assignment of tax refund

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• FOREIGN INCOME & TAXPAYERS

No employer refund for tax payments made on employee’s behalf

• International Tax
• Income & Exclusions
• Non-Resident Withholding

Editor: Mary Van Leuven, J.D., LL.M.

In a recent Chief Counsel Advice memorandum ( CCA 202202010 ), the IRS determined that an employer funding an international assignee's federal income tax obligations under a tax equalization policy may not seek a refund of excess withholding on that employee's compensation after the close of the calendar year during which the compensation was paid.

This IRS memorandum is notable because it is one of the few pieces of IRS guidance addressing the impact of global mobility tax compliance processes on an employer's federal income tax reporting and withholding obligations, and it appears to be the first published guidance to consider whether an overpayment of tax based on a hypothetical tax estimate is an "administrative error" that may be corrected by an employer after the close of the calendar year during which it was paid.

The IRS memorandum considers the scenario of a U.S. company sending an employee who is a U.S. citizen on an assignment to a foreign (host) country. Because there are both personal and economic costs to an employee who relocates to a host country, companies often provide these "assignees" with assignment allowances (such as cost - of - living adjustments, housing, and tuition for dependents) to mitigate the impact of an assignment on the assignee's pocketbook. However, these assignment allowances inflate an assignee's taxable earnings, and, in turn, increase the assignee's personal tax liability. Additionally, the assignee may be subject to tax in both the United States and the host country on this inflated income. Given the potential negative tax consequences for an assignee, many employers use a tax reimbursement policy known as tax equalization that attempts to approximate an assignee's personal out - of - pocket tax cost as if the assignee had not gone on assignment.

Tax equalization : Typical tax equalization policies divide an assignee's employment compensation into two categories. The first category, " assignment - related " compensation, includes assignment - related allowances. The company is responsible for all taxes on this income. The second category, " stay - at - home " compensation, includes amounts that would have been paid to the assignee regardless of whether the assignee was on an international assignment, such as base salary, annual bonus, vacation pay, and equity compensation. Tax equalization policies vary across organizations, but, in general, the assignee is responsible for the amount of tax that would have been incurred on this income had the assignee not relocated, and the company is responsible for any additional tax incurred on this income because of the assignment.

Hypothetical tax : Tax equalization is accomplished by collecting "hypothetical taxes" from an assignee. At the start of an assignment or tax year, the company estimates the amount of taxes the assignee would incur in the United States had the assignee not been on assignment. The assignee's salary is then reduced by this "estimated hypothetical tax" amount, which the company uses to fund the assignee's actual tax liability on equalized income. This estimated hypothetical tax amount is not considered "wages" or income for federal tax purposes, and, accordingly, it reduces the amount of wages reported to the IRS and the employee on Form W - 2 , Wage and Tax Statement .

The company meets the assignee's actual U.S. and host country tax liabilities by paying the taxes directly to the relevant tax authority and including the tax payment in the assignee's reportable compensation (a tax gross - up ). For federal tax purposes, all wages (including assignment allowances and tax payments) reduced by any hypothetical tax amounts are reported by the employer on Form 941, Employer's Quarterly Federal Tax Return .

After the calendar year ends, a hypothetical tax return is prepared to determine the amount of taxes the assignee would have incurred had the assignee not been on assignment, and a reconciliation is performed between this "actual hypothetical tax" amount and "estimated hypothetical tax" that had reduced the employee's wages over the course of the year. If the actual hypothetical tax amount is lower than the estimated hypothetical tax amount, the company pays the assignee the difference, and the amount is included in the assignee's taxable compensation in the year paid. However, if the actual hypothetical tax amount is greater than the estimated hypothetical tax amount, the assignee is required to repay that amount to the employer.

Overpayment of tax is not an administrative error

When an employee repays an employer for wages received in error in the current year, the employer may offset the repayment against current - year wages and may be able to report the repayment as an adjustment on Form 941 - X , Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund , to recover any employment taxes withheld on those repaid wages. However, when an assignee is required to repay an amount to the employer under a tax equalization program, the repayment represents a return of wages received in a prior year. The employer may wish to report the repayment as an adjustment on Form 941 - X to recover any employment taxes withheld on those repaid wages and issue a Form W - 2c , Corrected Wage and Tax Statement , to remove the overpaid tax from the assignee's wages and withholdings, but, as the IRS memorandum details, this approach is not consistent with federal income tax wage withholding rules.

