Is there a time limitation on over payments being applied to next years tax?

[jjrotcos1]

 I filed 3 years late because of IRS reviews, appeals, and decisions. I applied an over payment to the next years taxes and the IRS has denied the over payment and is not refunding the money, instead they are keeping the money. Is this legal?

[fanfare]

did you win on appeal? or lose? It sounds like you lost.

[SteamTrain]

1) Could be that they are keeping for a tax they know you owe, or have already assessed, for some other tax year.
 
 As stated by the IRS:
....."We hold income tax refunds in cases where our records show that one or more income tax returns are past due. We hold them until we get the past due return or receive an acceptable reason for not filing a past due return."

OR...
Also, depends on what tax year you are filing.....that overpayment represents a "refund"....and you can only file 3-years back to regain a refund...

2)  For example, for a 2013 tax return, It's due date was ~15 Apr 2014,  + 3 years = ~15 April 2017  (I use"~" because i'm not looking up the exact date.+ or - a couple days)
______________________
Beyond that, for filing prior-year tax returns, I never recommend attempting to apply the refund to the next year.  Simply because of the issue you have just noted..and also because you may make a mistake on one year, that the IRS corrects, and the error just gets propagated to the next year.  So treat each year you are back-filing as a completely separate form-set.

[Opus 17 · Accepted solution]

 Yes there is a time limit. You have three years from the original due date of the tax return to file an amended return or claim a refund on an original return.   For example, your 2013 tax return was due April 15, 2014. That means that if you filed after April 15, 2017, no refund will be paid or credited to future taxes, even if you were due a refund. 

[jjrotcos1]

Can you cite the specific passage in the tax code for your answer? I realize there is a time limit for refunds but have not found anything in the code to support your answer for using over payments as payment for future taxes. Why would the turbotax software allow this to be done if it was not legal? Why does the IRS get to keep the funds?

[fanfare]

overpayment = refund.
refund = overpayment.

[dmertz]

26 U.S. Code § 6511 - Limitations on credit or refund
<a rel="nofollow" target="_blank" href="https://www.law.cornell.edu/uscode/text/26/6511">https://www.law.cornell.edu/uscode/text/26/6511</a>

Note that the limitation applies to *credit* or refund.

There are many reasons one might need to prepare and file an original or amended tax return after the statute of limitations for obtaining a credit or refund has expired, but TurboTax has no way of knowing if the statute of limitations has expired under your particular circumstances.  Therefore, TurboTax allows you to prepare the tax return and will always show the claim for credit or refund.  The IRS simply won't give it to you if the statute of limitations has actually expired.

[DHDDHD]

The irs kept my $15k overpayment because I missed the filing deadline (2013--3yr 2017).  I appealed & it was denied.  In essence, I asked that they apply it to present taxes owed, & they declined so I had to pay $11k in addl current taxes.

The irs sent the $15k funds to the war fund. 

Is this confiscation of my $15k overpayment a charitable donation that should be tax deductible to me?  

To add insult, the original current taxes owed were $3k but ballooned up during irs appeals that were not timely.

They just kept sending me letters stating they were working on it & in the meantime, $3k in owed taxes amounted to $11k by the time I recvd their rejection. 

Do I have any options?