Don't Mess With Taxes

The rest of us waiting for less, but just as eagerly anticipated, refunds should use IRS online options to track down their money.

One of the biggest taxpayer frustrations every year is having to wait on the Internal Revenue Service to issue refunds. That's been exacerbated during taxes in the time of COVID-19.

The coronavirus pandemic has meant delayed filing deadlines, new tax laws and more jobs for IRS personnel. And that's meant that what used to be considered routine IRS work and customer service has suffered.

I wish I could tell you this post was a welcome revelation that things are getting better. It isn't. But I can offer some good tax news for one filer for you to enjoy vicariously.

Huge mistaken refund: The U.S. District Court of Arizona has ruled that a taxpayer gets to keep a refund the IRS erroneously paid him. And it's a nice chunk of change: just more than $281,000.

I'll let the words (most of them; the taxpayer's name is redacted) of James A. Teilborg, Senior United States District Judge and issuer of this ruling against the IRS, provide the background:

"We all make mistakes, the federal government included. This case involves a mistake the Internal Revenue Service (IRS) made on May 5, 2017, when it mailed [the taxpayer] an erroneous $491,104.01 tax refund check, which [the taxpayer] cashed on April 5, 2018. (Doc. 1 at 3). After [the taxpayer] did so, the IRS contacted [the taxpayer] and requested that he return the money to the government. (Id.). On December 6, 2019, [the taxpayer] returned $210,000 of the erroneous refund but not the rest. (Id.). On March 31, 2020, the government filed this case under 26 U.S.C. § 7405 to recover the remaining balance of the erroneous refund plus interest. (Id. at 1). The government alleges that [the taxpayer] retained the remainder of the refund for his personal use and enjoyment. (Id. at 3)."

I love the IRS' contention that the taxpayer used the hundreds of thousands of unexpected dollars for fun purposes. Ya think?

The IRS' legal problem, however, is that it missed a deadline to reclaim the wrongly issued refund.

Calendar issues: The IRS usually must file suit within two years of paying an improper refund. The IRS had argued, based on a couple of prior federal appellate decisions, that the statute-of-limitations period begins to run when the check is cashed.

Teilborg found, however, that the two-year period begins on the day the check is received by the taxpayer, per legal precedent set in the U.S. Court of Appeals for the Ninth Circuit, to which the IRS may appeal this ruling. Given the amount, Uncle Sam just might keep the legal ball rolling, even with the appellate court's unfriendly position.

Again, I'll let the judge speak:

"The government initiated the instant action on March 31, 2020. (Doc. 1). Therefore, the earliest [the taxpayer] could have received the erroneous refund check for the government's suit to fall within the statute of limitations is March 31, 2018. Although the government's complaint does not allege when [the taxpayer] received the refund check, the government mailed [the taxpayer] the erroneous refund on May 5, 2017, and it defies common sense to believe it took 330 days for [the taxpayer] to receive the check in the mail."

Despite recent complaints (including some I've made) about how poorly the U.S. Postal Service is doing its job, I've got to agree with Teilborg here. The erroneous refund check probably got to the taxpayer much sooner.

So, pending any appellate reversal, the taxpayer is, for now, the refund winner.

Slow, but in process: I hope all y'all awaiting tax refunds, regardless of the size, get your money from the IRS soon.

The IRS admits that COVID-19 continues to cause delays in some of its services. That's especially true for taxpayers who filed paper, instead of electronic, returns.

Those paper forms have to be input into the IRS computer system and they are processed, in the U.S. Postal Service order received. If you're still waiting, the IRS asks (begs) that you don't file a file a second tax return or call the agency.

Tracking regular refunds: Instead, the IRS recommends that to find the status of your refund, regardless of which filing method you used, you head to the agency's online Where's My Refund? tracking tool.

It's also available on the agency's IRS2Go mobile app. Or, if you prefer to call (yes, your smartphone can do that, too), you can check your refund status by dialing toll-free (800) 829-1954.

To get the delivery info, you'll need to provide the primary Social Security number on the tax return, the filing status, and the expected refund amount. The tool updates once daily, usually overnight, so it won't do anxious taxpayers any good to check it more often.

I hope the standard tracking tool works for you and that your tax cash arrives soon.

I also hope that you never have to go to court, whether initiated by you or the IRS, to get your refund money.

I suspect that the recent Arizona court's ruling in favor of the taxpayer who got that six-digit erroneous refund isn't going to happen in many other cases.

You also might find these items of interest:

• Don't fall for these 6 tax refund myths
• 29 million tax returns awaiting manual IRS processing
• When the Taxpayer Advocate Service can, and can't, help

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