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July 19, 2019

IRS Overrules Common-Law Mailbox Rule in the Ninth Circuit

Mailbox

As tax attorneys in Columbus, Ohio, Nardone Limited routinely assists taxpayers with representation in tax examinations, tax audits, appeals, and civil litigation with the Internal Revenue Service (“IRS”) and the Ohio Department of Taxation. As part of that representation, our tax attorneys advise clients on recent developments in the law. In a recent Ninth Circuit case, the court reminds us why it is important to properly document and follow-up with the IRS when it comes to time sensitive filings.  

Mailbox Rule May No Longer Be a
Defense for Certain Taxpayers

In Baldwin v. United States, a recent Ninth Circuit case, the taxpayers asserted that they timely mailed an amended return in 2011. The IRS, however, never received the original amended return. But, in 2013 the IRS received a new copy of the amended return from the taxpayers. When the IRS received the return in 2013 it noted that the postmark date was after the statutory deadline for filing a refund claim. Thus, the IRS denied the taxpayers’ refund on the grounds that it was not timely filed. The taxpayers, however, argued that under the common law mailbox rule there is a rebuttable presumption that the document was delivered to the IRS before the deadline.  

Under the common law mailbox rule, proof of proper mailing creates a rebuttable presumption that the document was physically delivered to the addressee. But, Internal Revenue Code Section 7502 was enacted to codify the mailbox rule. Section 7502 provides that if a document is postmarked before, and is received by the IRS after the due date of the required filing payment, then the date of the postmark is treated as of the date that the document was filed with the IRS. Section 7502 further provides that, if a document sent by registered mail, certified mail, or with a designated private delivery service, then the document will be presumed to have been delivered on the registration date. Ultimately, the court held that the taxpayer’s refund claim was not timely filed because the IRS never received the taxpayer’s original refund claim and the original claim was not sent by registered mail, certified mail, or a designated private delivery service.

Nardone Limited Comment: Although electronic filings are making Internal Revenue Code Section 7502 less relevant when it comes to filing returns, there are many reasons why taxpayers and tax return preparers will continue to file hard copy returns.  Thus, it is important to fully understand and comply with Internal Revenue Code Section 7502.  As we typically advise our clients and the tax return preparers that we work with, it is important to document all stages of the mailing. That is, in addition to filing the return by certified mail or by a third-party commercial delivery service, such as Federal Express, we also want to make sure that we maintain a copy of the outside of the envelope to confirm that it was properly addressed, we want to maintain a complete copy of all the contents of the mailing, and then we want to confirm delivery. Part of confirming delivery may include making sure that we track down the green card and maintain the green card with the certified mailing with postmark. Or, that may simply require us to go online to confirm delivery by Federal Express, UPS, United States Postal Service, etc. That entire mailing should then be maintained together with the contents of the mailing so that if there is ever a question, we have that maintained. And, importantly, all of those documents should be scanned and saved together electronically. Over time, the postmark, as an example, fades. Thus, if we need to document that we have a proper and timely postmark, if all we have is the faded postmark that we can no longer read, we may have a problem. If we maintain it electronically, it will not fade. 

Conclusion

In light of the Baldwin case, taxpayers should ensure that the professionals they hire are experienced in dealing with the IRS on a routine basis. Taxpayer’s need to ensure their filings and payments, in response to an IRS examination, are timely to avoid penalties. In addition, the Baldwin case highlights the importance of sending filings and correspondences to the IRS via registered mail, certified mail, or by private delivery service when you are handling a time sensitive matter. It is best practice to follow-up with the IRS to ensure that it received any filing or correspondence in response to an IRS exam. It is equally important to document that your filing was delivered, and that the IRS confirmed receipt. Carefully documenting your mailings to the IRS will help to refute any claims by the IRS that it did not timely receive your filing. If you have any questions or concerns regarding responding to the IRS, call Nardone Limited today at 614-223-0123.

 

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July 19, 2019

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