“A day late and a dollar short” is an American idiom that is another way of saying “too little too late”
Mr. & Mrs. Khafra (122 aftr 2d 2018-6610) went to court and argued that they were entitled to a refund of taxes paid on April 15, 2012 for the 2011 tax year because the IRS wrongfully denied their refund claim filed on April 16, 2015. The IRS argued that the Khafras filed their claim for refund too late and thus were not entitled to a refund. The Khafras represented themselves in court. If they represented themselves in court, they very likely prepared and filed their own claim for refund with the IRS. Perhaps that is the reason they found themselves in this predicament.
When taxes are withheld during the tax year via payroll tax withholdings, they are considered paid on April 15 of the following year (IRC Sec. 6513(b)(1)).
IRC Sec. 7503 states that when the last day prescribed under authority of the IRC falls on a Saturday, Sunday or legal holiday, the performance of such act shall be considered timely if it is performed on the next succeeding day that that is not a Saturday, Sunday or legal holiday.
For tax year 2011, the Khafras paid all their taxes via payroll tax withholdings, so their taxes were considered paid on April 15, 2012.
However, they filed their 2011 income tax return on April 16, 2015. The return reflected an overpayment of tax for which they requested a refund be issued to them. The IRS took NO exception that the filing of a return and claiming a refund can be made on the same return.
Claims for refund must be made during the 3-year period prescribed in IRC Sec. 6511(a).
The IRS contended that since the Khafras filed their 2011 return on April 16, 2015 (a fact not in dispute), their claim for refund fell outside the 3-year period which ended April 15, 2015 and thus they were not entitled to a refund. Missed by one day?
The Khafras argued that in 2012, April 15 fell on a Sunday and that April 16 was a legal holiday, thus their return was not due until April 17, 2012 and the filing of their refund claim fell within the 3-year period to file a refund claim since their claim was filed on April 16, 2015, a day earlier than April 17, 2015 – three years from the original due date per their calculation.
The Khafras further argued that since their 2011 Form 1040 was not due until April 17, 2012, their tax withholdings should be considered to have been paid on April 17, 2012, not on April 15.
The court agreed with IRS Rev. Rul. 2003-1 C.B. 814 that the granting of an extension of time when a due date falls on a Saturday, Sunday or legal holiday only applies when the taxpayer actually files a return on the next succeeding day that is not a Saturday, Sunday or legal holiday.
Tax Planning Tip:
Two additional adages are “penny wise, pound foolish” (as in Great British Pounds) and “a person who represents himself in court has a fool for a client”. We see in our practice multiple times each year when a taxpayer files their own taxes or attempts to resolve their IRS tax debt on their own and the IRS decides against them in a matter that the taxpayer could have prevailed with proper representation. Likewise, representing oneself in court rather than hiring an experienced attorney is a risky endeavor.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
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About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander is an IRS licensed Enrolled Agent and who owns and operates a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.