the [IRS] to commence, if it wishes, an examination of the claim.” (citing American Radiator & Std. San. Corp. v. United States, 318 F.2d 915, 920 (Fed. Cl. 1963))); Glodowski v. United States, No. CV-N-89-414-HDM, 1990 WL 54831, at *1-2 (D. Nev. Feb. 23, 1990), aff’d, 928 F.2d 1136 (9th Cir. 1991) (finding Plaintiff’s letter to the IRS requesting the return of his money insufficient for an informal written claim as it “appears to be a general indictment of the tax system” and lacks “specific allegations which alert the IRS to commence an examination into a claim for refund”); Roman v. United States, No. C 94-3269 TEH, 1995 WL 463669, at *3 (N.D. Cal. July 27, 1995) (finding plaintiff’s attempt, without explanation, to offset the alleged 1985 overpayment against her 1986 tax return was insufficient to inform the IRS she sought a refund for the payment made in 1985). “There are no hard and fast rules for determining the sufficiency of an informal claim, and each case must be decided on its own facts with a view towards determining whether under those facts the Commissioner knew, or should have known, that a claim was being made.” Schlachte v. U.S., No. C 07-6446 PJH, 2008 WL 3977901, at *5 (N.D. Cal. Aug. 26, 2008) (internal quotations and citation omitted).

Here, the court finds that the letter the taxpayers sent to the LTA meets the requirements for an informal claim because

The letter also notes Plaintiffs “are plagued by phantom interest and penalty charges for 2009” after they “in good faith, borrowed money and paid off all outstanding balances due” and that “the penalties and interest assessed against Gail Johnson and entered on her 2009 [Individual Master File] have no basis in any late balance due.” (Id. at 2-3.) The Court finds this language is sufficient to put the Government on notice of Plaintiffs’ claim for a refund, sufficiently states the legal and factual basis for the claim, and has a written component.

Because the taxpayers only mentioned 2009 in the critical letter and not 2010, the court only finds they made an informal claim for 2009 and not for 2010. 

These cases are difficult for taxpayers to win but the win here and in cases such as Palomares point to the possibility.  Persons seeking to make an informal claim argument must examine their contacts with the IRS looking for contacts which can support an argument that they have adequately apprised the IRS of the period and the problem.  No one wants to rely on the informal claim doctrine to win their case.  Always pay attention to the rules governing the timing of claims but if a failure has occurred don’t overlook the possibility of making this argument.