In a decision issued November 29, 2017 (Pearson v. Comm’r, 149 T.C. No. 20, No. 100184-15, Nov. 29, 2017), the Tax Court ruled that a Tax Court petition mailed with a Stamps.com postage label was timely filed under the mailbox rule. This article discusses the mailbox rule, particularly when using private delivery services other than the United States Postal Service (USPS); provides a summary and analysis of the Pearson case; and explores possible implications for taxpayers as a result of this decision.
Timely Mailed Means Timely Filed
Although a document is normally considered filed on the date that it is delivered to and received by the IRS, there is an exception to this rule under the timely mailed, timely filed rule (also known as the mailbox rule) under Internal Revenue Code (IRC) section 7502. If the taxpayer can prove that the document was mailed prior to the expiration of the statutory period at issue, it is considered timely filed, even if the IRS’s position is that the documents were received after the statutory period.
Notwithstanding the fact that the IRS strongly encourages utilizing the USPS, taxpayers and tax professionals are entitled to use certain commercial or private delivery services (PDS) designated by the IRS to meet the mailbox rule. (See Notice 2016-30, Designation of Private Delivery Services, as well as http://bit.ly/2JR8q81, for the most recent list of PDSs published by the IRS.) Of course, in order to qualify for the mailbox rule, taxpayers must make sure that the PDS is given or picks up the document on or before its due date.
Pursuant to section 7502(b), the IRC allows for regulations regarding postmarks made by commercial or private delivery services (referred to in the regulations as “postmarks not made by the USPS”). Regarding postmarks not made by the USPS, in order to satisfy the mailbox rule, the regulations state that—
- the postmark must reflect a legible date within the timely filing period,
- the document must be received during the time when a document mailed and postmarked by the USPS would ordinarily be received (e.g., two days from the actual delivery date for a two-day delivery service) [Treasury Regulations section 301.7502-1(c)(1)(iii)(B)(1)], and
- if the document is received after the period when a document mailed and postmarked by the USPS would ordinarily be received, to satisfy the mailbox rule, the taxpayer may also establish that it was timely mailed, and that the delay in receiving the document was due to a delay in the transmission of the U.S. mail [Treasury Regulations section 301.7502-1(c)(1)(iii)(B)(2)].
The Pearson Case
In Pearson, the taxpayer filed a petition with the Tax Court in response to a notice of deficiency. The Tax Court received the petition on April 29, 2015, one week after the 90-day statutory period to respond had expired (i.e., April 22, 2015). The envelope containing the petition bore a postage label from Stamps.com, with a date of April 21, 2015. The USPS entered the envelope in its tracking system for certified mail on April 23, 2015.
The administrative assistant for the law firm filing the petition on behalf of the taxpayer who created the Stamps.com postage label and who mailed the petition submitted a declaration that she actually mailed the petition on April 21; the declaration also included, as an attachment, the USPS certified mail receipt created by the administrative assistant bearing the date April 21, 2015. In addition, the IRS conducted its own research and determined that USPS certified mail from Salt Lake City, Utah (where the petition was mailed), to the Tax Court in Washington, D.C., can take eight days, and that the taxpayer’s petition was “most likely deposited and collected” by the USPS on the last date for timely filing the petition. Because the IRS and the taxpayer were in agreement that the document arrived in the time that it would have arrived if sent by USPS, the primary matter at issue was whether the Stamps.com postage label qualified as a postmark not made by the USPS.
The Tax Court agreed with the taxpayer and determined that the Stamps.com postage label qualified as a postmark not made by the USPS, concluding that the IRS’s construction of its own regulations is entitled to deference. While the court agreed that “a Stamps.com postage label does not literally ‘mark’ the entry of mail ‘post,’” it said that the date generated on the label does serve as an indication of the date the taxpayer purchased the postage and generated said label, and that “the envelope containing the petition received by this Court on April 29, 2015, was thus received ‘not later than a time when a document would ordinarily be received if [it] were postmarked.’”
Until clear and concise regulations are drafted on this issue, decisions may continue to fluctuate in the face of technology.
Almost as noteworthy was a strongly worded dissent by two of the judges. The dissent reasoned that a Stamps.com postage label should not qualify as a “postmark not made by the USPS” because no version of the tax regulations provides for Stamps.comlabels to be treated as a postmark. “A postage label printed by an individual customer on his own printer through the means of an Internet vendor and placed by himself on his own piece of mail” should not constitute a postmark made by the USPS, according to the dissent.
Possible Implications to Taxpayers as a Result of Pearson
Do not procrastinate.
Although the Tax Court sided with the taxpayer in this decision, there was a strong dissenting opinion, as well as a separate concurring opinion (discussed below). To alleviate any uncertainty, taxpayers are encouraged to avoid waiting until the last day to file time-sensitive documentation (e.g., tax returns, refund claims, Tax Court petitions) with the IRS.
USPS is still the provider of choice.
When sending time-sensitive documents to the IRS, taxpayers should, wherever possible, use USPS certified or registered mail and keep a postmarked receipt for their records. Taxpayers using USPS are under no obligation to prove when the document “would have been received,” or whether the USPS postage label qualifies as a postmark.
Technological advances may lead to further uncertainty.
To quote the consenting opinion, “Today there are myriad ways to purchase and apply postage.” Until clear and concise regulations are drafted on this issue, decisions may continue to fluctuate in the face of technology; a decision by the Tax Court from 2015 with “virtually identical facts” ruled that a Stamps.com label did not qualify as a postmark, and therefore, a petition was not timely filed (Tilden v. Comm’r, T.C. Memo. 2015-188). Further quoting the consenting opinion, “As technology evolves so must the law. But the law must evolve in a manner that is consistent with the statutes as written by Congress.”