The U.S. government has asked the federal court to order the defunct Concorde Garment Manufacturing Corp. to return $1.2 million to the Internal Revenue Service, now that the court has ruled in favor of the IRS on the issue of Federal Insurance Contributions Act taxes.
Landon Yost, trial attorney for the U.S. Department of Justice Tax Division, asked the U.S. District Court for the NMI to enter a judgment in favor of the U.S. government and against Concorde in the sum of $1,181,265.71 plus interest from Dec. 28, 2009.
Yost said that now that the court has ruled against Concorde’s arguments for why FICA taxes did not apply to its employees, it is clear that the company’s claim for refund lacked a legal basis and that the refund given to Concorde was erroneous and should be returned to the IRS.
Court records showed that Concorde filed Forms 941 “Employer’s Quarterly Tax Returns,” for the quarters ending March 31, 2006, June 30, 2006, Sept. 30, 2006, and Dec. 31, 2006. Concorde paid the amount due for the FICA taxes for those quarters.
Concorde then filed a Form 843 “Claim for Refund,” requesting a refund for those quarters, asserting that its temporary contract workers were not subject to FICA taxes and that it erroneously paid the payroll taxes for those employees.
On Dec. 28, 2009, IRS issued a refund to Concorde amounting to $1,181,265.71.
In July 2011, Concorde and over 4,000 Chinese nationals formerly employed by Concorde and its affiliated companies sued the U.S. government to recover wrongfully assessed FICA taxes that were erroneously paid to the U.S. for tax years 2004 to 2007.
The plaintiffs, through counsels Steven P. Pixley and Colin Thompson, asserted that the imposition of FICA tax liability on employees and collected from plaintiffs should be refunded.
On Dec. 17, 2011, the U.S. government filed a counterclaim for the recovery of this refund, arguing that Concorde’s claim was without legal basis and should not have been allowed.
In its answer to the counterclaim, Concorde asserted that the counterclaim was barred by the applicable statute of limitations.
In the U.S. government’s motion for entry of judgment filed last week, Yost stated that the court has now ruled that FICA taxes did apply to Concorde’s employees for the tax periods at issue, effectively holding that Concorde’s claim for refund lacks legal merit.
Yost said the counterclaim was timely as under the law, a suit for recovery of an erroneous refund must be filed within two years after the making of such a refund (or within five years if the refund was induced by fraud or misrepresentation of a material fact).
Yost said the refund was made on Dec. 28, 2009, and the U.S. filed its counterclaim on Dec. 17, 2011.
“It was therefore within two years of the issuance of the erroneous refund,” he said.
Moreover, Yost said, the statute of limitations was extended in this case pursuant to the law, which provides that if a hearing is requested, the running of any period of limitations is suspended for the period during which the hearing and appeals are pending.