Missteps in Filing a Tax Return Come Back to Haunt the Taxpayer and Her Representative
In prior blog posts (HERE) , I discussed the mailbox rule and filing tax returns with the IRS. A recent case in Michigan reiterates the lesson discussed in that blog post about always using certified or registered mail if a tax return is mailed to the IRS. In addition, the Michigan case confirms that a taxpayer should always file a tax return in the manner described by the Internal Revenue Code and regulations, and not file it with an IRS representative not authorized to receive a return.
In Harold v. United States (E.D. Mich. 2021) , the taxpayer and her representative made numerous missteps when trying to file a tax return, which resulted in the taxpayer being unable to discharge her taxes in bankruptcy. In 2009, the taxpayer’s representative, Mr. Gross, was negotiating an installment agreement with an IRS Revenue Officer to cover the taxpayer’s tax liability dating back to 2003. During the negotiations, Mr. Gross prepared the taxpayer’s 2008 tax return and faxed a copy of the complete signed return to the Revenue Officer, which was described as a courtesy copy. One month later Mr. Gross sent the IRS a Form 433-D, Installment Agreement to the Revenue Officer, covering tax periods for 2003-2008. Shortly thereafter, the taxpayer entered into an installment agreement with the IRS, however the installment agreement did not mention the 2008 tax year.
In 2016, the IRS informed the taxpayer that a 2008 tax return had not been filed. The taxpayer contacted Mr. Gross and was told the 2008 tax return had been filed with the Revenue Officer in 2009, and was provided a copy of the 2008 tax return.. The taxpayer immediately filed the 2008 tax return and shortly thereafter filed a Chapter 7 bankruptcy petition attempting to discharge the 2008 tax liability. The IRS filed an adversary proceeding arguing the 2008 tax liability could not be discharged because the 2008 tax return had been filed only five days before the bankruptcy petition was filed. In response the taxpayer argued that (1) her representative had timely mailed the tax return, (2) faxing the tax return to the Revenue Officer constituted the filing of the tax return and (3) the IRS entering into the installment agreement establishes the tax return had been filed. The court ruled in favor of the IRS because (1) during his deposition, Mr. Gross testified it was his practice to file tax returns by regular mail sent to the IRS service center, but he could not recall if he actually mailed the 2008 tax return, (2) the tax return faxed to the IRS agent was not a filing because it expressly stated it was a courtesy copy and (3) the 2008 tax return was not delinquent at the time the IRS approved the installment agreement because the taxpayer had filed an extension to file.
On appeal the court rejected the taxpayer’s argument that the faxing of the tax return was adequate for filing purposes stating:
The IRC specifies the place where tax returns are required to be filed. For persons other than corporations, “a return . . . shall be made to the Secretary—(i) in the internal revenue district in which is located the legal residence. . . of the person making the return, or (ii) at the service center serving the internal revenue district referred to in clause (i), as the Secretary may by regulations designate.” IRC § 6091(b)(1). Looking to the applicable regulations, Treasury Regulation § 1.6091-2(a)(1) provides that “income tax returns of individuals . . . shall be filed with any person assigned the responsibility to receive returns at the local Internal Revenue Service office that serves the legal residence . . . of the person required to make the return.” Further, in Friedmann v. Commissioner, the Tax Court held that an individual failed to file his tax return by giving photocopies of the tax return to a revenue agent, holding: “Clearly, the revenue agent was not the prescribed place for filing those returns pursuant to section 6901(b)(1).” 82 T.C.M. 381, 2001 WL 883222, at *7 (Aug. 7, 2001).
There are two lessons from Harold. First, as discussed in the prior blog post, if a document is to be mailed to the IRS, the taxpayer and/or representative should use certified or registered mail so there is evidence of mailing. This is especially true if the document is a tax return. Failure to do so increases the risk the IRS will raise the timely filing question. Second, giving a revenue officer or revenue agent a tax return is not a filing. Many revenue agents and revenue officers ask that returns be filed through them. When I am working with an IRS agent, I will file any return as instructed by the Internal Revenue Code and regulations and provide a courtesy copy to the IRS agent.
For questions regarding this blog post or any other civil or criminal tax related matter, please feel free to contact Joel Crouch at (214) 749-2456 or email@example.com.