Robert Williams v. Commissioner

T.C. Memo. 2017-182UNITED STATES TAX COURT
ROBERT WILLIAMS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 822-16. Filed September 18, 2017.
Held: Overpayment shown on P's 2013 Federal income tax
return and credited by R as an offset against P's unpaid tax for another
year unavailable to P to offset deficiency in his subsequently
determined 2013 tax liability.
Robert Williams, pro se.
Mimi M. Wong and Lyle B. Press, for respondent.
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[*2] MEMORANDUM OPINION
HALPERN, Judge: By notice of deficiency dated October 13, 2015,
respondent determined a deficiency in petitioner's 2013 Federal income tax of
$1,403. The parties agree to all of respondent's adjustments resulting in the
deficiency. The only issue remaining is respondent's treatment of a $711
overpayment in tax claimed by petitioner on his 2013 income tax return and
credited by respondent as an offset against petitioner's unpaid tax for another year.
Having so treated the $711 overpayment, respondent argues that it is no longer
available to petitioner to offset the 2013 deficiency. Petitioner disagrees. We
agree with respondent.
Unless otherwise indicated, all section references are to the Internal
Revenue Code of 1986, as amended and in effect for 2013.
Background
The parties have stipulated certain facts and the authenticity of certain
documents. The facts stipulated are so found, and documents stipulated are
accepted as authentic. We need find no facts in addition to those stipulated or that
can be drawn from the stipulated documents.
Petitioner resided in New York when he filed the petition.
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[*3] On April 15, 2014, petitioner filed Form 1040EZ, Income Tax Return for
Single and Joint Filers With No Dependents, for his taxable (calendar) year 2013.
He showed on that return a tax liability of $503, Federal income tax withheld of
$1,214, and an overpayment of $711. Respondent did not refund the $711 to
petitioner, but on that same date, pursuant to section 6402(a), he credited $711 as
an offset against petitioner's unpaid 2011 tax liability.
Subsequently, respondent examined petitioner's 2013 return and made the
following adjustments. He increased gross income by $7,323, on account of
petitioner's failure to report $3,493 and $3,830 of taxable wages and nonemployee
compensation, respectively. He increased the claimed credit for withheld income
tax by $155 on account of withholding attributable to the unreported taxable
wages. The addition of this amount to the $1,214 that petitioner reported as
withheld results in total withholding of $1,369. Respondent increased petitioner's
liability for self-employment tax by $541 on account of the omitted self-
employment income. As corrected, petitioner's 2013 Federal income tax liability
is $1,906. Petitioner accepts all of respondent's adjustments and does not disagree
with respondent's calculation of his correct 2013 tax liability. Nor does he
disagree with respondent's calculation of a deficiency in tax of $1,403.
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[*4] The parties disagree over respondent's treatment of the $1,369 of income tax
withheld. Given his 2013 tax liability of $1,906, and subtracting from that amount
the withheld tax of $1,369, petitioner calculates that he owes respondent only
$537. Respondent disagrees. Although petitioner's arithmetic is correct, he owes
respondent $1,248 because, before determining a $1,403 deficiency for 2013,
respondent had credited the $711 claimed 2013 overpayment as an offset against
petitioner's unpaid 2011 tax liability. That amount, respondent continues, is no
longer available to petitioner to pay any portion of the subsequently determined
$1,403 deficiency. But respondent does treat the $155 of withholding that first
came to light on respondent's examination of petitioner's return as a payment
satisfying in part the deficiency in tax of $1,403, so that, interest aside, petitioner
need pay only $1,248 to eliminate the deficiency.
