Bachner v. Comm'r of Internal Revenue, 27019–92.

• Decision Date: 24 September 1997
• Docket Number: No. 27019–92.,27019–92.
• Citation: 109 T.C. 125,109 T.C. No. 7
• Parties: Ronald C. BACHNER, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Tax Court

109 T.C. 125

109 T.C. No. 7

Ronald C. BACHNER, Petitioner,

v.COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 27019–92.

United States Tax Court.

Sept. 24, 1997.

P's employer withheld tax from his wages for 1984. P filed a timely 1984 return reporting no tax liability and claiming a refund for the withheld tax. No tax has ever been assessed or refunded for 1984. R issued a notice of deficiency after the expiration of the period of limitations. Assessment of any tax against P for 1984 is now barred. P claims that the entire amount of withheld tax is an overpayment within the meaning of sec. 6512(b), I.R.C. R maintains that any overpayment is limited to the amount by which the withheld tax exceeds the amount of tax which might have been properly assessed but for the statute of limitations.Held: Pursuant to Lewis v. Reynolds, 284 U.S. 281 (1932), the amount of an overpayment for a taxable year is limited to the excess of the tax paid over the amount which might have been properly assessed and demanded even though assessment is now barred by the statute of limitations.Dennis P. Craig, Bethel Park, PA, for petitioner.

Edward J. Laubach., Jr., St. Cloud, MN, for respondent.

OPINION

RUWE, Judge:

This case is before the Court on remand from the U.S. Court of Appeals for the Third Circuit for further consideration consistent with its opinion in Bachner v. Commissioner, 81 F.3d 1274 (3d Cir.1996), affirming our decision regarding petitioner's 1985 tax year and remanding with respect to petitioner's 1984 taxable year. Subsequent to the remand of this case, the parties filed a supplemental stipulation of facts and briefs relating to the issue on remand.

The issue for decision on remand is whether there is an “overpayment” of petitioner's income tax for the taxable year 1984 and, if so, the amount.

Background

In 1984 and 1985, petitioner was employed as a laboratory technician by the Westinghouse Electric Corp. In November 1984, petitioner sent the first of three letters to the Internal Revenue Service, all requesting assurance that his filing of a tax return would not cause him to be treated as having “relinquished” any of his constitutional rights. The District Director responded with letters emphasizing that the Internal Revenue Code mandated the filing of returns, describing the penalties otherwise applicable, and urging petitioner to submit the required information and pay the required amount.

On or about April 15, 1985, petitioner filed a Form 1040 for the 1984 tax year. In addition to providing his name, Social Security number, and other identification information, petitioner reported $24,441.71 on line 7, captioned “Wages, salaries, tips, etc.”, and attached the Form W–2 from his employer stating the same amount of compensation.

Petitioner typed “XXXXXX” over the caption designated “Moving expense” on line 24 and typed the amount $24,441.71 in the space provided. He added in the margin the notation “No Income or Taxable Compensation See Attached Letter and Eisner v. Macomber 252 U.S. 189”. In a letter attached to the Form 1040, petitioner claimed a refund of “erroneously withheld” Federal income taxes, cited 22 court decisions and the Internal Revenue Code for support, and stated that his submission did not constitute a waiver of any rights. Petitioner subtracted the claimed deduction on line 24 from his stated income and reported zero taxable income. He further claimed a refund of $4,396.95, the total amount withheld as taxes from his year's salary. The withheld taxes were not refunded.

In June 1989, petitioner was indicted on one count of tax evasion for the 1985 tax year, in violation of section 7201,¹ and four counts of filing false, fictitious or fraudulent claims for the years 1981 through 1984, in violation of 18 U.S.C. sec. 287. After a jury trial in the U.S. District Court, Western District of Pennsylvania, petitioner was acquitted of all charges. On September 11, 1992, respondent issued a notice of deficiency to petitioner for the year 1984 in which respondent determined a deficiency in the amount of $4,096 and an addition to tax pursuant to section 6653(b) of $2,048. Respondent filed an answer asserting in the alternative that petitioner is liable for additions to tax pursuant to sections 6651(a)(1) and 6653(a)(1) and (2).

In our original bench opinion, we upheld respondent's deficiency determination and respondent's alternative position regarding the additions to tax under sections 6651 and 6653(a).² We held that the altered Form 1040 that petitioner filed for 1984 did not qualify as a “return” that would commence the running of the period of limitations under section 6501(a). In doing so, we relied on Beard v. Commissioner, 82 T.C. 766, 779, 1984 WL 15573 (1984), affd. 793 F.2d 139 (6th Cir.1986), and its rationale that “tampered forms” which are a conspicuous protest against the payment of tax and are intended to deceive respondent's return processing personnel into refunding the withheld taxes do not meet the requirement that there be an honest and reasonable attempt to satisfy the requirements of the Federal income tax law.

