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Students And Taxes

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Students And Taxes

Students and taxes 3. Students and taxes   Reporting Rental Income, Expenses, and Losses Table of Contents Which Forms To UseSchedule E (Form 1040) Schedule C (Form 1040), Profit or Loss From Business Qualified Joint Venture Limits on Rental LossesAt-Risk Rules Passive Activity Limits Casualties and Thefts Example Figuring the net income or loss for a residential rental activity may involve more than just listing the income and deductions on Schedule E (Form 1040). Students and taxes There are activities which do not qualify to use Schedule E, such as when the activity is not engaged in to make a profit or when you provide substantial services in conjunction with the property. Students and taxes There are also the limitations which may need to be applied if you have a net loss on Schedule E. Students and taxes There are two: (1) the limitation based on the amount of investment you have at risk in your rental activity, and (2) the special limits imposed on passive activities. Students and taxes You may also have a gain or loss related to your rental property from a casualty or theft. Students and taxes This is considered separately from the income and expense information you report on Schedule E. Students and taxes Which Forms To Use The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). Students and taxes However, do not use that schedule to report a not-for-profit activity. Students and taxes See Not Rented for Profit , in chapter 4. Students and taxes There are also other rental situations in which forms other than Schedule E would be used. Students and taxes Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. Students and taxes , you normally report your rental income and expenses on Schedule E, Part I. Students and taxes List your total income, expenses, and depreciation for each rental property. Students and taxes Be sure to enter the number of fair rental and personal use days on line 2. Students and taxes If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. Students and taxes Complete lines 1 and 2 for each property. Students and taxes However, fill in lines 23a through 26 on only one Schedule E. Students and taxes On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. Students and taxes To find out if you need to attach Form 4562, see Form 4562 , later. Students and taxes If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. Students and taxes Form 6198, At-Risk Limitations. Students and taxes See At-Risk Rules , later. Students and taxes Also see Publication 925. Students and taxes Form 8582, Passive Activity Loss Limitations. Students and taxes See Passive Activity Limits , later. Students and taxes Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. Students and taxes If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. Students and taxes Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). Students and taxes Form 4562. Students and taxes   You must complete and attach Form 4562 for rental activities only if you are claiming: Depreciation, including the special depreciation allowance, on property placed in service during 2013; Depreciation on listed property (such as a car), regardless of when it was placed in service; or Any other car expenses, including the standard mileage rate or lease expenses. Students and taxes Otherwise, figure your depreciation on your own worksheet. Students and taxes You do not have to attach these computations to your return, but you should keep them in your records for future reference. Students and taxes   See Publication 946 for information on preparing Form 4562. Students and taxes Schedule C (Form 1040), Profit or Loss From Business Generally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer. Students and taxes Providing substantial services. Students and taxes   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Students and taxes Use Form 1065, U. Students and taxes S. Students and taxes Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). Students and taxes Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. Students and taxes For information, see Publication 334, Tax Guide for Small Business. Students and taxes Also, you may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. Students and taxes For a discussion of “substantial services,” see Real Estate Rents in Publication 334, chapter 5. Students and taxes Qualified Joint Venture If you and your spouse each materially participate (see Material participation under Passive Activity Limits, later) as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Students and taxes This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. Students and taxes If you make this election, you must report rental real estate income on Schedule E (or Schedule C if you provide substantial services). Students and taxes You will not be required to file Form 1065 for any year the election is in effect. Students and taxes Rental real estate income generally is not included in net earnings from self-employment subject to self-employment tax and generally is subject to the passive activity limits. Students and taxes If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect. Students and taxes For more information on qualified joint ventures, go to IRS. Students and taxes gov and enter “qualified joint venture” in the search box. Students and taxes Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. Students and taxes You must consider these rules in the order shown below. Students and taxes Both are discussed in this section. Students and taxes At-risk rules. Students and taxes These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. Students and taxes This applies only if the real property was placed in service after 1986. Students and taxes Passive activity limits. Students and taxes Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. Students and taxes However, there are exceptions. Students and taxes At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. Students and taxes Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. Students and taxes In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. Students and taxes You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. Students and taxes Any loss that is disallowed because of the at-risk limits is treated as a deduction from the same activity in the next tax year. Students and taxes See Publication 925 for a discussion of the at-risk rules. Students and taxes Form 6198. Students and taxes   If you are subject to the at-risk rules, file Form 6198, At-Risk Limitations, with your tax return. Students and taxes Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. Students and taxes For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. Students and taxes For a discussion of activities that are not considered rental activities, see Rental Activities in Publication 925. Students and taxes Deductions or losses from passive activities are limited. Students and taxes You generally cannot offset income, other than passive income, with losses from passive activities. Students and taxes Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. Students and taxes Any excess loss or credit is carried forward to the next tax year. Students and taxes Exceptions to the rules for figuring passive activity limits for personal use of a dwelling unit and for rental real estate with active participation are discussed later. Students and taxes For a detailed discussion of these rules, see Publication 925. Students and taxes Real estate professionals. Students and taxes   If you are a real estate professional, complete line 43 of Schedule E. Students and taxes      You qualify as a real estate professional for the tax year if you meet both of the following requirements. Students and taxes More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate. Students and taxes You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate. Students and taxes If you qualify as a real estate professional, rental real estate activities in which you materially participated are not passive activities. Students and taxes For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity. Students and taxes   Do not count personal services you perform as an employee in real property trades or businesses unless you are a 5% owner of your employer. Students and taxes You are a 5% owner if you own (or are considered to own) more than 5% of your employer's outstanding stock, or capital or profits interest. Students and taxes   Do not count your spouse's personal services to determine whether you met the requirements listed earlier to qualify as a real estate professional. Students and taxes However, you can count your spouse's participation in an activity in determining if you materially participated. Students and taxes Real property trades or businesses. Students and taxes   A real property trade or business is a trade or business that does any of the following with real property. Students and taxes Develops or redevelops it. Students and taxes Constructs or reconstructs it. Students and taxes Acquires it. Students and taxes Converts it. Students and taxes Rents or leases it. Students and taxes Operates or manages it. Students and taxes Brokers it. Students and taxes Choice to treat all interests as one activity. Students and taxes   If you were a real estate professional and had more than one rental real estate interest during the year, you can choose to treat all the interests as one activity. Students and taxes You can make this choice for any year that you qualify as a real estate professional. Students and taxes If you forgo making the choice for one year, you can still make it for a later year. Students and taxes   If you make the choice, it is binding for the tax year you make it and for any later year that you are a real estate professional. Students and taxes This is true even if you are not a real estate professional in any intervening year. Students and taxes (For that year, the exception for real estate professionals will not apply in determining whether your activity is subject to the passive activity rules. Students and taxes )   See the Instructions for Schedule E for information about making this choice. Students and taxes Material participation. Students and taxes   Generally, you materially participated in an activity for the tax year if you were involved in its operations on a regular, continuous, and substantial basis during the year. Students and taxes For details, see Publication 925 or the Instructions for Schedule C. Students and taxes Participating spouse. Students and taxes   If you are married, determine whether you materially participated in an activity by also counting any participation in the activity by your spouse during the year. Students and taxes Do this even if your spouse owns no interest in the activity or files a separate return for the year. Students and taxes Form 8582. Students and taxes    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. Students and taxes See Form 8582 not required , later in this chapter, to determine if you must complete Form 8582. Students and taxes   If you are required to complete Form 8582 and are also subject to the at-risk rules, include the amount from Form 6198, line 21 (deductible loss) in column (b) of Form 8582, Worksheet 1 or 3, as required. Students and taxes Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. Students and taxes Instead, follow the rules explained in chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Students and taxes Exception for Rental Real Estate With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. Students and taxes This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Students and taxes Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. Students and taxes Example. Students and taxes Jane is single and has $40,000 in wages, $2,000 of passive income from a limited partnership, and $3,500 of passive loss from a rental real estate activity in which she actively participated. Students and taxes $2,000 of Jane's $3,500 loss offsets her passive income. Students and taxes The remaining $1,500 loss can be deducted from her $40,000 wages. Students and taxes The special allowance is not available if you were married, lived with your spouse at any time during the year, and are filing a separate return. Students and taxes Active participation. Students and taxes   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Students and taxes Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions. Students and taxes Example. Students and taxes Mike is single and had the following income and losses during the tax year:   Salary $42,300     Dividends 300     Interest 1,400     Rental loss (4,000)   The rental loss was from the rental of a house Mike owned. Students and taxes Mike had advertised and rented the house to the current tenant himself. Students and taxes He also collected the rents, which usually came by mail. Students and taxes All repairs were either made or contracted out by Mike. Students and taxes Although the rental loss is from a passive activity, because Mike actively participated in the rental property management he can use the entire $4,000 loss to offset his other income. Students and taxes Maximum special allowance. Students and taxes   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. Students and taxes   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. Students and taxes If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. Students and taxes   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. Students and taxes Modified adjusted gross income (MAGI). Students and taxes   This is your adjusted gross income from Form 1040, U. Students and taxes S. Students and taxes Individual Income Tax Return, line 38, or Form 1040NR, U. Students and taxes S. Students and taxes Nonresident Alien Income Tax Return, line 37, figured without taking into account: The taxable amount of social security or equivalent tier 1 railroad retirement benefits, The deductible contributions to traditional individual retirement accounts (IRAs) and section 501(c)(18) pension plans, The exclusion from income of interest from Series EE and I U. Students and taxes S. Students and taxes savings bonds used to pay higher educational expenses, The exclusion of amounts received under an employer's adoption assistance program, Any passive activity income or loss included on Form 8582, Any rental real estate loss allowed to real estate professionals, Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the Instructions for Form 8582), The deduction allowed for one-half of self-employment tax, The deduction allowed for interest paid on student loans, The deduction for qualified tuition and related fees, and The domestic production activities deduction (see the Instructions for Form 8903). Students and taxes Form 8582 not required. Students and taxes   Do not complete Form 8582 if you meet all of the following conditions. Students and taxes Your only passive activities were rental real estate activities in which you actively participated. Students and taxes Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately and you lived apart from your spouse all year). Students and taxes If married filing separately, you lived apart from your spouse all year. Students and taxes You have no prior year unallowed losses from these (or any other passive) activities. Students and taxes You have no current or prior year unallowed credits from passive activities. Students and taxes Your MAGI is $100,000 or less ($50,000 or less if married filing separately and you lived apart from your spouse all year). Students and taxes You do not hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust. Students and taxes   If you meet all of the conditions listed above, your rental real estate activities are not limited by the passive activity rules and you do not have to complete Form 8582. Students and taxes On lines 23a through 23e of your Schedule E, enter the applicable amounts. Students and taxes Casualties and Thefts As a result of a casualty or theft, you may have a loss related to your rental property. Students and taxes You may be able to deduct the loss on your income tax return. Students and taxes Casualty. Students and taxes   This is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Students and taxes Such events include a storm, fire, or earthquake. Students and taxes Theft. Students and taxes   This is defined as the unlawful taking and removing of your money or property with the intent to deprive you of it. Students and taxes Gain from casualty or theft. Students and taxes   It is also possible to have a gain from a casualty or theft if you receive money, including insurance, that is more than your adjusted basis in the property. Students and taxes Generally, you must report this gain. Students and taxes However, under certain circumstances, you may defer paying tax by choosing to postpone reporting the gain. Students and taxes To do this, you generally must buy replacement property within 2 years after the close of the first tax year in which any part of your gain is realized. Students and taxes In certain circumstances, the replacement period can be greater than 2 years; see Replacement Period in Publication 547 for more information. Students and taxes The cost of the replacement property must be equal to or more than the net insurance or other payment you received. Students and taxes More information. Students and taxes   For information on business and nonbusiness casualty and theft losses, see Publication 547. Students and taxes How to report. Students and taxes    If you had a casualty or theft that involved property used in your rental activity, figure the net gain or loss in Section B of Form 4684, Casualties and Thefts. Students and taxes Follow the Instructions for Form 4684 for where to carry your net gain or loss. Students and taxes Example In February 2008, Marie Pfister bought a rental house for $135,000 (house $120,000 and land $15,000) and immediately began renting it out. Students and taxes In 2013, she rented it all 12 months for a monthly rental fee of $1,125. Students and taxes In addition to her rental income of $13,500 (12 x $1,125), Marie had the following expenses. Students and taxes Mortgage interest $8,000 Fire insurance (1-year policy) 250 Miscellaneous repairs 400 Real estate taxes imposed and paid 500 Maintenance 200 Marie depreciates the residential rental property under MACRS GDS. Students and taxes This means using the straight line method over a recovery period of 27. Students and taxes 5 years. Students and taxes She uses Table 2-2d to find her depreciation percentage. Students and taxes Because she placed the property in service in February 2008, she continues to use that row of Table 2-2d. Students and taxes For year 6, the rate is 3. Students and taxes 636%. Students and taxes Marie figures her net rental income or loss for the house as follows: Total rental income received  ($1,125 × 12) $13,500 Minus: Expenses     Mortgage interest $8,000   Fire insurance 250   Miscellaneous repairs 400   Real estate taxes 500   Maintenance 200   Total expenses 9,350 Balance $4,150 Minus: Depreciation ($120,000 x 3. Students and taxes 636%) 4,363 Net rental (loss) for house ($213)       Marie had a net loss for the year. Students and taxes Because she actively participated in her passive rental real estate activity and her loss was less than $25,000, she can deduct the loss on her return. Students and taxes Marie also meets all of the requirements for not having to file Form 8582. Students and taxes She uses Schedule E, Part I, to report her rental income and expenses. Students and taxes She enters her income, expenses, and depreciation for the house in the column for Property A and enters her loss on line 22. Students and taxes Form 4562 is not required. Students and taxes Prev  Up  Next   Home   More Online Publications
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Understanding your CP11M Notice

