Priscilla B. Badger - Page 5

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          existence and amount of any overpayment of tax when a taxpayer              
          had not filed a return prior to the time the Commissioner mailed            
          a statutory notice of deficiency.  The law is clear that when a             
          taxpayer failed to file a tax return or claim for refund prior to           
          the time the notice of deficiency was mailed, the taxpayer's                
          credit or refund generally is limited to those taxes paid within            


               2(...continued)                                                        
               imposed by this title in respect of which tax the                      
               taxpayer is required to file a return shall be filed by                
               the taxpayer within 3 years from the time the return                   
               was filed or 2 years from the time the tax was paid,                   
               whichever of such periods expires the later, or if no                  
               return was filed by the taxpayer, within 2 years from                  
               the time the tax was paid. * * *                                       
                    (b) Limitation on Allowance of Credits and                        
               Refunds.--                                                             
                         (1) Filing of Claim Within Prescribed                        
               Period.--No credit or refund shall be allowed or made                  
               after the expiration of the period of limitation                       
               prescribed in subsection (a) for the filing of a claim                 
               for credit or refund, unless a claim for credit or                     
               refund is filed by the taxpayer within such period.                    
                         (2) Limit on Amount of Credit or Refund.--                   
                              (A) Limit Where Claim Filed Within 3-                   
               Year Period.--If the claim was filed by the taxpayer                   
               during the 3-year period prescribed in subsection (a),                 
               the amount of the credit or refund shall not exceed the                
               portion of the tax paid within the period, immediately                 
               preceding the filing of the claim, equal to 3 years                    
               plus the period of any extension of time for filing the                
               return. * * *                                                          
                              (B) Limit Where Claim Not Filed Within                  
               3-Year Period.--If the claim was not filed within such                 
               3-year period, the amount of the credit or refund shall                
               not exceed the portion of the tax paid during the 2                    
               years immediately preceding the filing of the claim.                   






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