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Lawsuit against school district highlights complicated tax laws

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CALEDONIA, Mich. (NEWSCHANNEL 3) – A West Michigan school district has been named as a defendant in a lawsuit filed by the federal government, alleging the district received an “erroneous refund”.

The lawsuit, uncovered by the I-Team shows just how complicated tax laws can be, even stumping experts at times, as the tax deadline approaches.

“The United States is entitled to recover the $60,498.81 that was erroneously filed, plus interest,” reads the lawsuit filed against Caledonia Community Schools.

According to the lawsuit, the refund in question dates back to 2010.

Attorneys representing Caledonia Community Schools tell Newschannel 3 say the source of the lawsuit can be traced to a Michigan law, conflicting with federal law, just a small example of the complicated nature of the U.S. tax code.

The following statement was emailed to Newschannel 3’s I-Team from Miller Johnson, the legal firm representing Caledonia Community Schools:

“As required by Michigan law, Caledonia Community Schools withheld 3% of its employees’ wages and contributed those amounts to the State of Michigan to fund retiree health benefits. Caledonia, like many other school districts in Michigan, mistakenly paid federal employment taxes on the 3% contributions. As a result, Caledonia filed a claim for refund of the employment taxes, which the IRS granted.

The constitutionality of this Michigan law is currently being litigated by other parties. If this law is held to be unconstitutional, the 3% contributions should be returned to employees and subject to employment taxes. In light of this uncertainty, the United States filed this lawsuit to recoup the refund before it is barred from doing so by the applicable statute of limitations. But, if the law is ultimately unconstitutional, Caledonia will voluntarily repay the amount that was previously refunded.

On the other hand, if the Michigan law is held to be constitutional, Caledonia expects the United States to voluntarily dismiss this lawsuit.”

Tripp W. VanderWal

Attorney at Law

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