Clients ask us all of the time, “What is the Joint Committee on Taxation’s (JCT) process for reviewing refund claims granted by the Internal Revenue Service (IRS)?” Recently, the JCT has released an overview of its process. Wait, what? After the IRS has agreed to issue you a refund, there is a congressional committee that has to check the IRS’s work? Yep!
Internal Revenue Code (IRC) §6405 prohibits the IRS/US Department of the Treasury from issuing certain refund payments to taxpayers until 30 days after a “report” is given to the JCT. Only refunds “in excess” of $5 million for corporate taxpayers and $2 million for all other taxpayers (partnerships, individuals, trusts, etc.) are required to be reported to the JCT. A refund claim is an amount listed on an amended return (e.g., Forms 1140X and 1120X), tentative carrybacks (e.g., Forms 1139 and 1045), and refunds attributable to certain disaster losses. Numerous types of refund payments are excepted from JCT review, including refunds claimed on originally filed returns, resulting from litigation and employment taxes. It is important to note that this process is not limited to the IRS Examination stage; it can also occur at the IRS Appeals stage or even in tax court litigation.