It's Not Your Refund if You Owe Tax For Another Year, That Money Belongs to the IRS

Robert Williams self-filed a 1040EZ for 2013 on which he claimed an overpayment of $711.  He was disappointed, however, since the refund never arrived.  It was credited against a balance due for 2011 [IRC Sec. 6402(a)].

William Delaney, EA
Westwood, MA

Now comes an audit of 2013 and the IRS discovers that Mr. Williams had omitted both wage income and self-employment income (but if he had reported all of that stuff he couldn’t have used the simple 1040EZ form).  As a result, there was a balance due for 2013, with which the taxpayer did not agree. Mr. Williams wanted that original $711 refund to be applied to his adjusted 2013 balance and he petitioned the Tax Court to force the IRS to do just that.  See Robert Williams v. Comm., T.C. Memo 2017-182 (9/18/17).

First, the Court determined that the IRS had the authority to take the original $711 refund and apply it to another year’s unpaid tax under Sec. 6402(a).  Furthermore, the Court noted that “On account of section 6512(b)(4), we lack jurisdiction to review respondent’s action.”

Sec. 6512(b)(4) reads:  The Tax Court shall have no jurisdiction under this subsection to restrain or review any credit or reduction made by the Secretary under section 6402. 

I guess that Mr. Williams should not have represented himself in Tax Court, pro se.

Of course, with only this single issue at stake, who could afford legal advice?  And, one must wonder, if the credit were shifted back from 2011 to 2013, that would increase the balance due for 2011.  Did Mr. Williams think that they would not try to collect it?