We made changes to your return involving the Making Work Pay and Government Retiree Credit. You owe money on your taxes as a result of these changes.

Tax publications you may find useful

How to get help

Calling the toll free number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice carefully ― it will explain how the changes we made affected the Making Work Pay and Government Retiree Credit.
  • Pay the amount owed by the date on the notice's payment coupon.
  • Make payment arrangements if you can't pay the full amount you owe.
  • Contact us within 60 days of the date of your notice if you disagree with the change we made.
  • Correct the copy of your tax return that you kept for your records.

You may want to...


Answers to Common Questions

How can I find out what caused my tax return to change?
Please contact us at the number listed on your notice for specific information concerning your tax return.

What should I do if I disagree with the changes you made?
If you disagree, contact us at the toll free number listed on the top right corner of your notice.

If you contact us in writing within 60 days of the date of this notice, we'll reverse the change we made to your account. However, if you're unable to provide us additional information that justifies the reversal and we believe the reversal is in error, we'll forward your case for audit. This step gives you formal appeal rights, including the right to appeal our decision in court before you have to pay the additional tax. After we forward your case, the audit staff will contact you within five to six weeks to fully explain the audit process and your rights. If you don't contact us within the 60-day period, you'll lose your right to appeal our decision before payment of tax.

If you don't contact us within 60 days, the change won't be reversed and you must pay the additional tax. You may then file a claim for refund. You must submit the claim within three years of the date you filed the tax return, or within two years of the date of your last payment for this tax.

What happens if I can’t pay the full amount I owe?
You can arrange to make a payment plan with us if you can’t pay the full amount you owe.

Am I charged interest on the money I owe?
Not if you pay the full amount you owe by the date on the payment coupon. However interest accrues on the unpaid balance after that date.

Will I receive a penalty if I can't pay the full amount?
Yes, you will receive a late payment penalty. You can contact us at the number given on your notice if you're unable to pay the full amount shown in your specific notice because of circumstances beyond your control. Contact us by the due date of your payment and, depending on your situation, we may be able to remove the penalty.

What is the Making Work Pay Credit?
Making Work Pay Credit is a refundable tax credit that can go up to $400 for individuals and to $800 for married taxpayers.

How can taxpayers get this credit?
Taxpayers received the credit in advance through the automatic recalculation of their withholding amounts in the spring of 2009. This recalculation resulted in more take-home pay for them in their paychecks. Taxpayers then must demonstrate their eligibility for the credit by completing a Schedule M, Making Work Pay and Government Retiree Credits on their 2009 income tax return.

What happens if I don’t receive a paycheck from an employer?
You can claim the credit on your 2009 income tax return with a Schedule M, Making Work Pay and Government Retiree Credits.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

Perform a quick check on the amount you have withheld to pay your taxes to make sure you won't owe money next year. You can use this IRS withholding calculator.

