Notice 2023-21, issued on February 27, 2023, under the COVID-19 Emergency Declaration, removes the limitation on the amount of credit or refund the IRS can allow in certain circumstances. 2019 and 2020 individual income tax returns were postponed under Notice 2020-23 and Notice 2021-21, respectively. When a taxpayer believes they have overpaid their taxes, they must file a claim for credit or refund with the IRS by the later of 3 years from the date the return was filed, or 2 years from the date the tax was paid. Even when the taxpayer has filed a timely claim, there are limits on the amount the IRS may credit or refund. When the taxpayer files a timely claim, the credit or refund amount is limited to the amount of tax paid within a specified time period known as the lookback period. The lookback period is generally equal to 3 years plus the period of any extension of time for filing the return. However, when the Form 1040-X or other claim for refund is filed more than 3 years after the taxpayer's return was filed, the lookback period is 2 years. Income tax withheld and estimated tax are considered paid on the due date of the return (generally April 15). For the following affected taxpayers, Notice 2023-21 increases the lookback period when amending 2019 or 2020 returns to claim a credit or refund of taxes. For 2019 income tax returns. Affected taxpayers are individual taxpayers whose returns were due between April 1, 2020, and July 15, 2020, and who did not receive a filing extension. An affected taxpayer who filed their 2019 return after April 15, 2020, but on or before July 15, 2020, because of the postponement provided by Notice 2020-23 may be refunded all income tax payments for 2019 if they file their claim for refund within 3 years of the date they filed their original return. If, for example, an affected taxpayer filed their return on June 22, 2020, the taxpayer may be refunded all income tax payments for 2019 if they file their claim for refund by Thursday, June 22, 2023. An affected taxpayer who filed their 2019 return after July 15, 2020, may be refunded all income tax payments for 2019 if they file their claim for refund by Monday, July 17, 2023. (While 3 years from the postponed July 15, 2020, due date is July 15, 2023, that date will be a Saturday.) For 2020 income tax returns. Affected taxpayers are individual taxpayers whose returns were due on April 15, 2021, and who did not receive a filing extension. An affected taxpayer who filed their 2020 return after April 15, 2021, but on or before May 17, 2021, because of the postponement provided by Notice 2021-21 may be refunded all income tax payments for 2020 if they file their claim for refund within 3 years of the date they filed their original return. An affected taxpayer who filed their 2020 return after May 17, 2021, may be refunded all income tax payments for 2020 if they file their claim for refund by Friday, May 17, 2024. In the absence of Notice 2023-21, the lookback period in section 6511(b)(2) would prohibit the taxpayer from claiming a credit or refund for any timely paid income taxes if the Form 1040-X were filed more than 3 years after the due date of the income tax return even though, under section 6511(a), taxpayers can file a Form 1040-X for a return up to 3 years after the return was filed. The additional time, provided in Notice 2023-21, to file an amended return is automatic. Taxpayers do not need to contact the IRS, file any form, or send letters or other documents to receive this relief. Notices 2020-23 and 2021-21 were also issued under the COVID-19 Emergency Declaration. See Notice 2023-21 for additional information.
