ADP/ACP Refunds

[Guest agsmith]

Help!!

We cut ADP/ACP refund checks on March 14, 2003. We delivered the checks on the 18th. Client is now saying that since they didn't received the checks prior to the 15th, that the distribution should be taxable in 03 rather than 02. I don't know why they are questioning this since it will be subject to excise tax (other than they may have already filed personal returns).

Can anyone refer me to a document which states that the funds have to be paid out but the checks do not have to be received by the 15th.

Thanks in advance.

-AGS

[Brian Gallagher]

All the code says is that excesses must be "distributed" within 2 1/2 months. I take that to mean "out of the account", not necessarily the check being in anyone's particular hands. What if you had mailed the checks and it took a week in the mail? The code section I looked at is IRC 4979(f). 4979 is about the penalty tax.

[austin3515]

I work for an accounting firm, and this is something that comes up often - checks are printed but not mailed.

If the check has not been mailed, then nothing really has happened. It has to be mailed. I actually think there is something called the "mailbox rule" somewhere. Probably lots of court cases on this one.