 

Page Last Reviewed or Updated: 28-Mar-2014

The Students And Taxes

Students and taxes Publication 556 - Main Content Table of Contents Examination of ReturnsIf Your Return Is Examined Interest Netting Abatement of Interest Due to Error or Delay by the IRS Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Offer in Compromise Appeal RightsAppeal Within the IRS Appeals to the Courts Refund or Credit of Overpayments Before Final Determination Claims for RefundTime for Filing a Claim for Refund Limit on Amount of Refund Processing Claims for Refund Reduced Refund How To Get Tax Help Examination of Returns Your return may be examined for a variety of reasons, and the examination may take place in any one of several ways. Students and taxes After the examination, if any changes to your tax are proposed, you can either agree with those changes and pay any additional tax you may owe, or you can disagree with the changes and appeal the decision. Students and taxes Examination selection criteria. Students and taxes   Your return may be selected for examination on the basis of computer scoring. Students and taxes A computer program called the Discriminant Inventory Function System (DIF) assigns a numeric score to each individual and some corporate tax returns after they have been processed. Students and taxes If your return is selected because of a high score under the DIF system, the potential is high that an examination of your return will result in a change to your income tax liability. Students and taxes   Your return may also be selected for examination on the basis of information received from third-party documentation, such as Forms 1099 and W-2, that does not match the information reported on your return. Students and taxes Or, your return may be selected to address both the questionable treatment of an item and to study the behavior of similar taxpayers (a market segment) in handling a tax issue. Students and taxes   In addition, your return may be selected as a result of information received from other sources on potential noncompliance with the tax laws or inaccurate filing. Students and taxes This information can come from a number of sources, including newspapers, public records, and individuals. Students and taxes The information is evaluated for reliability and accuracy before it is used as the basis of an examination or investigation. Students and taxes Notice of IRS contact of third parties. Students and taxes    The IRS must give you reasonable notice before contacting other persons about your tax matters. Students and taxes You must be given reasonable notice in advance that, in examining or collecting your tax liability, the IRS may contact third parties such as your neighbors, banks, employers, or employees. Students and taxes The IRS must also give you notice of specific contacts by providing you with a record of persons contacted on both a periodic basis and upon your request. Students and taxes    This provision does not apply: To any pending criminal investigation, When providing notice would jeopardize collection of any tax liability, Where providing notice may result in reprisal against any person, or When you authorized the contact. Students and taxes Taxpayer Advocate Service. Students and taxes   The Taxpayer Advocate Service is an independent organization within the IRS whose goal is to help taxpayers resolve problems with the IRS. Students and taxes If you have an ongoing issue with the IRS that has not been resolved through normal processes, or your problems with the IRS are causing financial difficulty, contact the Taxpayer Advocate Service. Students and taxes    Before contacting the Taxpayer Advocate Service, you should first discuss any problem with a supervisor. Students and taxes Your local Taxpayer Advocate will assist you if you are unable to resolve the problem with the supervisor. Students and taxes   For more information, see Publication 1546. Students and taxes See How To Get Tax Help , near the end of this publication, for more information about contacting the Taxpayer Advocate Service. Students and taxes Comments from small business. Students and taxes    The Small Business and Agricultural Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards have been established to receive comments from small business about federal agency enforcement actions. Students and taxes The Ombudsman will annually evaluate the enforcement activities of each agency and rate their responsiveness to small business. Students and taxes If you wish to comment on the enforcement actions of the IRS, you can take any of the following steps. Students and taxes Fax your comments to 1-202-481-5719. Students and taxes Write to the following address: Office of the National Ombudsman U. Students and taxes S. Students and taxes Small Business Administration 409 3rd Street, SW Washington, DC 20416 Call 1-888-734-3247. Students and taxes Send an email to ombudsman@sba. Students and taxes gov. Students and taxes File a comment or complaint online at www. Students and taxes sba. Students and taxes gov/ombudsman. Students and taxes If Your Return Is Examined Some examinations are handled entirely by mail. Students and taxes Examinations not handled by mail can take place in your home, your place of business, an Internal Revenue office, or the office of your authorized representative. Students and taxes If the time, place, or method is not convenient for you, the examiner will try to work out something more suitable. Students and taxes However, the IRS makes the final determination of when, where, and how the examination will take place. Students and taxes Throughout the examination, you can act on your own behalf or have someone represent you or accompany you. Students and taxes If you filed a joint return, either you or your spouse, or both, can meet with the IRS. Students and taxes The person representing you can be any federally authorized practitioner, including an attorney, a certified public accountant, an enrolled agent (a person enrolled to practice before the IRS), an enrolled actuary, or the person who prepared the return and signed it as the preparer. Students and taxes If you want someone to represent you in your absence, you must furnish that person with proper written authorization. Students and taxes You can use Form 2848 or any other properly written authorization. Students and taxes If you want to consult with an attorney, a certified public accountant, an enrolled agent, or any other person permitted to represent a taxpayer during an interview for examining a tax return or collecting tax, you should make arrangements with that person to be available for the interview. Students and taxes In most cases, the IRS must suspend the interview and reschedule it. Students and taxes The IRS cannot suspend the interview if you are there because of an administrative summons. Students and taxes Third party authorization. Students and taxes   If you checked the box in the signature area of your income tax return (Form 1040, Form 1040A, or Form 1040EZ) to allow the IRS to discuss your return with another person (a third party designee), this authorization does not replace Form 2848. Students and taxes The box you checked on your return only authorizes the other person to receive information about the processing of your return and the status of your refund during the period your return is being processed. Students and taxes For more information, see the instructions for your return. Students and taxes Confidentiality privilege. Students and taxes   Generally, the same confidentiality protection that you have with an attorney also applies to certain communications that you have with federally authorized practitioners. Students and taxes   Confidential communications are those that: Advise you on tax matters within the scope of the practitioner's authority to practice before the IRS, Would be confidential between an attorney and you, and Relate to noncriminal tax matters before the IRS, or Relate to noncriminal tax proceedings brought in federal court by or against the United States. Students and taxes   In the case of communications in connection with the promotion of a person's participation in a tax shelter, the confidentiality privilege does not apply to written communications between a federally authorized practitioner and that person, any director, officer, employee, agent, or representative of that person, or any other person holding a capital or profits interest in that person. Students and taxes   A tax shelter is any entity, plan, or arrangement, a significant purpose of which is the avoidance or evasion of income tax. Students and taxes Recordings. Students and taxes    You can make an audio recording of the examination interview. Students and taxes Your request to record the interview should be made in writing. Students and taxes You must notify the examiner 10 days in advance and bring your own recording equipment. Students and taxes The IRS also can record an interview. Students and taxes If the IRS initiates the recording, you must be notified 10 days in advance and you can get a copy of the recording at your expense. Students and taxes Transfers to another area. Students and taxes    Generally, your return is examined in the area where you live. Students and taxes But if your return can be examined more quickly and conveniently in another area, such as where your books and records are located, you can ask to have the case transferred to that area. Students and taxes Repeat examinations. Students and taxes    The IRS tries to avoid repeat examinations of the same items, but sometimes this happens. Students and taxes If your tax return was examined for the same items in either of the 2 previous years and no change was proposed to your tax liability, please contact the IRS as soon as possible to see if the examination should be discontinued. Students and taxes The Examination An examination usually begins when you are notified that your return has been selected. Students and taxes The IRS will tell you which records you will need. Students and taxes The examination can proceed more easily if you gather your records before any interview. Students and taxes Any proposed changes to your return will be explained to you or your authorized representative. Students and taxes It is important that you understand the reasons for any proposed changes. Students and taxes You should not hesitate to ask about anything that is unclear to you. Students and taxes The IRS must follow the tax laws set forth by Congress in the Internal Revenue Code. Students and taxes The IRS also follows Treasury Regulations, other rules, and procedures that were written to administer the tax laws and court decisions. Students and taxes However, the IRS can lose cases that involve taxpayers with the same issue and still apply its interpretation of the law to your situation. Students and taxes Most taxpayers agree to changes proposed by examiners, and the examinations are closed at this level. Students and taxes If you do not agree, you can appeal any proposed change by following the procedures provided to you by the IRS. Students and taxes A more complete discussion of appeal rights is found later under Appeal Rights . Students and taxes If You Agree If you agree with the proposed changes, you can sign an agreement form and pay any additional tax you may owe. Students and taxes You must pay interest on any additional tax. Students and taxes If you pay when you sign the agreement, the interest is generally figured from the due date of your return (excluding any extension of time to file) to the date of your payment. Students and taxes If you do not pay the additional tax when you sign the agreement, you will receive a bill that includes interest. Students and taxes If you pay the amount due within 10 business days of the billing date, you will not have to pay more interest or penalties. Students and taxes This period is extended to 21 calendar days if the amount due is less than $100,000. Students and taxes If you are due a refund, you will receive it sooner if you sign the agreement form. Students and taxes You will be paid interest on the refund. Students and taxes If the IRS accepts your tax return as filed, you will receive a letter in a few weeks stating that the examiner proposed no changes to your return. Students and