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ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – WHAT YOU NEED TO KNOW WHEN FILING A CLAIM FOR REFUND WITH THE EDD, FTB, AND IRS

By Robert S. Schriebman

2019

Introduction

There are always two basic rules concerning filing a claim for refund – timing and the proper elements of notice. Notice has to do with using the right form, if one is available, and timing has to do with filing your claim within the appropriate statute of limitations. The recent FTB Wood case illustrates these points very clearly. This article will discuss the Wood case, using the correct forms, and the timing of the filing of your claim. .

The Wood case is important because it clearly illustrates the rules relating to timely filing a refund claim. I also used the Wood case as a springboard to inform you of the timing rules for other taxing agencies and the proper content of a claim for refund, when no form is available. In the matter of the Appeal of Craig P. Wood, September 17, 2019.

The Wood Case

Craig Wood sought a refund from the FTB for a penalty involving the late payment of his 2011 tax return. He filed his return on July 11, 2012 and paid his penalty on March 6, 2015. He filed his claim for refund on December 4, 2017. The FTB denied his refund claim and Mr. Wood sued the FTB for the refund before the Office of Tax Appeals, an administrative agency. Why was Mr. Wood’s claim late?

Revenue Taxation Code (RTC) § 19306(a) provides in part that no refund shall be allowed after a period ending four years from the date the return was filed, or four years from the last date prescribed for filing a return (determined without regard to any extension of time for filing the return), or one year from the date of the overpayment, which ever date expires later. Mr. Wood did not file his refund claim until December 2017 and that was many months beyond all of the rules for filing a claim for refund.

Not All Refund Claim Statutes Are The Same

Most tax professionals, including lawyers, CPAs and Enrolled Agents, know the basic IRS statute for filing a claim for refund. When I speak to a group of professionals about refunds, I always ask the audience how many know the refund claim rules relating to the FTB and the EDD. Many hands go up, and when I call on the audience, they only tell me the basic rule for filing an IRS refund claim – and they are all wrong! Professionals get trapped into thinking that the IRS rule applies everywhere; it doesn’t. These professionals file refund claims with the FTB and the EDD, only to have them denied as too late. This is why it is important to understand that each taxing agency has its own unique refund claim rules.

IRS and EDD Refund Claim Time Limits

We already discussed the rules relating to FTB claims. Let’s focus on the IRS and the EDD.

IRS Claim Rules

Internal Revenue Code § 6511 contains the time limits for filing a claim for refund. First, there is a generally applicable period of limitation on filing a claim. With respect to all taxes (other than those payable by stamp) where a return is filed, a claim must be filed or within three years from the time the return was filed or two years from the time the tax was paid, whichever period expires later. If no return is filed, the claim must be filed within two years from the time the tax was paid.

There are several exceptions to these basic rules. As an example, under IRC § 6511(h) more time can be granted if the taxpayer can prove that he/she have been disabled by sickness, accident, natural disaster, etc.

EDD Claim Rules

CUIC § 1178(b) sets forth the basic EDD claim rules of three years from the last day of the calendar month following the close of the calendar quarter for which the overpayment was made, or within six months after payment of a Notice of Assessment or sixty days from the date of payment, whichever time period expires later.

In conclusion, as you can see the refund claim rules are different for the IRS, EDD and FTB. Do not assume that the basic IRS rules also apply to California taxing agencies.

You Must Also Use The Correct Claim Form, If Available

In addition to filing your claim on time, there are also rules relating to the use of the proper form. However, not all taxing agencies have forms that you can use. All government agencies will respect a refund that is stated on the correct tax return. Fortunately, the IRS also has Form 843 which you can obtain on the IRS website. But, neither the FTB nor the EDD have forms. What do you do if there are no forms? The courts have stepped in to provide guidelines. In a nutshell, the claim for refund should have the following basic parts:

  • Name of taxpayer
  • Taxpayer’s Social Security Number
  • Taxpayer’s account number, if other than a Social Security number
  • Taxpayer’s address
  • Type of tax
  • Tax form, if available
  • Tax years in issue
  • Date of tax payment
  • Amount of claim
  • Grounds for the claim and exhibits

Bottom line: You must file a claim clear enough for the FTB or EDD to clearly see what you want and why you want it.

Conclusion

Never assume that the refund statutes for one taxing agency, apply to all taxing agencies. Always send your claim by certified mail, return receipt requested, Fed Ex, UPS, etc. You must be able to prove that you sent the claim timely in case it gets lost in the system. Never send a refund claim by regular mail.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

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