When a company funds an assignee's tax obligations through direct payments to the IRS, the tax payments made on the assignee's behalf represent income and reportable wages to the assignee. For employment tax purposes, these payments are deemed to have been withheld by the company from the employee's wages and are therefore reportable on the assignee's Form W - 2 as both wages and tax withholding on those wages in the tax year paid. Because these tax payments are properly considered wages in the year paid, a company may not correct an overpayment based on a hypothetical tax estimate in a subsequent year.

An exception to this general rule applies when the overpayment is due to an "administrative error." Although from the employer's perspective, an overpayment of tax based on a hypothetical tax estimate may seem like an "administrative error," as the IRS details, this term is defined for employment tax purposes as an error that results in the inaccurate reporting of the amount withheld. While an employer may have overpaid tax based on the hypothetical tax estimate, the company accurately reported that overpayment in the year paid. As the overpayment does not result in a difference between the amount the employer reported as withheld and the amount actually withheld from the assignee's wages, there is no administrative error to be corrected in a subsequent year. Therefore, the employer may not seek a refund of this overpayment.

Recovery of the employer portion of FICA tax

While the company cannot recover overwithheld federal income tax that was paid on behalf of an employee through Form 941 - X , the same is not true of Federal Insurance Contributions Act (FICA) tax, for which a refund or credit can be claimed by the employer in a subsequent calendar year. Prior to claiming a refund or credit for FICA tax, the company must make reasonable efforts to first repay or reimburse the employee for the employee's portion of FICA tax and secure the employee's consent for the employer to pursue the refund claim.

Additionally, the company must file a Form W - 2c and Form W - 3c , Transmittal of Corrected Wage and Tax Statements ,with the Social Security Administration to correct the reported FICA wages. While filing a Form 941 - X and issuing a Form W - 2c may be administratively burdensome, especially considering that an assignee's remuneration is likely to remain above the Old - Age , Survivors, and Disability Insurance threshold even after the wage repayment, there is still an opportunity for companies to recover significant tax costs with respect to the Medicare portion of the FICA tax, which is not subject to a cap.

Recovery of overpayment via the assignee's tax return

Although recovery of the overpayment of federal income tax is not possible via Form 941 - X , the employer is not without recourse, as the normal tax equalization process requires that the employee return to the employer a refund of tax that was paid by the employer on the employee's behalf. Because during the assignment the company is responsible for the assignee's actual tax liabilities, any reduction in tax on the assignee's return reduces the assignee's tax burden that the company has assumed.

Editor Notes

Mary Van Leuven , J.D., LL.M., is a director, Washington National Tax, at KPMG LLP in Washington, D.C.

For additional information about these items, contact Ms. Van Leuven at 202-533-4750 or [email protected] .

Contributors are members of or associated with KPMG LLP.

The information in these articles is not intended to be “written advice concerning one or more federal tax matters” subject to the requirements of Section 10.37(a)(2) of Treasury Department Circular 230 because the content is issued for general informational purposes only. The information is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. The articles represent the views of the author or authors only, and do not necessarily represent the views or professional advice of KPMG LLP.

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Deeds or letters of assignment: tax refund companies

General features, personal tax, share this article.

LITRG are increasingly hearing from people who have used a tax refund company in the past, for example to get a payment protection insurance or working from home tax refund, and who are now discovering that unconnected tax refunds are also going to the tax refund company, with further fees being deducted. 

This is because the person has signed a deed or letter of assignment. A deed or letter of assignment assures the person named as the assignee that the repayment will definitely be paid to them as opposed to a nomination (like that made via an R38 form, the form from HMRC which enables a reclaim of an overpayment of tax on which it is possible to nominate another person to receive this payment) that can be withdrawn unilaterally by the taxpayer at any time. Sometimes the taxpayer (the assignor) will not know that they have signed it – or may have thought they were signing it in respect of a specific tax refund only and not for past years.

In particular, you should be aware that if a taxpayer has signed a deed or letter of assignment, even inadvertently, it could mean that any 2020/21 P800 refunds (a tax calculation from HMRC indicating that a refund of tax is due) due to them over the next few months, could be diverted. 

