United States

Timely mailed is timely filed when a late return is a claim for refund

TAX ALERT  | 

In a recent district court decision, Harrison v. United States, No. 3:19-cv-194 (W.D. Wis. 2020), the court found that a late filed income tax return was a timely filed claim for refund under I.R.C. section 6511(b)(2)(A), vacating its previous order in favor of the government. Section 6511(b)(2)(A), referred to as the “three-year look-back,” limits a refund to taxes paid during the immediate three years preceding the date the claim is filed plus extension. The taxpayers’ case in Harrison turned on whether the date filed for the look-back began from the date the taxpayers mailed the late return/claim or from the date the IRS received the claim.   

The taxpayers in Harrison obtained an extension to file their 2012 income tax returns to Oct. 15, 2013. Three years later, on Oct. 11, 2016, they mailed their return, which claimed an overpayment of taxes paid as April 15, 2013. The IRS received the return on Oct. 17, 2016. The IRS applied the three-year look-back from Oct. 17, 2016 to April 17, 2013, determined the overpayment was outside the three-year window and denied the claim. The government argued that as a matter of law the claim was not timely because section 7502(a), the so-called “Mail Box Rule”, does not apply in situations where the original due date (Oct. 15, 2013) has already passed. Thus, according to the government, the date filed in this case for purposes of section 6511(b)(2)(A) was the date received. The court agreed.   

On a motion for reconsideration, the taxpayers argued that the Mail Box Rule did apply and the three-year look back was from Oct. 11, 2016 to April 11, 2013, bringing the April 15, 2013 overpayment within the three-year window. The taxpayers brought to the Court’s attention Treasury Regulation section 301.6502-1(f). It states that if an otherwise late-filed tax return is also a claim for credit or refund, then the date mailed is the date filed even if it is mailed after the original due date for the return. 

Reversing itself, the government did not oppose the taxpayers’ motion and informed the court that it erred in opposing the taxpayers’ position from the beginning. The government revealed that in Weisbart v. United States Department of Treasury and Internal Revenue Service, 222 F.3d 93 (2d Cir. 2000), the appellate court ruled against the government on this very issue.  Further, the IRS acquiesced to this decision in AOD-CC-9, and issued Chief Counsel Notice CC-2001-019, wherein it announced a change to its litigation position concerning the application of section 7502(a) to claims for refund on late filed income tax returns. The court noted that although neither side had brought these authorities to the court’s attention, the failure was an egregious misstep and negligent on the part of the government. In addition to vacating its previous order and finding for the taxpayers, the court also ordered the government to circulate the Weisbart opinion and the IRS Chief Counsel Notice no later than Feb. 12, 2020. 

Practitioners should be mindful that if a late-filed return is also an administrative claim for refund, then the date mailed is used when calculating timeliness with respect to the three-year look back under section 6511(b)(2)(A). If you have any questions about the statute of limitations for filing a refund claim, please contact a member of the tax controversy team. 

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