Non-Filers and Refunds – The Medical Exception

Previously I detailed that there was a statute of limitations on when you could file a claim for refund and get credit for any overpayments. That limit is 3 years from the due date or 2 years from the date of payment whichever is later. There are exceptions to this law and one of those is for medical reasons.

Sometimes it’s not laziness that produces a non-filer situation. Medical problems can also result in non-filer status. Congress carved out an exception for this in the tax code and the IRS issued Rev. Proc. 99-21 to cover this situation. The statute of limitations is suspended when the taxpayer is determined to have a mental or physical impairment that can be expected to result in their death or last for a period of at least 12 months.

There are two major requirements to use this exception:

    1. No person was authorized to act on behalf of the taxpayer, including their spouse, during the disability period, and
    2. There must be a written statement from a qualified physician as to the disability. This statement must be detailed and specifically state that the taxpayer was prevented from managing his or her affairs.

There are lots of ways to get the physician’s statement wrong, so pay attention to Rev. Proc. 99-21 if you are going to use this exception.

Author: Jim Payne

Jim Payne, a Florida Certified Public Accountant (CPA) since 1976, offers candid insights on getting square with the IRS — with the least pain, and at the lowest cost — with (or without) the help of a tax representative. Mr. Payne is a former IRS agent and expert in business profitability, IRS audits, IRS payroll tax, and IRS non-filer issues. As a Tax Representative, his goal is clear: " I will speak on your behalf to all IRS agents, so you never have to, and I'll guide you in executing a strategy to resolve your IRS problem so you can get back to enjoying life."

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