In Uncategorized on 09/28/2020 at 13:23

For U S Tax Court

“Scarce judicial resources” is a cliché, but like all clichés there is a substratum of truth. And for this cliché, the substratum is substantial. Expense and delay are multiplied when there aren’t enough courtrooms, facilities or judges to deal with all the justiciable problems. And no law affects so many as the Internal Revenue Code. Even permissible nonpayers only become so by virtue of those laws (and no, this is not a prelude to a political diatribe, or even a sober analysis, of a certain taxpayer’s return; my colleague Peter Reilly, CPA, has already commented on that).

So Judge David Gustafson proves the truth of the foregoing today in a $296 misunderstanding, more particularly bounded and described in Doris Ann Whitaker, Docket No. 4899-18, filed 9/28/20.

Doris Ann is questioning the credits applied to a couple twenty-five (count  ’em, twenty-five) year old tax liabilities (hi, Judge Holmes), for which Doris Ann can seek refunds in USDC or USCFC if SOL hasn’t run, and one fifteen year old liability for which Doris Ann got Section 6015 innocent spousery. After a phoneathon and many filings, the upshot of the credit hopscotching is that Doris Ann is entitled to $296.

Applying the credits (or getting them refunded) relates to the years to which the credits were applied, not to the year from which an overpayment was credited. Thus, a refund from a credit from 2005, which was applied to 1994 and 1995, can only be refunded in proceedings for 1994 and 1995, not 2005.

“It may be counterintuitive, but under the law a taxpayer whose 2005 overpayment has been credited against other liabilities for 1994 and 1995 has thereby received that 2005 overpayment, not in the form of a refund check but in the form of a crediting against the other liabilities. To receive refunds for those other years, she would need to file timely refund claims for those years and, if they were denied, file a refund suit not in the Tax Court (which except in limited circumstances does not have jurisdiction over refund claims) but instead in Federal district court or in the U.S. Court of Federal Claims.” Order, at p. 4.

But in the meantime Doris Ann got innocent spousery in 2016, so she’s entitled to a refund of $296 from her 2005 overpayment that pertained to spouse’s income.

But how does she get it? IRS proposes that Judge Gustafson order “…that after application of I.R.C. § 6015(b) for the taxable year 2005, there is no overpayment in income tax and no addition to tax due to petitioner, and there is an offset from the taxable year 2016 in the amount of $296.00 that will be released to petitioner” Order, at pp. 4-5. (Emphasis by the Court).

Judge Gustafson is perplexed.

“We do not understand why we should decide that there is no overpayment and that an ‘offset’ of $296 should be ‘released’, rather than simply deciding that there is an overpayment of $296.” Order, at p. 5. (Emphasis by the Court).

So let IRS do some ‘splainin’.

Doris Ann gets the same attention for $296 that a multinational would get if the $296 was followed by six zeros. For her innocent spousery story, see my blogpost “De Novo? Record Rule?” 5/15/20.

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