The word ‘deed’ makes people think of a formal legal document but often the inclusion of a few words on an application pack seems to be enough to be seen as a letter of assignment, even if not a deed. (Note that HMRC’s guidance (see tinyurl.com/4nm4pkm7) suggests that a ‘deed’ needs a witness signature, although it is interesting to note that a different page of HMRC guidance (see tinyurl.com/yh3nbds7) on the same topic does not mention this.)

For example, if a person signs an application pack, they may think they are just giving permission for the tax refund company to act on their behalf. But there may also be some small print saying something such as: ‘I unconditionally assign my repayment of tax (for tax years ending 2017/18, 2018/19, 2019/20 and 2020/21) to…. [tax refund company].’ 

A deed or letter of assignment is different from appointing an agent via form 64-8. Indeed, it is possible, for a 64-8 to be lodged on someone’s record appointing one agent, but the deed of assignment to be in respect of another. 

If it is valid (and this is something that may be subject to challenge), the deed or letter of assignment is legally binding and HMRC say they have no option but to issue the refund to the person (or company) to whom it has been assigned. In particular, note HMRC’s requirements that to be valid:

• it has to be clear, unambiguous and unconditional;
• the wording of the assignment must be provided before the customer’s signature, and cannot appear in small print or after the customer’s signature; and
• no particular form of words is required for the deed or the letter, but the assignment must specifically identify the repayment that is being assigned. For example, ‘Income tax overpaid by me for the two years ended 5 April 2009’ is acceptable, but ‘any repayment of tax due to me’ is not.

Where a refund has been sent to a tax refund company in accordance with a deed or letter of assignment, but there are questions over whether it is valid, a formal complaint should be made to HMRC, because it may be possible to argue that it should not have been accepted by HMRC in these circumstances. 

There is further guidance available on LITRG’s website (see www.litrg.org.uk/ref108) to help people understand whether a deed or letter is valid and what to do next.  A valid assignment can only be revoked if both the taxpayer who made the assignment and the person to whom they assigned the refund agree to it being revoked. This is different to simply removing the tax refund company as their ‘agent’, which is a fairly simple process and can be done unilaterally. Some tax refund companies may charge a fee to remove the deed (in addition to collecting the fee on any refunds diverted to them). 

It is of course entirely legitimate for people to exercise freedom of choice and use a tax refund company if they so wish, as long as they understand what they are signing up to, the fees they will pay and the scope of any associated deed or letter of assignment. However, this was not the case for those who have written in to us.  This is an extremely pressing consumer protection matter that we have urged HMRC to intervene in (see www.litrg.org. uk/ref2508). If you have any thoughts, comments or relevant experiences with tax refund companies and deeds or letters of assignment that we could feed into our discussions with HMRC, please write in and let us know. 

What is “Assignment of Income” Under the Tax Law?

Gross income is taxed to the individual who earns it or to owner of property that generates the income. Under the so-called “assignment of income doctrine,” a taxpayer may not avoid tax by assigning the right to income to another.

Specifically, the assignment of income doctrine holds that a taxpayer who earns income from services that the taxpayer performs or property that the taxpayer owns generally cannot avoid liability for tax on that income by assigning it to another person or entity. The doctrine is frequently applied to assignments to creditors, controlled entities, family trusts and charities.

A taxpayer cannot, for tax purposes, assign income that has already accrued from property the taxpayer owns. This aspect of the assignment of income doctrine is often applied to interest, dividends, rents, royalties, and trust income. And, under the same rationale, an assignment of an interest in a lottery ticket is effective only if it occurs before the ticket is ascertained to be a winning ticket.

However, a taxpayer can shift liability for capital gains on property not yet sold by making a bona fide gift of the underlying property. In that case, the donee of a gift of securities takes the “carryover” basis of the donor.  

For example, shares now valued at $50 gifted to a donee in which the donor has a tax basis of $10, would yield a taxable gain to the donee of its eventual sale price less the $10 carryover basis. The donor escapes income tax on any of the appreciation.

For guidance on this issue, please contact our professionals at 315.242.1120 or [email protected] .

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Published: July 24, 2020   |   Last Updated: October 24, 2023

Expediting a refund.

The IRS generally releases refunds within specified times. Generally, the IRS needs two weeks to process a refund on an electronically filed tax return and up to six weeks for a paper tax return.

