July 8, 2009

 

Karen Bigger

1478 Apache Dr.

Marion, IA 52302-6745

 

RE:  Individual Income Tax Protest

        Docket No. 08-20-1-0316

 

Dear Ms. Bigger:

 

The Iowa Department of Revenue has reviewed your protest.  This letter states the Department’s position in this matter.

 

Based on information received from the Internal Revenue Service (IRS), our office determined you had sufficient income to require filing state tax returns for 2001 through 2006, but we had no record of any returns on file for those tax years.  We used information received from the IRS to estimate taxable income and compute tax, penalty, and interest.  We do not have complete W-2 information and that is why our computations did not include credit for any Iowa tax withheld. 

 

Your protest requested a refund, but did not include any documentation to support your position.  However, we found that you filed 2003, 2004, and 2006 Iowa income tax returns.  Since you mailed these to our regular processing address near the time of the assessment, they were not considered in the computations.  We have thoroughly reviewed each tax year in the assessment and made appropriate adjustments, copies of which are enclosed.  The following explains each year’s determination.

 

2001 – Even though no return has been filed, it is obvious you overpaid tax.  However, we cannot issue a refund due to the statute of limitations.  The statute of limitations is explained below in more detail.  There is no need to file a return.

 

2002 – In 2002 you received a taxable distribution of $15,610 in addition to your wages.  State tax was not withheld on this income and therefore you still owe tax, penalty, and interest as shown.

 

2003 – Even though you filed a return showing a refund, no refund is available due to the statute of limitations.

 

2004 – Even though you filed a return showing a refund, no refund is available due to the statute of limitations.

 

2005 – Even though no return has been filed, it is obvious you overpaid tax.  However, no refund is available due to the statute of limitations.  There is no need to file a return.

 

2006 – We adjusted your 2006 return.  The deduction you took on line 16 for payments to an IRA, KEOGH, or SEP was incorrect.  This amount is found in box 12a on your W-2.  You cannot deduct this amount because it is already excluded from your taxable wages; it is a pre-tax contribution to a retirement plan.

 

Taxpayers have a limited amount of time in which to claim a refund; this is called the statute of limitations.  Iowa Code §422.73(2003) states in part:

 

2. If it appears that an amount of tax, penalty, or interest has been paid which was not due under division II, III or V of this chapter, then that amount shall be credited against any tax due on the books of the department by the person who made the excessive payment, or that amount shall be refunded to the person or with the person's approval, credited to tax to become due. A claim for refund or credit that has not been filed with the department within three years after the return upon which a refund or credit claimed became due, or within one year after the payment of the tax upon which a refund or credit is claimed was made, whichever time is the later, shall not be allowed by the director. . . . (emphasis added).

 

This subject has been reviewed many times.  In one such case, the administrative law judge stated:

 

Tax refunds for excessive tax paid are a creature of the statute.  Absent a statute, the taxpayer does not have a right to a refund.  Slimmer v. Chickasaw County, 140 Iowa 448, 118 N.W. 799 (1908).  See also Kraft v. City of Keokuk, 14 Iowa 86 (1862).  The Iowa statute does provide for a refund, but it is subject to a time limitation and the taxpayers failed to make their refund claim within the statutory time limit.  This Board can sympathize with the taxpayer who has mistakenly overpaid a tax and either through oversight or bad advice has let the statutory refund period expire.  But all statutes of limitations create a hardship on those who let it expire.  However, the public's interest in providing for a finality in settling accounts overrides any individual's private interest.  Boysen, Docket No. 658, pp. 3-4 (Iowa State Bd. of Tax Review Nov. 28, 1990).

 

See In the Matter of Gerald E. Smalley, Docket No. 95-20-2-0017, October 31, 1996.

 

In conclusion, there is no legal basis for granting the untimely refund claims.    

 

If you agree with our position or decide not to pursue the protest, please inform me in writing within 30 days of the date of this letter.  That letter, along with payment of $1,067.08, with interest computed through July 31, 2009, will allow me to inform the Director that the protest has been resolved, that no issues remain, and that the case may be closed.  Additional interest accrues the first of next month at the rate of $4.18 per month.

 

If you disagree with our position and wish to pursue the protest, please inform me in writing within 30 days of the date of this letter.  The Department will then forward this case to the Attorney General’s office for further review.  If no response is received within 30 days of the date of this letter, I will file a Motion to Dismiss the protest as provided in rule 701 IAC 7.44 on the grounds that the protester failed to pursue the protest.

 

If you have any questions, please feel free to contact Jeff Aten at (515)281-6463 or jeff.aten@iowa.gov.

 

Sincerely,

 

Jim McNulty, Program Manager

Audit Services Section

Taxpayer Services and Policy Division

 

JPM:ja