Ask The California Employment Tax And Payroll Tax Attorney – Going To The Tax Court – Filing With Fed Ex Ground Won’t Work
By Robert S. Schriebman
The US Tax Court has very strict rules when it comes to filing a timely petition. The standard rule requires that a petition must be filed within 90 days from the date stated on the Deficiency Notice (there are exceptions for those filing outside the US). The petition must be in the Court’s hands no later than the 90-day deadline. There are limited exceptions that are generically known as the “Mailbox Rule.” A petition deposited in the USPS on or before the 90th day is deemed timely filed even if the Court receives the petition after 90 days. Recognizing that there are domestic carriers other than the USPS, the IRS, in 2016, published a list of private delivery services that have been designated by the Secretary of the Treasury as counting just as much as the USPS “Mailbox Rule.” The list is set forth in IRS Notice 2016-30, 2016-18 I.R.B. 676. The list includes Fed Ex – but not all FedEx services.
In the recent case of Dzuy Nguyen and Jessica Thai v. Commissioner, the US Tax Court ruled that the “Mailbox Rule” does not apply to Fed ex Ground. This article will discuss this case and show you what allowed FedEx services to use. (Nguyen/Thai, U.S. Tax Court, CCH Dec. 62, 323(M), T.C. Memo 2023-151, December 20, 2023). The case is also important in illustrating that waiting until the 11th hour can be a dangerous thing.
The Nguyen/Thai Case
On October 13, 2022, the IRS sent the taxpayers a notice of deficiency for the years 2017 and 2018 assessing deficiencies of close to $3 million. The notice stated the last day on which the taxpayers could timely file a Tax Court petition was January 11, 2023. Either the petitioners or their attorney decided to use FedEx Ground to deliver the petition to the Court. The petition was deposited with Fed Ex on January 10, 2023 and was received at the Tax Court on January 12, 2023, on the 91st day. If the taxpayers or their attorney had used USPS the petition would have been deemed timely filed. If they had used other FedEx services, the petition would have been timely filed. So, what was wrong with using FedEx Ground?
Tax Court’s Decision
Tax Court Judge Lauber explained that the Court is one of limited jurisdiction. The 90-day filing rule is set forth in IRC § 6213(a). The Court lacks the authority to extend the 90-day period. A late filed petition must be dismissed. The judge does not have the ability to extend this statutory deadline unless these are limited statutory exceptions.
There are limited exceptions to the requirement that a petition must be in the Court’s hands no later than the 90th day. Since the USPS is a federal agency, a petition mailed on or before the 90th day is deemed legally filed. The petitioner, using USPS, must use certified mail to be able to prove to the judge that he/she dropped the petition in the mail in a timely fashion. This is why getting the certified receipt “round-stamped” is so important.
IRC §7502(f) entitled “Treatment of Private Delivery Services” provides that any reference to USPS shall also include any designated delivery service if such service is designated by the Secretary of the Treasury. The IRS published a list of all private delivery services that have been designated by the Secretary for purposes of § 7502. The Fed Ex services so designated include the following domestic Fed Ex services:
FedEx First Overnight
FedEx Priority Overnight
FedEx Standard Overnight
FedEx 2 Day
FedEx Ground is not a listed method and because of that the taxpayer’s petition was not deemed timely filed – it was late. The taxpayers were thrown out of Court.
If we are lucky, we learn something new every day. I have to admit this case came as quite a surprise to me. In the past I have used FedEx Ground to file petitions and other documents. However, I did not wait until the 11th hour to do so. Never wait to the last minute to file any time-sensitive document. This is especially true when statutes govern time deadlines. Not only does this decision apply to a Tax Court petition but also applies to the filing of pleadings, administrative petitions, and claims for refund.
In this case, the taxpayers were left with some advice from Judge Lauber. He suggested that the taxpayers pursue with the IRS an administrative resolution of their 2017 and 2018 tax liabilities, although he did not specify the specific what avenue of resolution. I believe he was hinting at a payment arrangement through the Collection Due Process system. He also suggested that they could fully pay the $3 Million deficiency and file a claim for refund – but they better not used FedEx Ground.
Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD, and he is not employed by the EDD or any other agency of the State of California.
Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
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