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Protective Claim for Refund for Over-Reported FICA Taxes Protective Claim for Refund for Over-Reported FICA Taxes on 3% Retiree Healthcare Contributions

By James M. Crowley / Feb 28, 2014

In a recent update we suggested that school districts consider filing a protective claim for refund for the FICA taxes on the 3% Retiree Healthcare Contributions withheld and paid in 2010. This protective claim for refund is contingent on the outcome of litigation challenging the constitutionality of the 3% Retiree Healthcare Contribution under Public Act 75. The refund claim for over-reported FICA taxes paid in 2010 must be filed on or before April 15, 2014.

With respect to this protective claim for refund, we wanted to clarify that the IRS allows a protective claim for refund to be filed without stating a dollar amount or getting prior consent from employees for their portion of the over-reported FICA taxes.

A protective claim for refund can be filed on IRS Form 941-x and must include the following in the required detailed explanation under Part 4, line 25 of the Form:

  • The essential nature of the refund claim;
  • The contingencies affecting the refund claim; and
  • A certification that the school district has not repaid or reimbursed its employees for the over-reported FICA taxes and has not obtained the employees' consent to file the claim.

If the Michigan Supreme Court overturns the Michigan Court of Appeals decision and upholds the 3% Retiree Healthcare Contribution under Public Act 75, a school district that files a protective claim for refund will be required to notify the IRS that the contingency has been resolved and to request that the IRS process the claim for refund. The school district will also be required to obtain written consents from its employees if the claim for refund includes the employee portion of the over-reported FICA taxes.


Please consult with a Clark Hill attorney within our Education & Municipal Practice Group if you have any questions regarding the refund of over-reported FICA taxes on the 3% retiree Healthcare Contribution.