Deadline for Excess Deferral Corrective Distribution-2005

[Guest CJK]

The deadline for making corrective distributions of excess deferrals is April 15. April 15 in 2006 falls on a Saturday. Since April 15 falls on a Saturday, is the deadline extended to Monday, April 17?

[Tom Poje]

the ERISA Outline book 11.171 (2006 edition) implies that corrective contributions made on Monday March 17,2003 would 'probably' be deemed late so it doesn't sound good. the issue is not adressed in regards to excess deferrals. since you do not get an extension on extension deferreals (even if you extend your personally taxes) I would say it does not sound good.

[Guest mjb]

IRC 7503 states "when the last day prescribed under authority of the internal revenue laws for performing any act falls on Saturday, Sunday or a legal holiday, the performance of such act shall be considered timely if it is performed on the next suceeding day which is not a Saturday, Sunday or a legal holiday." Why arent corrective distributions eligible for this extension since the last date is prescribed under the IRC?

[Tom Poje]

I don't know. ask Sal - I am only referencing from his book. he makes note of 7503 but indicates that is only used in limited cases.

[Guest mjb]

Why can't you just apply the plain language of the statute which extends the deadline to April 17. I dont see any limitation in the application of IRC 7503 which expressly refers to the last day prescribed under the IRC for performing any act ... which would include acts required under 402(g).

[Guest Pensions in Paradise]

mjb, you may want to consider purchasing the ERISA Outline Book. Granted it won't tell you anything you don't already know, but it is a good reference book.

[Guest mjb]

I dont need to it because I can find the correct answers from primary sources such as IRC, reg, rulings, cases, etc. What I cant figure out is who originated the urban legend that the Apr 15th deadline in IRC 402(g) cant be exended, or a cite from the IRS to that effect. The reason for the extension was made clear by another poster today because with the closing of the stock market tomorrow many refunds had to be processed by 4pm today if the deadline is 4/15.

[Guest Pensions in Paradise]

Well, the EOB has a pretty thorough discussion of this "urban legend" under the Filing Deadline definition in Chapter 1. But I'm sure you would have found the same material through your primary sources.

[Guest mjb]

If the statute applies you dont need another source. What is the basis in chapter 1 of the EOB for not allowing an extension to a refund of excess contributions under IRC 402(g) which have to be performed under a deadline prescibed under the IRC? Tom Poje refers to EOB 11.171 as stating that corrective distributions made on the next business day following a sat, sun or holiday would "probably" be deemed late for refunds due 3/15 but did not include any cite for this positon. Is there another statement in the EOB that was omitted? I have not found a case or ruling that limits the application of the extension as you claim (which would be hard to find since the statute applies to any act prescribed under the authority of the internal revenue laws without any exception). Under your intrepretation the deadline for some refunds was today if the financial institution processing the payments is closed tomorrow.

[Guest Pensions in Paradise]

The cite for Sal's position is Revenue Ruling 83-116.

And you made the statement that IRC 7503 "applies to any act prescribed under the authority of the internal revenue laws without any exception." If that is the case, then why in 2001 did the IRS include in its Priority Guidance Plan the application of section 7503 to various factual situations?

[Belgarath]

Interesting. I have no real opinion on this (other than the comment that it seems rather unreasonable for the IRS NOT to extend it to the next business day). But for anyone who cares, here's a link to the RR.

http://www.taxlinks.com/rulings/1983/revrul83-116.htm

[MWeddell]

The ERISA Outline Book, for those of you who haven't read it, doesn't really take a position on the issue. It concludes that to be safe excess deferrals should be refunded by April 15 even when it falls on a weekend because the IRS likely will content that IRC 7503 doesn't apply to this situation. At least that's what I recall when I had to look up this issue earlier in the week.

[Guest mjb]

There is one major problem with the IRS position in RR 83-116. The Tax Court has rejected the IRS rationale for limiting the extension to acts required to file a tax return. EB Grain Co v. IRS, 81 TC 70; Snyder v. Commissoner TC memo 1981-216. The reason for the rejection in both cases is that the statutory language of IRC 7503 applies to all acts prescribed under the IRC. In the EB case (which was decided after the Snyder case) the Tax court specifically rejected the IRS position on the need for specific extensions to be added to the IRC 7503 that was cited by the IRS in RR 83-116. If you are worried about the IRS using the RR to penalize refunds filed by April 17 then dont use 7503. If you believe that the IRS must follow the judical interpretation as determined by the Tax Court that the literial language of IRC 7503 must be followed then you have until today. But dont cite the EOB as authority for the principle that the deadlines under IRC 402g cannot be extended under 7503.

[E as in ERISA]

Sometimes the problem with case law is you have to be willing to go all the way to court in order to get agreement with your position. If you want things to go smoothly on examination or other enforcement action, you may want to take the more conservative IRS position.

[Guest mjb]

Under the IRS Reform Act the IRS is required to give taxpayers all contrary authority upon request. All the taxpayer has to do is ask the agent for letter stating the authority for the IRS position. Taxpayers have the right to submit contrary authority which must be considered by the IRS. There are penalities that can be the levied against the IRS for taking an unreasonable position. From an advocacy standpoint IRS insistance that a Rev Rule overrules several tax court decisions on the application of IRC 7503 could be viewed as taxpayer intimidation which is prohibited by the reform act.

[E as in ERISA]

Have you never been involved in a real IRS audit?

[Guest Pensions in Paradise]

And what percentage of your revenue is generated from representing clients in court?

[Guest mjb]

I represent clients in both benefit matters and individual tax matters. I have sucessful in asserting my cleints position to the IRS in order to achieve a satisfacory result without have to go to court. In order to represent benefit clients, advisors need to know the non benefits aspects of the tax law including statute of limitations, taxpayer rights and IRS procedures. Advisors must be able to make up their own minds to determine what the IRC means and not rely on a reference to a 23 yer old revenue ruling that contradicts the express language of the statute and has been rejected by several tax court decisions. Given the wieght of authority against the IRS position it is very unlikely that the IRS would penalize a plan for solely for applyng 7503 to make refunds under IRC 402(g).

[Guest dbvail]

Nice discussion so far, but it is getting, well, you know. And now that it's past the point of relevance for 2005 (the busiest Y/E date), what a good question for the 'ask the experts' or IRS on the dias at either the NIPA, Regional ASPPA/IRS, or other such meeting. I hope I remember to submit it!

[fiona1]

mlb - You make a convincing argument. But you said "But dont cite the EOB as authority for the principle that the deadlines under IRC 402g cannot be extended under 7503."

I don't see anyone in this thread who said "you can't extend the deadline because the EOB says so".

The EOB does not say you cannot extend pass the deadline. And no one said it did.