taxes You should keep this letter with your tax records. Students and taxes If You Do Not Agree If you do not agree with the proposed changes, the examiner will explain your appeal rights. Students and taxes If your examination takes place in an IRS office, you can request an immediate meeting with the examiner's supervisor to explain your position. Students and taxes If an agreement is reached, your case will be closed. Students and taxes If you cannot reach an agreement with the supervisor at this meeting, or if the examination took place outside of an IRS office, the examiner will write up your case explaining your position and the IRS's position. Students and taxes The examiner will forward your case for processing. Students and taxes Fast track mediation. Students and taxes   The IRS offers fast track mediation services to help taxpayers resolve many disputes resulting from: Examinations (audits), Offers in compromise, Trust fund recovery penalties, and Other collection actions. Students and taxes   Most cases that are not docketed in any court qualify for fast track mediation. Students and taxes Mediation can take place at a conference you request with a supervisor, or later. Students and taxes The process involves an Appeals Officer who has been trained in mediation. Students and taxes You may represent yourself at the mediation session, or someone else can act as your representative. Students and taxes For more information, see Publication 3605. Students and taxes 30-day letter and 90-day letter. Students and taxes   Within a few weeks after your closing conference with the examiner and/or supervisor, you will receive a package with: A letter (known as a 30-day letter) notifying you of your right to appeal the proposed changes within 30 days, A copy of the examination report explaining the examiner's proposed changes, An agreement or waiver form, and A copy of Publication 5. Students and taxes You generally have 30 days from the date of the 30-day letter to tell the IRS whether you will accept or appeal the proposed changes. Students and taxes The letter will explain what steps you should take, depending on which action you choose. Students and taxes Be sure to follow the instructions carefully. Students and taxes Appeal Rights are explained later. Students and taxes 90-day letter. Students and taxes   If you do not respond to the 30-day letter, or if you later do not reach an agreement with an Appeals Officer, the IRS will send you a 90-day letter, which is also known as a notice of deficiency. Students and taxes You will have 90 days (150 days if it is addressed to you outside the United States) from the date of this notice to file a petition with the Tax Court. Students and taxes Filing a petition with the Tax Court is discussed later under Appeals to the Courts and Tax Court . Students and taxes The notice will show the 90th (or 150th) day by which you must file your petition with the Tax Court. Students and taxes Suspension of interest and penalties. Students and taxes   Generally, the IRS has 3 years from the date you filed your return (or the date the return was due, if later) to assess any additional tax. Students and taxes However, if you file your return timely (including extensions), interest and certain penalties will be suspended if the IRS does not mail a notice to you, stating your liability and the basis for that liability, within a 36-month period beginning on the later of: The date on which you filed your tax return, or The due date (without extensions) of your tax return. Students and taxes If the IRS mails a notice after the 36-month period, interest and certain penalties applicable to the suspension period will be suspended. Students and taxes   The suspension period begins the day after the close of the 36-month period and ends 21 days after the IRS mails a notice to you stating your liability and the basis for that liability. Students and taxes Also, the suspension period applies separately to each notice stating your liability and the basis for that liability received by you. Students and taxes    The suspension does not apply to a: Failure-to-pay penalty, Fraudulent tax return, Penalty, interest, addition to tax, or additional amount with respect to any tax liability shown on your return or with respect to any gross misstatement, Penalty, interest, addition to tax, or additional amount with respect to any reportable transaction that is not adequately disclosed or any listed transaction, or Criminal penalty. Students and taxes Seeking relief from improperly assessed interest. Students and taxes   You can seek relief if interest is assessed for periods during which interest should have been suspended because the IRS did not mail a notice to you in a timely manner. Students and taxes   If you believe that interest was assessed with respect to a period during which interest should have been suspended, submit Form 843, writing “Section 6404(g) Notification” at the top of the form, with the IRS Service Center where you filed your return. Students and taxes The IRS will review the Form 843 and notify you whether interest will be abated. Students and taxes If the IRS does not abate interest, you can pay the disputed interest assessment and file a claim for refund. Students and taxes If your claim is denied or not acted upon within 6 months from the date you filed it, you can file suit for a refund in your United States District Court or in the United States Court of Federal Claims. Students and taxes   If you believe that an IRS officer or employee has made an unreasonable error or delay in performing a ministerial or managerial act (discussed later under Abatement of Interest Due to Error or Delay by the IRS ), file Form 843 with the IRS Service Center where you filed the tax return. Students and taxes If the IRS denies your claim, the Tax Court may be able to review that determination. Students and taxes See Tax Court can review failure to abate interest later under Abatement of Interest Due to Error or Delay by the IRS . Students and taxes If you later agree. Students and taxes    If you agree with the examiner's changes after receiving the examination report or the 30-day letter, sign and return either the examination report or the waiver form. Students and taxes Keep a copy for your records. Students and taxes You can pay any additional amount you owe without waiting for a bill. Students and taxes Include interest on the additional tax at the applicable rate. Students and taxes This interest rate is usually for the period from the due date of the return (excluding any extension of time to file) to the date of payment. Students and taxes The examiner can tell you the interest rate(s) or help you figure the amount. Students and taxes   You must pay interest on penalties and additions to tax for failing to file returns, for overstating valuations, for understating valuations on estate and gift tax returns, and for substantially understating tax liability. Students and taxes Interest is generally figured from the date (including extensions) the tax return is required to be filed to the date you pay the penalty and/or additions to tax. Students and taxes   If you pay the amount due within 10 business days after the date of notice and demand for immediate payment, you will not have to pay any additional penalties and interest. Students and taxes This period is extended to 21 calendar days if the amount due is less than $100,000. Students and taxes How To Stop Interest From Accruing If you think that you will owe additional tax at the end of the examination, you can stop the further accrual of interest by sending money to the IRS to cover all or part of the amount you think you will owe. Students and taxes Interest on part or all of any amount you owe will stop accruing on the date the IRS receives your money. Students and taxes You can send an amount either in the form of a deposit in the nature of a cash bond or as a payment of tax. Students and taxes Both a deposit and a payment stop any further accrual of interest. Students and taxes However, making a deposit or payment will stop the accrual of interest on only the amount you sent. Students and taxes Because of compounding rules, interest will continue to accrue on accrued interest, even though you have paid the underlying tax. Students and taxes To stop the accrual of interest on both tax and interest, you must make a deposit or payment for both the tax and interest that has accrued as of the date of deposit or payment. Students and taxes Payment or Deposit Deposits differ from payments in two ways: You can have all or part of your deposit returned to you without filing for a refund. Students and taxes However, if you request and receive your deposit and the IRS later assesses a deficiency for that period and type of tax, interest will be figured as if the funds were never on deposit. Students and taxes Also, your deposit will not be returned if one of the following situations applies: The IRS assesses a tax liability. Students and taxes The IRS determines that, by returning the deposit, it may not be able to collect a future deficiency. Students and taxes The IRS determines that the deposit should be applied against another tax liability. Students and taxes Deposits returned to you will include interest based on the Federal short-term rate determined under section 6621(b). Students and taxes The deposit returned will be treated as a tax payment to the extent of the disputed tax. Students and taxes A disputed tax means the amount of tax specified at the time of deposit as a reasonable estimate of the maximum amount of any tax owed by you, such as the deficiency proposed in the 30-day letter. Students and taxes Notice not mailed. Students and taxes    If you send money before the IRS mails you a notice of deficiency, you can ask the IRS to treat it as a deposit. Students and taxes You must make your request in writing. Students and taxes   If, after being notified of a proposed liability but before the IRS mails you a notice of deficiency, you send an amount large enough to cover the proposed liability, it will be considered a payment unless you request in writing that it be treated as a deposit. Students and taxes Keep copies of all correspondence you send to the IRS. Students and taxes   If the amount you send is at least as much as the proposed liability and you do not request that it be treated as a deposit, the IRS will not send you a notice of deficiency. Students and taxes If you do not receive a notice of deficiency, you cannot take your case to the Tax Court. Students and taxes See Tax Court , later under Appeal Rights . Students and taxes Notice mailed. Students and taxes    If, after the IRS mails the notice of deficiency, you send money without written instructions, it will be treated as a payment. Students and taxes You will still be able to petition the Tax Court. Students and taxes   If you send money after receiving a notice of deficiency and you have specified in writing that it is a “deposit in the nature of a cash bond,” the IRS will treat it as a deposit if you send it before either: The close of the 90-day or 150-day period for filing a petition with the Tax Court to appeal the deficiency, or The date the Tax Court decision is final, if you have filed a petition. Students and taxes Using a Deposit To Pay the Tax If you agree with the examiner's proposed changes after the examination, your deposit will be applied against any amount you may owe. Students and taxes The IRS will not mail you a notice of deficiency and you will not have the right to take your case to the Tax Court. Students and taxes If you do not agree to the full amount of the deficiency after the examination, the IRS will mail you a notice of deficiency. Students and taxes Your deposit will be applied against the proposed deficiency unless you write to the IRS before the end of the 90-day or 150-day period stating that you still want the money to be treated as a deposit. Students and taxes You will still have the right to take your case to the Tax Court. Students and taxes Installment Agreement Request You can request a monthly installment plan if you cannot pay the full amount you owe. Students and taxes To be valid, your request must be approved by the IRS. Students and taxes However, if you owe $10,000 or less in tax and you meet certain