IF YOU FILE YOUR TAXES TOO LATE YOU MAY LOSE YOUR REFUND

The Court of Appeals for the Fifth Circuit has denied an employer's refund claim, even through the employer had overpayments in certain quarters that were not applied to its withholding tax liability [Nicholas Acoustics & Specialty Company, Inc. v., CAS, 107 AFTR 2d ||2011-950,6/15/11].

Between 1999 and 2003, Nicholas Acostics & Specialty Company, Inc. (Nicholas) remitted payroll taxes to the IRS, but failed to file any tax returns.  The funds remitted were not for the exact amount owed, but were instead an estimate of the amount due.  The company occasionally paid taxes in excess of its liability.  Nicholas erroneously assumed that the IRS could apply all of its overpayments to other quarters in which it had underpaid its tax liability.

In 2003, the IRS audited Nicholas due to its failure to file its tax returns.  After the audit, Nicholas filed returns for the missing quarters, which allowed the IRS to refund overpayments or credit the overpayments to certain quarters in which a deficit had occurred.  The IRS said that it could only refund or credit Nicholas's overpayments for returns due within the past three years because of the statute of limitations.  Nicholas still owed taxes for the period in question, even after the IRS made the adjustments.  The IRS filed a lien against Nicholas, which Nicholas paid before seeking a refund.  Nicholas contended that the shortfall wouldn't have occurred if the IRS had applied all of the company's overpayments to future or past quarters.

The IRS classifies a remittance of taxes as either a payment or a deposit.  If a tax remittance is determined to be a deposit, it is treated like a cash bond, which the IRS simply holds, an a taxpayer may seek a refund of the deposit at any time.  But if a remittance is deemed a payment, the taxpayer may only recover the money by filing a timely claim for refund.

Comments

  1. TaxseerNovember 1, 2019 at 11:51 PM

    Thanks again for all the great information…I am grateful! 1099 C Form Online. You can clearly explain about it.

    ReplyDelete

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