In 2017, the Tax Court ruled that a petition filed using Stamps.com was deemed to have a timely postmark, even though it was not generated by USPS. However, beneath the surface of this ruling, there is a cautionary tale to be told. As a general rule, most tax documents are considered to be filed on the date mailed in accordance with Internal Revenue Code (IRC), Section 7502 and its related regulations. Specifically, Section 7502 provides that “if any return, claim, statement, or other document required to be filed” is received after the date prescribed in a provision of the law, then “the date of the United States “postmark” of the mailed items “shall be deemed the date of delivery”. Additionally, Section 7502(a)(2) provides the postmark rule applies to prescribed dates for filing “including any extension granted for such filing.”
It should be noted that Section 7502 only applies to returns and other documents that are “required to be filed.” Thus, one should use caution when relying on Section 7502 to protect a timely filing in cases such as special elections not filed with a tax return, balance due amended returns, collection due process documents and other IRS documents that are “not required to be filed.” However, Section 7502 would apply to an amended return that included a claim for refund because taxpayers are required under the Internal Revenue laws to file a claim in such cases if they want to actually receive the refund.
Back to the case: An attorney needed to file a Tax Court Petition on or before April 22, 2015. Postage was purchased, and a certified mailing label was printed using Stamps.com on April 21, 2015. The attorney claimed that a member of his staff delivered the petition to the USPS on April 21, 2015, one day prior to the last day for mailing (hence filing).
The court received the petition on Wednesday, April 29, 2015. The envelope in which the petition was mailed bore a 20-digit USPS Certified Mail tracking number. It did not have a USPS “postmark,” but it did have a “postmark” from Stamps.com, an online Postage Services provider. The label had the correct postage of $7.82, the Tax Court’s correct address, the Certified Mail tracking number referenced above and the date “04/21/15” reflecting the date on which the label was created, which was one day prior to the last day to timely file the petition. The administrative assistant for the law firm, Katelynn Marshall, stated under penalty of perjury that, on April 21, she created the Stamps.com label with the correct U.S. Postage of $7.82.
At this point things, began to get problematic. The United States Post Office maintains an online tracking system that enables customers to track the progress of Certified Mail. The earliest entry in that system shows the tax court petition arrived at a Salt Lake City USPS facility with zip code 84199 at 5:39 p.m. on April 23, 2015. That is a different facility from the one Ms. Marshall mailed the petition. Worse yet, it is one day after the final filing deadline for the Tax Court petition.
Further entries in the USPS tracking system show the petition left the facility with zip code 84199 at 6:57 p.m. on April 23, 2015 and was delivered to the Tax Court at 11:02 a.m. on April 29, 2015. These timeframes proved to be a critical element in the Tax Court’s decision in favor of the taxpayer.
When a taxpayer sends a petition to the Tax Court by United States mail, Internal Revenue Code Section 7502 states that timely mailed is timely filed. When the court receives the petition after the 90-day filing deadline, the date of the United States postmark stamped on the envelope in which the petition is mailed “shall be deemed to be the date of delivery” (IRC Section 7502(a)(1)). When the postmark on the envelope is not made by the United States Postal Service, the regulations provide:
- The postmark must bear a legible date on or before the last date prescribed for filing the document
- The document must be received by the agency or officer with which it is required to be filed “not later than the time when a document contained in an envelope that is properly addressed, mailed and sent by the same class of mail would ordinarily be received if it were postmarked at the same point of origin by the U.S. Postal Service on the last day prescribed for filing.”
The regulations further state if the taxpayer satisfies the first of the above requirements but not the second, the document will be treated as not timely filed unless the taxpayer establishes all of the following:
1) That the document was actually deposited in the mail from the place of the deposit that it was postmarked by the U.S. Postal Service on or before the last day prescribed for filing the document.
2) The delay in receiving the document was due to a delay in the transmission of the U.S. Mail.
3) The cause of the delay.
In the case at hand, the Pearsons were able to prove all three of the above requirements, and the court ruled that their Tax Court petition had been filed on time.
The tide turned in favor of the taxpayer when attorneys for the IRS contacted a United States Postal Service specialist regarding the timing questions presented by the case. The specialist advised the IRS counsel that “it was highly unlikely the mail piece entered P&DC [the Salt Lake Processing and Distribution Center] on 4/21 and sat for two days before processing.”
However, on the basis of USPS “logistical data, and the time of processing for this Certified Mail piece,” the specialist advised the attorney for the IRS that “it is the belief of our Salt Lake P&DC Operations Support Office that the mail piece in question was most likely deposited between 4:30 and 6:10 p.m. on 4/22.”
April 22nd was the last day for the petition to be timely filed, but one day later than the Stamps.com “postmark” on the certified letter. April 22nd is also one day later then Ms. Marshall testified that she deposited it in the U.S. mail.
Nevertheless, April 22nd, 2015 was within the 90-day window for the timely filing of the petition. Therefore, the counsel for IRS conceded the case, and the Tax Court entered the decision in the record in favor of the taxpayers. It should be noted that the above decision only decided the issue of the timely filing of the Tax Court petition. The taxpayers still had to proceed to yet another Tax Court to adjudicate the underlying issue that necessitated the petition in the first place.
Although the taxpayers prevailed in this case, their victory came by the narrowest of margins.
Using a service such as Stamps.com or a private postage meter can be a convenient and efficient way to handle outgoing mail. However, in spite of the fact that the decision in this case went in favor of the taxpayer, a close look at the underlying facts indicate cause for concern when using services other than USPS to postmark time-critical tax documents.
The taxpayer and the practitioner must bear in mind that if there is a delivery failure or delay, without a USPS postmark, the burden of proof is on the sender to prove the document was mailed timely. The taxpayers in Pearson v. Commissioner were able to meet this burden.
Nevertheless, it begs the question: Who wants to have to go through all this when an easy and safe alternative exists in the form of USPS Certified Mail? In the author’s opinion and experience, this is the only almost bulletproof way to ensure timely filing of mission critical tax documents.