Question: Jack and Diane attempted to make a rollover to a traditional IRA for $325,000 as a tax-free event. The IRS examined the return and determined it was a taxable event. This resulted in $135,000 of assessed tax liability. The IRS collected the assessment through two levies in June 2013. Jack and Diane disagreed with the IRS’s characterization of their attempted rollover. On the last day to file a timely refund claim, their tax preparer, John, placed their claim in the regular mail using a U.S. postage stamp. A few months later John checked the status of the claim and the IRS indicated it had no record the claim was received. John then forwarded a copy of the original file for refund. The IRS denied the claim on the basis that this claim was not timely filed. Do Jack and Diane have recourse?
Answer: No. While §7502 provides an exception to the physical delivery rule, if a document is postmarked before the deadline and received after the deadline, there is no proof the claim was mailed prior to the due date for the claim for refund. If the claim was mailed via registered mail or certified mail, or with an authorized private delivery service, this would establish the document was in fact postmarked by the due date, even if the IRS never received the document or the has no record of receiving it. Without proof of the postmarked date, Jack and Diane have no recourse with the IRS. However, they may have recourse against their tax preparer.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.