Author: Rena Pirsos, XpertHR Legal Editor

New York employers have been urged to file MTA payroll tax protective refund claims by today (November 2, 2012). However, some filing and payment deadlines have been extended for employers directly affected by Hurricane Sandy.

MTA Payroll Tax

The New York State Department of Taxation and Finance (DTF) has published procedures for filing protective refund claims of the New York State Metropolitan Commuter Transportation Mobility Tax (MTA Payroll Tax or MCTMT).

The New York Supreme Court recently ruled that the MTA Payroll Tax is unconstitutional due to errors made when it was enacted (Mangano v. Silver, No. 144440/10 (N.Y. Sup., 8-22-12)). The State of New York and the Metropolitan Transportation Authority are appealing the decision. Four prior challenges to the constitutionality of the tax on the same grounds were dismissed.

The DTF advises that, until the issue is resolved, the tax is still in effect and employers subject to it should continue to withhold the tax and file required returns. The DTF set November 2, 2012 as the preferred deadline by which to file a protective refund claim to prevent potential refunds from being time-barred by the statute of limitations should the tax be determined unconstitutional. Refund claims generally must be filed within three years of when a return was filed. The MTA Payroll Tax went into effect three years ago, on November 2, 2009.

However, employers that did not file by November 2, 2012, may still do so, but the protective refund claim will only apply to filing periods that are still within the statute of limitations. That period is generally within three years from the date the employer filed the return, or within two years from the date the tax was paid, whichever is later.

Hurricane Sandy extension: Employers directly affected by Hurricane Sandy have been granted an extension to file protective refund claims until November 14, 2012. In addition, payments of the MTA Payroll Tax made through the PrompTax system due on or after October 26, 2012 and before November 14, 2012 may be made by November 14, 2012. Employers need not apply for a waiver or an extension as the relief will be automatically granted. Taxpayers who were directly affected by the storm include:

  • Victims of the storm who reside in or have a principal place of business in New York State;
  • All workers assisting in the relief activities in the designated counties;
  • Any taxpayer whose records necessary to meet tax filing, payment or other deadlines are not available due to the storm;
  • Taxpayers having difficulty in meeting tax filing, payment, or other deadlines because of disruptions in the transportation and delivery of documents by mail or private delivery services, or due to disruptions in communications services due to the storm; and
  • Taxpayers whose tax practitioners were unable to complete work to meet tax filing, payment and other deadlines on behalf of their clients due to the storm.

Filing instructions: Employers may file a protective refund claim using one of the following three methods:

  • By logging in to the employer's online services account, if the employer has one;
  • By completing an electronic form provided on the DTF website; or
  • By automated telephone application (518- 485-2392).

Telephone assistance is available for employers that have trouble using any of these methods. The DTF cautions that no paper option is available and that employers should not file a protective refund claim by amending their MTA returns. If an employer has already done so, however, it should re-file using one of the three available options.

In addition, employers need not file a protective claim for each filing period for which they paid or will pay the tax. Once filed, a protective claim applies to all prior filing periods that are within the statute of limitations when the claim is filed and any future filing periods. For example, a protective claim filed by an employer by November 2, 2012, will apply to all prior and future filings of the tax.

Partnerships may file one protective claim on behalf of all the qualified partners previously included on the partnership's group return(s) (Form MTA-505). The claim may be filed using either the electronic form or automated telephone application options. Filers should select "individual," enter the group name and use the special MCTMT identification number assigned to the partnership for group filings.

Extension of Withheld Income Tax Payment Deadlines

Also as a result of Hurricane Sandy, deadlines for payments of income tax withheld by employers required to be made using Form NYS-1, Return of Tax Withheld, on or after October 26, 2012 and before November 14, 2012 have been extended until November 14, 2012 for employers directly affected by Hurricane Sandy, as defined above. PrompTax filers do not need to apply for a waiver or extension to obtain this relief. The DTF will provide instructions on its website for employers that Web file and pay using Form NYS-1.

Employers using a paper Form NYS-1 should write Hurricane Sandy on the top center of the front page of any late-filed return. This information should not be written on mailing envelopes.

The DTF will not subject these employers to any penalties for late filing, payment or underpayment, or to interest for the period from October 26, 2012 through November 14, 2012. Any affected employer that receives a penalty and/or interest notice is advised to call the phone number on the notice to have any interest or penalties abated.

Employers are encouraged to sign up for email alerts on the DTF website to receive additional information as it becomes available.

DTF Notice MCTMT - Legal proceedings and protective claims for refund, Oct. 17, 2012; DTF Notices N-12-11, N-12-12, Oct. 2012.

Additional Resources

Payroll > Withholding Taxes > New York
Payroll > Depositing and Reporting Withheld Taxes > New York
Payroll > Depositing and Reporting Withheld Taxes > New York