Hey! I Overpaid The Government!

User avatar
The Observer
Further Moderator
Posts: 6653
Joined: Fri Feb 07, 2003 12:48 am
Location: Virgin Islands Gunsmith

Hey! I Overpaid The Government!

Postby The Observer » Tue May 23, 2017 4:01 pm

JEFFREY ALAN RISCHE,
Plaintiff,
v.
UNITED STATES,
Defendant.

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT AND GRANTING UNITED STATES OF AMERICA'S
MOTION FOR SUMMARY JUDGMENT

This matter comes before the Court on the parties' respective motions for summary judgment. Dkt. ## 30, 31. This case arises from a dispute over whether plaintiff Jeffrey Alan Rische overpaid his federal income tax for the years 2013 and 2014. While the facts are undisputed, the parties disagree over the application of certain tax code provisions. Having reviewed the parties' memoranda, declarations, and exhibits, and the remainder of the record, the Court grants the government's motion and denies plaintiff's motion for the reasons that follow.

I. BACKGROUND

In 2013 and 2014, plaintiff worked for Lightspeed Design, Inc. ("Lightspeed") as Vice President of Sales and Marketing. Dkt. # 30-1 at 7, 19. In 2013, Lightspeed paid plaintiff $ 74,627. Dkt. # 30-1 at 9, 19–20; Dkt. # 30-2 at 5. That year, Lightspeed withheld $ 10,076 in federal income tax on plaintiff's behalf, along with $ 4,626 in social security tax and $ 1,082 in Medicare tax. Dkt. # 30-2 at 5. In 2014, Lightspeed paid plaintiff $ 113,712. Dkt. # 30-1 at 10, 19, 21; Dkt. # 30-2 at 8. That year, Lightspeed withheld $ 23,764 in federal income tax on plaintiff's behalf, along with $ 7,050 in social security tax and $ 1,648 in Medicare tax. Dkt. # 30-2 at 8. In 2013 and 2014, Lightspeed reported the above amounts on a Form W-2 Wage and Tax Statement, and those amounts are now reflected in IRS records. Dkt. # 30-2 at 5, 8.

In plaintiff's 2013 and 2014 tax returns, however, rather than declaring the annual income listed above as taxable income, plaintiff reported an income of $ 0. Dkt. # 30-1 at 33, 36. Based on this figure, in both 2013 and 2014, plaintiff claimed that his tax liability was $ 0. Dkt. # 30-1 at 33, 36. Because Lightspeed had withheld a certain amount of federal income tax, social security tax, and Medicare tax, plaintiff claimed that he had overpaid in both 2013 and 2014 and thus was entitled to a tax refund (of $ 15,785 in 2013 and $ 32,463 in 2014). Dkt. # 30-1 at 33, 36. It is uncontested that the government neither refunded the claimed overpayments to plaintiff, nor contested the returns by sending a notice of deficiency or executing a 26 U.S.C. § 6020(b) return. Dkt. # 17 at 6–7.

In March 2016, plaintiff filed this suit against the federal government, 1 seeking a refund of these alleged overpayments. Dkt. # 1. Both parties have now moved for summary judgment. Dkt. ## 31, 32. The government argues that, given the payments reported by Lightspeed in 2013 and 2014, plaintiff's net tax liability for those years exceeded the total amount withheld, and accordingly that plaintiff did not overpay his income tax. Plaintiff argues that under the definitions of the terms "wages," "trade or business," and "employee" in 26 U.S.C. §§ 3121, 3401, and 7701, his payments in 2013 and 2014 were not taxable income because they came from a private company in non-cash form. The government disagrees.

II. DISCUSSION

A. Summary Judgment Standard

Summary judgment is appropriate when there is no genuine dispute as to any material fact which would preclude the entry of judgment as a matter of law. Fed. R. Civ. P. 56(a). The moving party bears the initial burden of identifying those portions of the pleadings, depositions, answers to interrogatories, admissions, and affidavits, if any, that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has satisfied its burden, it is entitled to summary judgment if the nonmoving party fails to designate specific facts showing that there is a genuine issue of material fact for trial. Id. at 324. "The mere existence of a scintilla of evidence in support of the non-moving party's position is not sufficient," and factual disputes whose resolution would not affect the outcome of the suit are irrelevant to the consideration of a motion for summary judgment. Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 919 (9th Cir. 2001); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court will view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor. Mueller v. Auker, 576 F.3d 979, 991 (9th Cir. 2009).

