Does the mailbox rule apply to a private delivery service?

Question of the week: Can penalties and interest be waived for a return timely filed through a private delivery service? Does the mailbox rule apply?

September 16, 2020

Q. Should penalties and interest be waived under the mailbox rule for a return that was timely mailed through a private service?

Sam, a potential new client, asked for our help with an IRS notice she received. According to the notice she owes late filing and late payment penalties on her 2018 tax return. There is a small amount of interest too. She completed the return on her own and there was a large balance due. There were also several attachments she wasn’t quite sure how to handle and, since it was April 14, she decided to mail the whole thing along with the check using a private delivery service. According to the notice the IRS received the return several days after the due date. Shouldn’t the mailbox rule apply here? Sam has a receipt showing she mailed her return before the due date.

A. Unless the return was mailed using a designated private delivery service, late filing and payment penalties and interest apply for returns received after the due date.

Sam will probably have to pay the penalties and interest the IRS assessed on her 2018 return.

Under §7502, a document or payment that is timely mailed before the due date is treated as timely filed or paid, that is, filed or paid by the appropriate due date. For instance, a Form 1040 mailed in an envelope that is postmarked April 13 is treated as timely filed by April 15, even if the return is not delivered to the IRS until April 16. This rule, often called the “mailbox rule,” refers to the U.S. Post Office postmark stamped on the envelope in which the return, check, or other document was mailed. Under §7502(f), the mailbox rule may also apply to a designated private delivery service (PDS).

To qualify, a designated PDS must:

  • Be available to the general public
  • Be at least as timely and reliable on a regular basis as the USPS
  • Record in its electronic database or mark on the cover of the item to be delivered the date on which the item was given to the PDS for delivery
  • Satisfy other IRS criteria

Other services provided by private carriers, even well-known ones, do not fall under the mailbox rule. In Sanders v. Comm’r, a taxpayer’s untimely Tax Court petition delivered by “UPS Ground” was dismissed. Although the UPS label was dated one day before the due date for the request, it was delivered three days after the 90-day deadline had expired and, because UPS Ground was not a designated PDS, the mailbox rule did not apply. Consequently, the petition was treated as submitted on the date it was actually delivered to the court rather than the date it was mailed.

The IRS regularly updates its PDS list. Any services not shown on this list, including other DHL, FedEx, and UPS services, are not designated PDSs for purposes of the mailbox rule. Since it took days to deliver Sam’s tax return it is likely that she did not use a designated PDS. If she used one of these carriers but not a listed service, or used a different private carrier altogether, then the IRS receipt date is the date it was filed and her 2018 tax return was not timely.

Sam may be eligible for first time abatement relief if all of the following are true:

  • She had no previous return filing requirement or had no penalties for the previous three years (2015-2017).
  • She filed her current year tax return or an extension.
  • She has paid any tax due.

Assuming the three requirements are met, Sam should contact the IRS at the number shown on her notice to request abatement. If the penalties are abated, interest that accrued on the penalties will be abated as well.

If Sam did use a designated PDS then she should contact the IRS at the number shown on the notice and provide proof of her timely mailing.

The mailbox rule may apply to any type of deadline, such as the court petition in the Sanders case. Taxpayers who are concerned about approaching deadlines should be mindful of acceptable ways to send returns and documents to the IRS and not simply assume a receipt will satisfy the mailbox rule.

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