"Protective Claim"

[Jack from Ohio]

Client has a W-2C from 2004. The amount of SS earnings, Med earnings, and the associated withholdings are all that are changed, and all are lower.

Attached was a letter with references to CSX vs. United States Case No. 95-858. Bottom line, the court decision said that some severance pay to former employees should NOT have been subject to FICA taxes, so the company issued W-2C showing the change.

The letter says:

The Company will not request a refund from the IRS for the FICA taxes withheld...

Also:

Independently, you may want to pursue a refund under Treasury Regulations 31.6402(a)-2. This refund must be filed by April 15, 2008.

The last paragraph has me confused, as this is the first instance of this we have seen.

We understand that the IRS has not agreed with the US Court of Federal Claims ruling in the CSX case and my not process your refund request. However, you may want to file a protective claim in order to keep your tax year open until this matter had been resolved with the IRS. You should make certain that your claim clearly states it is a "Protective Claim."

My question... What forms to file to make this "Protective Claim", and what are my client's chances of being reimbursed? Total amounts to approx $600.

Anyone else dealt with this before?

[grandmabee]

Client has a W-2C from 2004. The amount of SS earnings, Med earnings, and the associated withholdings are all that are changed, and all are lower.

Attached was a letter with references to CSX vs. United States Case No. 95-858. Bottom line, the court decision said that some severance pay to former employees should NOT have been subject to FICA taxes, so the company issued W-2C showing the change.

The letter says:

The Company will not request a refund from the IRS for the FICA taxes withheld...

Also:

Independently, you may want to pursue a refund under Treasury Regulations 31.6402(a)-2. This refund must be filed by April 15, 2008.

The last paragraph has me confused, as this is the first instance of this we have seen.

We understand that the IRS has not agreed with the US Court of Federal Claims ruling in the CSX case and my not process your refund request. However, you may want to file a protective claim in order to keep your tax year open until this matter had been resolved with the IRS. You should make certain that your claim clearly states it is a "Protective Claim."

My question... What forms to file to make this "Protective Claim", and what are my client's chances of being reimbursed? Total amounts to approx $600.

Anyone else dealt with this before?

you file the 1040X across the top write Protective Claim in BOLD LETTERS. When the court makes it final ruling the the IRS will process the 1040X. I would of course send certified with return signature. It may take a while for the courts but you have your claim on time.

[jainen]

>>What forms to file to make this "Protective Claim"<<

Use Form 1040X and write "Protective Claim" in giant red letters at the top. Attach the new 1040, and a statement explaining completely EVERYTHING that regulation asks for. Plagiarize the exact wording. Then send in by registered mail.

I think the chances are pretty good. You aren't asking the IRS to accept any new facts about the income or deductions. And the taxpayers didn't do anything wrong except pay more than they should, which they had no control over, so that's really unfair and we know how much the IRS cares about fairness.

[Jack from Ohio]

you file the 1040X across the top write Protective Claim in BOLD LETTERS. When the court makes it final ruling the the IRS will process the 1040X. I would of course send certified with return signature. It may take a while for the courts but you have your claim on time.

How do you show the refund of FICA on the 1040X?

[jainen]

>>How do you show the refund of FICA on the 1040X?<<

It's line 67 on this year's Form 1040; probably slightly different for the relevant year. That flows to line 11 on the 1040X somehow, depending on your software.