B. Tax Refund Claim

The question presented in a tax refund suit is "whether the taxpayer has overpaid his tax." Lewis v. Reynolds, 284 U.S. 281, 283 (1932); see also Sokolow v. United States, 169 F.3d 663, 665 (9th Cir. 1999). "The taxpayer bears the burden of proving the amount he is entitled to recover." United States v. Janis, 428 U.S. 433, 440 (1976) (citing Lewis, 284 U.S. at 283). The Supreme Court defines "overpayment" as "any payment in excess of that which is properly due." Jones v. Liberty Glass Co., 332 U.S. 524, 531 (1947). Even where the government can no longer assess an individual's income tax for the years in question due to procedural bars (such as the statute of limitations, or the government's failure to issue a notice of deficiency or a 26 U.S.C. § 6020(b) return), the individual's tax liability must nonetheless be calculated to determine whether there was, in fact, an overpayment. See Lewis, 284 U.S. at 283 (recognizing that the government may "retain payments already received when they do not exceed the amount which might have been properly assessed and demanded" (emphasis added)). Thus, the Court must determine plaintiff's income tax liability for 2013 and 2014.

The parties agree that Lightspeed paid plaintiff $ 74,627 in 2013 and $ 113,712 in 2014. Dkt. # 30-1 at 9, 19–20; Dkt. # 30-2 at 5; Dkt. # 30-1 at 10, 19, 21; Dkt. # 30-2 at 8; Dkt. # 35 at 20. Based on these sums, the government calculates that in 2013 plaintiff had an income tax liability of $ 12,085, and that in 2014 plaintiff had an income tax liability of $ 22,173.11. Dkt. # 30 at 13; Dkt. # 30-3, ¶¶ 4–7. Based on the IRS records documenting Lightspeed's federal income tax withholding on plaintiff's behalf ($ 10,076 in 2013, Dkt. # 30-2 at 5, and $ 23,764 in 2014, Dkt. # 30-2 at 8), the government further calculates that plaintiff underpaid by $ 2,009 in 2013 and overpaid by $ 1,591 in 2014, for a net underpayment of $ 418. Dkt. # 30 at 18; 26 U.S.C. § 6402(a) (providing that overpayments may be credited against any liability on the part of the taxpayer). 2

Plaintiff does not dispute the figures underlying the government's calculations, or the validity of the calculations themselves. Rather, plaintiff contends that the government cannot now dispute plaintiff's asserted overpayments after failing to contest them through statutory remedies upon receiving plaintiff's returns in 2013 and 2014. But here, where the government is defending against a refund claim rather than affirmatively seeking an assessment, the government's failure to contest plaintiff's returns does not prevent the Court from evaluating plaintiff's overall federal tax liability for the years in question to determine whether plaintiff overpaid. See Lewis, 284 U.S. at 283 (holding that the government may "retain payments already received when they do not exceed the amount which might have been properly assessed and demanded" (emphasis added)). The government's failure to rebut plaintiff's refund claims in his Forms 4852 does not mean that the factual and legal assertions in those forms become binding. Neither does that failure estop the government from contesting those assertions now.

On the merits of his overpayment claim, plaintiff argues that his payments from Lightspeed were not taxable income based on his reading of various definitions in the Internal Revenue Code. Specifically, plaintiff argues that his payments from Lightspeed were not compensation for employment in "trade or business" as that term is defined in 26 U.S.C. § 7701(a)(26). That subsection provides that "the term ‘trade or business' includes the performance of the functions of a public office," and plaintiff argues that this definition limits the meaning of "trade or business" to functions performed by a "public office" - that is, a government agency. Plaintiff also argues that the definition of "employee" in 26 U.S.C. § 3401(c) - which specifically "includes an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia" - excludes individuals who are employed by private companies.

But as the government points out, the definitions at 26 U.S.C. §§ 3121 and 3401 govern an employer's responsibility to withhold taxes from payments to an employee - not an individual's responsibility to pay taxes on the income he receives. Thus, even if the Court were persuaded by plaintiff's statutory interpretation, 3 those interpretations would not affect the calculation of plaintiff's income tax liability.

The Court concludes that the payments plaintiff received from Lightspeed in 2013 and 2014 constitute taxable income. Plaintiff concedes that he performed various tasks for Lightspeed, including "contacting potential clients, preparing sales quotes, negotiating sales, developing new product strategies, creating marketing materials, and attending trade shows." Dkt. # 30-1 at 7. Plaintiff further concedes that he was "paid for his time at Lightspeed in 2013 and 2014." Dkt. # 35-2, ¶ 4. Those payments thus constituted "compensation for services," which in turn constitutes "gross income" under 26 U.S.C. § 61(a)(1). After subtracting any applicable deductions, this "gross income" is "taxable income" under 26 U.S.C. § 63(a). As noted above, the parties do not contest the sums that plaintiff received from Lightspeed. Accordingly, the Court accepts the government's calculations of plaintiff's income tax liability for 2013 and 2014 and concludes that plaintiff did not overpay his taxes for those years.

