Saturday, September 1, 2012

Ninth Circuit Denies an Untimely Claim for Refund (9/1/12)

In Reynoso v. United States, 692 F.3d 973, 2012 U.S. App. LEXIS 18208 (9th Cir. 2012), here, the Ninth Circuit applied the Section 6511, here, rules for statutes of limitations applying to refund to deny the taxpayer a claim for refund.  I don't think the Ninth Circuit broke new ground in the holdings.  See Oropallo v. United States, 994 F.2d 25, 30 (1st Cir. 1993).  I have,however, added the following examples to the examples in the text to show how the refund statute of limitations works:
Example 8.  Taxpayer prepays year 01 taxes in the amount of $100,000 by combination of estimated tax and withholding tax, but then fails to file the return timely on 4/15/02 and does not request an extension.  Those prepayments are deemed paid on 4/15/02.  The taxpayer thereafter files a delinquent year 01 original return on 7/15/05 on which he reports a tax liability of $50,000, claims credit for the prepaid tax of $100,000, and claims a resulting year 01 refund of $50,000.  The taxpayer meets the three year requirement of § 6511(a) because the claim for refund is filed contemporaneously with the return.  However, he flunks § 6511(b)(2)(A)’s look-back period requirement because the refund cannot exceed the taxes paid in the preceding three year period. Strangely, if the taxpayer had originally timely received an extension of the year 01 return which would have permitted him to file a timely year 01 return by 10/15/02, then the taxpayer will have met the § 6511(b)(2)(A) 3-year look-back requirement because extensions are counted even if not used. 
Example 9.  Same Example 8, except assume (i) the taxpayer does not apply for an extension, (ii) for some reason, the IRS treats the prepayment of $100,000 not as a payment of tax deemed paid on 4/15/02 but as a deposit or cash bond and (iii) the IRS applies the cash bond as a payment on 9/1/02.  The refund claim is then timely because the 7/15/05 filing is within 3 years of the date of payment.
Examples 8 and 9 will be added to the footnoted version of the book on p. 203, immediately after Example 7 (and will cite Reynoso the footnote); and in the nonfootnoted version of the book on p. 144.

Reynoso is an interesting read, though, for other reasons:

1.  The opinion does not discuss why the taxpayer timely overpaid his tax liabilities for the years but did not file timely returns.  He ultimately pled guilty to failure to file the returns for the years for which he filed delinquent returns in the pattern noted above.  One thing the case illustrates is that a failure to file case can be pursued even if no tax is due --  a tax due is not an element of the crime of failure to file.

2.  The case does discuss the taxpayer's arguments that, because the IRS inappropriately credited the amount involved to another year's return, he should escape the prohibition of § 6511(b)(2)(A)'s look-back period and move it forward to the year the improper credit occurred.  That is esoterica which can be consulted in the opinion as the readers needs.

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