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Fed Circ. Dismisses Tax Refund Suit for Badly Filed Tax Returns

By Tanya Roth, Esq. on April 20, 2012 | Last updated on March 21, 2019

Tax day was earlier this week and a recent case before the Federal Circuit Court of Appeals came out just in time, elaborating the prerequisites of bringing a refund claim.

As with most tax claims that reach the Federal Circuit Court of Appeals, the case doesn't break down tax issues as much as it talks about appellate procedure in tax cases.

Here, the Federal Circuit struck down the refund claim of married taxpayers, citing that they had not gone through the proper avenues for their case to be under the jurisdiction of the Court of Federal Claims.

Their mistake: Not filling in their amended tax returns properly.

To bring a tax refund suit in any court, a procedural prerequisite is that a claim for refund must have been filed. If a valid claim has been filed, then sovereign immunity will be deemed waived and a suit may be brought against the United States Government for refund.

In this case, the taxpayers had submitted a series of amended tax returns for the years in question. The issue turned to whether these amended returns constituted valid claims for refund.

A tax return can, under tax law, qualify as an administrative claim for refund. But, the Federal Circuit noted in its opinion, the return must satisfy various Treasury Regulations.

Specifically, the Federal Circuit court pointed to the requirement that the tax return must be properly executed.

What is a properly executed return?

Treasury Regulations say that the return must contain sufficient data to allow the collection of tax.

On their amended tax returns, the taxpayers replaced their reported income with zeros. They cited that the W2s as originally given to them were erroneous and that they actually had no income for the tax years in question.

The Federal Circuit applied precedent and stated that the "overwhelming majority of circuits" have ruled on the question, determining that a return containing zeros for income was not a valid return for the purposes of filing a refund suit.

The dismissal was upheld for lack of jurisdiction.

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