Refund due date

[Guest Jeff Weber]

Since 3/15/09 falls on a Sunday, are ADP/ACP refunds due on Saturday or Monday? Opinions differ in my office and I can't find anything official on this. Providing a link so I can print something official for my files would be great.

[Tom Poje]

it doesn't surprise there is confusion. It is argued about all the time. my research came up with the following:

at least this is what I included in The Coverage and Nondiscrimination Answer Book, 2008 Supplement, based on everything that I have been able to find.

Q 12:72

...

What happens if this date falls on the weekend? It is unclear. According to one recent IRS source, unlike the due dates for other forms, the two and one-half month period is not extended to the following Monday for excess contributions if the period ends on the weekend. For example, March 15, 2008 falls on a Saturday. For a calendar year plan, to avoid the 10% excise tax the excess contributions must be postmarked by that date. See Page 9 of IRS publication Retirement News for Employers (volume 4, Winter 2008) found at http://www.irs.gov/pub/irs-tege/rne_win08.pdf

The confusion arises because of Section 7503 of the Internal Revenue Code, Time for performance of acts where last day falls on Saturday, Sunday, or legal holiday provides:

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 succeeding day which is not a Saturday, Sunday, or a legal holiday. For purposes of this section, the last day for the performance of any act shall be determined by including any authorized extension of time; the term “legal holiday” means a legal holiday in the District of Columbia; and in the case of any return, statement, or other document required to be filed, or any other act required under authority of the internal revenue laws to be performed, at any office of the Secretary or at any other office of the United States or any agency thereof, located outside the District of Columbia but within an internal revenue district, the term “legal holiday” also means a Statewide legal holiday in the State where such office is located.

However, in Revenue Ruling 83-116, the IRS concluded that this section does not apply if it is not in connection with the determination, collection or refund of taxes. Thus, since the refund of excess contributions is not an IRS filing, there is no extension.

[BG5150]

However, so may argue that the date does, in fact, relate to the determination of taxes. Because after that date, the 10% excise tax gets assessed.

There is a little writeup on it in the ERISA Outline Book:

Quote

ERISA Outline, section on correcting ADP tests:

2.b.4)What if the 2½ date falls on a weekend or holiday? The regulations do not address whether the 2½ month period is extended if it ends on a weekend or holiday, pursuant to IRC §7503. For example, March 15^{th was a Saturday in 2003. This was the 2½-month date for correcting ADP violations and ACP violations for a plan year ending December 31, 2002. In Rev. Rul. 83-116, the IRS concludes that where an act is not in connection with the determination, collection, or refund of taxes, IRC §7503 does not apply, and any extension for a weekend or holiday would have to be expressly granted in the particular statutory provision that applies or by regulation. If the IRS position is correct, a corrective distribution made on Monday, March 17, 2003, for the plan year ending December 31, 2002, would be treated as made after the 2-1/2 month period, resulting in 2003 taxation to the employee and an excise tax on the employer.}

^{Cross-reference tip.For more information about IRC §7503 and the weekend/holiday rule, see the filing deadlines for performing acts definition in Chapter 1. That definition also includes a discussion of IRC §7508A, pursuant to which the IRS has the discretion to extend the 2½ month deadline because of a disaster or national emergency.}

^{This is from the "Filing Deadlines" in the definitions section of EOB:}

^{2.Pro and con arguments regarding application of the weekend/holiday rule to perform these acts. How should we apply Rev. Rul. 83-116 in the context of the acts for which no clear authority exists to apply the weekend/holiday rule, such as the acts cited in 1. above (other than the remedial amendment period - see 1.b. above - where the weekend/holiday rule is apparently not applicable)? On one hand, it can be argued that since these acts are not directly related to the collection of taxes, the weekend/holiday rule under IRC §7503 is not applicable, in reliance on Rev. Rul. 83-116 and Notice 89-8. On the other hand, it can be argued that, if the failure to perform such act could result in the imposition of taxes or the collection of additional taxes (e.g., an excise tax for failure to comply, or additional tax liability due to disqualification of the plan or late contribution for deduction purposes), then the deadline for performing the act should be subject to the weekend/holiday rule. In the context of the minimum funding deadline, a failure to deposit minimum funding contributions by the appropriate deadline results in a funding deficiency, which triggers the excise tax under IRC §4971. A failure to make timely corrective distributions results in additional tax liability to the participant and, in the case of corrective distributions under IRC §401(k)(8) and IRC §401(m)(6) that are made more than 2½ months after the close of the plan year, the failure results in an excise tax under IRC §4979. A failure to adopt a plan by the last day of the employer's tax year precludes a deduction for the employer's contribution for that year, pursuant to Rev. Rul. 81-114. The argument appears stronger in the context of actions that result in specific tax liability, such as an excise tax, if performed after a certain date. Taxpayers will need to make their own determinations regarding the applicable deadline until IRS issues more formal guidance. The "safe" approach would be to ensure that the action is performed by the normal deadline, and complete the action by the last business day preceding the deadline if the deadline falls on a weekend or holiday.}

^{IRS includes IRC §7503 on its 2001 Priority Guidance Plan. The IRS has in the past listed "application of section 7503 to various factual situations" as part of its Priority Guidance Plan, but formal action has yet to be taken.}

[Guest mjb]

it doesn't surprise there is confusion. It is argued about all the time. my research came up with the following:

at least this is what I included in The Coverage and Nondiscrimination Answer Book, 2008 Supplement, based on everything that I have been able to find.

Q 12:72

...

What happens if this date falls on the weekend? It is unclear. According to one recent IRS source, unlike the due dates for other forms, the two and one-half month period is not extended to the following Monday for excess contributions if the period ends on the weekend. For example, March 15, 2008 falls on a Saturday. For a calendar year plan, to avoid the 10% excise tax the excess contributions must be postmarked by that date. See Page 9 of IRS publication Retirement News for Employers (volume 4, Winter 2008) found at http://www.irs.gov/pub/irs-tege/rne_win08.pdf

The confusion arises because of Section 7503 of the Internal Revenue Code, Time for performance of acts where last day falls on Saturday, Sunday, or legal holiday provides:

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 succeeding day which is not a Saturday, Sunday, or a legal holiday. For purposes of this section, the last day for the performance of any act shall be determined by including any authorized extension of time; the term “legal holiday” means a legal holiday in the District of Columbia; and in the case of any return, statement, or other document required to be filed, or any other act required under authority of the internal revenue laws to be performed, at any office of the Secretary or at any other office of the United States or any agency thereof, located outside the District of Columbia but within an internal revenue district, the term “legal holiday” also means a Statewide legal holiday in the State where such office is located.

However, in Revenue Ruling 83-116, the IRS concluded that this section does not apply if it is not in connection with the determination, collection or refund of taxes. Thus, since the refund of excess contributions is not an IRS filing, there is no extension.

We have had this discussion before and it boils down a rejection by the Tax Court of the IRS position in 83-116 that the extension of time permitted by 7503 applies only to the collection or refund of taxes, e.g., filing of a tax return. See E-B Grain Co v. Commissioner of IRS, 81 TC 70 and Synder v Commissioner of IRS, TC Memo 1981-216.