By Mark DeLuca
Foster Swift
For businesses and individuals, preparing tax-related documents required by the Internal Revenue Service (IRS) or United States Tax Court can be a complex process, often requiring the assistance of outside advisors such as attorneys and accountants. As a recent case in the Tax Court demonstrates, the last, seemingly simple step in the process—filing a tax document —should not be taken lightly. Indeed, all of the analysis and number-crunching that goes into a tax document could be for naught if a document isn’t delivered before the relevant deadline.
At its core, what this decision demonstrates is that businesses, individuals, and tax professionals would be wise to spend the small amount required to send documents to the IRS or Tax Court via certified mail, registered mail, or a private delivery service authorized by the IRS, such as UPS or Federal Express, to buy peace-of-mind that the documents will be deemed timely filed.
When is a Tax Document “Filed” According to the IRS?
In the case of Seely v. Commissioner of Internal Revenue, T. C. Memo 2020-6 (filed January 13, 2020), the Tax Court considered whether a Tax Court petition filed by an attorney on behalf of his client should be rejected for having missed the relevant filing deadline. The attorney argued that he mailed the document, through United States Postal Service (USPS) regular mail, four days before the due date. However, the Tax Court did not receive the petition until 21 days after the due date.
IRC Sec. 7502 provides a version of what common law refers to as the “mailbox rule.” Pursuant to IRC Sec. 7502(a), a document delivered to the IRS or Tax Court by regular USPS mail is generally considered timely filed if the “the postmark date falls within the prescribed period or on or before the prescribed date [i.e., the due date].” In other words, as long as you get the filing in the mailbox and postmarked before the deadline, there should be no issue.
In an unfortunate twist for the attorney and his client, when the envelope enclosing the petition arrived at the Tax Court, the envelope appeared to have no indication of a postmark and had no other markings from the USPS to determine when it was placed in the mail. Because the petition was received after the due date, with no postmark, the IRS argued that the petition should be dismissed by the Tax Court.
The Tax Court, therefore, was faced with the question of how to resolve a timeliness argument when an envelope containing a petition is received by the Tax Court, but has no postmark or any other marking from the USPS.
IRC Sec. 7502 and the regulations thereunder do not directly address the issue of how to treat an envelope that lacks a postmark. However, the Tax Court explained that case law provides that if a postmark is illegible, then: (i) the burden is on the taxpayer to prove when the envelope was mailed; and (ii) the taxpayer is permitted to use extrinsic evidence to meet the burden of proof. If the taxpayer is unable to present “convincing evidence” to meet the burden, then the date the document is received by the Tax Court is treated as the default filing date.
In the Seely case, the Tax Court held that since the envelope lacked a postmark, the postmark should be deemed illegible and therefore both parties were allowed to introduce extrinsic evidence regarding when the envelope was mailed. The petitioners submitted a sworn statement from their attorney alleging that he deposited the petition with the USPS four days before the due date of the petition. The IRS admitted that it normally takes 8 to 15 business days for a document to be delivered to a government agency or office in Washington, D.C., when mailed from any location in the United States. Based upon the sworn statement from the petitioners’ attorney, and the information received from the IRS and the USPS regarding the timeline for mail to get to the Tax Court, the court sided with the petitioners and held that it was more likely than not that the petition was timely filed.
Conclusion
We are in the period in which, under normal circumstances, taxpayers and their advisors would be furiously preparing tax filings for the 2019 tax year. However, we are, of course, not operating under normal circumstances, and the U.S. Department of Treasury has automatically extended the April 15 deadline to file income tax returns and make tax payments until July 15, 2020. Whenever you file your documents or submit payments to the IRS, do so through reliable means. Rather than relying on regular U.S. mail, it’s advisable to transmit documents and payments via certified mail, registered mail, or a private delivery service authorized by the IRS, such as UPS or Federal Express, in order to prove you filed them timely.
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Mark DeLuca is a member of Foster Swift’s Trust and Estates Practice Group and is based in the Lansing office.
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