F is for the fish that got away.  I went fishing in Canada in early June and while the picture proves I didn’t really catch many impressive fish, I do have a story about the fish that got away.  In the evening I thought I hooked a fish, so I started reeling it in.  After a few seconds it just stopped moving and I changed my mind; it seemed I had caught a huge tree branch or something.  So I keep reeling in and at this point I am basically dragging the boat in the direction of my line which isn’t moving until the fish takes off to the right and the chase is on again.  The fish got up near the boat and we got a glimpse of what seemed like a very large fish only to lose it by the boat.  I like to think it would have been the biggest fish of the trip and we can only speculate how big it was (40 inches, 45 inches, 65 inches, who knows).  While it makes for a decent story and it was exciting at the time, we don’t need to repeat that experience with tax credits.  The story of the tax refund that got away is a depressing tale of poor time management and planning and you will be able to figure out exactly how much money you left on the table so let’s try and avoid this story.

The IRS imposes a statute of limitations on claims for refund and if you let that statute expire, you aren’t going to get any sympathy from the IRS.  If you discover an error on your tax return that results in a refund claim, it needs to be filed with the IRS within 3 years of the original filing date or within 2 years of paying the tax.  If you are even 1 day late you are out of luck.

Sometimes you amend returns to generate a loss, but there is no refund directly from that amended return.  If you amend your 2010 return to add business losses that generate an NOL, you can still carryback that NOL to the 2008 and 2009 years based on the 2010 statute of limitations.  The refunds are generated from the 2010 return so you would have 3 years from April 15th, 2011 to file the NOL carryback claims.

If you discover a reason to amend your return to correct something, report new information, claim an R&D credit, whatever it is, make sure you are paying attention to the statute of limitations so you don’t have a tale of the tax refund that got away.

Taxes A to Z – still randomly meandering through tax topics, but at least for 26 posts in an alphabetical order.