other criteria, the IRS must accept your request. Students and taxes Before you request an installment agreement, you should consider other less costly alternatives, such as a bank loan. Students and taxes You will continue to be charged interest and penalties on the amount you owe until it is paid in full. Students and taxes Unless your income is below a certain level, the fee for an approved installment agreement has increased to $105 ($52 if you make your payments by electronic funds withdrawal). Students and taxes If your income is below a certain level, you may qualify to pay a reduced fee of $43. Students and taxes For more information about installment agreements, see Form 9465, Installment Agreement Request. Students and taxes Interest Netting If you owe interest to the IRS on an underpayment for the same period the IRS owes you interest on an overpayment, the IRS will figure interest on the underpayment and overpayment at the same interest rate (up to the amount of the overpayment). Students and taxes As a result, the net rate is zero for that period. Students and taxes Abatement of Interest Due to Error or Delay by the IRS The IRS may abate (reduce) the amount of interest you owe if the interest is due to an unreasonable error or delay by an IRS officer or employee in performing a ministerial or managerial act (discussed later). Students and taxes Only the amount of interest on income, estate, gift, generation-skipping, and certain excise taxes can be reduced. Students and taxes The amount of interest will not be reduced if you or anyone related to you contributed significantly to the error or delay. Students and taxes Also, the interest will be reduced only if the error or delay happened after the IRS contacted you in writing about the deficiency or payment on which the interest is based. Students and taxes An audit notification letter is such a contact. Students and taxes The IRS cannot reduce the amount of interest due to a general administrative decision, such as a decision on how to organize the processing of tax returns. Students and taxes Ministerial act. Students and taxes    This is a procedural or mechanical act, not involving the exercise of judgment or discretion, during the processing of a case after all prerequisites (for example, conferences and review by supervisors) have taken place. Students and taxes A decision concerning the proper application of federal tax law (or other federal or state law) is not a ministerial act. Students and taxes Example 1. Students and taxes You move from one state to another before the IRS selects your tax return for examination. Students and taxes A letter stating that your return has been selected is sent to your old address and then forwarded to your new address. Students and taxes When you get the letter, you respond with a request that the examination be transferred to the area office closest to your new address. Students and taxes The examination group manager approves your request. Students and taxes After your request has been approved, the transfer is a ministerial act. Students and taxes The IRS can reduce the interest because of any unreasonable delay in transferring the case. Students and taxes Example 2. Students and taxes An examination of your return reveals tax due for which a notice of deficiency (90-day letter) will be issued. Students and taxes After you and the IRS discuss the issues, the notice is prepared and reviewed. Students and taxes After the review process, issuing the notice of deficiency is a ministerial act. Students and taxes If there is an unreasonable delay in sending the notice of deficiency to you, the IRS can reduce the interest resulting from the delay. Students and taxes Managerial act. Students and taxes    This is an administrative act during the processing of a case that involves the loss of records or the exercise of judgment or discretion concerning the management of personnel. Students and taxes A decision concerning the proper application of federal tax law (or other federal or state law) is not a managerial act. Students and taxes Example. Students and taxes A revenue agent is examining your tax return. Students and taxes During the middle of the examination, the agent is sent to an extended training course. Students and taxes The agent's supervisor decides not to reassign your case, so the work is unreasonably delayed until the agent returns. Students and taxes Interest from the unreasonable delay can be abated since both the decision to send the agent to the training class and not to reassign the case are managerial acts. Students and taxes How to request abatement of interest. Students and taxes    You request an abatement (reduction) of interest on Form 843. Students and taxes You should file the claim with the IRS Service Center where you filed the tax return that was affected by the error or delay. Students and taxes   If you have already paid the interest and you would like a credit or refund of interest paid, you must file Form 843 within 3 years from the date you filed your original return or 2 years from the date you paid the interest, whichever is later. Students and taxes If you have not paid any of the interest, these time limitations for filing Form 843 do not apply. Students and taxes   Generally, you should file a separate Form 843 for each tax period and each type of tax. Students and taxes However, complete only one Form 843 if the interest is from an IRS error or delay that affected your tax for more than one tax period or for more than one type of tax (for example, where 2 or more tax years were being examined). Students and taxes   If your request for abatement of interest is denied, you can appeal the decision to the IRS Appeals Office. Students and taxes Tax Court can review failure to abate interest. Students and taxes    The Tax Court can review the IRS's refusal to abate (reduce) interest if all of the following requirements are met: You filed a request for abatement of interest (Form 843) with the IRS after July 30,1996. Students and taxes The IRS has mailed you a notice of final determination or a notice of disallowance. Students and taxes You file a petition with the Tax Court within 180 days of the mailing of the notice of final determination or the notice of disallowance. Students and taxes   The following requirements must also be met: For individual and estate taxpayers — your net worth must not exceed $2 million as of the filing date of your petition for review. Students and taxes For this purpose, individuals filing a joint return shall be treated as separate individuals. Students and taxes For charities and certain cooperatives — you must not have more than 500 employees as of the filing date of your petition for review. Students and taxes For all other taxpayers — your net worth must not exceed $7 million, and you must not have more than 500 employees as of the filing date of your petition for review. Students and taxes Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions If you are (or were) affected by a Presidentially declared disaster occurring after 1996 or a terrorist or military action occurring after September 10, 2001, the IRS may abate (reduce) the amount of interest you owe on certain taxes. Students and taxes The IRS may abate interest for the period of any additional time to file or pay that the IRS provides on account of the disaster or the terrorist or military action. Students and taxes The IRS will issue a notice or news release indicating who are affected taxpayers and stating the period of relief. Students and taxes If you are eligible for relief from interest, but were charged interest for the period of relief, the IRS may retroactively abate your interest. Students and taxes To the extent possible, the IRS can take the following actions: Make appropriate adjustments to your account. Students and taxes Notify you when the adjustments are made. Students and taxes Refund any interest paid by you where appropriate. Students and taxes For more information on disaster area losses, see Disaster Area Losses in Publication 547. Students and taxes For more information on other tax relief for victims of terrorist attacks, see Publication 3920. Students and taxes Offer in Compromise In certain circumstances, the IRS will allow you to pay less than the full amount you owe. Students and taxes If you think you may qualify, you should submit your offer by filing Form 656, Offer in Compromise. Students and taxes The IRS may accept your offer for any of the following reasons: There is doubt about the amount you owe (or whether you owe it). Students and taxes There is doubt as to whether you can pay the amount you owe based on your financial situation. Students and taxes An economic hardship would result if you had to pay the full amount owed. Students and taxes Your case presents compelling reasons that the IRS determines are a sufficient basis for compromise. Students and taxes If your offer is rejected, you have 30 days to ask the Appeals Office of the IRS to reconsider your offer. Students and taxes The IRS offers fast track mediation services to help taxpayers resolve many issues including a dispute regarding an offer in compromise. Students and taxes For more information, see Publication 3605. Students and taxes Generally, if you submit an offer in compromise, the IRS will delay certain collection activities. Students and taxes The IRS usually will not levy (take) your property to settle your tax bill during the following periods: While the IRS is evaluating your offer in compromise. Students and taxes The 30 days immediately after the offer is rejected. Students and taxes While your timely-filed appeal is being considered by Appeals. Students and taxes Also, if the IRS rejects your original offer and you submit a revised offer within 30 days of the rejection, the IRS generally will not levy your property while it considers your revised offer. Students and taxes For more information about submitting an offer in compromise, see Form 656. Students and taxes Appeal Rights Because people sometimes disagree on tax matters, the IRS has an appeals system. Students and taxes Most differences can be settled within this system without expensive and time-consuming court trials. Students and taxes However, your reasons for disagreeing must come within the scope of the tax laws. Students and taxes For example, you cannot appeal your case based only on moral, religious, political, constitutional, conscientious, or similar grounds. Students and taxes In most instances, you may be eligible to take your case to court if you do not reach an agreement at your appeals conference, or if you do not want to appeal your case to the IRS Office of Appeals. Students and taxes See Appeals to the Courts , later, for more information. Students and taxes Appeal Within the IRS You can appeal an IRS tax decision to a local Appeals Office, which is separate from and independent of the IRS office taking the action you disagree with. Students and taxes The Appeals Office is the only level of appeal within the IRS. Students and taxes Conferences with Appeals Office personnel are held in an informal manner by correspondence, by telephone, or at a personal conference. Students and taxes If you want an appeals conference, follow the instructions in the letter you received. Students and taxes Your request will be sent to the Appeals Office to arrange a conference at a convenient time and place. Students and taxes You or your representative should be prepared to discuss all disputed issues at the conference. Students and taxes Most differences are settled at this level. Students and taxes If agreement is not reached at your appeals conference, you may be eligible to take your case to court. Students and taxes See Appeals to the Courts , later. Students and taxes Protests and Small Case Requests When you request an Appeals conference, you may also need to file either a formal written protest or a small case request with the office named in the letter you received. Students and taxes Also, see the special appeal request procedures in Publication 1660. Students and taxes Written protest. Students and taxes   You need to file a written protest in the following cases: All employee plan and exempt organization cases without regard to the dollar amount at issue. Students and taxes All partnership and S