Recent Federal Circuit Decision Holds Fast to the Three Year Look-Back Provision Under § 6511.
In a recent decision, the Federal Circuit affirmed a lower court’s decision allowing the IRS to keep money withheld from an Italian citizen’s severance package, even though everyone involved agreed that the IRS had no right to the funds, and that the Italian citizen had no obligation to ever pay U.S. tax. The taxpayer never lived in the United States and never worked in the United States. He was employed by Verizon and worked for them in many countries, but never in the U.S. In 2004, he received a severance package from Verizon, and Verizon, in error, withheld over $70,000 in United States income tax, social security tax, and Medicare tax. In 2009, he sought a refund from the IRS for the wrongfully withheld tax.
The Court focused on the three year look-back provision of IRS § 6511, which provides that a taxpayer must seek a refund within three years of the tax having been paid. Withheld taxes are generally deemed paid on the return due date – in most cases April 15th of the following year. So the Court deemed the tax was paid April 15, 2005, (though there was some discussion that it could be deemed paid June 15, 2005) meaning the deadline to request a refund expired on April 15, 2008. While the Court recognized there was no U.S. tax obligation, it interpreted the three year deadline strictly, denying equitable arguments for waiver of the limitation period. The majority’s final footnote quotes United States v. Brockamp, 519 U.S. 347, 352 (1997): “Tax law, after all, is not normally characterized by case-specific exceptions reflecting individualized equities.”
The Court’s full decision of Boeri v. United States can be found here: http://docs.justia.com/cases/federal/appellate-courts/cafc/12-5102/12-5102-2013-07-31.pdf