Caring for Wife with Alzheimers Did Not Suspend Statute of Limitations for Tax Refund Claim. (Parker Tax Publishing July 5, 2014)

A taxpayer, who claimed that his wife had Alzheimers which lead to problems with filing returns, did not qualify for the financial hardship exception to the running of the statute of limitations and was not eligible to obtain refunds for prior year tax overpayments. Meconi v. U.S., 2014 PTC 275 (D. Del. 6/6/14).

According to Patrick Meconi, his wife managed all of their business and personal financial affairs for forty years. Because of Alzheimer's disease, after the 2003 tax year she was incapable of providing any meaningful information for tax filing purposes and financial information was "co-mingled, misfiled and lost." Patrick contended that he made "generous deposits" to the IRS in 2005, 2006, and 2007 using Form 1040-ES for estimated taxes. Not until 2010 was Patrick able to file original Form 1040 returns for tax years 2004 through 2009. According to Patrick, his tax returns were delayed because of caring for his spouse and his commensurate and personal physical and emotional ordeal. During his wife's illness, Patrick experienced numerous health problems of his own, and underwent seven operations.

After his wife passed away in 2010, Patrick requested refunds relating to earlier years. The IRS issued a refund for overpayments made in 2007 for the 2006 tax year, but denied refunds for earlier years. According to the IRS, the refund claims were invalid under Code Sec. 6511 because the statute of limitation had run on the earlier years. Patrick appealed the IRS determination and provided supplementary documentation of "financial disability" as allowed under Code Sec. 6511(h). The IRS denied the claim, saying that Patrick did not meet the statutory criteria.

A district court held that, while compelling, Patrick's claim against the United States for the refund of overpayments made to the IRS in a good faith effort to pay taxes during a particularly stressful period had to be dismissed. Under Code Sec. 6511(b)(2)(A), the court noted, a taxpayer is unable to recover a credit or refund that exceeds the portion of the tax paid within the three years immediately preceding the filing of the claim. Here, Patrick filed his claim for a refund in 2010 when he submitted six years of tax returns. While the IRS refunded the claimed amount for 2007, it could not refund the claims from 2005 or 2006 because of the statutory limitation of Code Sec. 6511(b)(2)(A). Additionally, the court observed, Code Sec. 6511 (h) provides for a limited exception to the time restrictions. Under Code Sec. 6511(h)(1), the running of the time period is "suspended during any period of such individual's life that such individual is financially disabled. To achieve such relief, the taxpayer must have been under the hardship themself and must proffer specific evidence and documentation, partially attested by a physician, explaining the extent of the disability and the time period during which the taxpayer suffered. The court noted that Congress chose to define "financially disabled" very narrowly and by the plain language of the statute and Rev. Proc. 99-21, neither Patrick nor his wife met the requirements for tolling of the statute of limitations due to financially disability.

For a discussion of the rules relating to the suspension of the statute of limitations during a period of financial hardship, see Parker Tax ¶261,180. (Staff Editor Parker Tax Publishing)

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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