Lawful Money and Retirement Account Distributions

[jeffreydavid]

Here is my suggestion - if you have a 401(k) or other employer retirement account have it "rolled over" into an IRA. When you take the distribution from your IRA just tell the custodian to not withhold any Federal or State taxes when they mail you the check (with our firm the client specifies if they want withholdings held from their account on the form). Then non-endorse the check via Title 12 and keep for your records. I did this for my entire IRA last year, and while I have not received any response yet to the 2011 filing, I included copies of every redeemed IRA distribution check done throughout 2011 in the filing. Will see if any problems arise.

[PastorP]

Is there any other way to get the funds that were taken, without filing a 1040?

[ManOntheLand]

Is there any other way to get the funds that were taken, without filing a 1040?

Under I.R.C. Sec. 7422, a suit can be maintained to recover a refund as long as a written claim, formal or informal has been filed with the Secretary. Amounts alleged to have been "erroneously collected" can be included in such a refund claim.

So as far as the courts are concerned, your standing to sue if IRS does not give you the refund within 6 months of the claim is not affected by whether you use a 1040 or whether you choose an informal written communication. (This looks to me like a remedy built into the Code for those who are not "taxpayers" yet have had money withheld and need a proper administrative process for reclaiming it, without being required to assume the "taxpayer" baggage of a 1040 form.

I like that the first subsection of 7422 does not employ the use of the term "taxpayer". In b) it even says you can have standing to sue even if the amounts were paid under protest or duress.

I personally prefer the idea of an informal claim to the Secretary to signing a 1040. I feel such an informal claim is less likely to be mishandled or misinterpreted as "frivolous" and sent to Ogden.


From Internal Revenue Manual 4.90.7.1 (05-09-2013)


A ‘claim’ is a request by the taxpayer for a refund of assessed tax that has been paid (tax, penalties, and interest).

...

Claims for refunds can be either formal or informal. Whenever a claim provides the necessary information, whether formal or informal, it is handled as a valid claim for refund.

...

An "informal claim" is a request for refund submitted by the taxpayer either on a non-standard form (written request) or by some other means as long as the required claim elements are identified, e.g., tax year, identification number, refund requested and reason for the refund. Several court cases discuss this concept including United States v. Kales, 314 U.S. 186 (1941); Newton v. United States, 163 F. Supp. 614 (Ct. Cl. 1958). For example, a letter from the Taxpayer can be an informal claim.