III. CONCLUSION

For all of the foregoing reasons, the Court DENIES plaintiff's motion for summary judgment (Dkt. # 31) and GRANTS the government's motion for summary judgment (Dkt. # 30). The Clerk of the Court is directed to enter judgment against plaintiff and in favor of defendant.

DATED this 19th day of May, 2017.

Robert S. Lasnik
United States District Judge


FOOTNOTES:
/1/ Though plaintiff deliberately named the "United States" rather than the "United States of America" as a defendant in this case, the Court understands these titles both to denote the federal government.

/2/ Plaintiff argues that, at the summary judgment stage, the Court should not credit the government's IRS records, showing plaintiff's income from Lightspeed in 2013 and 2014, over plaintiff's IRS Forms 4852, reporting taxable income of $ 0. Dkt. # 35. But finding that Lightspeed compensated plaintiff for his work does not require the Court to choose between these two records, as plaintiff has conceded that Lightspeed paid him $ 74,627 in 2013 and $ 113,712 in 2014. Dkt. # 30-1 at 9–10. That the parties' respective tax records categorize these payments differently does not create a genuine issue of fact regarding whether the payments were actually made in exchange for plaintiff's contributions to the company.Plaintiff also argues that the declarations offered by the government are inadmissible. Dkt. # 35-1. The Court finds that the declarations are admissible under Fed. R. Civ. P. 56(c)(4).

/3/ Because the statutory provisions do not affect the Court's analysis, the Court expresses no view on the merits of plaintiff's interpretive arguments.
"I could be dead wrong on this" - Irwin Schiff

"Do you realize I may even be delusional with respect to my income tax beliefs? " - Irwin Schiff

Famspear
Knight Templar of the Sacred Tax
Posts: 7196
Joined: Sat May 19, 2007 1:59 pm
Location: Texas

Re: Hey! I Overpaid The Government!

Postby Famspear » Tue May 23, 2017 6:35 pm

I'm convinced that the Good Lord put people like Mr. Rische on the Earth just to provide amusement for the rest of us.

:whistle:

Looks like another one of Hendrickson's Heroes.....

:beatinghorse:
...why is anyone in this [losthorizons] community paying the least attention to...'Larry Williams' [Famspear], or other purveyors of disinformation from...quatloos? – Pete Hendrickson, former inmate 15406-039, Fed’l Bureau of Prisons

User avatar
The Observer
Further Moderator
Posts: 6653
Joined: Fri Feb 07, 2003 12:48 am
Location: Virgin Islands Gunsmith

Re: Hey! I Overpaid The Government!

Postby The Observer » Tue May 23, 2017 7:10 pm

Famspear wrote:Looks like another one of Hendrickson's Heroes.....


Man, if I was Prevaricatin' Pete, I would really be upset by all of these people who took my sure-fire winning de-tax method and let it get trounced in court. Can't understand why Pete is tolerating all of these losers trashing CtC. Maybe he needs to screen his clientele and only let people who fully understand his strategy and can win use it?

Of course, that would mean Pete couldn't let himself use it either...
"I could be dead wrong on this" - Irwin Schiff

"Do you realize I may even be delusional with respect to my income tax beliefs? " - Irwin Schiff

Famspear
Knight Templar of the Sacred Tax
Posts: 7196
Joined: Sat May 19, 2007 1:59 pm
Location: Texas

Re: Hey! I Overpaid The Government!

Postby Famspear » Tue May 23, 2017 11:22 pm

One of the many errors made by this clown involves the incorrect argument that the Federal tax must be assessed before tax liability can be found. He quotes the following language from the Court of Appeals for the Ninth Circuit:

For the condition precedent of liability to be met, there must be a lawful assessment, either a voluntary one by the taxpayer or one procedurally proper by the IRS.


--from Bothke v. Fluor Engineers and Constructors, Inc., 713 F.2d 1405, 1414 (9th Cir. 1983), vacated and remanded, 468 U.S. 1201, 104 S. Ct. 3566, 82 L.Ed.2d 867 (1984), decision on remand, 834 F.2d 804 (9th Cir. 1987).