What do I need to know?

The PATH Act made the following changes, which became effective for the 2017 filing season, to help prevent revenue loss due to identity theft and refund fraud related to fabricated wages and withholdings:

• The IRS may not issue a credit or refund to you before February 15th, if you claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) on your tax return.
• This change only affects returns claiming EITC or ACTC filed before February 15.
• The IRS will hold your entire refund, including any part of your refund not associated with the EITC or ACTC.
• Neither TAS, nor the IRS, can release any part of your refund before that date, even if you’re experiencing a financial hardship.

If you are facing a hardship, like a financial hardship (can’t buy medicine, can’t pay mortgage or rent and received an eviction notice, can’t pay utilities and got a shut off notice, etc.) and you need your refund sooner, the IRS may be able to expedite the refund. You will need to contact the IRS and explain your hardship situation.

The IRS may be able to expedite your refund

The IRS may be able to expedite your refund,  if it is held up by a temporary backlog in processing  — you may receive a letter or notice from the IRS telling you there’s a problem with your tax return or that your refund will be delayed. In that case, if you are experiencing a financial hardship, the IRS might be able to manually process your refund to get it to you sooner.

If you owe tax to the IRS from a prior tax year

If you  owe tax to the IRS from a prior tax year , the IRS may be holding your refund to pay down that debt. But if you are facing a serious financial hardship and need your refund immediately, the IRS can consider not following its usual procedures of taking the refund. Instead, it may release and expedite part or all the refund to help with your hardship.

• Note: The IRS can only expedite a refund held to pay an IRS debt. If the Bureau of the Fiscal Service (BFS) is offsetting your refund for debts other than federal tax debts like past due student loans, child support, state unemployment compensation, or other federally insured debt, even with a serious financial hardship the IRS cannot issue you a refund.

What should I do?

Request an expedited refund by calling the IRS at 800-829-1040 (TTY/TDD 800-829-4059).

• Explain your hardship situation; and
• Request a manual refund expedited to you.

The IRS will likely request documentation of your financial hardship such as copies of shutoff notices, eviction or foreclosure notices, etc., as well as other supporting information like a copy of your tax return with the refund claim.  Respond promptly to the IRS’s request

If you owe federal taxes , discuss payment options such as an installment agreement or an offer in compromise with the IRS.  You can find more information on our Get Help pages for these topics.

How will this affect me?

If you provide the information the IRS is asking for within the requested time, the IRS will immediately consider your request for an expedited refund.

Some things to consider if you’re seeking an expedited refund:

• An expedited refund is limited to your hardship amount verified by the IRS. The IRS may not release all your refund.
• If the IRS issues an expedited partial refund to help with your hardship, the process may delay your remaining refund.

Wait, I still need help

The Taxpayer Advocate Service is an independent organization within the IRS that helps taxpayers and protects taxpayers’ rights. We can offer you help if your tax problem is causing a financial difficulty, you’ve tried and been unable to resolve your issue with the IRS, or you believe an IRS system, process, or procedure just isn’t working as it should. If you qualify for our assistance, which is always free, we will do everything possible to help you.

Visit www.taxpayeradvocate.irs.gov or call 1-877-777-4778.

Low Income Taxpayer Clinics (LITCs) are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level and who need to resolve tax problems with the IRS. LITCs can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. In addition, LITCs can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Services are offered for free or a small fee. For more information or to find an LITC near you, see the LITC page on the TAS website or Publication 4134 , Low Income Taxpayer Clinic List.

Resources and Guidance

IRS Toll-Free: 800-829-1040 (TTY/TDD 800-829-4059)

Find your local TAS office

IRM 21.4.6.5.5 Hardship Refund Request

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Self Assessment Manual

Sam110130 - repayments: issue repayment: nominations and assignments.

General 2008 Finance Act changes Differences between a nomination and an assignment A valid assignment What to do when you receive a letter of assignment Bankruptcy cases

A Self Assessment return and / or claim form R38 enable a taxpayer to nominate someone else to receive a repayment on their behalf. A taxpayer may also authorise by letter that a repayment is to be issued to a nominee.

Some taxpayers choose to go further than just a nomination and legally 'assign' a repayment by  a letter to a nominee. A  letter of assignment assures the nominee that the repayment will definitely be paid to them as opposed to a nomination that can be withdrawn by the taxpayer at any time.

