Serious illness and the refund statute make a cruel combination. The people least able to manage their paperwork are often the ones who overpaid and never filed for the money. For a long time the law gave them nothing. Today there is a specific rule, and it is narrow, technical and worth knowing exactly.

This guide covers the financial disability rule in section 6511(h), how it came about, the proof the IRS requires and the exception that cuts it off.

How we got here

In United States v. Brockamp, 519 U.S. 347 (1997), the Supreme Court considered taxpayers who had filed refund claims years late and argued their delay was caused by disabilities, including senility. The Court held that courts cannot toll the statutory time and amount limitations in section 6511 for nonstatutory equitable reasons. It pointed to the statute's detailed, technical language, its repetition of the limits and its explicit list of exceptions that did not include equitable tolling.

The Court said Congress would likely have wanted to decide explicitly whether, or where and when, to expand the limitations periods. Congress did. The statutory notes show that section 6511(h) was added by the IRS Restructuring and Reform Act of 1998, applicable to periods of disability before, on or after July 22, 1998, but not to claims already barred by law or by res judicata as of that date.

The rule

Section 6511(h)(1) says that in the case of an individual, the running of the periods in subsections (a), (b) and (c) of section 6511 is suspended during any period of the individual's life that the individual is financially disabled.

Note what is suspended. Subsection (a) is the deadline to file a claim. Subsection (b) includes the lookback cap on the amount. Subsection (c) covers refund periods extended by consent. All three stop running during the disability.

Note who qualifies. The rule applies to individuals. Corporations, partnerships and other entities do not get it.

What financially disabled means

Section 6511(h)(2)(A) says an individual is financially disabled if the individual is unable to manage financial affairs by reason of a medically determinable physical or mental impairment that can be expected to result in death or that has lasted, or can be expected to last, for a continuous period of not less than 12 months.

The same subparagraph adds that an individual is not considered to have such an impairment unless proof of its existence is furnished in the form and manner the IRS requires.

Three elements, then: an inability to manage financial affairs, caused by a medically determinable impairment, of the required severity or duration. Plus proof in the required form.

The guardian exception

Section 6511(h)(2)(B) says an individual is not treated as financially disabled during any period that the individual's spouse or any other person is authorized to act on the individual's behalf in financial matters.

This exception does a lot of work. If someone holds a power of attorney over the person's finances, or a court appointed a guardian or conservator, the suspension does not apply for that period, even if the person is severely impaired. The theory is that someone was able to file the claim.

IRM 25.6.1 gives an example. A taxpayer became unable to manage financial affairs by a date identified by the physician, and months later the spouse authorized a relative to act for the taxpayer. The IRM treats the refund period as suspended only from the onset of disability until the day before the relative was authorized, and adds those days to the normal refund expiration date.

The proof the IRS requires

IRM 25.6.1 describes the procedural requirements. Proof of the medically determined impairment must be submitted with the claim. The claim needs two statements.

  • A written statement from the person signing the claim that no person, including the taxpayer's spouse, was authorized to act on behalf of the taxpayer during the period the taxpayer was unable to manage financial affairs.
  • A written statement from a physician that names and describes the impairment, gives a medical opinion that it prevented the taxpayer from managing financial affairs, gives a medical opinion that the impairment has had or is expected to have the required duration or result, states to the best of the physician's knowledge the period during which the taxpayer was prevented from managing financial affairs and includes a signed certification that the representations are true, correct and complete to the best of the physician's knowledge and belief.

The IRM also notes a federal district court decision accepting a psychologist's statement for this purpose, and it addresses mental impairments that vary in severity: the impairment may vary between severe and moderate during the period, but it may not vary between severely impaired and not impaired.

For joint returns, the IRM says a claim cannot be denied solely because one spouse was not financially disabled; the claim is considered as it relates to the disabled spouse.

Applying it in practice

Start with the normal dates. Find when the return was filed and when the tax was paid or deemed paid, and compute the normal refund deadline and lookback under the rules in the guides to the refund claim deadline and deemed payment dates.

Then document the disability period: when the impairment began preventing the person from managing financial affairs, according to the physician, and when it ended, if it did. Then remove any part of that period during which a spouse or anyone else was authorized to act in financial matters. What remains is the suspension.

Gather the medical records before you draft the physician's statement. The statement must cover specific elements, and vague letters saying a patient was ill are not enough.

And file the claim as soon as you can. A suspension that extends the deadline by months does not help if the claim arrives a year later.

Questions to answer before filing

  • When did the impairment begin to prevent the person from managing financial affairs, according to a physician who can say so in writing?
  • Has it ended, and if so, when?
  • Did anyone hold a power of attorney, guardianship, conservatorship or similar authority over finances at any point during that time?
  • What were the normal refund deadline and lookback dates for each year, before any suspension?
  • Who will sign the claim, and does that person have authority to do so?

The answers determine the length of the suspension and whether the claim is timely. They also become the content of the statements the IRS requires.

What it does not do

Section 6511(h) does not suspend the IRS's assessment or collection deadlines. It applies to the refund periods only.

It does not reopen claims that were barred before the provision took effect, under the effective date note.

And it does not create a general hardship exception. After Brockamp, courts will not extend section 6511 for equitable reasons. If the facts do not fit section 6511(h), the claim is subject to the normal deadlines, including the late return trap.

The bottom line

Families dealing with a loved one's illness rarely think about refund deadlines. If you are helping someone whose finances were neglected during a long illness, add old refund claims to the list early, along with the medical documentation that may support a suspension.

IRC 6511(h) suspends the refund claim deadline, the lookback and consent-extended periods for an individual who is financially disabled by a medically determinable impairment of the required duration, but not while a spouse or anyone else is authorized to act in financial matters. Proof matters: a physician's statement with the required elements and a statement that no one was authorized to act. It is the only illness-based relief the refund statute allows.