Do I need to file a protective claim and how do I file one?

Taxpayers have a limited time to file refund claims with the IRS. Occasionally, this time limit may expire before the taxpayer’s right to the refund claim is finalized and determinable (e.g., during pending litigation). To preserve its right to claim a refund, the taxpayer must file a protective claim.

 

A protective claim (1) is a written claim for refund of taxes (2) that meets the substantive criteria for refund claims and (3) is contingent upon an expected future event (4) to determine the merits and sometimes the amount of the claim. In general, protective claims may be made informally or formally and are filed to protect a taxpayer’s right to refund should the statute of limitations for claims expire prior to the resolution of the contingency. Taxpayers should strive to file formal claims, except for situations in which the Internal Revenue Service (IRS) has explicitly indicated it will accept informal claims (e.g., within the first 30 days of a Large Business and International Division examination (IRM 4.46.3.7.1.1)). By filing formal claims, one generally avoids the risk of the IRS (or the US Department of Justice in litigation) arguing that a valid claim was never filed on grounds of lack of formality.

 

The IRS typically accepts protective claims that are based on expected changes in a current regulation, pending legislation or current litigation. (See IRM 21.5.3.4.7.3.). Any claim based on a pending court case or decision should be accepted by the IRS as a protective claim so long as the other criteria for the claim are met.

 

There is no specific form for filing this type of claim.  The filing can be formal or informal.  The claim must include the following:

• Identify fully, and clearly, the basis for which the claim (a credit or refund) is filed.
• The claim must include sufficient facts to apprise the IRS of the underlying reasons for the claim.
• The contingency, or contingencies, affecting this claim need to be fully described and identified.
• The year, or years, for which the claim is involved must be included.
• The amount of the contingent refund, if known or knowable, should be quantified.
• The claim must be signed, and dated, under penalty of perjury.
• The claim must be filed before the expiration of the statute of limitations.

The form of the claim can be a pro-forma tax return, prepared and included as part of the details noted above.  The return must state “Protective Claim” written across the top of the first page.

Good afternoon @Delturba01 ,

 

Protective claims are filed to preserve the taxpayer's right to claim a refund when the taxpayer's right to the refund is contingent on future events and may not be determinable until after the statute of limitations expires. You are, essentially, extending the statute of limitations.

There is no specific IRS form to do this.   The filing can be formal or informal.  The claim must include the following:

• Identify fully, and clearly, the basis for which the claim (a credit or refund) is filed.
• The claim must include sufficient facts to apprise the IRS of the underlying reasons for the claim.
• The contingency, or contingencies, affecting this claim need to be fully described and identified.
• The year, or years, for which the claim is involved must be included.
• The amount of the contingent refund, if known or knowable, should be quantified.
• The claim must be signed, and dated, under penalty of perjury.
• The claim must be filed before the expiration of the statute of limitations.

The form of the claim can be a pro-forma tax return, prepared and included as part of the details noted above.  The return must state “Protective Claim” written across the top of the first page.

Here is a great article regarding the filing of a protective claim.

Thank you for reaching out to the TurboTax Community with this great question!