For example, a nominee is frequently the taxpayer's agent and sometimes agents insist that their clients nominate them to receive a particular repayment so they can be sure of getting their fees. But because the taxpayer can withdraw their nomination, some agents are now getting their clients to legally assign a repayment to them to be certain of receiving the repayment.

Sometimes a repayment may be assigned to a loan company that lends money to a taxpayer in anticipation of them receiving a repayment.

If an assignment is received and one is already in place, the original assignment must be revoked before the new assignment can be accepted.

2008 Finance Act changes

Section 133 of the Act closes off the possibility of separating a person’s right to claim a repayment from their liability to pay their HMRC debts by assigning that right to another person. All assignments received on or after 21 July 2008 are secondary to set-off.

In effect S133 allows HMRC to make set-off of any overpayment to a taxpayer’s outstanding debts in accordance with S130 of the Act (HMRC powers to make set-off), before making payment of any remaining assigned repayment to the assignee. This ensures that an assignee cannot receive any more of a repayment than the original taxpayer would have received had the repayment not been assigned.

Also any outstanding debts owed by the assignee should be taken into account and considered for set-off before any assigned repayment is made to the assignee.

Differences between a nomination and an assignment

A taxpayer may nominate someone else to receive a repayment on their behalf by completing the appropriate authorisation on the return, form, by letter or over the phone provided the taxpayer passes the level 2 security questions, and this is known as a 'bare' nomination. In the case of a nomination a taxpayer remains the person legally entitled to the repayment and the repayment is issued to their nominee at our discretion. The taxpayer may also withdraw their nomination at any time prior to the repayment being issued.

The nomination can be withdrawn over the telephone if the repayment is to be issued to the taxpayer (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

If a taxpayer legally assigns a repayment to a third party by an assignment, that third party (the assignee) becomes the person (or company) legally entitled to the repayment. The assignment is legally binding, and we have no option but to issue the repayment to the person (or company) to whom it has been assigned.

The assignment can only be revoked if both the taxpayer who made the assignment and the person to whom the repayment was assigned both agree to it being revoked. The agreement to revoke the assignment must be in writing and signed by both parties before being sent to HMRC. Note: An Agent cannot revoke an assignment on his client’s behalf. Both parties to the assignment must sign an agreement to revoke the assignment otherwise it must be returned and the appropriate signatures requested.

An assignee may also nominate someone else to receive the repayment on his or her behalf and this nomination must be in writing and signed.

The person who is assigned to receive the repayment is always able to disclaim their right to the repayment but, where the taxpayer wishes to revoke the assignment, and a dispute arises between the parties, HMRC cannot get involved.

A valid assignment

An assignment may be made by letter and in order to be valid must meet the following criteria

• It must be absolute, that is, the wording should be clear, unambiguous and unconditional. To do this it must state the customer unconditionally gives up the right to a repayment in favour of someone else
• It must be in writing and signed by the individual entitled to the repayment (‘wet’, scanned, photocopied and faxed signatures are all acceptable)
• The actual assignment must be submitted to HMRC (telephone call reporting its existence or photocopy will not suffice)
• The assignment must specify the years involved. That is, years cannot include future tax years (as taxes must have actually been overpaid to be assigned). Valid assignments will therefore cover previous tax years, the current year will only be assignable for an in-year repayment claim
• The wording of the assignment must not include any statements around agreement to terms and conditions or fees
• Terms and conditions/fees can appear in the combined document but must appear separate to the assignment, in its own section of the form, with its own signature. The wording of the assignment must be provided before the customers signature, it cannot appear in small print or after the customer's signature

No particular form of words is required for the assignment but it must specify the repayment that is being assigned. For example, 'The Income Tax repayment of £1,345.75 due to me for the year 2014-15' or 'Income Tax and Class 4 NIC overpaid by me for the two years ended 5 April 2015' are acceptable, but 'any repayment of tax due to me' is not.

If you consider that an assignment does not satisfy the above criteria, you should inform the taxpayer of this (or the agent if the assignment was submitted by the agent) using SEES letter OCA197 and explain why the assignment is not valid.

If the taxpayer has already nominated the same assignee in the normal way to receive the repayment, then you should proceed with the issue of the repayment to the nominee.

