Tax Court: The Postmark Rule May Not Always Apply

As evidenced by two new Tax Court cases, taxpayers and practitioners alike should be aware the postmark rule can have its exceptions. 

Jan 27th 2020
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For those unaware, when tax returns and other tax documents are sent by regular mail, the “postmark rule” generally applies if the IRS doesn’t receive the paperwork in time.

Under the postmark rule, a return is treated as having been filed on the date of the postmark on the envelope, even the correspondence is received after the due date. In other words, if you file a return with an envelope postmarked April 15th and the IRS doesn’t get it until, say, April 17th, it’s still considered to be filed on time.

But a return envelope that is postmarked April 16th or after is treated as being late, even if it isn’t your fault. Also, note that the postmark rule only counts toward your benefit for mailings through the U.S. Postal Service (UPS). 

If you’re not using the UPS, all bets are off. In the two new cases, taxpayers challenged the mailbox rule with favorable tax outcomes.

Case #1: A couple paid all their 2012 tax liability through withholding. They were granted an extension to file their 2012 return to October 13, 2013. But they didn’t file by that date.

About three years later—on October 11, 2016—the couple finally mailed their 2012 tax return via certified mail, seeking a refund of taxes withheld. The IRS received the return on October 17, 2016. The IRS denied the refund claim since no taxes were paid during the look-back period (i.e., three years plus the extension).

The IRS deemed the filing date to be the day it received the return, October 17, 2016, so the look-back period only extended to April 17, 2013. Since the taxpayers effectively paid their taxes on April 15, 2013, the IRS said that no taxes were paid during the look-back period. Ergo, three’s no money to refund.

The taxpayers contended that the filing date for their claim was the mailing date of, October 11, 2016. This would have extended the look-back period to April 11, 2013.

Result: The District Court in Wisconsin ruled that the tax return was filed late, so the postmark rule doesn’t apply. The couple can rely on the mail date for this purpose (Harrison, 125 AFTR2d 2020-442, 1/9/20). However, the court noted that this is an issue of first impression for the Seventh Circuit Court of Appeals. Thus, it might provide a different result.

Case #2: On March 28, 2017, the IRS mailed a notice of deficiency to a couple that resided in Washington. It advised the couple that they had 90 days from the date of the notice to file a petition in the Tax Court for a redetermination of the deficiency. The notice of deficiency also stated that the last day to petition the Tax Court was June 26, 2017.

The couple’s attorney prepared a petition seeking a redetermination of the deficiency and mailed it to the Tax Court. The Court received the petition on July 17, 2017, 111 days after the mailing of the notice of IRS. The envelope was properly addressed to the Tax Court with U.S. postage stamps, but had no postmark.

Result: In this instance, the Tax Court found that the attorney’s testimony that the petition was mailed in time to be credible. Therefore, it ruled in favor of the taxpayers despite the postmark rule (Seely, TC Memo. 2020-6, 1/13/20)

The IRS encourages taxpayers to file electronically whenever this option is available. This gives professional tax return preparers like yourself, who are generally required to e-file returns, an advantage. Not only do you avoid potential problems, clients will receive any refunds sooner.

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