No Monetary Relief Available for Taxpayer Who Received Bad Tax Advice from Employer

(Parker Tax Publishing April 2022)

The Court of Federal Claims held that while it found credible allegations by a taxpayer that his government employer gave him bad tax advice that cost him more than $3,000, there was no legal remedy in the Court of Federal Claims for his claim for monetary damages. The court stated that, for jurisdiction to lie in the Court of Federal Claims, the taxpayer had to show that the statutes or regulations allegedly violated by his government employer were money-mandating and the taxpayer failed to do so. Schneiter v. U.S., 2022 PTC 100 (Fed. Cl. 2022).

Background

In 2018, Karl Schneiter worked for the National Geospatial-Intelligence agency (NGA), an agency of the Department of Defense (DoD). During his NGA career before 2018, Schneiter moved four times to different duty stations through the Permanent Change of Station (PCS) process. For each of these moves, Schneiter relied on tax guidance provided by the NGA. In 2017, however, the Tax Cuts and Jobs Act of 2017 (TCJA) changed the law regarding the taxation of PCS entitlements, including where a federal agency reimburses an employee for certain costs relating to moving to a new duty station. The TCJA statutory provisions took effect on January 1, 2018.

Schneiter went through the PCS process again in 2018. Unfortunately, the NGA, in the weeks leading up to and throughout Schneiter's change in duty station, provided its employees with outdated and inaccurate guidance as to the taxation of PCS entitlements, as if the TCJA had never been enacted and was not in force. Thus, even though Schneiter relied, as he had in the past, on the most recent PCS guidance from the NGA, which purportedly addressed the taxation of PCS entitlements in 2018, he received misleading information that proved quite costly in terms of the taxes he owed for the PCS entitlements he received in 2018.

Schneiter sought monetary relief from the NGA through an administrative process that began with him filing a claim for damages in April 2019. He maintained that if he had timely received accurate tax guidance from the NGA regarding his PCS in 2018, he could have avoided $3,402 in tax liabilities and associated expenses. Schneiter also alleged that he was harmed by the NGA's issuance of inaccurate tax forms concerning his PCS entitlements in 2018. In August 2019, Schneiter resubmitted the claim, per instructions from the NGA, to the United States Department of the Army (Army) for processing. The Army viewed the claim as one brought under the Federal Tort Claims Act and denied the claim. The Army's rationale was that NGA had no duty to ensure that tax information is put out at all, particularly at any certain time, or for ensuring that every employee has a copy and understands it fully. According to the Army, each federal taxpayer, not their employer, has a duty to research any and all deductions that might apply to them including deductions that might apply to a PCS move.

Schneiter then filed suit in the Court of Federal Claims seeking monetary relief. Schneiter's description of his claim before the Court of Federal Claims included terms that implied a contractual relationship between the NGA and Schneiter. Schneiter also alluded to the equitable remedy of restitution. Schneiter alleged that the NGA was well aware of the tax changes affecting PCS entitlements in 2018 but withheld that information. More generally, Schneiter referenced a number of missteps in the NGA's provision of tax information to its employees in the wake of the TCJA's changes to the Internal Revenue Code. He alleged that the National Security Agency, a "sister" agency of the NGA, provided its employees with "thoughtful" guidance on the taxation of PCS entitlements, but the NGA provided no such support to its employees. He stated that the NGA acknowledged its "poor process management" after it issued inaccurate or delayed tax forms relating to PCS entitlements in 2018. He characterized the NGA's provision of inaccurate tax information as a "failure to perform its policies and procedures" (as it had always done in the past for Schneiter). He asserted that the NGA failed "to produce correct W2 travel and W2c forms until after the tax filing deadline for April 2019 and stated that the agency "grossly mis-managed the taxing mechanisms associated with the PCS process."

Analysis

The Court of Federal Claims held that, while it found the allegations by Schneiter to be credible and it was unfortunate that Schneiter found himself at "the mercy of the NGA's bureaucratic foot-dragging," there was no legal remedy in the Court of Federal Claims for Schneiter's claims. According to the court, for jurisdiction to lie in the Court of Federal Claims, Schneiter had to show that the statutes or regulations allegedly violated by the NGA were money-mandating. In other words, the court said, the statutes and regulations identified by Schneiter had to hold the United States monetarily liable for inaccuracies in the tax information provided by the NGA. The court concluded that Schneiter failed to satisfy this jurisdictional requirement.

The court noted that Schneiter excerpted statutes, regulations, and DoD instructions that address, in some detail, PCS entitlements and, more generally, the administration of travel allowances for DoD employees. However, the court observed, those references to the administrative obligation placed upon DoD component agencies did not address, with any specificity, the accuracy of the tax information provided to employees.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

Parker Tax Pro Library - An Affordable Professional Tax Research Solution. www.parkertaxpublishing.com

We hope you find our professional tax research articles comprehensive and informative. Parker Tax Pro Library gives you unlimited online access all of our past Biweekly Tax Bulletins, 22 volumes of expert analysis, 250 Client Letters, Bob Jennings Practice Aids, time saving election statements and our comprehensive, fully updated primary source library.

Try Our Easy, Powerful Search Engine

A Professional Tax Research Solution that gives you instant access to 22 volumes of expert analysis and 185,000 authoritative source documents. But having access won’t help if you can’t quickly and easily find the materials that answer your questions. That’s where Parker’s search engine – and it’s uncanny knack for finding the right documents – comes into play

Things that take half a dozen steps in other products take two steps in ours. Search results come up instantly and browsing them is a cinch. So is linking from Parker’s analysis to practice aids and cited primary source documents. Parker’s powerful, user-friendly search engine ensures that you quickly find what you need every time you visit Our Tax Research Library.

Dear Tax Professional,

My name is James Levey, and a few years back I founded a company named Kleinrock Publishing. I started Kleinrock out of frustration with the prohibitively high prices and difficult search engines of BNA, CCH, and RIA tax research products ... kind of reminiscent of the situation practitioners face today.

Now that Kleinrock has disappeared into CCH, prices are soaring again and ease-of-use has fallen by the wayside. The needs of smaller firms and sole practitioners are simply not being met.

To address the problem, I’ve partnered with a group of highly talented tax writers to create Parker Tax Publishing ... a company dedicated to the idea that comprehensive, authoritative tax information service can be both easy-to-use and highly affordable.

Our product, the Parker Tax Pro Library, is breathtaking in its scope. Check out the contents listing to the left to get a sense of all the valuable material you'll have access to when you subscribe.

Or better yet, take a minute to sign yourself up for a free trial, so you can experience first-hand just how easy it is to get results with the Pro Library!

Sincerely,

James Levey

Parker Tax Pro Library - An Affordable Professional Tax Research Solution. www.parkertaxpublishing.com