If you are not sure about the validity of an assignment, you should  submit your query by completing the Operational Excellence referral .

If a taxpayer has assigned a repayment due to them to a third party, the assignee will usually also be nominated on the return or claim form to receive repayment. Where the assignee is not the same as the nominee shown on the return or claim form or, the nomination section has not been completed, the relevant repayment must be issued to the assignee, as they are legally entitled to it.

What to do when you receive a letter of assignment

It is important that a letter of assignment is identified in the receiving office as soon as possible to ensure that the repayment assigned under the assignment is not issued to the claimant or another nominee in error. There should also be a check to see if an assignment already exists, since if an assignment is already in place, it must be revoked before the new assignment can be accepted.

If a taxpayer has assigned a repayment to a third party, the assignee will usually also be nominated on the return or claim form to receive repayment. Where the assignee is not the same as the nominee shown on the return or claim form, the nomination is superseded by the assignment and the relevant repayment must be issued to the assignee as they are legally entitled to it. Note: It is important that the guidance at SAM110132 is followed to note receipt of the letter of assignment, and to set the No Repayment signal appropriately.

Bankruptcy cases

Special rules apply to set-offs in bankruptcy cases (S131 FA2008) and mutuality of debt is crucial, but a repayment which has been legally assigned to a third party on or after 21 July 2008 is now secondary to set-off against outstanding HMRC debts. In effect, any repayment that is assigned can first be used for set-off against the taxpayer’s outstanding debts and then against any outstanding debts of the assignee, before any remaining amount is repaid to the assignee.

The taxpayer cannot assign a repayment which, under the Insolvency Act 1986, legally belongs to the trustee in bankruptcy. If you receive a letter of assignment which seeks to assign a repayment which legally belongs to the trustee, do not accept it. Return it to the taxpayer (or agent) and explain why the repayment cannot be assigned.

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Tax Consulting Law Firm Wins Jurisdiction Fight, But $2.75M 'Assignment' Worthless

Texas common law has long recognized that when a cause of action is assigned, the assignee may sue either in its name or in the name of its assignor, the Third District Court of Appeals found.

April 21, 2023 at 03:04 PM

3 minute read

Adolfo Pesquera

Share with email, thank you for sharing, what you need to know.

• An international tax consulting firm erred in calculating a $2.75M tax refund it bought from a client, an appeals court said.
• The opinion concluded the state comptroller was right to deny the refund and affirmed the trial court ruling.
• On cross-appeal, the comptroller's objections to standing for both the original plaintiff and assignee was thwarted.

An international tax consulting law firm prevailed on appeal against a state comptroller’s argument it had no right to sue over an assignment of right to a tax refund, only to be told the refund was worthless.

In a case where sophisticated parties on both sides ended the day with some egg on their face, the Third District Court of Appeals dismantled every argument put forth by Texas Comptroller Glenn Hegar on standing, and informed the tax law firm it had misread reportable gains instructions—the basis of its claim on a $2.75 million right to refund it purchased from Hibernia Energy, an oil and gas exploration company.

‘Belied by the Common Law’

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Irs has 2 years to reclaim erroneous refunds, but when does it start.

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US Government Treasury check

Occasionally, the IRS goofs and issues a refund check in error to a taxpayer. If the IRS discovers the error, it will usually attempt informally to recover the funds. When this proves unsuccessful, the government may file a lawsuit against the taxpayer in federal court, requesting a judgment for a return of the erroneous refund.

However, the government does not have forever to file an erroneous refund lawsuit. Rather, section 6532(b) provides that “[r]ecovery of an erroneous refund by suit . . . shall be allowed only if such suit is begun within 2 years from the making of such refund ” unless the refund was caused by fraud or misrepresentation. In these latter circumstances, the 2-year statute of limitations period is extended to five years.

Recently, the Ninth Circuit was tasked with an issue of first impression relating to the 2-year statute of limitations period under section 6532(b). In U.S. v. Page, No. 21-17083 (9th Cir. June 26, 2024), the IRS mailed Jeffrey Page (Page) a $500,000 refund check on May 5, 2017. But the check was issued due to a clerical error—in fact, Page should have received a refund of only roughly $4,000.