corporation cases without regard to the dollar amount at issue. Students and taxes All other cases, unless you qualify for the small case request procedure, or other special appeal procedures such as requesting Appeals consideration of liens, levies, seizures, or installment agreements. Students and taxes   If you must submit a written protest, see the instructions in Publication 5 about the information you need to provide. Students and taxes The IRS urges you to provide as much information as you can, as it will help speed up your appeal. Students and taxes That will save you both time and money. Students and taxes    Be sure to send the protest within the time limit specified in the letter you received. Students and taxes Small case request. Students and taxes   If the total amount for any tax period is not more than $25,000, you may make a small case request instead of filing a formal written protest. Students and taxes In figuring the total amount, include a proposed increase or decrease in tax (including penalties), or claimed refund. Students and taxes If you are making an offer in compromise, include total unpaid tax, penalty, and interest due. Students and taxes For a small case request, follow the instructions in our letter to you by sending a letter: Requesting Appeals consideration, Indicating the changes you do not agree with, and Indicating the reasons why you do not agree. Students and taxes Representation You can represent yourself at your appeals conference, or you can be represented by any federally authorized practitioner, including an attorney, a certified public accountant, an enrolled actuary, or an enrolled agent. Students and taxes If your representative attends a conference without you, he or she can receive or inspect confidential information only if you have filed a power of attorney or a tax information authorization. Students and taxes You can use a Form 2848 or any other properly written power of attorney or authorization. Students and taxes You can also bring witnesses to support your position. Students and taxes Confidentiality privilege. Students and taxes   Generally, the same confidentiality protection that you have with an attorney also applies to certain communications that you have with federally authorized practitioners. Students and taxes See Confidentiality privilege under If Your Return Is Examined , earlier. Students and taxes Appeals to the Courts If you and the IRS still disagree after the appeals conference, you may be entitled to take your case to the United States Tax Court, the United States Court of Federal Claims, or a United States District Court. Students and taxes These courts are independent of the IRS. Students and taxes If you elect to bypass the IRS's appeals system, you may be able to take your case to one of the courts listed above. Students and taxes However, a case petitioned to the United States Tax Court will normally be considered for settlement by an Appeals Officer before the Tax Court hears the case. Students and taxes If you unreasonably fail to pursue the IRS's appeals system, or if your case is intended primarily to cause a delay, or your position is frivolous or groundless, the Tax Court may impose a penalty of up to $25,000. Students and taxes See Appeal Within the IRS, earlier. Students and taxes Prohibition on requests to taxpayers to give up rights to bring civil action. Students and taxes   The Government cannot ask you to waive your right to sue the United States or a Government officer or employee for any action taken in connection with the tax laws. Students and taxes However, your right to sue can be waived if: You knowingly and voluntarily waive that right, The request to waive that right is made in writing to your attorney or other federally authorized practitioner, or The request is made in person and your attorney or other representative is present. Students and taxes Burden of proof. Students and taxes   For court proceedings resulting from examinations started after July 22, 1998, the IRS generally has the burden of proof for any factual issue if you have met the following requirements: You introduced credible evidence relating to the issue. Students and taxes You complied with all substantiation requirements of the Internal Revenue Code. Students and taxes You maintained all records required by the Internal Revenue Code. Students and taxes You cooperated with all reasonable requests by the IRS for information regarding the preparation and related tax treatment of any item reported on your tax return. Students and taxes You had a net worth of $7 million or less and not more than 500 employees at the time your tax liability is contested in any court proceeding if your tax return is for a corporation, partnership, or trust. Students and taxes    The burden of proof does not change on an issue when another provision of the tax laws requires a specific burden of proof with respect to that issue. Students and taxes Use of statistical information. Students and taxes   In the case of an individual, the IRS has the burden of proof in court proceedings based on any IRS reconstruction of income solely through the use of statistical information on unrelated taxpayers. Students and taxes Penalties. Students and taxes   The IRS has the burden of initially producing evidence in court proceedings with respect to the liability of any individual taxpayer for any penalty, addition to tax, or additional amount imposed by the tax laws. Students and taxes Recovering litigation or administrative costs. Students and taxes   These are the expenses that you pay to defend your position to the IRS or the courts. Students and taxes You may be able to recover reasonable litigation or administrative costs if all of the following conditions apply: You are the prevailing party. Students and taxes You exhaust all administrative remedies within the IRS. Students and taxes Your net worth is below a certain limit (see Net worth requirements , later). Students and taxes You do not unreasonably delay the proceeding. Students and taxes You apply for administrative costs within 90 days of the date on which the final decision of the IRS Office of Appeals as to the determination of the tax, interest, or penalty was mailed to you. Students and taxes You apply for litigation costs within the time frames provided by Tax Court Rule 231, found at http://www. Students and taxes ustaxcourt. Students and taxes gov  www. Students and taxes ustaxcourt. Students and taxes gov . Students and taxes   Prevailing party, reasonable litigation costs, and reasonable administrative costs are explained later. Students and taxes Note. Students and taxes If the IRS denies your award of administrative costs, and you want to appeal, you must petition the Tax Court within 90 days of the date on which the IRS mails the denial notice. Students and taxes Prevailing party. Students and taxes   Generally, you are the prevailing party if: You substantially prevail with respect to the amount in controversy or on the most significant tax issue or set of issues in question, and You meet the net worth requirements, discussed later. Students and taxes   You will not be treated as the prevailing party if the United States establishes that its position was substantially justified. Students and taxes The position of the United States is presumed not to be substantially justified if the IRS: Did not follow its applicable published guidance (such as regulations, revenue rulings, notices, announcements, private letter rulings, technical advice memoranda, and determination letters issued to the taxpayer) in the proceeding (This presumption can be overcome by evidence. Students and taxes ), or Has lost in courts of appeal for other circuits on substantially similar issues. Students and taxes   The court will generally decide who is the prevailing party. Students and taxes Reasonable litigation costs. Students and taxes   These include the following costs: Reasonable court costs. Students and taxes The reasonable costs of studies, analyses, engineering reports, tests, or projects found by the court to be necessary for the preparation of your case. Students and taxes The reasonable costs of expert witnesses. Students and taxes Attorney fees that generally may not exceed $125 maximum hourly rate as set by statute and indexed for inflation. Students and taxes See Attorney fees , later. Students and taxes Reasonable administrative costs. Students and taxes   These include the following costs: Any administrative fees or similar charges imposed by the IRS. Students and taxes The reasonable costs of studies, analyses, engineering reports, tests, or projects. Students and taxes The reasonable costs of expert witnesses. Students and taxes Attorney fees that generally may not exceed $125 per hour. Students and taxes See Attorney fees , later. Students and taxes Timing of costs. Students and taxes    Administrative costs can be awarded for costs incurred after the earliest of: The date the first letter of proposed deficiency is sent that allows you an opportunity to request administrative review in the IRS Office of Appeals, The date you receive notice of the IRS Office of Appeals' decision, or The date of the notice of deficiency. Students and taxes Net worth requirements. Students and taxes   An individual taxpayer may be able to recover litigation or administrative costs if the following requirements are met: For individuals — your net worth does not exceed $2 million as of the filing date of your petition for review. Students and taxes For this purpose, individuals filing a joint return are treated as separate individuals. Students and taxes For estates — your net worth does not exceed $2 million as of the date of the decedent's death. Students and taxes For charities and certain cooperatives — you do not have more than 500 employees as of the filing date of your petition for review. Students and taxes For all other taxpayers — as of the filing date of your petition for review, your net worth does not exceed $7 million, and you must not have more than 500 employees. Students and taxes Qualified offer rule. Students and taxes    You can also receive reasonable costs and fees and be treated as a prevailing party in a civil action or proceeding if: You make a qualified offer to the IRS to settle your case, The IRS does not accept that offer, and The tax liability (not including interest, unless interest is at issue) later determined by the court is equal to or less than the amount of your qualified offer. Students and taxes You must also meet the remaining requirements, including the exhaustion of administrative remedies and the net worth requirement, discussed earlier, to get the benefit of the qualified offer rule. Students and taxes Qualified offer. Students and taxes    This is a written offer made by you during the qualified offer period. Students and taxes It must specify both the offered amount of your liability (not including interest) and that it is a qualified offer. Students and taxes   To be a qualified offer, it must remain open from the date it is made until the earliest of: The date it is rejected, The date the trial begins, or 90 days from the date it is made. Students and taxes Qualified offer period. Students and taxes    This period begins on the day the IRS mails you the first letter of proposed deficiency that allows you to request review by the IRS Office of Appeals. Students and taxes It ends 30 days before your case is first set for trial. Students and taxes Attorney fees. Students and taxes   Attorney fees generally may not exceed $125 maximum hourly rate as set by statute and indexed for inflation. Students and taxes However, this amount can be higher in certain limited circumstances depending on the level of difficulty of the issues in the case and the local availability of tax expertise. Students and taxes See IRS. Students and taxes gov for more information. Students and taxes    Attorney fees include the fees paid by a taxpayer for the services of anyone who is authorized to practice before the Tax Court or before the IRS. Students and taxes In addition, attorney fees can be awarded in civil actions for unauthorized inspection or disclosure of a taxpayer's return or return information. Students and taxes   Fees can be awarded in excess of the actual amount charged if: You are represented