Procedurally Taxing: When Is a Late Return Not Really “Late”?? – Part 2 (December 6, 2021)

Bob Probasco, Senior Lecturer and Director Tax Dispute Resolution Clinic, has made available for download his article, “When Is a Late Return Not Really “Late”?? – Part 2” published on the Procedurally Taxing blog. The article begins as follows:

And now some observations and questions about that recent IRS legal memo on an overpayment interest issue.  The memo relied substantially on two cases addressing similar situations: MNOPF Trs. Ltd. v. United States, 123 F.3d 1460 (Fed. Cir. 1997) and  Overseas Thread Indus. v. United States, 48 Fed. Cl. 221 (2000).  (The Overseas Thread scenario is virtually identical to that in the memo.)  Normally, taxpayers receive overpayment interest from the filing due date of the return, if all payments that make up the overpayment were made by then.  These cases involved a statutory provision, Section 6611(b)(3), under which if the return is filed late, taxpayers do not receive overpayment interest before the date the return was filed. 

MNOPF established the principle that a return cannot be “late” if the taxpayer was not required to and did not file a tax return.  Overseas Thread addressed the situation of a foreign corporation that did not have a U.S. trade or business and therefore was not required to file an income tax return – but had to do so to claim a refund of excessive withholding tax on dividends from a U.S. source.  The court in that case determined that the tax return filed to claim a refund of an overpayment was only required by the normal filing date, and therefore late if not filed by then, if the taxpayer knew of the overpayment before the prescribed filing date.  Part I provided background on those two cases and the legal memo.  I think Overseas Thread and the memo leave a lot of questions, and they may be incomplete or even wrong.  Those rulings also could be applied much more broadly than the specific fact pattern they address. 

Click here to view Bob Probasco’s summary of “When Is a Late Return Not Really “Late”?? – Part 2.”

Posted by Bennett Mansour, Associate Editor, Wealth Strategies Journal

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