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An IRS Response To A Properly-Claimed Refund Of Money Improperly Withheld



The $10,152.96 which this notice acknowledges as an overpayment to be refunded to my wife and I is the total of every penny withheld in more-or-less the standard fashion from the salary paid me by a company for which I worked in 2002.  (That is to say, improperly and without regard to my protest, but only out of the ordinary in that the IRS had taken it upon themselves to request that the company withhold from me at a particular rate).  It includes, of course, every penny withheld for Social Security, Medicare, etc..


The return which resulted in this notice and refund can be seen here.


(These displayed documents-- the 1040, Form 4852, and corrected 1099-Misc-- comprise EVERYTHING furnished to the IRS in regard to our 2002 federal tax filing, with the sole exception of our response to an agency assertion about our 2000 and 2001 filings, which is discussed a bit further down this page.  Nothing else preceded, accompanied, or followed these documents.)




For the sake of those finding their way to this page with a partial (and consequently, dangerous) understanding of the truth about tax law who might be troubled by what they imagine to be the nefarious implications of the refund notice's reference to 'overpaid tax', I will provide this brief excerpt of 'About 1040's And Claiming Refunds' from 'Cracking the Code- The Fascinating Truth About Taxation In America':


I’ll let the relevant code and regulation sections begin the explanation of this aspect of the law:

Sec. 6402. - Authority to make credits or refunds

(a) General rule

In the case of any overpayment, the Secretary, within the applicable period of limitations, may credit the amount of such overpayment, including any interest allowed thereon, against any liability in respect of an internal revenue tax on the part of the person who made the overpayment and shall, subject to subsections I, (d), and (e) [deductions for past due obligations to federal or state agencies -PH] refund any balance to such person.


Sec. 301.6402-3 Special rules applicable to income tax.

(a) In the case of a claim for credit or refund filed after June 30, 1976--

(1) in general, in the case of an overpayment of

income taxes, a claim for credit or refund of

such overpayment shall be made on the

appropriate income tax return.


(5) A properly executed individual, fiduciary, or

corporation original income tax retrun or an

amended return (on 1040X or 1120X if

applicable) shall constitute a claim for refund or

credit within the meaning of section 6402 and

section 6511 for the amount of the

overpayment disclosed by such return (or

amended return).

Even language as seemingly straightforward as that above actually incorporates hidden meanings and complicating elements.  To begin with, “overpayment” is itself a custom-defined legal term within the code:

“The term ‘’overpayment’’ includes that part of the amount of the payment of any internal revenue tax which is assessed or collected after the expiration of the period of limitation properly applicable thereto.”

and would not, on its face, apply to the circumstances of non-“taxpayers”.  Indeed, until the enactment of the Current Tax Payment Act of 1943, the law made no particularly explicit provisions for dealing with the refund of amounts taken from persons for whom no tax liability existed.  But with that act, doubtless in recognition of the fact that its easily misunderstood language could lead to withholding being improperly applied to non-government persons, congress added the sections establishing penalties for fraudulent or erroneous W-2’s at which we looked in ‘Lies, Damned Lies, and W-2’s’, and amended the existing section relating to the credit for tax withheld on “wages”, (section 35) into what are now sections 6401(b)(1) and (c), and 31(a)(1), of the IRC:

Section 6401- Amounts treated as overpayments

(b) Excessive credits

(1) In general

If the amount allowable as credits under subpart C of part IV of subchapter A of chapter 1 (relating to refundable credits) exceeds the tax imposed by subtitle A (reduced by the credits allowable under subparts A, B, D, and G of such part IV), the amount of such excess shall be considered an overpayment.

 (c) Rule where no tax liability

An amount paid as tax shall not be considered not to constitute an overpayment solely by reason of the fact that there was no tax liability in respect of which such amount was paid.

(The “subpart C of part IV of subchapter A of chapter 1” reference in (b)(1) is to:

Sec. 31 -Tax withheld on wages

(a) Wage withholding for income tax purposes

(1) In general

The amount withheld as tax under chapter 24 shall be allowed to the recipient of the income as a credit against the tax imposed by this subtitle.)


You can see that congress was trying hard to make this simple.  This section establishes that amounts withheld under the provisions of Chapter 24 (“employment” withholding) are claimable as overpayments-- even when the amounts were withheld from someone with no associated tax liability, which is to say, a non-“taxpayer”.  6401 also precludes the barring of amounts withheld as tax under Chapter 21 (FICA taxes) from being treated as overpayments.


Those who are troubled by references to Social Security numbers, 1040's, or anything else in this IRS notice, will need more substantial guidance than can be provided here.  They should read 'Cracking the Code' in its entirety in order to gain a complete understanding of American tax law; as should everyone interested in securing the proper legal status, and consequent return, of their own money similarly withheld.


By the way, the declaration on this notice that $1699.86 of the refund amount will be applied to 'another tax obligation' involves the ongoing refusal of the agency to acknowledge our filings for the year 2000.  That year was complicated by our having first submitted a return prepared in a mostly 'conventional' fashion-- which the agency refused to accept as filed due to our addition of language to the perjury statement disputing the accuracy of the agency's use of the term "income".  (Specifically, "...except insofar as the term "income" is misused herein.")  This was followed about a year later by a superceding return properly prepared (and thus needing no modifications).  Those who have read 'Cracking the Code' will be familiar with this story.  The agency thoughtfully calculated alleged liabilities for Doreen and me for that year between the time of its refusal to accept the first return and our submission of the superceding claim-for-refund return.  $1699.86 is the figure they arrived at, with interest added, as outstanding with respect to Doreen for 2000.


