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IRS Can Lose Returns, Burden on Taxpayer for Mailbox Rule

By Tanya Roth, Esq. on April 04, 2012 | Last updated on March 21, 2019

In the midst of tax season, here comes a tax case out of the First Circuit Court of Appeals. The case deals with the prerequisites to filing a refund claim with the District Court.

Stripping the tax lingo out of this case, this case really emphasizes the importance of maintaining good tax records and, just as importantly, maintaining proof that you've actually mailed your tax returns or claims.

There are many procedural prerequisites to filing a claim for refund in the District Court; one of them is that you can't maintain a tax refund suit in District Court unless the refund claim "has been duly filed." This comes from statute, specifically IRC 7422(a).

In this case, a medical group was seeking a refund from the IRS for FICA taxes paid. With regard to their 2001 tax year, the government failed to respond to discovery requests, saying that the District Court had no jurisdiction on the case due to the fact that the claim had never been duly filed. The claim must have been filed within three years from when the return for that year was filed.

The IRS claims that it never received the claim. But is receipt determinative of "timely filing" or does the mailbox rule apply?

The mailbox rule, in tax law, says "timely mailed, timely filed." But we all know the "check is in the mail" excuse. Under the tax-law mailbox rule, a registered or certified mail receipt is prima facie evidence of delivery.

In this case, however, there was no certified or registered mail. Here, a postmark would have sufficed. But the IRS claimed that it never received the claim, so there is no way to locate the postmark. There was no evidence offered that could prove that the letter was mailed, no testimony from anyone saying that they remembered watching a post office clerk affix a postmark, nor any receipts from the postal office.

Without the ability to show actual delivery or even the level of evidence needed to prove that the letter was put in the mail, the court found that the taxpayer had not been sufficiently diligent in its record-keeping, as it related to the mailing of the tax forms. As such, the First Circuit agreed with the District Court.

This case was lost largely on the fact that the taxpayer didn't keep track of any records related to the mailing of those returns. The lesson here, as the court noted, is that the IRS does lose returns. If and when it does, the burden is on the taxpayer to show that the return or claim was mailed.

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