Page did not deposit the check right away. Instead, he waited one year and cashed the check on April 5, 2018. The IRS eventually discovered the error and requested the funds back. Page returned approximately half of the refund and kept the remaining portion.

On March 31, 2020, the government filed suit against Page to recover the remaining balance. Page did not respond to the complaint, and the government moved for default judgment. In determining whether default judgment was appropriate, the district court questioned the IRS as to whether it had satisfied the 2-year statute of limitations period under section 6532(b). The agency contended it had because, according to the government, the 2-year period should run from the “check-clearance date.” The district court disagreed and dismissed the lawsuit as untimely.

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On appeal, the Ninth Circuit reversed the district court. Initially, the appeals court noted that the Supreme Court had previously found in two separate decisions that payment triggers the statute of limitations period. Although the Supreme Court did not answer whether the receipt of payment meant the check or transfer of funds, the Ninth Circuit reasoned that requiring the statute of limitations to run from the check-clearance date provided a clearer rule.

The Ninth Circuit also noted that holding otherwise would create a circuit split with two other appellate courts. In U.S. v. Commonwealth Energy Sys . and Greene-Thapedi , the First and Seventh Circuits, respectively, both concluded that the section 6532(b) statute of limitations ran from the date the check cleared the Federal Reserve Bank.

Given the decision in Page , taxpayers should be mindful of the “check-clearance” rule under section 6532(b) for erroneous refunds. Although the refund at issue in Page seemingly related to a more obvious clerical error, the government has the option to file an erroneous refund suit in other contexts, including a simple disagreement with the taxpayer that a refund is even owed. In these circumstances, taxpayers should recognize that the clock starts ticking only after the funds clear and are deposited into the taxpayer’s bank account (and not, as argued in prior cases, the check date or the date the taxpayer receives the check).

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How do I review the tax payment or federal refund method I chose after filing with TurboTax Online?

By turbotax • updated 5 months ago.

You can verify the tax payment or federal refund method you chose on the Electronic Filing Instructions for your 2023 Federal Tax Return page, next to Balance Due/Refund. To see the page, follow these instructions:

• Sign in to TurboTax and open your return.
• On the  Tax Home screen, scroll down and select  Add a State  (don't worry, you're not actually adding a state, this just gets you into the right area) to access your tax forms and worksheets.
• In the menu, select  Tax Tools , then Print Center .
• On the  TurboTax Print Center  screen, select  Print, save or preview this year’s return .
• On the next  TurboTax Print Center  screen, select 2023 Federal return and Include government and TurboTax worksheets , then select View or print forms .
• The information will be on the first page, Electronic Filing Instructions for your 2023 Federal Tax Return next to Balance Due/Refund.

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Treasury and IRS announce final regulations on how to report and pay the corporate stock repurchase excise tax

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IR-2024-179, June 28, 2024

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued final regulations that provide taxpayers and tax professionals with guidance on how to report and pay the 1 percent excise tax owed on corporate stock repurchases.

The Inflation Reduction Act imposed a new excise tax on stock repurchases equal to 1 percent of the aggregate fair market value of stock repurchased by certain corporations during the taxable year, subject to adjustments. The stock repurchase excise tax applies to repurchases after Dec. 31, 2022.

These final regulations require that the stock repurchase excise tax be reported on Form 720, Quarterly Federal Excise Tax Return , due for the first full calendar quarter after the end of the corporation’s taxable year, with the Form 7208, Excise Tax on Repurchase of Corporate Stock, attached. The Form 7208 is used to figure the amount of stock repurchase excise tax owed.

Forms 720 and 7208 due for taxable years ending after Dec. 31, 2022, and on or before June 30, 2024, must be filed by the third quarter due date for Form 720, which is Oct. 31, 2024.

If a corporation has more than one taxable year ending after Dec. 31, 2022, and on or before June 30, 2024, the corporation should file a single Form 720 with two separate Forms 7208 (one for each taxable year) attached by Oct. 31, 2024.

The final regulations affect publicly traded domestic corporations that repurchase their stock or whose stock is acquired by certain affiliates after Dec. 31, 2022. The regulations also affect certain publicly traded foreign corporations that repurchase their stock or whose stock is acquired by certain affiliates after Dec. 31, 2022.

More information can be found on the Inflation Reduction Act of 2022 page on IRS.gov.

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