Section 183 election extends the refund period

Article Abstract:

The Tax Court held that a taxpayer was not barred by the limitations period for refunds because an election under IRS section 183(e)(4) extended the period without the need for formal IRS approval. In this case, which involved a divided opinion among the presiding judges, the court found that the last year of the taxpayer's activity was in 1996. Since the taxpayer had elected the section 183(e)(4) postponement, its provisions automatically extended the period for assessing a deficiency, based on his last year of activity, to 1998. The taxpayer was therefore entitled to refunds which fell within the extended limitations period. Further, for the sake of consistency, the court ruled that the IRS cannot invoke lack of mutuality under IRS section 6501(c)(4) to a refund. The legislative history behind section 183(e)(4) also supported the tax court's conclusion.

Tax refunds, Tax returns, United States. Tax Court

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District court bars service's employer-only FICA assessment

Article Abstract:

The IRS has lost a case involving the aggregated assessment of an employer's share of the FICA tax due on unreported tips. The 'Quietwater Entertainment' case, which was heard by a district court in the Eleventh Circuit, concerned a taxpayer that owned and operated a restaurant in Florida. The IRS had claimed that the taxpayer had underpaid its employment taxes having used the aggregate method to compute taxes due. The taxpayer, however, argued that the IRS had improperly used an assessment method that was not appropriate for a tipping system that allowed 'tipping out' practices. Citing Section 3121(q), the district court distinguished the circumstances of the case from an earlier Eleventh Circuit case cited by the IRS as a rationale for its deficiency assessment.

Eating places, Restaurants & Food Service, Food Services and Drinking Places, Taxation, Restaurants, Tipping

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