Indeed, our filing for 2001, which was actually submitted before the superceding filing for 2000 mentioned above, is also in dispute.  That filing reflected a developing, but not yet complete understanding of the law, and consequently had a multi-page attachment to the 1040 discussing a great deal of law-- all of which was correct enough, but was also superfluous and complicating.  The presence of this extraneous material probably led to the return being presumed, without examination, to be a typical self-contradictory Schiff "zero" return-- and thus treated as a nullity.  


Consequently, the IRS calculated what it alleged to be an outstanding liability for me individually for 2001, just as it had for 2000.  So, following the first notice displayed at the beginning of this page, we received two others relating to the 2002 overpayment, each announcing a deduction from the balance owed to us which was being applied to one of the remaining alleged liabilities.  Those other two notices zeroed out what the agency had alleged as owed by us for 2001 and part of what it had alleged was owed by me for 2000.  This process left one amount alleged as still owed to it-- the balance of what it had declared to be my liability for 2000.  That portion was zeroed out by the IRS 'claiming' a portion of the refund owed us for 2003.  Click here to see the acknowledgement (and refund check) for that year.


We may well have to sue the Treasury over all of that money but that's beside the point, which is that the IRS has acknowledged that we owed nothing for 2002 (and now 2003 as well)-- despite earnings for which your average H & R Block type would have me saying good-bye to nearly all of that 10K+-- and that the Treasury owed all of that withheld money back to us.  Establishing those facts is a necessary precursor to forcing the refund, if it doesn't show up in the mail.  Trust me, five minutes spent properly preparing a claim of refund is a good deal easier than arguing these things out in court.


P. S. Knowing that some-- taken in by the tactically invaluable reputation that the IRS has cultivated of being not only a nest of rattlesnakes, but comically incompetent rattlesnakes as well-- will scoff and presume that the content of the notice is a computer-generated glitch of some kind, I am providing the following copy of the first notice we received relating to this filing, and our response:



Our Response (appended to a copy of the above notice):


"Copies of our returns for the years to which you refer are attached, along with proofs of your having received them.  Please remit our refund promptly.  If, as citizens and residents of Michigan, the Form 1040 is not the correct form for us to be using, please respond with an appropriate clarification within 30 days."


The returns for 2000 and 2001 which we attached to this response also list -0- for the AGI and claim full refunds, just like the one for 2002 being questioned.  The agency's reply was the notice with which this page begins.  (We received no such argument with regard to our 2003 return, by the way.)



Tens of thousands of readers of 'Cracking the Code- The Fascinating Truth About Taxation In America' have taken control of their own resources, in accordance with, and respect for, the law. The likely total amount reclaimed by these good Americans so far is upward of several billion dollars.


A few of these good American men and women are generous enough to share their victories in upholding the law, for the edification and inspiration of everyone. At the moment the shared refund checks, closing notices, and so forth total:


Crack the Code

P. P. S. The success, or prospect of success, of a proper claim-for-refund should not be viewed as a reason to let a company that is improperly withholding off the hook.  Rather, it should be used to educate such a company as to the error of its ways (and the criminal liability associated with them, as extensively explained in 'Cracking the Code').  No one should have to ask for, or wait for, or argue about, a refund of money that should never have been taken in the first place.


Furthermore, a simple, lawful response such as that shown here cannot be relied upon.  The odds of a claim being shunted to a 'compliance' office which will do everything possible to resist acknowledging it and making the refund-- including attempting to intimidate you into withdrawing it, and obliging you to go to court to enforce it-- are high.  A properly made claim will be on solid legal footing should it come to that (and no effort to reclaim your money will be on any kind of legal footing if you have not properly made that claim...), but who wants to go through that unnecessarily?  Keep the heat on the company which is improperly withholding.




By the way, it will be noticed that my wife and I filed a joint return, and took the standard deduction, on this and our 2003 returns.  I am becoming persuaded, as my research continues, that we should file individual returns-- and perhaps decline that deduction-- in the future, in order to address idiosyncrasies reflected in 26 USC 6013 regarding who can and cannot file joint returns. (This involves one's status as a "resident" or "non-resident", and has nothing to do with the nature or amount of "income" received.)  These idiosyncrasies may well be moot as a practical matter, but as there is no downside to filing singly, and such filing is equally amenable to either status, my abiding interest in avoiding complicating ambiguities is suggesting this decision.  (The personal exemptions my wife and I claim are available regardless of status.)


Those who are interested can view my 2004 filing (which the 'service' has been processing since August of 2005, according to my conversation with an agent in 2006...), and my 2005 and 2006 filings (which the 'service' claims to be unable to locate) by clicking on the years just listed.  Having had nothing withheld, received less than the exemption amount of "income", and been faced with no assertions to the contrary to overcome, I've had no occasion to file since the return for 2006.