TiNY Report for October 18, 2018 (covering DTA cases issued October 11)

This week we have two ALJ Orders and three ALJ Determinations. 

Matter of Frias; Judge: Gardiner; Division’s Rep: Charles Fishbaum; Taxpayer’s Rep: Jhonatan Mondragon; Articles 22 and 30.  Petitioner filed his 2012 New York return timely on March 6, 2013.  On November 30, 2016, Petitioner filed a claim for refund in addition to the refund claimed on the original 2013 return.  On February 28, 2017, the Division denied the claim for additional refund on timeliness grounds. And then Petitioner challenged the denial with a timely-filed ALJ Petition, to which Petitioner attached an August 17, 2016, Tax Court decision indicating there was a change to Petitioner’s 2012 income.

The Division moved for summary determination on the basis that Petitioner’s additional refund claim was not filed within three years of the original return as required by statute.  Petitioner cross-moved for summary determination on the basis (we surmise) that the Tax Court decision “opened the door” for his refund claim.  Judge Gardiner denied both parties’ motions for summary determination on the grounds that she needs to have a hearing to determine the nature of the Tax Court’s changes to Petitioner’s income, and then whether those changes revived the time during which Petitioner could file a refund claim. 

Matter of Perez; Judge: Maloney; Division’s Rep: Colleen McMahon; Taxpayer’s Rep: pro se; Article 22.  Judge Maloney rescinded a Notice of Intent to Dismiss.  The NoItD was issued based on the apparent failure of Petitioner to file an ALJ Petition within 90 days of the issuance of the BCMS Order.  But the proof put on by the Division was relevant only to when the Notice of Deficiency was issued.  The issue date of the Notice of Deficiency is relevant to whether Petitioner filed a timely BCMS request, but it is not relevant to whether the ALJ petition challenging the BCMS Order was timely.

We expect the Division’s will file a motion for summary determination based on the late-filed BCMS Request very soon.  

ALJ DETERMINATIONS

Matter of Cabrera; Judge: Maloney; Division’s Rep: Stephanie Lane; Taxpayer’s Rep: pro se; Article 22.  BREAKING NEWS:  One must (generally) file their ALJ petition within 90 days of the BCMS Order!  Taxpayers shocked at this development!  News causes broad market sell-off!

Matter of Fruchthandler; Judge: Friedman; Division’s Rep: Michele Milavec; Taxpayer’s Rep: Ellen Brody; Article 22.  I have been at this for a while, so I am pretty jaded.  And I think the Judge probably got it right on the law.  But if you’re outside of the tax world looking in, I wouldn’t blame you for exclaiming “What the Fruchthandler!  This is not how my government should conduct itself.” 

SUMMARY:  Petitioners couldn’t prove they filed their 2009 tax return in October 2010.  The earliest they could prove filing is April 23, 2014.  So Supervising ALJ Friedman ruled that Petitioners’ 2009 return was too late to claim a $281,517 tax overpayment that a timely 2009 return would have applied to Petitioners’ 2010 return, and then to their 2011 return and then to their 2012 return.  Ultimately the ALJ sustains the Notice of Deficiency the Division issues for additional taxes owed by the Petitioners for 2012 due to the lack of availability of the carryforward tax overpayments from 2009.

SOME DETAILS:  The Division did not dispute that Petitioners had a tax overpayment of at least $281,517 in 2009.

The Division “certified” that it had no record of receiving the 2009 return.  But the Division had previously claimed non-receipt of Petitioners’ 2006, 2007, 2008 and 2010 returns, and in each of those instances, Petitioners proved the returns had been filed through the presentation of a certified mailing receipt and matching cover letter.  So the Division’s certification of non-receipt of the 2009 return has a bit of “the-boy-who-cried-wolf” taint.

On October 18, 2010, the IRS received the 2009 federal return Petitioners mailed on October 15, 2010.   

In 2011, the Division inquired about Petitioners’ 2007 and 2008 returns.  The Division did not mention at that time that it had not received a return for 2009, even though the inquiry occurred well after the 2009 return should have been filed.  Indeed, it appears that New York did not notify Petitioners that it was missing their 2009 return until well after the statute for claiming the refund on the return had expired.

TiNY COMMENTS:  The burden of proof to show that a return was filed is undeniably on the taxpayer.  The ALJ found that the Petitioners’ proof of filing did not satisfy the clear and convincing standard.  The Petitioners had proof that they filed their 2006 – 2008 and 2010 New York returns.  So the lack of proof for 2009 is suspicious. 

TiNY subscribes to the notion of a level playing field.  The Division is held to a high standard of proof in mailing cases.  So, in that sense, I guess one could say that holding taxpayers to a similarly high standard is “fair.”   

But the existence of a significant tax overpayment in 2009 to be carried forward to later years was not disputed.  The State did not deny that it had the use of a couple hundred thousand dollars of Petitioners’ money since 2009.  Instead of saying “thank you,” the Division said, “it’s ours now, sucker.”   In a better world, the Division would have notified Petitioners in November 2010 regarding the missing 2009 return.  In this sense, the result is ridiculously unfair.

One of your TiNY authors used to request that all but $1 of his overpayment be applied to his next tax year.  The $1 check he received every year was proof that his return was received and processed.  Now he gets electronic confirmation when his return is filed.

Matter of Spivak; Judge: Galliher; Division’s Rep: Stephanie Lane; Taxpayer’s Rep: John Sullivan; Article 22. FROM TiNY’s OFFICE OF REDUNDANCY OFFICE:  Taxpayers generally need to file challenges (either a BCMS Request or an ALJ Petition) within 90 days of the Division’s mailing of the Notice of Deficiency.  Petitioner filed his BCMS Request late for one of the Notices he received and then filed an ALJ Petition late for the other Notice he received.  He did, however, file a timely ALJ Petition challenging the BCMS Order denying his late-filed BCMS Request.   So Petitioner received a rare (and totally alliterative) dual dismissal/ denial determination.   

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