There are several problems with the quoted language from the 1983 Bothke text. First, the language constitutes obiter dicta -- not judicial precedent. The statement was not a decision by the Court of Appeals. The Court was not called upon to decide, and did not decide, whether a lawful assessment is a condition precedent to tax liability. Second, the statement is simply incorrect. As explained below, under the Internal Revenue Code, assessment is not a condition precedent for tax liability. Third, of course, even the decision that was rendered in the case (which was on a different legal issue) was vacated by the U.S. Supreme Court.

A tax liability is a legal duty to pay the tax.

For the duty to pay the tax at the time prescribed for filing the related tax return, see IRC section 6151. In citing this particular Code section, a unanimous United States Supreme Court stated, on February 25, 1992: "The Internal Revenue Code ties the duty to pay federal income taxes to the duty to make an income tax return". Holywell Corp. v. Smith, 503 U.S. 47 (1992).

From Internal Revenue Code section 6151:

(a) Except as otherwise provided in this subchapter, when a return of tax is required under this title or regulations, the person required to make such return shall, without assessment or notice and demand from the Secretary, pay such tax to the internal revenue officer with whom the return is filed, and shall pay such tax at the time and place fixed for filing the return (determined without regard to any extension of time for filing the return).


--from 26 USC section 6151(a) (emphasis added).

The argument that no tax is owed unless the tax is first officially assessed by the IRS was specifically rejected by the United States Court of Appeals for the Second Circuit, which cited section 6151(a), in United States v. Ellett, 527 F.3d 38, 2008-1 U.S. Tax Cas. (CCH) paragr. 50,362 (2d Cir. 2008) (per curiam) and United States v. Dack, 747 F.2d 1172, 1174-75 (7th Cir. 1984) (per curiam) (distinguishing and limiting a contrary statement by the Court Appeals for the Seventh Circuit, in United States v. England, 347 F.2d 425 (7th Cir. 1965)). See also United States v. Voorhies, 658 F.2d 710 (9th Cir. 1981) and United States v. McLain, 646 F.3d 599 (8th Cir. 2011). See also dicta in United States v. Silkman, 156 F.3d 833 (8th Cir. 1998).

Under section 6501(a) of the Internal Revenue Code, the government may file a lawsuit for collection of a federal tax within three years after the related tax return is filed, even if the tax has not been assessed. See, e.g., United States v. Craddock (In re Craddock), 184 B.R. 974 (D. Colo. 1995) (under section 6501(a) of the Internal Revenue Code, assessment of a federal tax is not a requirement in a lawsuit brought by the government within three years after the related tax return is filed, and assessment is not a requirement for tax liability). (Further, if the tax is assessed within three years after the time the related tax return is filed, the government generally has ten years from the assessment date to collect the tax by levy, or to file a lawsuit for collection; see section 6502). One example of language in section 6501 that illustrates the power of the government to maintain a lawsuit for collection of an unassessed tax is section 6501(c)(3): the case where the taxpayer has simply failed to file a return. That statute provides that in such a case, "...the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time" (italics added).

Further: “taxes may be and often are collected without assessment…[and] in such a case, the tax, if legally due, cannot be recovered [by the taxpayer as a tax refund] merely because it had not been formally assessed.” Meyersdale Fuel Co. v. United States, 44 F.2d 437 (Ct. Cl. 1930).

See also Theodore D. Peyser, "Limitations Periods, Interest on Underpayments and Overpayments, and Mitigation," vol. 627 (4th ed. 2012), Bloomberg BNA, under "General Rules of §§ 6501(a) and 6502": " . . . the government cannot begin any court proceeding without assessment for the collection of tax after the expiration of the three-year period, although the IRS rarely institutes a collection suit before making an assessment." In other words, even without assessment, the government can begin such a proceeding if the three year period has not yet expired, but such actions without assessment are rare.

The Court of Appeals for the Ninth Circuit has stated that "tax liabilities, though unassessed, are deemed obligations due and owing at the close of the taxable year." Edelson v. Commissioner, 829 F.2d 828, 834 (9th Cir. 1987).

To the same effect, in another federal criminal tax case:

[The defendant Richard] Kelley further contends that he had no tax liability for the year 1973 because of the failure of the IRS to conduct an administrative assessment of his tax after refusing to accept his incomplete return. See United States v. Radue, 486 F.2d 220, 222 (5th Cir. 1973), cert. denied, 416 U.S. 908, 94 S.Ct. 1615, 40 L.Ed.2d 113 (1974).

