I Received an IRS 1462 Notice. What Should I Do?

An IRS Letter 105C or Letter 106C informs you that a claim for a refund or credit you filed has been disallowed. The IRS sends Letter 105C for a fully disallowed claim and Letter 106C when the claim is partially disallowed. This notice is not a bill or an audit, but a formal explanation of the IRS’s decision regarding your claim and provides a reason for the denial.

Understanding the Disallowance

The disallowance letter will state the specific justification for the denial of your claim. A primary reason for disallowance is the statute of limitations. A claim for refund must be filed within three years from the time the original return was filed or two years from the time the tax was paid, whichever is later. If your claim was submitted after this window closed, the IRS will deny it on procedural grounds.

Another frequent cause for denial is a determination that you were not eligible for the specific credit or deduction claimed. The IRS may also disallow a claim if it finds the supporting documentation you provided was insufficient to substantiate your position. Finally, simple mathematical errors on the claim form or discrepancies between your claim and information the IRS has on file can trigger a disallowance.

Your Options After Receiving the Notice

Upon receiving a disallowance letter, you have a few distinct paths you can take. The simplest option is to agree with the IRS’s determination. If you review the reason for the disallowance and find it to be correct, no further action is required. Should the denied claim result in a balance due, the IRS will issue a separate notice for that amount with payment instructions.

A second option is to formally dispute the decision through the IRS’s administrative appeals process. You have two years from the date of the letter to file a formal protest and initiate an appeal. This process allows you to present your case to the IRS Independent Office of Appeals, a separate function within the agency.

Your third choice is to bypass the internal IRS appeals system and file a lawsuit. This action can be brought in either a U.S. District Court or the U.S. Court of Federal Claims. This action also has a two-year statute of limitations from the date of the disallowance letter. Pursuing litigation involves formal legal proceedings and is often more complex than an administrative appeal.

The IRS Appeals Process

Should you decide to appeal the disallowance, you must prepare a formal written protest. This letter is your official request for an appeal and is not a standard form. It is a document you must create that contains specific, required elements to be considered valid by the IRS.

Your protest letter must include:

• Your name, address, and taxpayer identification number.
• A clear statement that you are appealing the IRS’s decision.
• A copy of the disallowance letter you received and the tax periods involved.
• A detailed statement of facts, where you lay out the circumstances supporting your claim.
• An explanation of the law or other authority you are relying on to justify your position.

To finalize the protest, you must sign a declaration under penalty of perjury, affirming that the facts presented are true, correct, and complete. The completed protest letter and all supporting documents should be mailed to the IRS address on your disallowance letter. It is highly recommended to use certified mail with a return receipt for proof of timely filing. Once received, your case will be assigned to an appeals officer who will contact you.