Opinion
Case No. 8:02-cv-845-T-24 MAP
December 30, 2003
ORDER
This matter came before the Court on a non-jury trial that was held on December 30, 2003. After considering all of the evidence, the pleadings filed by the parties, the arguments made by counsel, and the legal authorities submitted to the Court, the Court makes the following findings of fact and conclusions of law.
On November 15, 1982, Plaintiff filed for bankruptcy under Chapter 11. The Internal Revenue Service ("IRS") filed a proof of claim, in which it asserted an unsecured priority claim of $5,784.66 for FICA taxes for the fourth quarter of 1982 through the date of the bankruptcy petition, i.e., from October 1, 1982 through November 15, 1982. (Pla. Ex. 1). On October 11, 1984, the bankruptcy court confirmed Plaintiff's reorganization plan. (Pla. Ex. 4). The Confirmation Order provided that Plaintiff would pay the IRS's unsecured priority claim of $5,784.66, plus 12% simple interest, in equal installments over seventy-two months. (Pla. Ex. 4). Plaintiff complied with the confirmation order and paid off this claim by April 15, 1991. (Def. Ex. A, p. 1).
On April 5, 1993, the IRS sent Plaintiff a letter stating that (1) Plaintiff owed the IRS $3,969.35 for FICA taxes for the final half of the fourth quarter of 1982, i.e., the FICA taxes that accrued after Plaintiff filed for bankruptcy; (2) Plaintiff owed interest and penalties on the $3,969.35 of FICA taxes due, which amounted to $10,246.18; and (3) The total amount due was $14,215.53. (Pla. Ex. 2). Plaintiff disputed that he owed this money, but he agreed to waive the statute of limitations for the collection of these taxes, interest, and penalties. Thereafter, Plaintiff paid $11,056.34 towards this new claim. Of this amount, Plaintiff paid $150 on March 2, 1998 and $150 on March 28, 1998. (Def. Ex. A, p. 1-2).
On January 27, 2000, Plaintiff filed a claim for a refund with the IRS for the overpayment of his FICA taxes for the final half of the fourth quarter of 1982. The IRS denied his claim, and he filed suit in this Court on May 10, 2002 for a refund of $24,221.84, pursuant to 26 U.S.C. § 7422. (Doc. No. 32).
At trial, Plaintiff testified that he overpaid his FICA taxes for the final half of the fourth quarter of 1982. He further testified that when he received the April 5, 1993 letter informing him of he new amount due, he asked the IRS to explain their calculation, but the IRS did not do so until they took the deposition of Plaintiffs accountant on April 23, 2003.
At trial, the IRS attempted to explain their calculation, but the explanation was not consistent with its documents. According to the IRS's documents, Plaintiff's FICA taxes for the entire fourth quarter of 1982 equaled $9,754.01, which is comprised of (1) $5,784.66 from October 1, 1982 through November 15, 1982 (as stated in its proof of claim filed in the bankruptcy court — Plaintiff's Exhibit 3), plus (2) $3,969.35 for the final half of the fourth quarter of 1982 (as stated in the April 5, 1993 letter from the IRS — Plaintiff's Exhibit 2). However, the IRS reflected the amount of Plaintiff's FICA taxes for the entire fourth quarter of 1982 to be $10,660.60. (Def. Ex. A, p. 1). The difference in these two amounts ($10,660.60-$9,754.01) equals $906.59. Based on this unexplained difference of $906.59, the Court rejects the IRS's evidence regarding the amount of tax due from Plaintiff, since the Court finds the evidence to be unreliable.
The IRS attempted to explain this difference by surmising that the difference was due to a login in its posting certain transactions to Plaintiff's account. However, the last transaction prior to the April 5, 1993 letter occurred on April 15, 1991. The Court declines to accept the IRS's connection that it may have taken two years for a transaction to post to the account.
Instead, the Court has re-calculated the amount of tax owed by Plaintiff. Using Mr. Allin's table (Def. Ex. A, p. 2-4), the Court begins by reducing the IRS's initial balance of $6,863.41 as of February 1, 1983 by the $906.59, as calculated above. Thus, the initial balance due as of February 1, 1983 is $5,956.82. Thereafter, the Court uses the IRS's interest factor (rounded to the third decimal place) to calculate the new amounts of interest accrued. The Court finds that according to its recalculation, Plaintiff overpaid his FICA taxes for the fourth quarter of 1982 by $704.96.
The Court did not add the $343.48 penalty assessed on May 23, 1983, because it may have been calculated based on the amount of taxes due, which the IRS failed to calculate correctly. All of the other transactions listed on pages 2-4 of the IRS's Exhibit A were used in the Court's calculation.
The Court cannot award Plaintiff the entire amount of his overpayment, however, because 26 U.S.C. § 6511(a) bars Plaintiff from claiming a refund for overpayments made before January 27, 1998. (Doc. No. 50). Thus, Plaintiffs refund claim is limited to the two payments he made after January 27, 1998. These payments, made on March 2, 1998 and March 28, 1998, total $200.
Accordingly, it is ORDERED AND ADJUDGED that:
(1) The Clerk is directed to enter judgment in favor of Plaintiff for $300;
(2) Plaintiff is awarded prejudgment interest at the statutory rate on $150 of the judgment, beginning on March 2, 1998. Plaintiff is also awarded prejudgment interest at the statutory rate on the other $150 of the judgment, beginning on March 28, 1998;
(3) Plaintiff is directed to file a motion for fees and costs, pursuant to 26 U.S.C. § 7430, no later than February 6, 2003, if Plaintiff wishes to file such a motion; and
(4) The Clerk is directed to CLOSE this case. The Court will retain jurisdiction to rule on any post-trial motions.DONE AND ORDERED.