Posted by: Howard J. Kass CPA, AEP®
When we file tax returns, we all know that a return must be filed by its due date. In the case of our 1040s, the one we are all familiar with, the due date of April 15 is indelibly burned into our minds. So, while we know that a tax return must be filed by its due date, at what point can we say a tax return has been actually filed?
Most federal tax returns are covered by a variation of what is known as the Mailbox Rule. Under this IRS variation, governed by Internal Revenue Code Sec. 7502, known as the timely-mailed-equals-timely-filed rule, a tax return is considered to have been filed on the date it is mailed. But, how do you prove that a tax return has been mailed?
There are several statutory methods for satisfying the burden of proof of timely mailing.
The first three methods all involve the United States Postal Service (USPS). The first method is regular first-class mail. Under IRC sec. 7502(a)(1), when a tax return arrives late, but is postmarked on or before the due date, the return is considered to be timely filed. However, to prove that you mailed the return timely, you must make and keep a copy of the postmarked envelope. Most people don’t make copies of their postmarked envelopes before mailing – in fact, it would seem the only possible way to do that is to mail your tax return at the post office and ask the clerk for a photocopy of the envelope after it has been postmarked. It is also important to note that this rule only applies to a tax return that is mandatory to file. This rule, therefore, does not apply to the filing of an amended return.
The second method is to use registered mail. Under Sec. 7502(c)(1), a registered mail receipt is valid proof of mailing. The registration date on the receipt is treated as the postmark date for satisfying the timely-mailed-equals-timely-filed rule.
The third method is to use certified mail. Under Sec. 7502(c)(2), IRS regulations permit the use of USPS certified mailing as proof of meeting the timely-mailed-equals-timely-filed rule. In this case, the postmark on the receipt given to the sender proves the postmark date.
The next method for satisfying timely filing is the use of IRS-approved E-Filings. Under Sec. 7502(c)(2), the date of the electronic postmark given by an authorized return transmitter is deemed to be the filing date for an e-filed return.
The last method is to use an IRS-Approved Private Delivery Service. This method was adopted fairly recently and is covered under IRS Notice 2004-83, which specifies that the following such services are IRS approved:
1. DHL Express same-day service,
2. The following Federal Express services –
a. Priority overnight,
b. Standard overnight,
c. 2nd day,
d. International priority, and
e. International first.
3. The following UPS services –
a. Next day air,
b. Next day air saver,
c. 2nd day air,
d. 2nd day air AM,
e. Worldwide express, and
f. Worldwide express plus.
Warning: The above listed private delivery services are the only private delivery services that the IRS recognizes as proof of mailing under the timely-mailed-equals-timely-filed rule. So, for example, if you were to send your tax return through Federal Express, but not through one of the specific services listed above, you would not have valid proof of filing your return.
So, other than avoiding or reducing late filing or late payment penalties and interest, is there any other reason to be concerned about proving when you filed a return with the IRS? In a word, yes.
Some readers are aware that there are statutes of limitations that restrict the IRS ability to assess additional tax, interest or penalty on a previously filed return – generally three years from the later of that return’s due date or actual filing date. Did you also know that there is also a statute of limitations for filing a claim for refund of overpaid tax? In fact, there is. Under Sec. 7422(a), a valid claim for credit or refund must be filed by the later of three years from the time the original return was filed, or two years from the time the tax was paid. So, how does this relate to the timely-mailed-equals-timely-filed rule?
Imagine the following scenario. You timely filed your 2010 income tax return on April 10, 2011. You have since discovered an error on that return that will result in a refund if you amend your 2010 return. When must you file your amended return to avoid losing that refund?
Under the guidelines mentioned above, you would have three years from the later of the due date for your 2010 return or the date you actually filed the return, or two years from the date you paid the tax. In this case, the due date of April 15 was later than the filing date, so the statute of limitations for filing a claim for refund would expire on April 15, 2014, three years after the due date for your 2010 return.
Assuming that you choose to file an amended return, while you could simply drop it into the mailbox on or before April 15, 2014, you would have no proof of timely mailing. Therefore, if the IRS received your amended return after April 15, you would have no proof that you filed it timely. A better choice would be to use any of the other approved methods mentioned in this article that provides you with a receipt proving the mailing date.
As you can see, the ability to prove when you mailed a tax return can not only protect you from penalties or interest resulting from late filing, it can also preserve a tax refund that may otherwise be lost. A few extra dollars spent on mailing can, indeed, be cheap insurance.
For answers to your questions on this or any other tax related issue, contact one of the tax professionals at Zinner & Co. LLP.