Since 2020 tax advisers and their clients have been a bit frustrated with how slowly the IRS processes returns, especially amended returns.  But, in the case of Lofton v. United States,[1] the taxpayer grew impatient about the IRS delays and attempted to get the matter resolved in Court.

Unfortunately for the taxpayer, while the law allows taxpayers to pursue relief in the courts if the IRS fails to rule on their request for a refund, that law also mandates that the IRS be given six months to act on the request

IRC §6532(a)(1) provides:

(1) General rule. No suit or proceeding under section 7422(a) for the recovery of any internal revenue tax, penalty, or other sum, shall be begun before the expiration of 6 months from the date of filing the claim required under such section unless the Secretary renders a decision thereon within that time, nor after the expiration of 2 years from the date of mailing by certified mail or registered mail by the Secretary to the taxpayer of a notice of the disallowance of the part of the claim to which the suit or proceeding relates.[2]

This provision is meant to balance the interests of the government and the taxpayer.  The government is given six months to rule on the claim so there is a reasonable amount of time for the government to respond to the request, also reducing the burden on the courts.  But the law also recognizes that the IRS will not be allowed to just hold a claim indefinitely the agency doesn’t wish to approve in order to effectively avoid having to defend the denial before a court.

In this case the facts were as follows:

Plaintiff pro se Somona Lofton filed this calendar year 2021 federal income tax refund case against the United States on September 14, 2022. See ECF No. 1. Plaintiff alleges she filed a 2021 Form 1040-X, Amended U.S. Individual Income Tax Return, on May 18, 2022, claiming a federal income tax refund in the amount of $5,362.2 See ECF No. 1 at 2; ECF 1–2 at 20. Plaintiff seeks to challenge the IRS's “refus[al] to process [her] Amended Tax return.” See ECF No. 1 at 2. Plaintiff claims the following relief: “$5,362.00 [t]ax refund amount.” Id. at 3. …

Plaintiff filed this tax refund suit on September 14, 2022; by the Court's calculation: 3 months and 27 days after purportedly filing her 2021 Form 1040-X.[3]

The IRS objected to this Court action, noting that the taxpayer had not given the agency six months to respond to her claim:

Pending before the Court is defendant's motion to dismiss plaintiff's complaint for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Rules of the United States Court of Federal Claims (RCFC). See ECF No. 13. Specifically, defendant asserts plaintiff's complaint was filed prematurely — i.e., before the expiration of the six-month waiting period required under 26 U.S.C. § 6532(a)(1), which allows the IRS time to investigate and process tax refund claims.[4]

The opinion notes that the taxpayer concedes that the IRS had not processed her refund claim at the time she filed suit:

In alleging the IRS has not yet processed her refund, plaintiff concedes the IRS did not issue a decision prior to her filing suit.[5]

The opinion notes that since she hadn’t waited six months to file her action, the case must be dismissed:

Because the six-month statutory waiting period had not expired at the time plaintiff filed her complaint, this Court lacks jurisdiction to adjudicate this action. See Weston, 2022 WL 1097361, at *1 (“[T]he failure to file a timely complaint under § 6532(a)(1) deprives the [Court of Federal Claims] of subject matter jurisdiction.”) (citing cases); e.g., Gaynor v. United States, 150 Fed. Cl. 519, 538 (2020) (dismissing tax refund claims for lack of jurisdiction because the “requisite waiting period had not yet elapsed” when plaintiff filed the initial complaint).[6]

Somewhat amusingly, the decision was issued on the date that was exactly six months after she filed her claim with the IRS—thus, as the opinion notes, she can immediately refile the case:

The irony is not lost on the Court that this Order of Dismissal is being issued on the precise date that Ms. Lofton's statutory six-month waiting period expires. As noted by the government, however, the jurisdictional requirements of § 6532(a) must be satisfied at the time a tax refund suit is filed. See Gaynor, 150 Fed. Cl. at 537–38 (“[O]ur jurisdiction is assessed at the time at which a complaint is filed — not subsequently, after a plaintiff already has filed an action. Concluding otherwise would render the statutory waiting period a dead letter.”). Accordingly, plaintiff's complaint must be dismissed, albeit without prejudice. Indeed, plaintiff may refile her tax refund complaint as early as today, though she could not have so as late as yesterday.[7]

[1] Lofton v. United States, US Court of Claims, No. 1:22-cv-01335, November 18, 2022, https://www.taxnotes.com/research/federal/court-documents/court-opinions-and-orders/individual-filed-refund-suit-too-early%2c-court-finds/7fdlh

[2] Lofton v. United States, US Court of Claims, No. 1:22-cv-01335, November 18, 2022

[3] Lofton v. United States, US Court of Claims, No. 1:22-cv-01335, November 18, 2022

[4] Lofton v. United States, US Court of Claims, No. 1:22-cv-01335, November 18, 2022

[5] Lofton v. United States, US Court of Claims, No. 1:22-cv-01335, November 18, 2022

[6] Lofton v. United States, US Court of Claims, No. 1:22-cv-01335, November 18, 2022

[7] Lofton v. United States, US Court of Claims, No. 1:22-cv-01335, November 18, 2022