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Discussion:Late Filing Penalty Case

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Tesoriero case

Death&Taxes (talk|edits) said:

3 October 2012
http://www.ustaxcourt.gov/InOpHistoric/TesorieroMemo.TCM.WPD.pdf

Another good example about why, if possible, efiling extensions is the best way to go. This concerns a 2004 return. The NYC accountant in this case, Mr. Portney, seemed to have a very large practice and it is surprising that he did not avail himself of certified mail, return receipt requested.

Ckenefick (talk|edits) said:

3 October 2012
Had a new client one time that came in to get his returns prepared in May. He was on extension. Said he got a big envelope (addressed to him) from his prior CPA firm a few weeks prior, around 4/15. He opened it up around 5/1, thinking it might be some of his records he'd need for our meeting. Lo and behold it was a stack of federal extensions. CPA firm put the wrong label on the envelope.

Kbairtax (talk|edits) said:

4 October 2012
I have filed a pile of extension in one envelope, certified mail. All of them get accepted except one. Efile, Efile, Efile.

I have the same issue with 941 returns. I used to send all 40 or so of my payroll clients together in one envelope..certified mail. Now I send them in groups. Got tired of 3 or 4 of them not getting recieved. So I send them 4-5 at a time, certified mail. I do not currently have a good way to file them electronically. Amazingly the smaller chunks are not a problem for the IRS mail openers. They must not like big thick envelopes

Ckenefick (talk|edits) said:

4 October 2012
I have filed a pile of extension in one envelope, certified mail. All of them get accepted except one.

But isn't it nice that certified mail provides dated filing evidence of the thing you *claimed* was inside the envelope...

Or does it?

Or does it only provide said proof if the IRS actually received the thing you filed?

Death&Taxes (talk|edits) said:

4 October 2012
In 1999 I had 5 extensions to file in Fresno(?). I filed all in the same envelope by regular mail. One was a man who would owe 700K; he had given me a 200K check to secure a California extension but none for Federal. He filed in late July and had a 140,000 late filing penalty; I took a POA and called Practitioner Priority. A nice gentleman asked if I could give him the names and SSN of the four other extensions filed that same day. I also noted that California had cashed its check. I gave him names and numbers; he called the next day to say that one of them was 'marked twice' whatever that meant, so that he thought this was an error and waived the penalty.

Where I worked before, in June we found in the library a large envelope with over 30 returns to be sent to the City of Philadelphia! All had checks.

Chris writes "Or does it?" Isn't that why you have to put the Certified Mail # on EVERY individual document?

Ckenefick (talk|edits) said:

4 October 2012
From 7502(a)(1):

(a) General rule.

(1) Date of delivery. If any return, claim, statement, or other document required to be filed, or any payment required to be made, within a prescribed period or on or before a prescribed date under authority of any provision of the internal revenue laws is, after such period or such date, delivered by United States mail to the agency, officer, or office with which such return, claim, statement, or other document is required to be filed, or to which such payment is required to be made, the date of the United States postmark stamped on the cover in which such return, claim, statement, or other document, or payment, is mailed shall be deemed to be the date of delivery or the date of payment, as the case may be.

This is the "postmark" rule of 7502, which on it's face, only applies if there is actual delivery and which is separate from the "mailbox rule."

But what if there is no actual delivery or what if IRS says there was no actual delivery?

Well, we have 7502(c), which says this:

(c) Registered and certified mailing; electronic filing.

(1) Registered mail. For purposes of this section, if any return, claim, statement, or other document, or payment, is sent by United States registered mail—

(A) such registration shall be prima facie evidence that the return, claim, statement, or other document was delivered to the agency, officer, or office to which addressed; and

(B) the date of registration shall be deemed the postmark date.

That's good, if you have a postmarked certified mail receipt, there's a presumption of delivery, which then leads to a presumption of an on-time postmark date.

But what if you didn't use certified mail? Don't we have the common law mailbox rule that says we can use extrinsic evidence to prove we mailed it, thereby resulting in a presumption of delivery in the ordinary course of the mails and also a presumption of an on-time postmark date?

We'll, here's from the reg:

Registered and certified mail. In the case of a document (but not a payment) sent by registered or certified mail, proof that the document was properly registered or that a postmarked certified mail sender's receipt was properly issued and that the envelope was properly addressed to the agency, officer, or office constitutes prima facie evidence that the document was delivered to the agency, officer, or office. Other than direct proof of actual delivery, proof of proper use of registered or certified mail, and proof of proper use of a duly designated PDS as provided for by paragraph (e)(2)(ii) of this section, are the exclusive means to establish prima facie evidence of delivery of a document to the agency, officer, or office with which the document is required to be filed. No other evidence of a postmark or of mailing will be prima facie evidence of delivery or raise a presumption that the document was delivered.

Seems that IRS is putting a kibash on the common law mailbox rule?

Can they do this? With the stroke of a pen, can they wipe away all that common law mailbox rule case law? Are we no longer allowed to argue the 'common law mailbox rule?' Is it a proper interpretation of 7502(c) that certified mail (or a PDS) is the only (i.e. "one and only," i.e. exclusive) way we can make our case?

What say you?

And what about D&T's comment:

Isn't that why you have to put the Certified Mail # on EVERY individual document?

Is it true?

Reg. 1.6081-4(a)(4) still says you have to have a good faith estimate on 4868 (vs all zeros for extensions)

Wiles (talk|edits) said:

4 October 2012
I see that there was some discussion in this case regarding Portney making no attempt to reasonably estimate the taxpayer's income tax liability for presentation on the Form 4868. However, in footnote 5, the Court states that they do not need to decide on whether the Form 4868 was void because of this issue since there was no proof of filing, anyhow.

Does anybody know of a case where a Form 4868 was determined to be void because there was not a good-faith attempt to estimate tax liability? I need to throw it in somebody's face because they continue to file Form 4868 with zeros across the board despite my haranguing.

Ckenefick (talk|edits) said:

4 October 2012
Just show this person the reg. There haven't been any cases on this recently, since the "no pmt req'd with extension" rule was instituted. Nonetheless, the "you must properly estimate your tax" rule still exists. When the reg came out, one commentator said, "Why don't you do away with this rule if the taxpayer isn't required to make a pmt?" IRS countered that it would not do away with this rule. It's reasoning was that, "Putting an estimated balance due on the 4868 apprizes the taxpayer of how much he owes and won't pay with the 4868, which lets the taxpayer know how much will be subject to penalties and interest."

Nonetheless, this reg still exists. To play it safe, put something down. Obviously, if the IRS tries to void and extension on the "no estimate made" grounds, we will simply refer to them to the *reason* why this rule still exists. And, of course, we argue that the extension shouldn't be voided if no payment is required with it anyway.

I also suppose it's a matter of preparer malpractice if an extension is voided for this reason. Whose the client gonna blame?

Wiles (talk|edits) said:

11 April 2013
Here we go again. Another preparer in my office continues to put zeroes across the board on the entire Form 4868 if the client either does not owe or owes and is not paying.

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