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January 16, 2007

Taxpayer is a Day Late: IRS Attorney Prevails

Tax Litigation

Houston Tax Attorney


I recently attended a legal seminar put on by the Texas Bar Association in which an attorney who was nearing retirement was lamenting the decline of the legal profession. That attorney cited examples of other attorneys using court rules to gain a competitive advantage over the other party, even though minor instances of non-compliance with the court rule would not have impacted the case. The attorney concluded that these other attorneys were “lawyers,” but not “professionals.” That brings me to today’s Austin v. Commissioner case.

Austin failed to timely file federal tax returns. The IRS imposed failure to file and failure to pay penalties. The IRS mailed Austin a notice of deficiency (also known as a 90-day letter), which required Austin to file a tax court petition by May 7, 2006 – which was a Sunday. The tax court received the tax court petition on May 10th, the handwritten FedEx label was marked May 8th, and the computer generated FedEx label was marked May 9th. The FedEx tracking information specified that the package was picked up on May 9th at 5:22 p.m.

The IRS attorney filed a Motion To Dismiss for Lack of Jurisdiction on the ground that the petition was not filed with the Court within the 90-day time frame prescribed by statute. The taxpayer objected to the IRS motion, stating that:

[O]n May 4, 2006, she flew to Baltimore, Maryland, to attend a trade show; that she stayed at the Days Inn while in Baltimore; that she signed the petition on Sunday, May 7, 2006; that she completed the customer handwritten label at about 8 a.m. on Monday, May 8, 2006, and affixed it to the FedEx envelope; that she placed the petition in the FedEx envelope, which she then handed to the front desk clerk of the Days Inn with the understanding that the envelope would be picked up later that day by FedEx; that the front desk clerk placed the envelope in the hotel’s “pickup box”; and that, upon returning to the hotel after the trade show later that day, she inquired about the envelope and was told by a front desk clerk that the “pickup box” was empty. In sum, petitioner asserts that “There was no reason for me to think that my FEDEX package had not been picked up on the 8th.”

As required by law, the tax court dismissed the taxpayers tax court case due to the IRS attorney’s request – denying the taxpayer the ability to have her day in court. The IRS attorney prevailed over an unrepresented taxpayer due to the taxpayer missing a filing deadline by one day.

According to the position by the attorney cited at the beginning of this article, a tax lawyer practicing fifty years ago would never have filed this kind of motion given these facts. The taxpayer would have had her day in court, and she would have won or lost in court. Cases like this leave me wondering if perhaps that old attorney was right about the legal profession.

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