Refund Trap.

• Author: Tapajna, Joseph J.
• Position: IRS tax return "mailbox rule"

A taxpayer's year 1 individual income tax return is due on April 15 of year 2. The taxpayer mailed the return on April 15 of year 5. It arrived at the IRS Service Center on April 17 of the same year. Under Sec. 7502(a)'s "mailbox rule," is the taxpayer entitled to a refund of the excess withholding reflected on the return? Two circuit courts are split on the answer.

In Anastassoff, 8/22/00, the Eighth Circuit said "no," relying on its unpublished opinion in Christie (1992). In Christie, it noted that the Code imposes two restrictions on refunds. First, Sec. 6511 (a) requires a taxpayer to file a claim within three years of filing a return or two years from the date on which he paid the tax. An original income tax return showing an overpayment of tax may double as a refund claim (an "original return claim"); see Regs. Sec. 301.6402-3. Second, Sec. 6511 (b) (2) limits the amount of the refund. Specifically, if Sec. 6511 (a)'s three-year period applies, the taxpayer may recover the amount paid within three years preceding the filing of the claim, plus any extension of time for filing the original return (the three-year lookback period). Alternatively, if Sec. 6511's two-year period applies, then the refund cannot exceed the amount paid within the two years preceding the filing of the claim (the "two-year look-back period").

On the assumed facts, Christie held that the refund claim was timely, because it satisfied Sec. 6511 (a)'s three-year requirement. Moreover, because the original return is late, the mailbox rule did not apply to it (and, implicitly, to the refund claim). The mailbox rule provides that, if a taxpayer mails a document to the IRS before the statutory deadline that does not arrive until after the deadline, the Service deems the mailing date as the filing date. Under Christie, even if the claim (as opposed to the return) was independently subject to the mailbox rule, the result is the same; the claim would be deemed filed before the return, implicating Sec. 6511(b)(2)'s two-year look-back period.

In Weisbart, 7/28/00, the Second Circuit reached the opposite conclusion. It observed that Treasury regulations seemingly contradict the IRS's position on the mailbox rule. Regs. Sec. 301.7502-1 states that "a return may constitute a claim for refund or credit. In such a case, section 7502 is applicable to the claim for refund or credit if the conditions of such section are met, irrespective of whether the claim is also a return." The...