April 16, 2013

Self-Employed Individuals: File Protective Claim by April 2013

Self-Employed Individuals: File Protective Claim by April 2013

The constitutionality of the Metropolitan Commuter Transportation Mobility Tax (MCTMT) has been challenged in a series of lawsuits. In almost all of these cases, the MCTMT has been ruled constitutional. However, in a recent case as of this September 2012, a Nassau County Supreme Court justice ruled the MCTMT to be unconstitutional. This determination is currently under appeal by the State of New York and the MTA.

What will it mean to taxpayers if the MCTMT is deemed unconstitutional?

Taxpayers will be able to submit refund claims for MCTMT they have paid. Generally, a refund claim must be filed within three years of when a taxpayer filed his/her tax return. The State has been accepting protective claims from employers since November 2, 2012 (November 26, 2012 for taxpayers affected by Hurricane Sandy). Self-employed individuals should file their protective claim by April 30, 2013.

Should a taxpayer file a refund claim even though the litigation has not been concluded and the tax is still in effect?

Yes. In this case, a taxpayer would file a protective claim. A protective claim is a refund claim that involves an unresolved issue. The purpose of a protective claim is to safeguard a taxpayer’s right to a refund. Since the litigation on the MCTMT matter has not yet been concluded, and the State cannot determine when/if it might be, a protective claim will prevent the refund from being rejected based on the three year deadline.

How to file a protective claim

A taxpayer can file a protective claim by using the State’s online service (http://www.tax.ny.gov/online) or by calling an automated telephone application (518-485-2392).The State does not have a paper refund claim option.The State is also not accepting amended MCTMT returns as a means of protecting a taxpayer’s claim.

The protective claim will apply to the filing periods that are within the statute of limitations. This is generally three years from the date a taxpayer filed his/her return or within two years from the date the tax was paid, whichever is later.

A protective claim does not need to be filed by a taxpayer for each period MCTMT has been, or will be, paid. Only one claim is needed. Once this claim is accepted by NYS, it applies to all prior filings that are within the three year statute and all future filing periods.

As of today, based on the Governor’s recent budget, the MCTMT remains in effect and taxpayers are required to file the appropriate forms and and pay the tax due. Your Marcum Tax Advisor will notify you of any changes to the law.