The opinion of the court was delivered by: Honorable Jan E. DuBois
AND NOW, this 2nd day of April, 2009, upon consideration of Plaintiffs' Motion for Summary Judgment (Document No. 22, filed December 12, 2008), the United States' Cross-Motion for Summary Judgment and Response to the Plaintiffs' Motion for Summary Judgment (Document No. 23, filed December 20, 2008), Plaintiffs' Reply to Defendant's Motion for Summary Judgment (Document No. 25, filed December 31, 2008), Reply Brief in Support of the United States' Cross-Motion for Summary Judgment (Document No. 26, filed January 9, 2009), and Plaintiffs' Sur-Reply (Document No. 27, filed March 24, 2009), for the reasons set forth in the attached Memorandum, IT IS ORDERED as follows:
1. Plaintiffs' Motion for Summary Judgment is GRANTED;
2. Defendant's Cross-Motion for Summary Judgment is DENIED; and,
3. JUDGMENT IS ENTERED in FAVOR of plaintiffs Richard Ciccotelli and Maureen Mason and AGAINST defendant, the United States of America, in the amount of $50,000, less any tax due, plus interest from the date plaintiffs' 2000 federal income tax return was filed.
IT IS FURTHER ORDERED that the Clerk shall MARK the case as CLOSED FOR STATISTICAL PURPOSES.
This case concerns a remittance of $50,000 that plaintiffs, Richard Ciccotelli and Maureen Mason, made to the Internal Revenue Service ("IRS") on January 17, 2001. On September 9, 2005, plaintiffs filed a claim for a refund with the IRS. The IRS denied the claim on the ground that the statute of limitations had run on a request for refund on plaintiffs' tax payment. Plaintiffs commenced the instant lawsuit on September 28, 2007 to contest the IRS's determination and pursue their claim for a refund of $50,000.
Presently before the Court are plaintiffs' Motion for Summary Judgment and the Cross-Motion for Summary Judgment of defendant, the United States of America. For the reasons that follow, plaintiffs' Motion for Summary Judgment is granted and defendant's Cross-Motion for Summary Judgment is denied.
In 2000, plaintiffs made three separate estimated tax payments to the IRS in the following amounts: $16,000 on April 15th, $17,000 on July 17th, and $15,000 on September 25th. (Barbara A. Brennan Decl. ¶ 8, Dec. 11, 2008, Ex. 102 to Def.'s Mem. Supp. Cross-Mot.) Each of these three payments was accompanied by an IRS Form 1040-ES Payment Voucher ("Payment Voucher"), which provided that it should be "[f]ile[d] only if you are making a payment of estimated tax by check or money order." (1040-ES Payment Voucher Forms for 2000, Ex. 105 to Def.'s Mem. Supp. Cross-Mot ("1040-ES Payment Voucher Forms"); Richard Ciccotelli Dep. 32:12--14, Sept. 18, 2008, Ex. 104 to Def.'s Mem. Supp. Cross-Mot.) In addition, on January 17, 2001, plaintiffs sent a check for $50,000 to the IRS, with a notation of "estimated taxes" written on it. (Pls.' Mot. 2; Check for $50,000, Ex. 101 to Def.'s Mem. Supp. Cross-Mot.) Although Mr. Ciccotelli completed a Payment Voucher for a fourth quarterly payment in the amount of $50,000, (1040-ES Payment Voucher Forms), he testified that he did not submit a Payment Voucher with this remittance because such a coupon "specifically would have put [the $50,000] towards estimated taxes" and he "didn't think [he] owed taxes for 2000." (Pls.' Mot. 2; Ciccotelli Dep. 32:15--24, 35:20--21, 36:1--4.) Mr. Ciccotelli did not obtain any advice from an accountant before making the $50,000 remittance. (Ciccotelli Dep. 18:21--22.) Rather, he submitted it "[t]o avoid any kind of penalties or interest" in anticipation of being unable to file his taxes on time because of impending "pure personal turmoil . . . ." (Ciccotelli Dep. 16:22--24, 17:9--10, 17:23--18:5, 36:6--11.)
In 2001, plaintiffs filed for two extensions for submission of their 2000 tax return, thereby delaying the filing deadline to October 15, 2001. (Brennan Decl. ¶ 19.) However, due to "severe medical problems" within their family, plaintiffs were unable timely to file their federal tax returns for the years of 2000 to 2004. (Pls.' Mot. 1; Def.'s Mem. Supp. Cross-Mot. 3; Ciccotelli Dep. 39:14--42:17.) They ultimately submitted these returns in 2005, and the IRS processed plaintiffs' tax returns on July 17, 2005. (Brennan Decl. ¶ 16.) The tax due for the 2000 year was $63,227. (Brennan Decl. ¶ 16; Pls.' Mot. 2; Def.'s Mem. Supp. Cross-Mot. 2.) The three payments made in 2000 (totaling $48,000), combined with their employment withholding for 2000 ($21,415), created a total payment of $69,415 for the 2000 calendar year. (Pls.' Mot. 2; Brennan Decl. ¶ 10.) Thus, without the $50,000 at issue in this case, plaintiffs overpaid their 2000 tax liability by $6,188. (Pls.' Mot. 2; Brennan Decl. ¶ 13.)
In their 2000 tax return, plaintiffs' tax return preparer, Marilyn Hatfield, placed the total of the three estimated tax payments made in 2000 and the $50,000 remittance check submitted on January 17, 2001, $98,000, on Line 59 of the return for "2000 estimated tax payments and amount applied from 1999 return." (Marilyn Hatfield Aff., Dec. 23, 2008, Ex. 22 to Pls.' Reply; 2000 Tax Return, Ex. 102, Attach. 4, to Def.'s Mem. Supp. Cross-Mot.) Ms. Hatfield explained that she "probably erred in placing the $50,000 check there but did not know where else to place a deposit-there is no line on the return specifically for that purpose." (Hatfield Aff.)
According to the IRS, plaintiffs' 2000 tax return constituted an administrative request for refund of the $6,188 that plaintiffs had overpaid and the $50,000 remittance. (Pls.' Mot. 2; Brennan Decl. ¶ 18.) However, the IRS did not give plaintiffs credit for the $56,188. (Pls.' Mot. 2; Brennan Decl. ¶ 20.) Rather, "in the 34th week of 2005"-in "August 2005"-the IRS transferred the $56,188 to an excess collections account to which "funds are transferred if the Service no longer credits those funds to a certain tax year." (Brennan Decl. ¶ 15, n.3.)
On September 9, 2005, plaintiffs filed a claim for a refund, which the IRS rejected by letter dated September 29, 2005 on the ground that the statute of limitations for a request of credit or refund on their tax payment had run. ("We Couldn't Allow Your Claim" Letter, Sept. 29, 2005, Ex. 7 to Pls.' Mot.) On March 30, 2007, the IRS abated the penalties plaintiffs accrued because of their failure to file and failure to pay penalties. (Letter from IRS Appeals Tax Specialist, Mar. 30, 2007, Ex. 6 to Pls.' Mot.) Plaintiffs initiated ...