Tax Insights

Your Guide to State, Local, Federal, Estate + International Taxation

Delayed refunds on Form 1120-F

Form 1120-F, international taxSome taxpayers filing Form 1120-F, U.S. Income Tax Return of a Foreign Corporation, have experienced a delay in receiving their refund. The delay is due to the issuing of Internal Revenue Manual code 21.8.2.12.2.3, which became effective for all 1120-F returns filed after January 1, 2015. The IRM states that all refunds based on withholding credits from forms 8805, 1042-S, and 8288-A are being held for up to six months from the date of filing the tax return or the tax return due date, whichever is later. The IRS is personally verifying each withholding credit before they release any refunds. Moreover, if the IRS has any issues verifying the credit, they can freeze the refund up to another six months after the initial freeze.

Many taxpayers whose refunds are delayed will not even get interest from the IRS from holding their refunds. Under the Hiring Incentives to Restore Employment (HIRE) Act of 2010, the IRS has 180 days to review these types of credits before interest needs to be paid to taxpayers.

The IRS is not generating any letters of explanation to taxpayers whose returns are affected. Instead, agents at IRS call centers have been trained to explain these refund delays to the likely callers.

Please note the information above is only general in nature and should not be construed as any form of tax advice. Please contact a qualified tax professional should you need tax advice or assistance.

Jill A. Helm, CPA