## Facts

- Nick and Helen Kikalos timely filed a joint 1998 federal income tax return, reporting and paying $504,181.
- The IRS audited the 1998 return and proposed multiple adjustments increasing tax liability.
- Before the final deficiency notice, the Kikaloses filed an amended return reporting additional tax and paid $43,609 to reduce or eliminate penalties.
- The IRS issued a statutory notice of deficiency asserting an understatement of $81,704 and assessed additional tax and penalties, which the Kikaloses paid.
- The Kikaloses later filed a Form 1040X seeking a refund based on a reported decrease in tax of $81,704 and requested $141,654, including the earlier payment.
- On the Form 1040X, they did not provide reasons or supporting facts for the refund request, stating only: “Income was incorrectly assessed to the above named taxpayer.”
- The IRS denied the claim because it lacked explanation or documentation and advised the Kikaloses they could file a proper claim by a stated deadline.
- The Kikaloses did not submit a corrected administrative claim and instead filed a federal district court refund suit.

## Issues

1. Whether a Form 1040X stating only that “Income was incorrectly assessed” satisfies 26 U.S.C. § 7422(a) and Treas. Reg. § 301.6402-2(b)(1) as a “duly filed” administrative refund claim.
2. Whether the IRS waived the regulatory specificity requirements through audit-related correspondence, denial correspondence, or alleged knowledge of the dispute’s grounds.

## Decision

- The Seventh Circuit affirmed dismissal for lack of subject-matter jurisdiction.
- The court held the Form 1040X was not a valid refund claim because it failed to state detailed grounds and supporting facts as required by regulation.
- The court rejected waiver and informal-claim arguments because the filing and related writings did not adequately apprise the IRS of the exact basis for the refund, and the denial letter did not excuse noncompliance.

## Legal Principles

- A federal court lacks jurisdiction over a tax refund suit unless the taxpayer first files a “duly filed” administrative refund claim with the IRS as required by 26 U.S.C. § 7422(a).
- Treas. Reg. § 301.6402-2(b)(1) requires a refund claim to set out each ground in detail and include facts sufficient to inform the IRS of the exact basis for the claim; a nonconforming claim is not treated as a claim for any purpose.
- General, conclusory assertions (e.g., that income was “incorrectly assessed”) do not satisfy the regulatory specificity requirement.
- Informal-claim principles require a timely written submission that is specific enough to alert the IRS to the nature and basis of the refund request; audit objections and vague filings that do not identify grounds and facts are insufficient.
- An IRS denial letter that identifies defects and invites a proper refiling does not waive the statutory and regulatory prerequisites to suit.

## Conclusion

The court held that the taxpayers’ conclusory Form 1040X failed to constitute a duly filed administrative refund claim, and because the IRS did not waive the specificity requirements, the refund action was properly dismissed for lack of subject-matter jurisdiction.


Kikalos v. United States, 479 F.3d 522 (7th Cir. 2007)