Lookback period extended for refunds related to pandemic postponements

On Monday, in Notice 2023-21, the IRS lengthened the lookback period for refund claims for returns with due dates that were deferred by Notice 2021-21 or Notice 2020-23, which postponed the due dates for filing certain tax returns and making certain tax payments during the COVID-19 pandemic.

Under the new notice, in determining the beginning of the lookback period for taxpayers with due dates postponed by Notice 2021-21, the IRS will disregard the period from April 15, 2020, to July 15, 2020, and for taxpayers with due dates postponed by Notice 2020-23, from April 15, 2021, to May 17, 2021. This will align those periods with the postponed return filing due dates.

When the COVID-19 pandemic hit, the IRS in Notice 2021-21 and Notice 2020-23 postponed some filing due dates for returns, but it did not lengthen the lookback period under Sec. 6511(b)(2)(A). That meant that some payments could fall outside the lookback period if taxpayers filed their returns after April 15 in 2020 and 2021. Thus, without the change, “[i]f the payments fall outside of the lookback period, then, despite filing a timely refund claim, a taxpayer cannot be refunded those payments,” the IRS said in a news release.

National Taxpayer Advocate Erin Collins said in a blog post Monday that for tax year 2019, nearly 34 million returns were filed in the postponement period and that nearly 29 million were filed in the postponement period for tax year 2020.

“Without IRS intervention, any claims for credit or refund filed during the postponed period three years later that included withholding or estimated taxes would have been denied because the withheld amount(s) would have been credited to the taxpayer’s account as of April 15, outside the three-year lookback period,” Collins wrote.

Collins recommended that Congress should amend Sec. 6511(b)(2)(A) to make the relief provided in Notice 2023-21 permanent, so that it will apply every time the IRS provides disaster relief by postponing the filing deadlines.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.