Ask The California Employment Tax And Payroll Tax Attorney – The “Mailbox Rule” – A Good Try Doesn’t Count
By Robert S. Schriebman 2020
Introduction
The Organic Cannabis Foundation, LLC has petitioned the US Supreme Court in an effort to overturn both the 9th Circuit and the US Tax Court, both having ruled that the petition filed in the US Tax Court was too late. This case illustrates just how important time deadlines are when it comes to filing a court petition or an administrative EDD petition to the CUIAB. The common thread that weaves through filing deadlines, relates to time limits for challenging audit assessments. Whether it’s the IRS or the EDD you have a right to challenge the results of an audit, but there are time deadlines always involved.
The so-called “mailbox rule” involves time deadlines for challenging tax audits. Unfortunately, the rule always seems to apply to those folks who wait until the eleventh hour to file a petition challenging the underling audit results. In short, the “mailbox rule” allows the petition to be deemed timely filed if it is properly deposited in the USPS. The petition does not have to actually arrive at the Tax Court or the CUIAB. As long as the petition or protest or claim for refund is timely deposited, it will be deemed timely filed.
There are some important rules that must be observed for one is to take advantage of the mailbox rule:
- You must have proof in writing that you made a timely deposit in the USPS. You cannot rely upon the testimony your friendly post office employee, “Oh yes, I remember Mr. Jones. He was at my post office station two weeks ago.” That doesn’t cut it.
- You must send your petition etc., by certified or registered mail and you must have your receipt round-stamped so you can prove that date of the deposit.
- You do not have to use the USPS to take advantage of the mailbox rule, but you must select a private carrier recognized by the Tax Court or CUIAB. Private delivery companies such as FedEx, UPS, or DHL are on the list of recognized carriers. As you will see below, Organic Cannabis did not use one of these carriers.
The Case of Organic Cannabis Foundation LLC (Organic)
Organic wanted to challenge an IRS audit by filing a petition in the US Tax Court. They hired attorneys to represent them. Unfortunately, these attorneys waited until the last day possible to file the petition. Instead of going to the post office or using a recognized carrier, the law firm gave the petition to a secretary who decided to use an overnight delivery service not recognized by the Tax Court. The delivery service attempted to drop off the petition at the Court’s headquarters in Washington DC, but the access was blocked off because of some unspecified safety threat. The delivery service was turned away by a guard. No attempt was made by the service to attempt another delivery that day.
No evidence was offered by the taxpayer to prove that it was impossible to attempt another delivery. The petition did not get timely filed.
What does an untimely petition mean? When you file a petition in the Tax Court or CUIAB, you do not have to pay the assessment first. An untimely petition means that the proposed assessment has become final and must be paid before it can be challenged through the refund process. This is an expensive and time-consuming “revolting development” to quote the late comedian William Bendix.
Conclusion
If Cannabis would have gone to the post office on the last day for filing, and sent the petition by certified mail, getting the receipt round-stamped, the petition would have been deemed timely filed, even if it arrived several days later. Likewise, if Cannabis would have delivered the petition to FedEx, UPS or DHL, they would have had a timely filed petition. A good try did not count.
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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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