for no fee, or for a nominal fee, as a pro bono service, and The award is paid to your representative or to your representative's employer. Students and taxes Jurisdiction for determination of employment status. Students and taxes    The Tax Court can review IRS employment status determinations (for example, whether individuals hired by you are in fact your employees or independent contractors) and the amount of employment tax under such determinations. Students and taxes Tax Court review can take place only if, in connection with an audit of any person, there is a controversy involving a determination by the IRS that either: One or more individuals performing services for that person are employees of that person, or That person is not entitled to relief under Section 530(a) of the Revenue Act of 1978 (discussed later). Students and taxes   The following rules also apply to a Tax Court review of employment status: A Tax Court petition to review these determinations can be filed only by the person for whom the services are performed, If you receive a Notice of Determination by certified or registered mail, you must file a petition for Tax Court review within 90 days of the date of mailing that notice (150 days if the notice is addressed to you outside the United States), If during the Tax Court proceeding, you begin to treat as an employee an individual whose employment status is at issue, the Tax Court will not consider that change in its decision, Assessment and collection of tax is suspended while the Tax Court review is taking place, Payment of the asserted employment tax deficiency is not required to petition the U. Students and taxes S. Students and taxes Tax Court for a determination of employment status. Students and taxes There can be a de novo review by the Tax Court (a review which does not consider IRS administrative findings), and At your request and with the Tax Court's agreement, small tax case procedures (discussed later) are available to simplify the case resolution process when the amount at issue (including additions to tax and penalties) is $50,000 or less for each tax period involved. Students and taxes   For further information, see Publication 3953, Questions and Answers About Tax Court Proceedings for Determination of Employment Status Under IRC Section 7436. Students and taxes Section 530(a) of the Revenue Act of 1978. Students and taxes   This section relieves an employer of certain employment tax responsibilities for individuals not treated as employees. Students and taxes It also provides relief to taxpayers under audit or involved in administrative or judicial proceedings. Students and taxes Tax Court review of request for relief from joint and several liability on a joint return. Students and taxes    As discussed later, at Relief from joint and several liability on a joint return under Claims for Refund, you can request relief from liability for tax you owe, plus related penalties and interest, that you believe should be paid by your spouse (or former spouse). Students and taxes You also can petition (ask) the Tax Court to review your request for innocent spouse relief or separation of liability if either: The IRS sends you a determination notice denying, in whole or in part, your request, or You do not receive a determination notice from the IRS within 6 months from the date you file Form 8857. Students and taxes   If you receive a determination notice, you must petition the Tax Court to review your request during the 90-day period that begins on the date the IRS mails the notice. Students and taxes See Publication 971 for more information. Students and taxes Note. Students and taxes Your spouse or former spouse may file a written protest and request an Appeals conference to protest your claim of innocent spouse relief or separation of liability. Students and taxes See Rev. Students and taxes Proc. Students and taxes 2003-19, which is on page 371 of the Internal Revenue Bulletin 2003-5 at  www. Students and taxes irs. Students and taxes gov/pub/irs-irbs/irb03-05. Students and taxes pdf. Students and taxes Tax Court You can take your case to the United States Tax Court if you disagree with the IRS over: Income tax, Estate tax, Gift tax, Employment tax involving IRS employment status determinations, or Certain excise taxes of private foundations, public charities, qualified pension and other retirement plans, or real estate investment trusts. Students and taxes For information on Tax Court review of a determination of employment status, see Jurisdiction for determination of employment status, earlier. Students and taxes For information on Tax Court review of an IRS refusal to abate interest, see Tax Court can review failure to abate interest, earlier under Examination of Returns. Students and taxes For information on Tax Court review of Appeals determinations with respect to lien notices and proposed levies, see Publication 1660. Students and taxes You cannot take your case to the Tax Court before the IRS sends you a notice of deficiency. Students and taxes You can only appeal your case if you file a petition within 90 days from the date the notice is mailed to you (150 days if it is addressed to you outside the United States). Students and taxes The notice will show the 90th (or 150th) day by which you must file your petition with the Tax Court. Students and taxes Withdrawal of notice of deficiency. Students and taxes If you consent, the IRS can withdraw a notice of deficiency. Students and taxes A notice of deficiency may be rescinded if the notice was issued as a result of an administrative error; the taxpayer submits information establishing the actual tax due is less than the amount shown in the notice; the taxpayer specifically requests a conference with the appropriate Appeals office for the purpose of entering into settlement negotiations. Students and taxes However, the notice may be rescinded only if the appropriate Appeals office first decides that the case is susceptible to agreement. Students and taxes See Revenue Procedure 98-54 for a more detailed explanation of the requirements. Students and taxes Once withdrawn, the limits on credits, refunds, and assessments concerning the notice are void, and you and the IRS have the rights and obligations that you had before the notice was issued. Students and taxes The suspension of any time limitation while the notice of deficiency was issued will not change when the notice is withdrawn. Students and taxes After the notice is withdrawn, you cannot file a petition with the Tax Court based on the notice. Students and taxes Also, the IRS can later issue a notice of deficiency in a greater or lesser amount than the amount in the withdrawn deficiency. Students and taxes Generally, the Tax Court hears cases before any tax has been assessed and paid; however, you can pay the tax after the notice of deficiency has been issued and still petition the Tax Court for review. Students and taxes If you do not file your petition on time, the proposed tax will be assessed, a bill will be sent, and you will not be able to take your case to the Tax Court. Students and taxes Under the law, you must pay the tax within 21 days (10 business days if the amount is $100,000 or more). Students and taxes Collection can proceed even if you think that the amount is excessive. Students and taxes Publication 594 explains IRS collection procedures. Students and taxes If you filed your petition on time, the court will schedule your case for trial at a location convenient to you. Students and taxes You can represent yourself before the Tax Court or you can be represented by anyone admitted to practice before that court. Students and taxes Small tax case procedure. Students and taxes   If the amount in your case is $50,000 or less for any 1 tax year or period, you can request that your case be handled under the small tax case procedure. Students and taxes If the Tax Court approves, you can present your case to the Tax Court for a decision that is final and that you cannot appeal. Students and taxes You can get more information regarding the small tax case procedure and other Tax Court matters from the United States Tax Court, 400 Second Street, N. Students and taxes W. Students and taxes , Washington, DC 20217. Students and taxes More information can be found on the Tax Court's website at www. Students and taxes ustaxcourt. Students and taxes gov. Students and taxes Motion to request redetermination of interest. Students and taxes   In certain cases, you can file a motion asking the Tax Court to redetermine the amount of interest on either an underpayment or an overpayment. Students and taxes You can do this only in a situation that meets all of the following requirements: The IRS has assessed a deficiency that was determined by the Tax Court. Students and taxes The assessment included interest. Students and taxes You have paid the entire amount of the deficiency plus the interest claimed by the IRS. Students and taxes The Tax Court has found that you made an overpayment. Students and taxes You must file the motion within one year after the decision of the Tax Court becomes final. Students and taxes District Court and Court of Federal Claims Generally, the District Courts and the Court of Federal Claims hear tax cases only after you have paid the entire tax and penalties, and filed a claim for a credit or refund. Students and taxes The taxpayer may litigate certain types of employment tax cases in either the United States District Court or the United States Court of Federal Claims. Students and taxes Before taxpayers can initiate suit in either of these courts with respect to certain employment taxes, they will have to pay, at a minimum, the employment tax assessment attributable to one employee for any one quarter and file a claim for refund of the tax. Students and taxes Once the claim for refund is denied or 6 months elapse without any action by the IRS, the taxpayer may initiate suit. Students and taxes As explained later under Claims for Refund, you can file a claim with the IRS for a credit or refund if you think that the tax you paid is incorrect or excessive. Students and taxes If your claim is totally or partially disallowed by the IRS, you should receive a notice of claim disallowance. Students and taxes If the IRS does not act on your claim within 6 months from the date you filed it, you can then file suit for a refund. Students and taxes You generally must file suit for a credit or refund no later than 2 years after the IRS informs you that your claim has been rejected. Students and taxes However, you can file suit if it has been 6 months since you filed your claim and the IRS has not yet delivered a decision. Students and taxes You can file suit for a credit or refund in your United States District Court or in the United States Court of Federal Claims. Students and taxes However, you cannot appeal to the United States Court of Federal Claims if your claim is for credit or refund of a penalty that relates to promoting an abusive tax shelter or to aiding and abetting the understatement of tax liability on someone else's return. Students and taxes For information about procedures for filing suit in either court, contact the Clerk of your District Court or of the United States Court of Federal Claims. Students and taxes Refund or Credit of Overpayments Before Final Determination Any court with proper jurisdiction, including the Tax Court, can order the IRS to refund any part of a tax deficiency that the IRS collects from you during a period when the IRS is not permitted to assess that deficiency, or to levy or engage in any court proceeding to collect that deficiency. Students and taxes In addition, the court can order a refund of any part of an overpayment determined by the Tax Court that is not at issue on appeal to a higher court. Students and taxes The court can order these refunds before its decision on the case is final. Students and taxes Taxpayers should thoroughly review IRS settlement offers before signing a Tax Court Decision document to ensure that all adjustments are correct, including the inclusion of any tax credits that the taxpayer is allowed to claim. Students and taxes Note. Students and taxes The court may no longer order a refund of an overpayment after the case is final. Students and taxes Generally, the IRS is not permitted