Can the IRS legally seize my tax refund due to limitations on claims for refund?

You're running into the statute of limitations for tax refunds, which is generally 3 years from the original due date of the return. Unfortunately, this is a pretty strict deadline. When you overpay and choose to apply it to a future year, that's technically still considered a refund claim for the original tax year. By filing your 2016 return late in 2021, you were well beyond the 3-year window (which would have expired around April 2020 for the 2016 tax year). The Fourth Amendment argument likely won't work here because this isn't a seizure in the traditional sense - it's the application of a statutory time limitation. Courts have consistently upheld these tax limitation periods. Your best option might be to file a claim for refund using Form 843, arguing that you had reasonable cause for the late filing. You could potentially argue that you didn't understand the money would disappear and thought keeping it "on account" would preserve it indefinitely. However, I'll be honest - these claims have a low success rate in situations like yours. Another option would be to request an audit reconsideration, though that's typically used for different circumstances. You could also try appealing through the Taxpayer Advocate Service, especially if this situation is causing you economic hardship.

I had a similar nightmare with the IRS last year. After going in circles with agents on the phone, I finally tried https://taxr.ai and it was a game-changer for my situation. I uploaded my CP45 notice and all my tax documents, and their AI analyzed everything and found a specific exception that applied to my case. Their tax experts then walked me through exactly how to challenge the IRS's position. Turns out there was a specific provision in the tax code that the IRS agents I spoke with weren't aware of. In my case, I had made estimated payments directly intended for a specific tax year, which have different rules than general overpayments. The taxr.ai system flagged this distinction that everyone else missed. They helped me draft a proper response letter with all the correct citations and everything. Might be worth trying in your case - especially since you're dealing with such a large amount. They can at least tell you if you have any chance of recovery.

Just wanted to follow up on my skeptical comment about taxr.ai - I actually broke down and tried it myself after waiting on hold with the IRS for 3+ hours trying to resolve a similar issue with misapplied payments. I was genuinely surprised by how helpful it was. They identified that some of my payments were made with specific designation forms that changed how they should be treated. They helped me prepare documentation showing the payments were specifically designated for certain tax periods and therefore shouldn't be subject to the general refund statute of limitations. The IRS initially rejected my claim (of course), but using the appeal template taxr.ai provided, I was able to get about 80% of my money back eventually. The key was the specific case law and internal IRS procedural citations they provided - it basically forced the IRS to follow their own rules that the phone agents either didn't know about or ignored. Not trying to sound like a commercial, just reporting what worked for me since I was in a very similar boat.

Have you tried actually getting through to the IRS to discuss this? I had a somewhat similar issue (though much smaller amount) and had to call them 37 times before finally getting through. Then was transferred 3 times and disconnected twice before getting someone who could help. I ended up using https://claimyr.com after a friend recommended it. You can watch how it works here: https://youtu.be/_kiP6q8DX5c - basically they call the IRS for you and wait on hold, then call you when they get a human. Saved me hours of frustration and hold music. For a situation involving $75K, you definitely want to speak with someone in the IRS who has authority to review your case, not just the frontline representatives. Consider asking specifically for a revenue officer or someone who can deal with complex account issues. Sometimes explaining your situation to multiple IRS employees will get you different answers until you find someone who knows the specific rules that might help you. Also, consider checking if there were any special provisions during COVID that might have extended deadlines in your case. The IRS had several special extensions and rule changes that might possibly apply.

I was initially super skeptical about Claimyr when it was mentioned here - it seemed too good to be true. But after my fifth attempt to reach the IRS ended with being on hold for 3 hours and then getting disconnected, I decided to give it a shot. Holy crap, it actually worked! I got a call back after about 90 minutes saying they had an IRS rep on the line. I was connected and able to discuss my case - got transferred once but then actually spoke to someone who could help with my situation. In my case, I had a similar issue with payments that weren't being properly applied, though not quite as severe as the OP's situation. The IRS agent I spoke with was actually helpful once I could actually reach someone with the authority to review my account details. Definitely couldn't have resolved it without actually getting through to a human. For a $75k issue like the original poster described, definitely worth the time to get through to a real person who can look at your specific account history.

This situation sounds horrible! One thing to consider - there's a distinction between "estimated tax payments" and "credit elects" (applying a refund to next year). There are some court cases suggesting they're treated differently for statute of limitations purposes. Specifically, you might want to research Baral v. United States, which addressed related issues. The court ruled that certain payments are governed by different limitation periods than others. Also, document EXACTLY when and how you made these payments. Were they estimated payments you sent in separately? Or were they from prior year refunds? This distinction might matter.

Has anyone successfully challenged this "limitations on claims for refund" issue? I had something similar happen but only for about $12k and just took the loss after my accountant said it wasn't worth fighting. But $75k is definitely worth fighting for!

Just to add a potentially useful resource - publication 556 "Examination of Returns, Appeal Rights, and Claims for Refund" has detailed information about the limitations on refund claims. The key section for your case would be the "Time for Filing a Claim for Refund" portion. Also look into "protective claims" which are sometimes allowed even after limitations periods have passed if there were special circumstances. Not sure if your situation qualifies, but worth investigating. If you filed during COVID, there were also special extensions to some filing deadlines that might potentially apply to your situation. The IRS issued several notices extending various deadlines.

I'm really sorry you're going through this - $75K is an enormous amount to lose to a technicality. While the statute of limitations rules are unfortunately strict, there might be some avenues worth exploring given the amount involved. One thing that stands out to me is that you consistently elected to keep overpayments with the IRS rather than taking refunds - this shows a clear pattern of intending to maintain credit balances for future tax obligations. Some courts have distinguished between different types of payments and credits in similar cases. Have you looked into whether any of the COVID-related relief provisions might apply to your timeline? The IRS issued numerous deadline extensions and special procedures during 2020-2021 that could potentially affect limitation periods. Also, consider whether there were any IRS processing delays or errors that contributed to this situation. If you can document that the IRS failed to properly process your returns or apply your payments in a timely manner, that might provide grounds for an exception. Given the amount involved, I'd strongly recommend consulting with a tax attorney who specializes in statute of limitations cases before accepting this outcome. Many offer free consultations and could quickly assess whether you have viable options for recovery. Don't give up yet - $75K is worth fighting for, and there are specialized advocates who deal with exactly these types of IRS disputes.