Couple Appeals to 5th Circuit for Tax Refund Suit

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5th Circuit Bar Refund Suit

A couple arguing that the IRS failed to apply their tax overpayments to deficiencies claimed by the agency has asked the Fifth Circuit to reverse a lower court’s dismissal of their suit. The couple claims the decision effectively asks them to pay twice.

5th Circuit Bar Refund Suit : Dispute Over Tax Overpayments

Jay and Lisa Balentine argued in a brief Tuesday that a Texas federal court erroneously adopted the government’s stance. The court had claimed it lacked authority to hear the couple’s complaint seeking to recover approximately $630,000 in overpayments and establish their right to claim about $348,000 in refunds.

The U.S. argued that under the “pay to litigate” rule from the Supreme Court ruling in Flora v. U.S., the couple was barred from bringing their case to federal district court due to an unpaid tax deficiency of about $480,000 for 2017. The Balentines contend this interpretation is incorrect.

5th Circuit Bar Refund Suit : Challenging the Flora Rule

Although Flora held that a taxpayer must pay any taxes due before suing in district court, the Balentines pointed out that the taxpayer in Flora made only a partial payment. They argued that Flora did not address how credits and overpayments affect a federal district court’s jurisdiction, nor does it allow the IRS to ignore evidence showing no deficiency is owed.