The IRS is required to follow certain procedures in assessing the liability of a taxpayer before it can bring a civil suit to enforce a collection of the tax due. 26 U.S.C. §§ 6020(b), 6201 et seq.; 26 C.F.R. §§ 301.6020-1, 301.6201-1 et seq. (Supp.1975). There is no requirement, however, that an administrative assessment record be filed before there can be a criminal prosecution for failing to report or pay income tax under 26 U.S.C. §§ 7201-07. Tax liability is imposed by statute independent of any administrative assessment. United States v. Radue, supra, 486 F.2d at 222; Funkhouser v. United States, 260 F.2d 86, 87 (4th Cir. 1958), cert. denied, 358 U.S. 940, 79 S.Ct. 346, 3 L.Ed.2d 348 (1959); 10 J. Mertens, Federal Income Taxation § 55A.05 (1970 1204*1204 rev. ed.); see United States v. Commerford, 64 F.2d 28, 30 (2d Cir.), cert. denied, 289 U.S. 759, 53 S.Ct. 792, 77 L.Ed. 1502 (1933).


--from United States v. Kelley, 539 F.2d 1199 (9th Cir. 1976), cert. denied, 97 S. Ct. 393 (1976).

EDIT: In short, for some legal purposes, a Federal income tax liability arises at the close of the tax year. For other legal purposes, a Federal income tax liability arises at the time prescribed by law for filing the related tax return (generally without regard to extensions).

Self-assessment by the taxpayer is not a legal requirement for a Federal income tax liability.

Assessment by the Internal Revenue Service is not a legal requirement for a Federal income tax liability.

And, contrary to what some tax protesters have argued, the filing of a tax return by the taxpayer is not a legal requirement for a Federal income tax liability. Filing of a section 6020(b) return by the IRS on behalf of the taxpayer also is not a legal requirement for a Federal income tax liability (the misleading "shall" language found in section 6020 notwithstanding).
...why is anyone in this [losthorizons] community paying the least attention to...'Larry Williams' [Famspear], or other purveyors of disinformation from...quatloos? – Pete Hendrickson, former inmate 15406-039, Fed’l Bureau of Prisons

Arthur Rubin
Tupa-O-Quatloosia
Posts: 1457
Joined: Fri May 30, 2003 12:02 am
Location: Brea, CA

Re: Hey! I Overpaid The Government!

Postby Arthur Rubin » Wed May 24, 2017 2:21 am

I'm puzzled. Is the court implying that, if Mr. R had only contested the 2014 return, he would have gotten the refund he was actually entitled to, without reopening the 2013 return which the IRS mistakenly accepted as a return?
Arthur Rubin, unemployed tax preparer and aerospace engineer
ImageJoin the Blue Ribbon Online Free Speech Campaign!

Butterflies are free. T-shirts are $19.95 $24.95 $29.95

User avatar
grixit
Recycler of Paytriot Fantasies
Posts: 3550
Joined: Thu Apr 24, 2003 7:02 am
Contact:

Re: Hey! I Overpaid The Government!

Postby grixit » Wed May 24, 2017 4:13 am

No frivpen, so VICTORY!!!!

Now watch him keep trying to re litigate until he does get penalized.
I voted for Hillary, and i didn't even get a stupid tshirt!

10 . . . . . . . . . . . . . . . 2
. . . . . . Dr Pepper
. . . . . . . . . . . . . . .. . . 4

User avatar
notorial dissent
A Balthazar of Quatloosian Truth
Posts: 10905
Joined: Mon Jul 04, 2005 8:17 pm

Re: Hey! I Overpaid The Government!

Postby notorial dissent » Wed May 24, 2017 5:30 am

grixit wrote:No frivpen, so VICTORY!!!!

Now watch him keep trying to re litigate until he does get penalized.

He certainly sounds bright enough to go that route, the old if at first you don't succeed, fail fail again, as the frivpens mount ever higher.
The fact that you sincerely and wholeheartedly believe that the “Law of Gravity” is unconstitutional and a violation of your sovereign rights, does not absolve you of adherence to it.

User avatar
The Observer
Further Moderator
Posts: 6653
Joined: Fri Feb 07, 2003 12:48 am
Location: Virgin Islands Gunsmith

Re: Hey! I Overpaid The Government!

Postby The Observer » Wed May 24, 2017 4:11 pm

notorial dissent wrote:
grixit wrote:No frivpen, so VICTORY!!!!

Now watch him keep trying to re litigate until he does get penalized.

He certainly sounds bright enough to go that route, the old if at first you don't succeed, fail fail again, as the frivpens mount ever higher.


But of course - in order to get "street cred" with the TP crowd, you gotta be able to brag about how many frivpens you have garnered.
"I could be dead wrong on this" - Irwin Schiff

"Do you realize I may even be delusional with respect to my income tax beliefs? " - Irwin Schiff


Return to “US”

Who is online

Users browsing this forum: Ahrefs [Bot], Bing [Bot] and 1 guest