§7405 — Action for recovery of erroneous refunds

1990), the Court noted that the rejection ofthe Commissioner's imposition ofwhat was then an addition to tax for negligence was limited to the facts ofthat case.

4 In 1996 the Department of Justice (DOJ), on behalf of the Commissioner,4 brought suit pursuant to section 7405 in federal district court to recover the refund issued to the LaRosas, arguing that the refund was erroneous.

Consequently, we hold that the April 2, 2010, refund was a nonrebate refund.

Section 6602 provides: "Any portion ofan internal revenue tax (or any interest, assessable penalty, additional amount, or addition to tax) which has been erroneously refunded, and which is recoverable by suit pursuant to section 7405, shall bear interest at the underpaymentrate established under section 6621 from the date ofthe payment ofthe refund." Section 7405 concerns actions for recovery oferroneous refunds, and section 7405(b) provides: "Any portion ofa tax imposed by this title which has

Accordingly, petitioner argued, - 22 - the only way respondent could recover the tentative refunds was to bring an erroneous refund suit under section 7405, for which the period of limitations had expired.

The Code provides the Commissioner with two methods to recover erroneous rebate refunds he issues: either by filing a refund suit pursuant to section 7405 or by pursuing a supplemental assessment by following the deficiency procedures.

Section 6602 provides: “Any portion of an internal revenue tax (or any interest, assessable penalty, additional amount, or addition to tax) which has been erroneously refunded, and which is recoverable by suit pursuant to section 7405, shall bear interest at the underpayment rate established under section 6621 from the date of the payment of the refund.” Section 7405 concerns actions for recovery of erroneous refunds, and section 7405(b) provides: “Any portion of a tax imposed by this title whic

Petitioners offer no logical reason why their deficiency should be limited to $6,984 and the Government forced to file an erroneous refund suit under section 7405, ifstill timely, to collect the additional $516.

to the extent of$47,045) (claimed 2006 erroneous refund).3 Petitioner's representative maintained (1) that, because petitioner received from the IRS what that representative claimed was an erroneous refund for his taxable year 2006, subsection (d) ofsection 7405, titled "Action for Recovery ofErroneous Refunds", governs the period within which the IRS is entitled to collect that claimed 2006 erroneous refund from petitioner and (2) that that period of limitations, which petitioner's representati

teral estoppel effect from the anticipated decision was not a sufficient reason for trying a case when no money was at stake. We ordered suspension. By order ofOctober 26, 1978, however, we lifted the suspension, plaintiffhaving pointed out that by I.R.C. sec. 7405, ifplaintifftook the check, defendant could sue in a U.S. District Court for recovery ofa refund erroneously paid. Defendant later denied it had any such strategy in mind, and we are sure it did not. However, we believe a party who ha

United States, 63 F.3d 83, 88 (1st Cir. 1995); Clayton v. Commissioner, T.C. Memo. 1997-327, aff'd per curiam without published opinion, 181 F.3d 79 (1st Cir. 1998). "Examples ofnonrebate refunds are refunds issued because the Commissioner credited a taxpayer'spaymenttwice or the Commissioner applied a paymentto the wrong taxyea

United States, 63 F.3d 83, 88 (1st Cir. 1995); Clayton v. Commissioner, T.C. Memo. 1997-327, aff'd per curiam withoutpublished opinion, 181 F.3d 79 (1st Cir. 1998). "Examples ofnonrebate refunds are refunds issued because the Commissioner credited a taxpayer's paymenttwice or the Commissioner applied a paymentto the wrong tax ye

not have been so applied, credited or refunded is not an exclusive method . Two other methods are available to recover such amount : (a) By way of a deficiency notice under section 6212 ; or (b) by a suit to recover an - 27 - erroneous refund under section 7405 . * * * [Emphasis added . ] Sec . 301 .6213-1(b)(2)(ii), Proced . & Admin . Regs . See generally Ron Lykins, Inc . v . Commissioner, 133 T .C . 87 (2009) . The difference in wording is obvious--section 6213 uses the word "may", instead of

ch should not have been so applied, credited or refunded is not an exclusive method. Two other methods are available to recover such amount: (a) By way of a deficiency notice under section 6212; or (b) by a suit to recover an erroneous refund under section 7405. * * * [Sec. 301.6213-1(b)(2)(ii), Proced. & Admin. Regs.; emphasis added.] See generally Ron Lykins, Inc. v. Commissioner, 133 T.C. 87 (2009). The difference in wording is obvious — section 6213 uses the word “may”, instead of section 60

deficiency attributable to the tentative carryback adjustment as if due to a mathematical error ; (ii) to institute an erroneous refund suit under section 7405 ; or (iii) to issue a notice of deficiency under section 6212 .'0 Baldwin v .

The Court of Appeals concluded that, since the assessment had been extinguished by the taxpayer's payment, the Commissioner could not employ his summary collection powers in the absence of an assessment, but instead had to recover the erroneous refund through an erroneous refund action under section 7405.18 Respondent has applied $6,500 in 1999 remittances to the Freijes' 1997 account in an effort to recover the erroneously refunded $5,513 (plus interest, presumably).

6532(b) provides as follows: Suits by United States for Recovery of Erroneous Refunds.--Recovery of an erroneous refund by suit under section 7405 shall be allowed only if such suit is begun within 2 years after the making of such refund, except that such suit may be brought at any time within 5 years from the making of the refund if it appears that any part of the refund was induced by fraud or misrepresentation of a material fact.

A suit for the recovery of an erroneous refund under section 7405 is merely one of several remedies open to the Government in such a situation.

Respondent has more than one remedy to recover erroneous refunds; these include bringing a civil suit under section 7405 or following the deficiency procedures under sections 6211 through 6215.

Respondent argues that she is not limited to a suit under section 7405, that the deficiency procedures are applicable, and that respondent's statutory notice was timely issued.