Wednesday, July 10, 2013

Pay Attention to Court Filings Not Qualifying for the Timely Mailing-Timely Filing Rule (7/10/13)

Every tax controversy practitioner and student is aware of the time-mailing, timely-filing rule in Section 7502, here. The general concept is easily stated -- a document timely mailed to the IRS or a petition to the Tax Court will be deemed timely filed even if it arrives after the due date.  The rule is subject to some nuance and risks.  I won't get into the nuances and risks now.

But, I do want to remind readers that there is no such timely mailing-timely filing rule for other filings.  Perhaps the other most common filing that tax practitioners will deal with is the filing of the suit for refund, necessarily in a court other than the Tax Court.  There is a statute of limitations for a suit for refund -- 2 years from the date the refund claim is denied.  There is no timely-filing, timely-mailing rule for such suits.

I guess I could leave it at that, but I do call readers' attention to a recent case, Langan v. United States, 2013 U.S. Claims LEXIS 740 (Fed. Cl. June 28, 2013), here.  In this case, the claim disallowance was mailed on 12/16/09.  The taxpayer's lawyer delivered the envelope containing the Court of Federal Claims complaint to the USPS in Massachusetts late on 12/15/11, just one day before the statute closed.  The Court of Federal Claims received the envelope and stamped the complaint on 12/19/11.  Too late.

The taxpayer tried to save the day on some older authority from the court that could be read to say that a filing timely delivered to the USPS in time to be timely received by the court will be deemed to have been timely delivered even if was not timely delivered.  In effect, there would be some type of equitable relief if the timely mailing was prudent because of the expectation of timely delivery. This authority even if it were still good, did not apply because the late delivery in Langan to the USPS on the day before the complaint was required to be filed was not filed in time that, in due course, it would be timely delivered the next day.  (The taxpayer's counsel actually used a type of USPS service that would have promised timely next-day delivery had it been deposited with the USPS earlier in the day, but the late delivery (around 11pm) did not qualify for USPS assurance of next day delivery and thus taxpayer's counsel did not act prudently, a necessary condition for the special relief if it even continued to exist.)

This is a cautionary tale.  Just based on the bare facts, the taxpayer's lawyer appears to have botched this and, if so, the tax dollars paid are gone forever.  (As I read the rules, the IRS is  now forbidden to make a refund even if it were to discover that it was due.)

So, if there is a rule coming out of this, there is a risk even if the taxpayer were to mail the document timely and it gets to the court late.  This rule of uncertain continuing effect might be held not to apply.  Timely filing means timely filing and, since there is no statutory timely mailing-timely filing rule, a taxpayer necessarily is not acting prudently just by mailing  in time to get to the court timely.  The time he needs relief is when it doesn't get to the court timely.  And then there is no statutory relief.  And, correspondingly, the statute very explicitly requires a timely filing.  Whether or not the Court of Federal Claims would give that relief is probably not certain.

Avoid this problem by making a timely filing, come hell or high water.  Go or send someone to the court (D.C. for the Court of Federal Claims) for the filing if necessary or, alternatively, send it early enough that you can  confirm receipt in time to fix it if the package got lost in the mail.

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