The first step in filing a claim for refund against the IRS is to file either a Form 1040X, Amended U.S. Federal Income Tax Return, or a Form 843, Claim for Refund. Other informal methods may qualify as well. If you already filed the amended return, and it was denied, there is no need for file the Form 843 Claim for Refund.
Once you file the Form 1040X or 843, you are effectively telling the IRS that they owe you money. The IRS has two options: deny the claim with a formal Notice of Disallowance or ignore it.
If the IRS issues a Notice of Disallowance, you may immediately file suit. You have 90 days to file suit in the U.S. Tax Court and 2 years to file suit in either your local U.S. District Court or the U.S. Court of Federal Claims in Washington, DC. These time limits do not stop running even if you file an appeal with the IRS Appeals Office. Given the bias of the appeals department, an administrative appeal is mostly useless. New legislation enacted in 2019 is intended to change this, but it’s doubtful it will be effective. Appeals are a waste of time, and, because they are not necessary, we advise to skip it.
If the IRS simply ignores your claim for refund, which is their right to do, you must wait at least 6 months before you can bring a lawsuit to litigate the merits of the claim in court to recover your money.
The U.S. Tax Court encourages pro se litigants to represent themselves without an attorney, which sounds great until you realize the Tax Court tends to rule in favor of the IRS more frequently than other courts. Any state-licensed attorney can represent you in this court.
The U.S. District Courts can go either way depending on the political philosophy of the judge. You’re stuck with the federal district wherein you reside, which means you’ll need an attorney in your state to represent you.
The U.S. Court of Federal Claims is more taxpayer-friendly; however, they have extensive procedural rules and hiring an attorney is advisable. Any state-licensed attorney can represent you in this court. One advantage to filing in the U.S. Court of Federal Claims is that your state of residence does not matter. You will only need an attorney who is admitted to practice with that court.