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ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – SERVICE MEMBERS DEPLOYED IN A COMBAT ZONE ARE ALLOWED MORE TIME TO FILE REFUND CLAIMS

By Robert S. Schriebman
2020

Introduction

I take a special interest in tax matters involving deployed members of our Armed Services. As a former JAG Officer in the California military, my job involved helping deployed members of National Guard solve their IRS and California tax problems that sometimes frustrated their ability to be effectively deployed. I was also appointed by the Department of Defense as Special Tax Counsel to members of the US Armed Services.

When the case of S. Khan crossed my desk, I felt the issues where important enough for readers of this website. In the Matter of the Appeal of S. Khan (OTA Case No. 19024361), the issue arose as to the timeliness of the refund claim that was initially denied by the FTB. Khan was member of the US Army. She was deployed to Pakistan where she was part of US Mission Essential Personnel (MEP). She was deployed during the entire year 2012. She initially filed her 2012 FTB return and was issued a partial refund. On February 12, 2019, she filed an amended return requesting an additional refund for being a non-resident. The FTB denied her refund claim for the year 2012 as being filed too late.

The Office of Tax Appeals (OTA) reviewed Khan’s case and ruled in her favor. Let’s look at the decision.

General Rules for FTB Refund Claims

The normal rules for filing a timely refund claim are as follows:

  1. Four years from the date the return was filed, if filed within the extended due date;
  2. Four years from the due date of the return, without regard to extensions; or
  3. One year from the date if the overpayment.

A taxpayer may qualify for special treatment extending filing deadlines to pay taxes and file refund claims if they served in the US Armed Services in a combat zone (R&TC §18571 and Internal Revenue Code § 7508).  In the year 2012, Pakistan was certified by the Defense Department as a qualified combat zone. The general rule is that the time allowed for filing a timely refund claim is extended for the entire period of deployment, plus 180 days. The deadline for Khan to file her refund claim for 2012, expired on March 28, 2019. Khan filed her claim on February 12, 2019 well within the allowable time limit.

The FTB was wrong in refusing to honor Khan’s claim for refund.

Conclusion

Service members deployed in a recognized combat zone are allowed substantial additional time to file tax returns, pay taxes without penalties, and to file refund claims. Keep in mind that it is one thing to be allowed to file a refund claim, but quite another thing to prove that the claim is righteous and that you are indeed entitled to your refund. The important thing to remember in the case of S. Khan is not to take a refusal of your rights by any governmental agency lying down. Never assume any taxing agency is correct. Protect your rights and fight back.

***

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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