IRS Notice provides relief for certain 2019 refund claims: PwC

In brief

The IRS in Notice 2023-21 (March 13, 2023) provided that the period April 15, 2020, to July 15, 2020, during which the due date of calendar-year 2019 income tax returns was postponed by the COVID-19 pandemic relief granted by Notice 2020-23, will be disregarded in determining the three-year lookback period under Section 6511(b).

Action item: Taxpayers affected by the pandemic who pursuant to Notice 2020-23 filed their 2019 returns after April 15, 2020, but on or before July 15, 2020, have three years from the date the returns were received by the IRS to file refund claims. Pursuant to the new grant of relief provided by Notice 2023-21, the amount refundable under Section 6511(b) will include any amounts paid or deemed paid between April 15, 2020 and the date the taxpayer’s 2019 return was filed. Taxpayers affected by this guidance generally should file their refund claims within three years of the date their 2019 returns were received by the IRS.

In detail

Notice 2020-23 provided that taxpayers affected by the pandemic had until July 15, 2020, to file their 2019 tax returns. That notice, however, did not affect the date on which any withheld tax or estimated tax for 2019 was deemed paid. Any withheld or estimated tax for 2019 was deemed paid on April 15, 2020, for calendar-year taxpayers.

As a result, because the additional time to file provided by Notice 2020-23 is a “postponement” rather than an “extension,” Chief Counsel Memorandum (CCA) 202053013 concluded that in order for such amounts to fall within the three-year lookback period under Section 6511(b), a refund claim must be filed on or before Monday, April 17, 2023. Because that date is Emancipation Day, a holiday in the District of Columbia, the CCA should have identified Tuesday, April 18, 2023 as the due date under its analysis.

However, if the taxpayer had filed an extension request and then filed on July 15, 2020, the taxpayer would have until July 17, 2023 (July 15, 2023 is a Saturday), to claim a refund of estimated or withheld tax, as the payment would have been made within the extension period.

IRS Chief Counsel recognized in the CCA that its determination could lead to harsh results. The relief granted in Notice 2023-21 permits taxpayers who (1) had a return filing due date postponed by Notice 2020-23, (2) did not receive a normal extension of time for filing such return, and (3) file timely claims for credit or refund to be credited or refunded amounts deemed paid on April 15, 2020 (such as withholding and estimated tax payments).

Section 6513(a) provides that for purposes of the period of limitations on refund claims under Section 6511, a return that is filed before the unextended due date shall be considered as filed on the due date. For example, a return due on April 15 and filed on April 10 would be deemed to be filed on April 15. However, because July 15, 2020 is the postponed rather than the unextended due date for calendar-year 2019 returns, that rule does not apply. Instead, returns filed after April 15, 2020, and on or before July 15, 2020, whether pursuant to the grant of relief in Notice 2020-23 or a normal extension of time to file, are generally treated as filed on the date they are received by the IRS, and that is the date the three-year period of limitations for filing refund claims begins to run.