-
Extension of the IRS Lookback Period: What you need to know
It’s been 3 years since the onset of the global Covid-19 pandemic, and we are still feeling the side effects when it comes to accounting, taxes, and tax refunds. In both 2020 and 2021, the IRS issued notices under the Tax Code, giving them the authority to postpone deadlines and due dates related to filing tax returns due to the federally declared disaster. However, these notices did not pertain to the IRS lookback period for refund claims filed after April 15th. Therefore, many taxpayers who file yearly after April 15th will not be able to claim a refund as it falls outside of the lookback period.
Now, in 2023, a new notice has been issued by the IRS, extending the lookback period for refund claims.
Here is a rundown of everything you need to know about this IRS extension.
What is a Lookback Period
First off, it’s important to understand exactly what the IRS lookback period for refund claims is.
In general, a taxpayer must claim a refund on their taxes within 3 years from the date the related tax return was filed or 2 years from the date that the tax regarding the claim was paid. This IRS lookback rule allows taxpayers to request a refund in amounts paid within the lookback period.
The Extended IRS Lookback Period
Since the IRS failed to extend the lookback period in 2020 and 2021, many taxpayers who filed after April 15th have been left unhappy and without an option to request refund claims on those payments.
In an effort to remedy this problem, the IRS has issued a new notice regarding the lookback period, Notice 2023-21. This notice disregards the time periods from April 15, 2020 to July 15, 2020 (2019 tax returns) as well as from April 15, 2021 to May 17, 2021 (2020 tax returns), when determining the start of the lookback period.
This notice comes in an effort to realign the lookback periods with the formerly postponed due dates for filing tax returns due to the pandemic.
What Does the Extended IRS Lookback Period Mean for Taxpayers?
While the IRS’s extended lookback period is a positive move for taxpayers, it does not fully fix the problem created 3 years ago. This should be taken as an opportunity to look deeper into tax law and how we can create a permanent solution and prevent this type of misalignment in the event that future disaster filing postponements are made.
People are already weary of the IRS, filing taxes, and making refund claims, and this situation definitely does not help their confidence. It is our hope that necessary changes are made to ensure that all taxpayers have the opportunity to claim credits or refunds moving forward without being denied.
All in all, taxes and dealing with the IRS and lookback periods can be stressful, but the best way to ensure your tax filing and refund claim experience is as positive as possible is to keep your bookkeeping and financials up to date and organized so you always have what you need and can file on time.
Sorry, there were no replies found.
Log in to reply.