ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – THE IMPORTANCE OF THE “ROUND-STAMP” IN TIMELY FILING A PETITION – THE CHANG CASE A LESSON THAT APPLIES TO BOTH THE IRS AND THE EDD
By Robert S. Schriebman
Waiting to the last minute to file any type of petition involving taxes, is never a good idea. It is also vitally important how that petition is filed and when it is deemed timely filed. The sad case of Herbert Change brings home the old adage of being a day late and a dollar short. In this article we will review the U.S. Tax Court decision in the Chang matter and show you why you cannot rely on a private postage meter to determine timely filing.
The Case of Herbert W. Chang
Herbert owed the IRS for the tax years 1999 to 2014. When you owe the IRS, you will receive a series of computer generated collection notices, each notice is more threatening. You will eventually receive a Notice by certified mail telling you that you have the right to file a Collection Due Process (CDP) Petition. Read the certified notice very carefully and completely to learn if you have petition rights and where to properly file you petition. Your petition rights are sometimes hidden in the text.
The timely filing of the petition stops the IRS from doing any enforced collection action, such as a bank account levy or wage garnishment. You will have an opportunity to work out a payment resolution on your tax debt. You will also have the right to go to the US Tax Court (or U.S. District Court) without first having to pay the IRS. The judge is there to help you work out a payment arrangement. These rights accrue to you only if you file a timely petition. This means filing a petition within 30 days from the IRS ‘mail date.’
If you fail to timely file a petition, but if you file a petition within one year from the mail date, you will receive an Equivalency Hearing. This gives you the opportunity to work out a payment resolution with an IRS Settlement Officer but you have no right to go to court if things don’t work in your favor.
Herbert Chang received a CDP notice but waited until the very last day to file his petition. He simply put on a stamp, dropped the envelop in the mail box, and walked away without getting the letter ’round-stamped’ to show proof of mailing. The IRS received the letter after the 30-day deadline for a regular hearing but offered Herbert an Equivalency Hearing. Herbert found this unacceptable and challenged the timely filing issue in the Tax Court.
At the same time Herbert mailed his petition, his accountant also sent a copy of the petition on his own, using a private postage meter. The postage meter marking showed a timely filed petition. Did the private postage meter save the day and allow Herbert to have full CDP rights?
The U.S. Tax Court Decision
Judge Gerber ruled that Herbert had no standing to seek full CDP petition rights. The IRS received Herbert’s letter with no postmark. The IRS received Herbert’s letter one day after the due date for full CDP rights. Herbert testified at the hearing that he was certain that he mailed or deposited his envelop in a mailbox at the Waialae, Kahala Post Office in Hawaii. The Court cited Baldwin v. United States, 921 F.3d 836 (9th Cir.2019) holding that extrinsic evidence cannot be used to prove timely mailing where there is no postmark.
Herbert should have gone into the post office and obtained a “round-stamp” from the clerk. The round-stamp would have been conclusive proof of a timely filed petition. The IRS has a rule known as “timely mailing equals timely filing” But you must have proof of timely mailing. The round-stamp gives you that proof.
A post office official testified that when the USPS receives an envelope, that envelope receives a barcode which is printed on it by a computerized mail processing machine. The barcode represents a serial number that identifies the time and date an envelope is received in the facility. In Herbert’s case the barcode was put on one day too late.
Judge Gerber also cited the Baldwin case in holding that the post mark on the private postage meter constituted extrinsic evidence that could not be used to prove timely mailing.
For years the courts have held that an official USPS round-stamp is absolute proof of the date something was mailed or filed with the IRS. The post mark on a private postage meter has no weight at all. Getting a round-stamp only takes a few minutes and is free. Taking those few minutes to do things right will prevent you from being one day late and one dollar short.
The rules relating to the impact of the round-stamp also apply to the filing of EDD petitions and Claims for Refund.
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 40 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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