There have been a number of tax cases involving disputes as to when tax documents are mailed to the government. In Tildon v. Commissioner, No. 15-3838 (7th Cir. 2017), the court considered a dispute that turned on whether U.S. Postal Service tracking data is a “postmark made by the U.S. Postal Service.”
The Facts and Procedural History
In Tildon, the taxpayer hired a tax law firm to prepare and file a petition with the U.S. Tax Court. The law firm prepared the petition, but did not obtain a postmark from the U.S. Postal Service when it mailed the petition to the U.S. Tax Court. Instead, the law firm put a self-printed stamps.com label on the envelope and hand-delivered the envelope to the post office. It did so on the last day for filing the petition with the U.S. Tax Court. Two days later, at a facility that was 10 miles away from the post office, the U.S. Postal Service entered the tracking information for the envelope into its computer system. The U.S. Tax Court received the envelope several days later and deemed the petition to be filed late. The taxpayer appealed the decision to the Seventh Circuit Court of Appeals.
The Timely-Mailing, Timely-Filed Rule
In the U.S. Tax Court litigation, the IRS cited the general timely-mailing, timely-filed rule. The timely-mailing, timely-filing rule is found in Sec. 7502. It says tax returns and, as in this case, tax court petitions, are timely filed even if they are received by the IRS after the due date as long as they were mailed on or before the due date. This rule only applies when there is a postmark made by the United States Postal Service (the regulations include similar rules for certain private delivery carriers, such as UPS and FedEx).
To be more specific, the timely-mailing, timely-filed rule says that the tax return or tax court petition is considered timely filed if the IRS actually receives the envelope either by the due date or “the time when a document or payment 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 date.” The IRS concluded the language in quotes was not satisfied, as it took the U.S. Postal Service seven days to deliver the envelope from Utah to Washington D.C., which was longer than it would ordinarily take.
The Exception Where There Are Two Postmarks
The U.S. Tax Court did not agree. It applied a different rule, which says that where there is a postmark by a U.S. Postal Service and another postmark that was not made by the U.S. Postal Service, only the postmark by the U.S. Postal Service is to be considered. The U.S. Tax Court treated the U.S. Postal Service tracking information as equivalent to a postmark for purposes of this rule. Because the tracking information was not entered into the U.S. Postal Service’s system for two days after the U.S. Postal Service received the envelope, the U.S. Tax Court concluded that the tax court petition was not timely mailed.
On appeal, the Seventh Circuit Court of Appeals concluded that the rule cited by the U.S. Tax Court did not apply. It noted that the U.S. Postal Service certified mail tracking information was not a postmark and not equivalent to a postmark. The IRS agreed that the general timely-mailing, timely-filed rule applied and was satisfied.
Avoiding these Disputes by Using Certified Mail
The Seventh Circuit had some harsh words for the tax law firm, which serves as a reminder why, even in this day and age of high technology, we take the time to mail correspondence to the IRS via U.S. Postal Service certified mail and retain the hand-stamped postmark as proof of mailing:
Although the taxpayer thus prevails on this appeal, we have to express astonishment that a law firm would wait until the last possible day and then mail an envelope without an official postmark. A petition for review is not a complicated document; it could have been mailed with time to spare. And if the last day turned out to be the only possible day (perhaps the firm was not engaged by the client until the time had almost run), why use a private postmark when an official one would have prevented any controversy? A member of the firm’s staff could have walked the envelope to a post office and asked for hand cancellation. … [The law firm] … was taking an unnecessary risk with Tilden’s money (and its own, in the malpractice claim sure to follow if we had agreed with the Tax Court) by waiting until the last day and then not getting an official postmark or using a delivery service.
The Code even confirms that the certified mail is “deemed the postmark date,” which means that it is equivalent to a postmark.