Appeals court finds taxpayer failed to mail amended return in time despite mailbox rule

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A federal appeals court reversed a district court’s judgment, holding that taxpayers could not rely on the common law mailbox rule to show that an amended return had been timely filed in order to claim a tax refund.

The Ninth Circuit Court of Appeals reversed the lower court decision in the case, Baldwin v. U.S., CA-9, on Tuesday. In the case, a married couple, Howard and Karen Baldwin, filed an action to obtain a refund of taxes they paid for the 2005 tax year. The district court decided in their favor, awarding them approximately $167,000 plus $25,000 in litigation costs. But on appeal, the Ninth Circuit overruled the decision, holding that the district court lacked jurisdiction to hear the case.

As a prerequisite to filing a refund claim, the court noted that a taxpayer has to file a timely amended return claiming the refund. The common law rule allows proof of proper mailing to constitute timely delivery if it was mailed within the time it would ordinarily take to arrive. However, section 7502 of the tax code requires actual delivery of a document to the Internal Revenue Service with a postmark on or prior to the deadline. The IRS never received the amended 2005 return postmarked by the Oct. 15, 2011 deadline. The IRS eventually received an amended 2005 return in July 2013, but it was postmarked after the statutory deadline had passed. As a result, the IRS denied the Baldwins’ refund claim as untimely.

The appeals court observed that the underlying tax dispute, although not relevant to its decision, originated in the Baldwins’ attempt to carry back a loss from their movie production business in 2007 to 2005 to offset their 2005 tax liability.

The court found Reg. section 301.7502-1(e)(2), which interprets Code section 7502, is valid and applies in this case. Therefore, because timely filing is a mandatory requirement for maintaining tax refund suits, it reversed.the judgment of the district court.

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Tax-related court cases Tax refunds Tax returns Tax code IRS