Client 'was' in trouble with IRS -

[MAJ]

I had a new client last April {10th) who needed to file his 2003, 2004, 2005 and 2007 returns as the IRS contacted him stating he owed about $12k. Of course he was ready to freak out.

He found most of his papework {house mortgage, W2's etc} and I processed accordingly.
We {he} contacted the IRS due to the April 15th deadline for 2003 returns. They were accomodating and gave him a different address to mail the older returns to s they would get processed..

After processing all returns the client was set to get back $8k instead of owing $12,. Obviously, he was happy- I was paid.

He returned this year early and states they denied 2003 due late filing. This was a $2,300 return alone. He's upset and I want to work with him and the IRS to resolved. However, he is having a problem finding the original notes he took when he talked to them. {Agent ID which I asked him to retain}..

Question:
What if anything can I do to further the cause {it was filed 5 days late according to them).
How do some of you charge to assist in these areas? Should I have him sign a letter of engagement to cover my time and protect myself.

Thoughts?

[S T]

Dates

What date did you file the returns? Year 2003 in particular

Did t/p send the returns certified return receipt to establish date of postmark?

Sandy

[erchess]

My Two Cents

Do an engagement letter if you are going to put any time into this guy.

Do not let working with this guy cause you to miss anything significant in your personal life nor let doing so interfere with your maximum efforts to assist clients who file timely and are inherently more reliable income streams than he is. Chances are he won't file on time for 08 or 09 or 10.

Most clients cannot be trusted to keep up with tax related papers. Don't give them anything without keeping a copy or perhaps even keeping the original and giving them a copy if whether you ever see it again is of concern to you. You may find a few of your clients who run efficient businesses or other offices or used to are exceptions to this rule but the rule is still a good one.

I think that if the IRS says the 2003 return was late the onus of proof is on him to show he mailed it before the applicable deadline. Even one day past the ultimate deadline is too late and he won't get his refund. Live and learn, both of you.

[S T]

Wasn't

The 2003 tax return would have been due 4/15/04 or 10/15/04 if on extension. Doesn't the statute expire on refunds on either 4/15/07 or 10/15/07?

You haven't supplied exact dates, however, making a presumption on your OP, you filed the 2003 tax return on or about 4/10/08. So the statute would have expired on the 2003 tax return.

The 2004 tax return would have been due 4/15/05 or 10/15/05 if on extension. Doesn't the statute expire on refunds on either 4/15/08 or 10/15/08? This return might be within the Statute period to receive a refund.

I hope the taxpayer sent all certified return receipt with a verification of postmark date!

Sandy

[JohnH]

Did I read somewhere that the IRS ignores the date mailed and only recognizes the date received for late-filed returns when applying the SOL? Seems like that's an exception to the rule about getting a postal receipt for the date mailed, but maybe I'm off base on this.

[Gene V]

Postmark date

Did I read somewhere that the IRS ignores the date mailed and only recognizes the date received for late-filed returns when applying the SOL? Seems like that's an exception to the rule about getting a postal receipt for the date mailed, but maybe I'm off base on this.

I had a client that received a notice disallowing his claim for refund for tax year 1995.

We disagreed with the IRS decision base on United States Court of Appeals for the Second Circuit Weisbart v. United States, KTC 2000-362 (2d Cir.2000).

We got a letter back from the IRS:

Dear Taxpayer:

Thank you for your inquiry dated Jan. 01, 2001

A recent regulation change now allows US to accept a postmark date as the return received date when considering timely filed claims for refund on late-filed returns.
We are applying a credit of $790.00 to your account that we previously disallowed.
Etc. etc. You get the picture.


I believe the postmark date still applies.

[taxea]

The postmark date does still apply...so the client has to prove it was postmarked by the required date.

If an extension was filed that only applies to the actual return. Any payment is due by 4/15.

If an extension was filed for a refund return then the client may have a case. taxea

[BHoffman]

MAJ - agree with Sandy. 2003 is outside the SOL. So your client is also SOL (S*% Outta Luck) and they don't send the refund.

[JohnH]

Thanks for the clarifications on the "postmark-vs-received" date question for late-filed returns. Guess I was behind the times on that one.

[New York Enrolled Agent]

Thanks for the clarifications on the "postmark-vs-received" date question for late-filed returns. Guess I was behind the times on that one.

Actually, I think you're right on target.

The Courts have long held that the date of filing is the date the IRS receives the return (the day of delivery). I'll give you one of many, many cites. Pace Oil v Commissioner 73 TC 249. Of course, given the complexity of the IRC, there are always exceptions.

Exception #1 is the filing date of a return received (delivered) before the filing date. §6501(b) says such a return is considered filed on the due date.

Exception #2 is the "mail-box" rule found in code section §7502. Many preparers don't fully understand this section. This section says the postmark date will be considered the filing date ONLY under specific conditions. If the return is postmarked on or before the DUE date and received after the DUE date, then the postmark date will be considered the day of delivery to the IRS.

Example: taxpayer gets a valid extension to 10/15.
Case 1. taxpayer mails the retun on September 10 (with a postmark of 9/10), IRS receives it on September 12 - the filing date = September 12.
Case 2. taxpayer mails the return on October 15 (with a postmark of 10/15), IRS receives it on October 17 - the filing date = October 15.

Weisbart is a valuable case - it did not change the rules above but it extended the mail-box rule to allow a taxpayer to use §7502 in seeking a refund. It is a great read.

[JohnH]

Now I'm not sure if I'm right or wrong, but I';m leaning toward wrong.
I looked up the situation that caused me to write the original post and here's what I found.

The taxpayer paid estimated corp tax of $1,200 on March 12, 2003 in conjunction with a timely-filed Form 7004 for the 2002 calendar year. However, he didn't get the proper info to me until Sept 2006.

I prepared the 1120-A showing a $127 refund, which he signed on 9/12/06 and mailed via certified mail with R/R on 9/15/06. The R/R came back stamped 9/18/06. On 12/27/06 he received a letter denying the refund claim, and the denial letter showed the date the claim was received as being 9/18/06. A subsequent letter from IRS on 3/6/07 upheld the denial and stated that the return was considered filed on the day it was received, not the day it was mailed.

Apparently we might have been able to push the point based on the info Gene V furnished above, but in this case my charges for chasing the $127 would have been more than the amount of the refund. In retrospect, I'm glad there wasn't much money at stake because it's possible I wouldn't have thought to push the matter. I'll certainly keep Gene V's info handy if this wierd situation comes up again.

Good discussion, and interesting issues.

[MAJ]

Client 'was' in trouble with IRS

Thanks all for the valuable input.. Will digest and revie..
Sorry - I may have mistyped -- I believe the year in question was 2004 --- I will reivew and update.

I always appreciate the input..

MAJ