The Tax Court can be an unusually cruel place when it comes to deadlines. This is what a recent taxpayer found out in a Tax Court decision that denied their challenge of an over $4.6 Million dollar tax bill asserted by the IRS. See Nguyen v. Comm’r, T.C. Memo 2023-151. The taxpayers received notice of the IRS asserted deficiency on October 13, 2022 that gave them 90-days to file a petition with the Tax Court challenging that amount. The deadline was correctly noted on the notice as January 11, 2023. This deadline is statutory and jurisdictional, which means it cannot be extended by agreement or otherwise. In short, you miss it and you can no longer file a Tax Court petition.
The taxpayers prepared their petition for the Tax Court and mailed it to the court for filing on January 10,2023. Generally, this would be okay. The Internal Revenue Code supports the theory that if an item “timely mailed” is also “timely filed.” See 26 U.S.C. §7502. However, especially when it comes to Tax Court petitions, the devil is in the details. This timely mailed is timely filed general rule is primarily referring to the U.S. mail when determining that the date of the postmark is “deemed to be the date of delivery.” See 26 U.S.C. §7502(a)(1). The taxpayers in this case used Federal Express, which is a private delivery service. The Internal Revenue Code allows for private delivery services as well, but when using a ”designated delivery service.” See 26 U.S.C. §7502(f); IRS Notice 2016-30. Although Federal Express is listed as a “designated delivery service,” not all of their delivery methods are covered. In this case, the taxpayers used Federal Express – Ground, which is not an approved service. They attempted to claim that the Federal Express 2-Day service is substantially identical, but the Tax Court held that substantially similar doesn’t change the list and it is not allowed to rely on general equitable principles.
Although this appears to be an unusually harsh rule, it does not foreclose all options for the taxpayer to challenge the amount. If a taxpayer misses a Tax Court petition deadline, as noted in the opinion, a taxpayer can pursue a challenge in the federal district court or Court of Federal Claims. However, there is one big “if” that applies to those jurisdictions and that is that they are require payment of the taxes owing, a claim for refund filed with the IRS, and then a denial or the expiration of 6 months without any decision. See 26 U.S.C. §§6511, 7422. This can, in some jurisdictions, involve not only the entire tax claimed as owed but also penalties. Therefore, unless the taxpayers can afford to pay the more than $4.6 Million alleged as owed by the IRS they would not have an ability to file a claim for refund or file suit to recover that amount in the federal district court or the Court of Federal Claims.
Taxpayers should be very careful with deadlines and consult a tax professional about the nuances involved to avoid an unexpected result based on the assumption that all types of mailing are treated the same or other sometimes logical but wrong assumptions about the tax law or tax litigation. Otherwise, the results can be very unfavorable.
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