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Certified Mail? More Like Certified Fail.

By William Peacock, Esq. on January 24, 2013 | Last updated on March 21, 2019

Anyone here familiar with 1950s game shows? Yep. Thought so.

An otherwise ordinary tax dispute was made slightly less ordinary by the inclusion of a pop culture reference to the "$64,000 Question" a 1950s game show.

(A quick note to clerks and judges everywhere: if your pop culture reference requires a footnote, it's probably too obscure. Stick to Bieber Fever.)

As for the actual $64,000, it is a disputed overpayment refund for the Stockers. As many taxpayers do, they waited until the deadline (even with multiple extensions) to mail their documents. When their tax preparer mailed the envelopes, he left part of the certified mail receipt in the office, making the concept of certified mail absolutely useless.

The Stockers filed multiple tax documents in addition to the $64,000 refund. All of the others were received and processed on time. This refund, however, allegedly had a four-day-late postmark, per the IRS's records. Unfortunately, the IRS did not preserve the original envelope, despite internal regulations requiring that it do so.

What date matters for purposes of determining timeliness of IRS filings?

Traditionally, it was the "physical delivery rule", meaning the date upon which the IRS received the documents was the relevant date. However, Congress carved out two exceptions with 26 U.S.C. § 7502, the postmarked date and the registration date (for certified mail).

The Stockers had no envelope (thanks to the IRS) and no certified mail receipt.

Are these the only two ways to prove a mailing date? In the Sixth Circuit, Second Circuit, and a few others, yes. Conversely, in the Third and Ninth Circuits, the statute is considered supplemental, meaning other evidence can still be introduced.

But the Stockers weren't finished. They also argued for an adverse inference spoliation instruction due to the IRS' violation of its own regulations in destroying the envelope. After all, the only record of the actual postmark was that envelope - the IRS merely has a date stamp applied by its employees.

In order for an adverse inference instruction to be appropriate, the moving party must show (1) an obligation to preserve the evidence; (2) the records were destroyed with a culpable state of mind; and (3) the destroyed evidence was relevant to the claim.

The IRS internal regulation provides the obligation to preserve the evidence. And a postmarked envelope is obviously relevant. Is negligence a sufficient "culpable" state of mind?

Culpability depends on whether the party destroying the evidence knew it was relevant to litigation but destroyed it anyway. Though the Sixth Circuit has previously held some negligent parties culpable, it declined to do so here after balancing the IRS's fault against the allegedly- late postmark and the fact that the envelope was marked "certified." (Certified mail gives rise to a reasonable assumption that the sender had a return receipt, rendering the envelope unnecessary.)

What's the takeaway for your firm? Mail early. If not, use certified mail and keep the receipt!

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