Discussion
When a taxpayer files a taxable year return that shows payments of tax in
excess of tax liability, instead of refunding the indicated overpayment to the
taxpayer, the Commissioner may credit the amount of the overpayment against the
taxpayer's tax liabilities for other taxable years. Sec. 6402(a). The
Commissioner's crediting of a refund for one year against a tax liability for another
year does not prevent the Commissioner from later determining a deficiency for
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[*5] the year from which the refund arose. Savage v. Commissioner, 112 T.C. 46,
48-49 (1999); Luque v. Commissioner, T.C. Memo. 2016-128, at *4. If the
taxpayer then files a timely petition with this Court, we "have jurisdiction to
redetermine the correct amount of the deficiency". Sec. 6214(a). If we find "that
there is no deficiency and * * * that the taxpayer has made an overpayment of
income tax" for the year before us, we "have jurisdiction to determine the amount
of such overpayment" and order that that amount "be credited or refunded to the
taxpayer." Sec. 6512(b)(1). "In determining the existence and amount of any
overpayment, we must take into account the extent to which the Commissioner
previously credited any overpayment shown on the taxpayer's return for the year
before us against the taxpayer's tax liability for another year." Luque v.
Commissioner, at *5; see Belloff v. Commissioner, 996 F.2d 607, 612-613 (2d
Cir. 1993), aff'g T.C. Memo. 1991-350. And while in exercising our jurisdiction
under section 6512(b) for a taxable year before us, we must take into account any
prior credits allowed by the Commissioner under section 6402(a) from that year to
another year, our jurisdiction does not extend to weighing the merits of the
assessed liability against which the credit was applied. See sec. 6512(b)(4); Luque
v. Commissioner, at *5-*6. As we explained in Winn-Dixie Stores, Inc. v.
Commissioner, 110 T.C. 291, 294 (1998): "Section 6512(b)(4) restricts our
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[*6] jurisdiction in two situations. First, we may not restrain or prevent
respondent from reducing a refund by way of credit or reduction pursuant to
section 6402. Second, we may not review the validity or merits of any reduction
of a refund under section 6402 after such reduction has been made by respondent."
See also Luque v. Commissioner, at *6.
On his 2013 Form 1040EZ, petitioner claimed that he had overpaid his 2013
tax by $711. Respondent did not refund that amount but, pursuant to section
6402(a), credited it as an offset against petitioner's unpaid 2011 tax liability. On
account of section 6512(b)(4), we lack jurisdiction to review respondent's action.
Thus, of the $1,369 withheld from petitioner's 2013 income, only $658 ($1,369 !
$711) was available at the time respondent examined petitioner's 2013 return and
determined that petitioner's 2013 tax liability was $1,906. Subtracting $658 from
$1,906 results in a difference of $1,248, which is precisely the amount (interest
aside) that respondent seeks to collect from petitioner.
Petitioner's argument that he owes respondent only $537 (2013 tax liability
of $1,906, minus withheld tax of $1,369) is based principally on the layout of, and
directions on, the 2013 Form 1040EZ, which, after directing the taxpayer to
calculate and enter his taxable income, directs him to find, from tax tables, his tax
liability. The form then directs the taxpayer to compare his tax liability, $1,906,
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[*7] with the sum of his payments and credits, $1,369, and, if the former exceeds
the latter (it does), the difference, $537, is his tax liability. That calculation, he
argues, proves that the unpaid amount of the $1,403 deficiency in tax is $537, not
$1,248.
Petitioner's arithmetic is sound, but his premise (that the form is controlling)
is not. A Federal income tax return is a report of the taxpayer's self-determined
tax liability. It is subject to examination by the Commissioner, who may make
adjustments to reflect, among other things, items omitted by the taxpayer or the
offset of a refund claimed by the taxpayer against his unpaid tax for a different
year. It is a backward-looking document, and Form 1040EZ is neither intended
nor designed to reflect that a current year's refund may be offset against a prior
year's tax liability.
We will sustain respondent's determination of a deficiency of $1,403 in
petitioner's 2013 Federal income tax. We will also note in our decision document
that respondent concedes a payment of $155, which would decrease the amount
petitioner owes from $1,403 to $1,248.
An appropriate decision will
be entered.