ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – HOW TO FILE PROPER IRS AND EDD CLAIMS FOR REFUND
By Robert S. Schriebman
Most government agencies, state and federal that impose and assess taxes, allow for the filing of refund claims for various reasons. The IRS has an elaborate statutory structure commencing with IRS § 6511 and time limits set forth in IRC § 7422. The EDD rules start at CUIC § 1178 and 1179. All refund processes have one thing in common – you have to file a claim. This article will discuss how to successfully file a claim for refund in light of the U.S. District Court Decision in Intermountain Electronics, Inc v. U.S. 2021-2 U.S.T.C 50, 192 (Jul. 16, 2021).
First Things First; – Use A Form If Available
Some agencies have refund claim forms; some do not. The IRS has Form 873 “Claim for Refund and Request for Abatement”. When making an IRS refund claim you must use the proper form. The EDD, other the hand, does not have a preprinted form. If the agency does not have its own form, the following elements need to be clearly set forth:
Name of Taxpayer:
Account Number: on Social Security Number
Amount of Claim:
Date of Payment (final payment): Full payment of all taxes, penalties, and interest must be paid before a claim is considered valid.
Power of Attorney: Use if you are represented by an attorney, CPA, or Enrolled Agent.
Specific Grounds for the Claim: This is one of the most important parts as will be explained in this article.
Your signature and Date.
Second: Filing Your Claim:
All claims should be filed so you can prove it was timely sent and received. Merely dropping it off in the mail is not advisable. You need to track the claim so you can prove it was timely sent and delivered. Have the Post Office “Round Stamp” the claim so you have proof it was timely sent. Send it by certified mail so you can track its delivery. Private carriers such as Fed Ex and UPS are also recommended.
Third: The Claim Must be Clear and Complete –The Intermountain Electronics, Inc. Case
Your claim may not be honored, and may even be rejected if you do not make it perfectly clear your reasons for your claim. This is what in the Intermountain case was all about. Intermountain filed a refund claim with the IRS seeking R&D credits. After the claim was filed the IRS took five years to audit the company. The IRS rejected the claim for not being specific enough. Intermountain filed a suit for refund in the U.S. District Court and lost! The Court agreed with the IRS. The Court ruled that the claim must set forth in detail each ground upon which a credit or refund is claimed and facts sufficient to apprise the Commissioner of the exact basis thereof. IRC §7422(a). See also Treas. Reg. §301.6402(b)(1).
I want to close this article by telling you a true story. Quite some time ago I was retained to file an FTB refund claim for a well-known screen writer. It was a large claim. The FTB rejected the claim and a suit for a refund had to be filed in the Superior Court. The Attorney General (AG) sought to win his case by arguing that the claim was not specific enough. The Deputy AG had a copy of my book entitled “California Tax Collection Practice and Procedures”, and he quoted that portion of the book that discussed the elements of a proper refund claim. The judge reviewed my book and was very impressed with it. He asked my opinion of the legal sufficiency of the filed refund claim. I told the judge if after reading the claim he could understand what the taxpayer wanted and why, the claim was legally sufficient. The judge ruled that the claim was clear and complete. The AG lost and the claim was granted.
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 50 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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