to take action on a tax deficiency during: The 90-day (or 150-day if outside the United States) period that you have to petition a notice of deficiency to the Tax Court, or The period that the case is under appeal if a bond is provided. Students and taxes Claims for Refund If you believe you have overpaid your tax, you have a limited amount of time in which to file a claim for a credit or refund. Students and taxes You can claim a credit or refund by filing Form 1040X. Students and taxes See Time for Filing a Claim for Refund , later. Students and taxes File your claim by mailing it to the IRS Service Center where you filed your original return. Students and taxes File a separate form for each year or period involved. Students and taxes Include an explanation of each item of income, deduction, or credit on which you are basing your claim. Students and taxes Corporations should file Form 1120X, Amended U. Students and taxes S. Students and taxes Corporation Income Tax Return, or other form appropriate to the type of credit or refund claimed. Students and taxes See Publication 3920 for information on filing claims for tax forgiveness for individuals affected by terrorist attacks. Students and taxes Requesting a copy of your tax return. Students and taxes   You can obtain a copy of the actual return and all attachments you filed with the IRS for an earlier year. Students and taxes This includes a copy of the Form W-2 or Form 1099 filed with your return. Students and taxes Use Form 4506 to make your request. Students and taxes You will be charged a fee, which you must pay when you submit Form 4506. Students and taxes Requesting a copy of your tax account information. Students and taxes   Use Form 4506-T, Request for Transcript of Tax Return, to request free copies of your tax return transcript, tax account transcript, record of account, verification of nonfiling, or Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript. Students and taxes The tax return transcript contains most of the line items of a tax return. Students and taxes A tax account transcript contains information on the financial status of the account, such as payments, penalty assessments, and adjustments. Students and taxes A record of account is a combination of line item information and later adjustments to the account. Students and taxes Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript contains data from these information returns. Students and taxes Penalty for erroneous claim for refund. Students and taxes   If you claim an excessive amount of tax refund or credit relating to income tax (other than a claim relating to the earned income credit), you may be liable for a penalty of 20% of the amount that is determined to be excessive. Students and taxes An excessive amount is the amount of the claim for refund or credit that is more than the amount of claim allowable for the tax year. Students and taxes The penalty may be waived if you can show that you had a reasonable basis for making the claim. Students and taxes Time for Filing a Claim for Refund Generally, you must file a claim for a credit or refund within 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. Students and taxes If you do not file a claim within this period, you may no longer be entitled to a credit or a refund. Students and taxes If the due date to file a return or a claim for a credit or refund is a Saturday, Sunday, or legal holiday, it is filed on time if it is filed on the next business day. Students and taxes Returns you filed before the due date are considered filed on the due date. Students and taxes This is true even when the due date is a Saturday, Sunday, or legal holiday. Students and taxes Disaster area claims for refund. Students and taxes   If you live in a Presidentially declared disaster area or are affected by terroristic or military action, the deadline to file a claim for a refund may be postponed. Students and taxes This section discusses the special rules that apply to Presidentially declared disaster area refunds. Students and taxes    A Presidentially declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Disaster Relief and Emergency Assistance Act. Students and taxes Postponed refund deadlines. Students and taxes   The IRS may postpone for up to 1 year the deadlines for filing a claim for refund. Students and taxes The postponement can be used by taxpayers who are affected by a Presidentially declared disaster. Students and taxes The IRS may also postpone deadlines for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Students and taxes For more information, see Publication 547. Students and taxes   If any deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin. Students and taxes A list of the areas eligible for assistance under the Disaster Relief and Emergency Assistance Act is available at the Federal Emergency Management Agency (FEMA) website at www. Students and taxes fema. Students and taxes gov and at the IRS website at www. Students and taxes irs. Students and taxes gov. Students and taxes Nonfilers can get refund of overpayments paid within 3-year period. Students and taxes   The Tax Court can consider taxes paid during the 3-year period preceding the date of a notice of deficiency for determining any refund due to a nonfiler. Students and taxes This means that if you do not file your return, and you receive a notice of deficiency in the third year after the due date (with extensions) of your return and file suit with the Tax Court to contest the notice of deficiency, you may be able to receive a refund of excessive amounts paid within the 3-year period preceding the date of the notice of deficiency. Students and taxes The IRS may postpone for up to 1 year certain tax deadlines, including the time for filing claims for refund, for taxpayers who are affected by a terrorist attack occurring after September 10, 2001. Students and taxes For more information, see Publication 3920. Students and taxes Claim for refund by estates electing the installment method of payment. Students and taxes   In certain cases where an estate has elected to make tax payments through the installment method, the executor can file a suit for refund with a U. Students and taxes S. Students and taxes District Court or the U. Students and taxes S. Students and taxes Court of Federal Claims before all the installment payments have been made. Students and taxes However, all the following must be true before a suit can be filed: The estate consists largely of an interest in a closely-held business. Students and taxes All installment payments due on or before the date the suit is filed have been made. Students and taxes No accelerated installment payments have been made. Students and taxes No Tax Court case is pending with respect to any estate tax liability. Students and taxes If a notice of deficiency was issued to the estate regarding its liability for estate tax, the time for petitioning the Tax Court has passed. Students and taxes No proceeding is pending for a declaratory judgment by the Tax Court on whether the estate is eligible to pay tax in installments. Students and taxes The executor has not included any previously litigated issues in the current suit for refund. Students and taxes The executor does not discontinue making installment payments timely, while the court considers the suit for refund. Students and taxes    If in its final decision on the suit for refund the court redetermines the estate's tax liability, the IRS must refund any part of the estate tax amount that is disallowed. Students and taxes This includes any part of the disallowed amount previously collected by the IRS. Students and taxes Protective claim for refund. Students and taxes   If your right to a refund is contingent on future events and may not be determinable until after the time period for filing a claim for refund expires, you can file a protective claim for refund. Students and taxes A protective claim can be either a formal claim or an amended return for credit or refund. Students and taxes Protective claims are often based on current litigation or expected changes in the tax law, other legislation, or regulations. Students and taxes A protective claim preserves your right to claim a refund when the contingency is resolved. Students and taxes A protective claim does not have to state a particular dollar amount or demand an immediate refund. Students and taxes However, to be valid, a protective claim must: Be in writing and be signed, Include your name, address, social security number or individual taxpayer identification number, and other contact information, Identify and describe the contingencies affecting the claim, Clearly alert the IRS to the essential nature of the claim, and Identify the specific year(s) for which a refund is sought. Students and taxes   Generally, the IRS will delay action on the protective claim until the contingency is resolved. Students and taxes Once the contingency is resolved, the IRS may obtain additional information necessary to process the claim and then either allow or disallow the claim. Students and taxes   Mail your protective claim for refund to the address listed in the instructions for Form 1040X, under Where To File. Students and taxes Exceptions The limits on your claim for refund can be affected by the type of item that forms the basis of your claim. Students and taxes Special refunds. Students and taxes   If you file a claim for refund based on one of the items listed below, the limits discussed earlier under Time for Filing a Claim for Refund may not apply. Students and taxes These special items are: A bad debt, A worthless security, A payment or accrual of foreign tax, A net operating loss carryback, and A carryback of certain tax credits. Students and taxes   The limits discussed earlier also may not apply if you have signed an agreement to extend the period of assessment of tax. Students and taxes For information on special rules on filing claims for an individual affected by a terrorist attack, see Publication 3920. Students and taxes Periods of financial disability. Students and taxes   If you are an individual (not a corporation or other taxpaying entity), the period of limitations on credits and refunds can be suspended during periods when you cannot manage your financial affairs because of physical or mental impairment that is medically determinable and either: Has lasted or can be expected to last continuously for at least 12 months, or Can be expected to result in death. Students and taxes    The period for filing a claim for refund will not be suspended for any time that someone else, such as your spouse or guardian, was authorized to act for you in financial matters. Students and taxes   To claim financial disability, you generally must submit the following statements with your claim for credit or refund: A written statement signed by a physician, qualified to make the determination, that sets forth: The name and a description of your physical or mental impairment, The physician's medical opinion that your physical or mental impairment prevented you from managing your financial affairs, The physician's medical opinion that your physical or mental impairment was or can be expected to result in death, or that it has lasted (or can be expected to last) for a continuous period of not less than 12 months, and To the best of the physician's knowledge, the specific time period during which you were prevented by such physical or mental impairment from managing your financial affairs, and A written statement by the person signing the claim for credit or refund that no person, including your spouse, was authorized to act on your behalf in financial matters during the period described in paragraph (1)(d) of the physician's statement. Students and taxes Alternatively, if a person was authorized to act on your behalf in financial matters during any part of the period described in that paragraph, the beginning and ending dates of the period of time the person was so authorized. Students and taxes    The period of limitations will not be suspended on any claim for refund that (without regard to this provision) was barred as of July 22, 1998. Students and taxes Limit on Amount of Refund If you file your claim within 3 years after filing your return, the credit or refund cannot be more than the part of the tax paid wi