Attorney-at-Law

NO REFUND, NO DEFICIENCY

In Uncategorized on 05/18/2020 at 16:57

The Jersey Boys get the tough ones, and Lord S. Pope, 2020 T. C. Memo. 62, filed 5/18/20, is no exception. IRS refunded Lord his overpaid withholding, but denied his child care and child tax credits. That’s $7800, and Lord wants a refund.

But he won’t get it from Tax Court. These aren’t refundable credits, they’re withholding credits.

Judge Albert G (“Scholar Al”) Lauber has this one.

“Section 6212(a) authorizes the IRS to send the taxpayer a notice of deficiency, and section 6213(a) grants this Court jurisdiction to make a ‘redetermination of the deficiency’ determined by the IRS. A ‘deficiency’ is defined as the amount by which the tax imposed for the year (i.e., the correct amount of tax) exceeds ‘the amount shown as the tax by the taxpayer upon his return’ plus any ‘amounts previously assessed * * * as a deficiency.’ Sec. 6211(a)(1). Section 6211(b)(1) in turn provides that ‘the tax imposed * * * and the tax shown on the return shall both be determined * * * without regard to credit under section 31.’ Section 31, captioned ‘Tax withheld on wages,’ provides: ‘The amount withheld as tax [by an employer] under chapter 24 shall be allowed to the recipient of the income as a credit against the [income] tax.’ Sec. 31(a)(1).

“Because the correct tax for the year and the tax shown on the return are both determined ‘without regard to the credit under section 31,’ withholding credits (and overstatements thereof) are necessarily excluded from ‘deficiencies’ as defined by section 6211(a)(1). And because our jurisdiction as relevant here is limited to ‘redetermination of the deficiency’ determined by the IRS, we lack jurisdiction to redetermine an adjustment to withholding credits.” 2020 T. C. Memo. 62, at p. 6. (Citation omitted).

Section 6201(a)(3) says that withholding credits can be assessed like arithmetic mistakes, thus no SNOD and no jurisdiction in Tax Court. And while the statute also says the overstated withholding credit may be assessed like a deficiency, here the overstated withholding was summarily assessed six months before IRS issued the SNOD.

But was what IRS gave Lord a SNOD? There’s a two-part test from Dees, a case I did not blog (but see my blogpost “Is It or Isn’t It?” 3/6/18).

First, does it look like a SNOD (remember, there’s no required form a SNOD must take, just tax, year, and call TAS)? Next, if ambiguous, the party seeking to establish Tax Court jurisdiction must show that IRS did establish a deficiency and that the party seeking jurisdiction wasn’t misled by the ambiguous document.

Well, here there was no refundable credit, so no deficiency, and the Letter 4800C, Questionable Credit 30 Day Contact Letter that Lord got wasn’t a SNOD. IRS says it is “the initial contact for the Automated Questionable Credit Program on fraudulent wages, withholding, or noncompliant credits.” 2020 T. C. Memo. 62, at p. 3.

Lord wasn’t misled, because he petitioned.

Section 6512(b)(1), the overpayment jurisdictional grant, requires a deficiency, and there’s none here. Section 6512(b)(1) is not basis for a stand-alone overpayment case.

Tough loss. On a pro bono yet.

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