Petitioner appealed our decision. On appeal, respondent reversed his position at trial and conceded that petitioner's altered 1984 Form 1040 was a valid “return” and that the 3–year period of limitations for assessment of petitioner's 1984 tax had expired. As a result, the statute of limitations bars the assessment of the deficiency and additions to tax for 1984. The Court of Appeals declined to decide whether petitioner was due a refund of the $4,396.95 that had been withheld from his wages, stating that questions as to the existence and amount of any overpayment are appropriately under the jurisdiction of this Court in the first instance. See sec. 6512(b)(1); Bachner v. Commissioner, supra at 1279.

Discussion

The issue before us is whether there is an overpayment of petitioner's 1984 income tax and, if so, the amount. Petitioner claims that the $4,396.95 that was withheld from his wages as tax should be refunded or credited to him with interest. Generally, under section 6402(a), if a taxpayer has made an “overpayment”, the Secretary must refund the overpayment, including interest. ³ In cases where this Court has jurisdiction to redetermine a deficiency, section 6512(b) gives us jurisdiction to determine the amount of any overpayment which is to be credited or refunded. Section 6512(b) does not define the term overpayment.

Petitioner directs us to section 6401(a) for the definition of “overpayment”. Section 6401(a) provides that “The term ‘overpayment’ includes that part of the amount of the payment of any internal revenue tax which is assessed or collected after the expiration of the period of limitation properly applicable thereto.” (Emphasis added.) In Estate of Baumgardner v. Commissioner, 85 T.C. 445, 449, 1985 WL 15391 (1985), we stated that section 6401 contains a description of certain specific items that are statutorily treated as overpayments but that there is no specific statutory definition of the term “overpayment” within the Code. Therefore, we decline to accept any argument that the term “overpayment” is specifically and narrowly defined by section 6401(a). In any event, the facts of this case do not come within the literal terms of section 6401(a). Here, as explained infra, the withheld tax was deemed paid on April 15, 1985, well within the period of limitations, and respondent is no longer seeking to make any assessments or collections.

The term “overpayment” has been interpreted to mean “any payment in excess of that which is properly due.” Jones v. Liberty Glass Co., 332 U.S. 524, 531, 68 S.Ct. 229, 92 L.Ed. 142 (1947). In United States v. Dalm, 494 U.S. 596, 609 n. 6, 110 S.Ct. 1361, 108 L.Ed.2d 548 (1990), the Supreme Court again addressed the meaning of the term “overpayment”, stating: “The commonsense interpretation is that a tax is overpaid when a taxpayer pays more than is owed, for whatever reason or no reason at all.” In Estate of Baumgardner v. Commissioner, supra at 450, we stated:

The Liberty Glass Co. generic definition of ‘overpayment’ is in reference to section 322 of the Internal Revenue Code of 1939. Section 322(d) of the Internal Revenue Code of 1939, in pertinent part, included the following language which is substantially similar to its successor, section 6512(b): ‘If the [Tax Court] finds that there is no deficiency and further finds that the taxpayer has made an overpayment of tax * * *, the [Tax Court] shall have jurisdiction to determine the amount of such overpayment.’

The Liberty Glass Co. definition applies in our determination of an overpayment as provided by section 6512(b). It follows that in order to have an overpayment, petitioner must have made a “payment” of tax for 1984 in excess of the amount which is properly due.

Petitioner argues that his withheld taxes are fully recoverable with interest because they are “deposits” rather than payments. Petitioner relies on Cohen v. United States, 995 F.2d 205, 207 (Fed.Cir.1993), wherein the court stated: “if the remittance was a deposit, a payment did not occur until the formal assessments”.⁴ Petitioner argues that since the period of limitations for assessment has expired, the deposit should be treated as an overpayment which should be refunded. We disagree.

The taxes withheld from petitioner's wages were not deposits. Section 6513(b) provides that “For purposes of section 6511 or 6512—(1) Any tax actually deducted and withheld at the source during any calendar year under chapter 24 shall, in respect of the recipient of the income, be deemed to have been paid by him on the 15th day of the fourth month following the close of his taxable year”. During 1984, Westinghouse Electric Corp. withheld tax from petitioner's wages in the amount of $4,396.95.⁵ Pursuant to section 6513(b), the taxes withheld from petitioner's 1984 wages are deemed to have been paid by petitione...