IRS issuing refund credits from closed years

[Max W]

Recently, I have had two clients that received refund credits from closed years.

In one case, there was a $3000 refund from 2005 that was applied to a balance due from 2017.

If this is a new policy, does anyone know when it was changed?   Has anyone else encountered this? 

It used to be that closed year refunds were lost.

[BulldogTom]

Shhhhhh......... the IRS might be trolling this board.   They obviously made a mistake.

Tom
Modesto, CA

[jklcpa]

On 10/31/2018 at 3:06 PM, Max W said:

Recently, I have had two clients that received refund credits from closed years.

In one case, there was a $3000 refund from 2005 that was applied to a balance due from 2017.

If this is a new policy, does anyone know when it was changed?   Has anyone else encountered this? 

It used to be that closed year refunds were lost.

 

It really depends on when, or if, the return for that year was filed and/or when the tax was paid, and that is covered in sec 6511 (a) through (c).  Is your client a nonfiler or a very late filer?  If so, again, your answer may be in sec 6511 

Other reasons refunds may be issused from closed years is when a carryback of loss or credit to an open year frees up credits that are then allowed to be carried back into those years generally closed. 

I suspect that your client's case is that of the former, not any sort of carryback situation. 

That sec 6511, starting at para (d) covers the other situations, losses, credits and the various time frames allowed for filing and claiming refunds.

[Max W]

TY, Judy.  That is a good referenece.