Case dismissed. A federal trial court has ruled that an employee who sued her employer, alleging that the employer’s share of FICA and FUTA were wrongfully withheld from her pay, had to instead file a refund claim with the IRS for those amounts. If the refund claim is denied, she can sue the IRS for her money, the court concluded. (Ednacot v. Mesa Medical Group, PLCC, No. 5:14-cv-00096, D.C. E. Ky., 2014)
practices gone haywire. The employee alleged that her employer improperly withheld the employer’s share of FICA and FUTA, state unemployment taxes, expenses for a cellphone and travel expenses. She sued her employer for those overwithheld amounts and, as extra insurance, threw in state law claims for damages in the amount of the overwithholding and for breach of contract.
Her employer sought to have the case dismissed.
Employer: This is a tax refund case, which belongs before the IRS.
Employee’s response: Applying to the IRS for a tax refund offers no remedy because there is no provision in the tax code for an employee to seek a refund of the employer’s share of FICA.
How many ways can you say tax refund? A federal trial court dismissed the federal portion of the employee’s lawsuit and most of the state law claims, as well.
Court: There is a remedy before the IRS. Simply because the employee alleges that the overwithholding equals the employer’s share of FICA doesn’t mean that she seeks a refund of the employer’s share of FICA, the court said. The result would be the same, the court pointed out, if she alleged that 10% of her wages were overwithheld as FICA taxes. The employee’s claim regarding the wrongfully withheld state unemployment taxes was sent back down to state court.
A BRIEF REPRIEVE: This court reaffirmed the general principle that there is no private right to enforce the tax code. That right belongs exclusively to the IRS. And that’s important, because employees sue their employers for alleged overwithholding often enough. It’s also important to note that this employer only bought itself a limited amount of breathing space. The IRS has a long memory. If it refunds the employee her FICA taxes, the court noted, it will surely go after the employer for the amount of the employee’s refund.