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The month of September 2021 has brought forth an interesting update for American taxpayers. The IRS just unveiled a distinct initiative in the form of a brand new webpage to address issues of taxpayers eligible for large-scale refunds. The recently introduced web page is helpful for refund claimants who need to undergo the Joint Committee of Taxation (JCT) review. Such a review is necessary prior to the settlement of specific types of refunds. Team Infinity Globus is here to help you to get to the bottom of this fresh IRS move and how it will prove beneficial for federal taxpayers.

Just a short while ago, on 22nd September 2021, the IRS has added a separate webpage for the assistance of entities that often claim refunds worth millions for a financial year. Such refunds remain subject to an independent review from a specialized Joint Committee or JCT.

What does the Joint Committee of Taxation infer?

The JCT represents a non-partisan committee of the US Congress founded initially as per the Revenue Act, 1926. This committee remains deeply involved in overseeing all critical aspects of the legislative tax procedures in the United States.

What are the functions of the Joint Committee?

The role of the Joint Committee of Taxation covers aspects such as:
  • Review of significant income tax refund cases called “Joint Committee Refund Cases.”
  • Offer assistance in drafting statutory language
  • Preparation of committee reports, hearing pamphlets, or conference reports
  • Revenue estimation of various revenue legislation that the Congress considers
  • Support Congress members in developing and analysing legislative proposals

Which specific issues will the new webpage address?

The newly introduced webpage will assist taxpayers with the following issues -:
  1. It shall detail matters regarding how IRS handles a Joint Committee Refund case
  2. The page shall also explain the meaning of a Joint Committee Refund case.
  3. Lastly, it will offer information regarding the steps taxpayers need to follow for claiming JC refunds.

What are Joint Committee Refund Cases?

As per tax regulations, Joint Committee refund cases signify those cases where US taxpayers claim tax refunds exceeding the specified thresholds. Let us probe into which particular taxpayers attract the criteria of Join Committee Refund Cases.

A Joint Committee Refund case can originate from any of the following situations -:

  1. Such a refund claim can relate to tax returns previously assessed and paid. The tax amount covers penalties and interest. The JC refund claim may be for an amended tax return or can even be connected with a claim shared during an IRS examination. The IRS reviews such refund claims and reports them to the Joint Committee ahead of settling the refund amount.
  2. The JC refund cases also comprise tentative refunds that arise from tentative carrybacks of capital losses, net operating losses, or business credits. Such refunds get paid before the IRS and Joint Committee review. One can claim tentative refunds with Form 1045- Application for Tentative Refund or Form 1139- Corporation Application for Tentative Refund.
  3. These Joint Committee refund cases also cover refunds or income tax credits that occur because of certain losses regarding federally declared disasters. The refund claims or tentative refunds or credit connected to disaster loss must fulfill the below-stated conditions:
  • They must arise from taxes on income, excess profits, gifts, war profits, or estates, or
  • They should result from the tax levied as per Chapters 41,42,43, 44 of the Internal Revenue Code. These chapters cover tax matters on public foundations, public charities, pension plans, operator’s trust funds, and real estate investment trusts.

The refund threshold is $2 million for all taxpayers except C corporations. In the refund cases of C Corporations, the limit is $ 5 million. It is relevant to note that this refund or tentative refund claim gets determined on a net basis. Moreover, the amount stands for every taxpayer separately, irrespective of whether they are related or not. The only exceptions are for corporations filing consolidated returns or couples submitting joint returns.

Net basis refers to the amount of refund or tax credit after adjusting the deficiency amount. This deficiency indicates any tax liability payable for the same type of taxes. The net refund amount gets derived from all taxpayer’s returns that the IRS reviews. Additionally, the refund amount and tentative refund do not get summed together to determine the threshold for Joint Committee refund cases.

The IRS is responsible as per the legal requisites to review such large refund claims and share an appropriate report with the Joint Committee on Taxation. There also exist refund cases that fall under the Post Review program. The IRS shares reports for showcasing considerable deficiencies on issues that they had closed before submitting a report with the JCT.

Which types of refunds do not fall under the purview of the Joint Committee of Taxation?
The Joint Committee refund cases exclude the following types of tax refunds or credits -:
  1. A refund of trust fund recovery penalties
  2. Any refund or credit of certain excise taxes, windfall profits, or employment
  3. Those refunds or credits related to unassessed advance payment or deposits get processed before the IRS estimates the tax obligation.
  4. The refund or credits that come down to $2 million or $5 million thresholds after netting the taxes owed for the same form of taxes.
  5. The refund or credits that come down to $2 million or $5 million thresholds after netting the taxes owed for the same form of taxes.
  6. Those tax refunds or credits for income tax witholdings or estimated payments that are settled without IRS audit
  7. Those tax refunds or credits for income tax witholdings or estimated payments that are settled without IRS audit
What process does the IRS use to deal with Joint Committee refund cases?

First and foremost, a JCT refund case gets assigned to an IRS examiner for an examination or survey. In a survey, the examiner decides to accept a return without a detailed examination. For all such matters, the IRS then drafts a report for the Joint Committee on Taxation. There are two possible situations in the next stage -:

  1. If the Joint Committee Refund case stands as agreed, partially agreed, surveyed, or no-changed, the members under the JC review program will prepare the report. The Joint Committee review program forms part of the Large Business and International Divison of the IRS.
  2. If the Joint Committee Refund case is unagreed and the taxpayer makes an appeal, the Independent Office of Appeals of the IRS drafts the report.
What does the IRS report to the JCT include?

The report shared covers affairs enlisted below:

  1. An explanation for the reasons for the tax refund or credit
  2. A summarised history of the taxpayer
  3. Corroborating evidence related to the adjustment amount for the tax years under review and reasons for the inclusion of such adjustments

The IRS may contact the relevant taxpayer for additional information for preparing the JCT report.

What should a taxpayer do after he files for a JCT refund claim?

If an IRS agent contacts you for a Joint Committee refund, you should work with the agent assigned to your JC case and follow necessary measures as suggested. You can contact CPAs or professional tax consultants for further assistance.

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Shared By: Dixita Chandarana, Tax Staff at Infinity Globus
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