Rev. Rul. 83-79

1983-1 C.B. 346.

                       Internal Revenue Service
                                 Revenue Ruling

                    PROTECTIVE CLAIMS;  FICA TAX OVERPAYMENT

                            Published: May 16, 1983

SECTION 6402. - -AUTHORITY TO MAKE CREDITS OR REFUNDS, 26 CFR 301.6402-2: Claims for credit or refund

  Protective claims;  FICA tax overpayment.  An employer's timely filed protective claim for refund of FICA tax will also protect its employees' individual claims filed after the period of limitations has expired.

ISSUE

  In the situation described below, will an employer's timely filed protective claim for credit or refund of Federal Insurance Contributions Act (FICA) tax also protect its employees' individual claims filed after the period of limitations had expired?

FACTS

  An employer provides meals without charge to its employees under circumstances that meet the requirements of section 119 of the Internal Revenue Code.  Under that section the value of the meals is therefore excluded from the employees' gross income.  Prior to the Supreme Court decision in Rowan Companies, Inc. v. United States, 452 U.S. 249 (1981), 1981-2 C.B. 191, the employer filed timely protective claims on behalf of the employer's and employees' shares of FICA tax on the value of the meals.  The employer then opened a checking account, which remained open for 30 days, and issued checks to its employees for the repayment of the employees' shares.  As a result of Rowan, on January 1, 1982, the employer followed the procedure in Rev. Proc. 81-69, 1981-2 C.B. 726, for perfecting the claims for its share of overpaid FICA tax and the portion of the employees' shares of FICA tax paid that it actually had paid back to its employees.  Some employees were not repaid by the employer because they did not cash their checks within the 30 days that the account was open.  These employees then filed individual claims for refund of the overpaid FICA tax.  However, the period of limitations for filing a claim had expired by the time these employees filed their claims.

LAW AND ANALYSIS

  Section 6402 of the Code permits the Secretary to credit the amount of any overpayment, including any allowable interest, against any internal revenue tax liability on the part of the person who made the overpayment and refund any balance to the person within the applicable period of limitations.

  Under section 301.6402-2(a) of the Regulations on Procedure and Administration, credits or refunds of overpayments may not be allowed or made after the applicable period of limitations has expired unless, before the period expires, the taxpayer files a claim.  Section 301.6402-2(b) states that refunds or credits will not be allowed after the period of limitations applicable to the filing of the claim expires except upon one or more of the grounds set forth in a claim filed before the period expired.  The claim must set forth in detail each ground upon which a credit or refund is claimed and facts sufficient to apprise the Commissioner of the exact basis for the claim.

  Under section 31.6402(a)-2(b) of the Employment Tax Regulations, an employee may file a claim for refund of any overpayment if more than the correct amount of employee FICA tax is collected by an employer and paid to the district director, the employee does not receive reimbursement in any manner from the employer, and the employee does not authorize the employer to file a claim and receive refund or credit.

  In Rowan, the Court held that the value of meals and lodging furnished to an employee by an employer that is excludable from the employee's gross income under section 119 of the Code is not "wages" for purposes of FICA tax.

  Rev. Proc. 81-69, issued in response to the Rowan decision, provides instructions to employers for making adjustments of overpaid FICA taxes, and for perfecting protective claims for refunds previously filed.  However, the revenue procedure does not pertain to claims for refunds of overpaid FICA tax that are made by employees themselves.

  In this case the employer filed the initial protective claim on behalf of all employees.  The claim was timely filed and set forth the basis and ground upon which the refund was being claimed. Therefore, the employer's protective claim protects the interests of both the employer and all the employees.

HOLDING

  The employer's timely filed protective claim protects the employees' individual claims for refund.  Individual employees may file claims for refund of erroneous FICA tax withheld by following the procedures set forth in section 31.6402(a)-2(b) of the Employment Tax Regulations.

Rev. Rul. 83-79, 1983-1 C.B. 346.