In this deficiency case, the taxpayer's self-reported liabilities, for year for which he e-filed return on extended due date that was rejected for failure to provide valid IP PIN and subsequently refiled return with IP PIN which IRS accepted.
The Tax Court determined on summary judgment that taxpayer's 1st submission triggered running of IRC Sec. 6501(a)'s 3-year Statute of limitations for assessment, so deficiency notice that IRS sent outside that period was untimely. Notwithstanding that the IP PINWas omitted, the taxpayer's 1st submission was “required return” and “properly filed.”
The court held that the 1st submission met the Beard test insofar as it purported to be return, appeared to be honest and reasonable attempt to comply with tax laws as it included his income, deductions, exemptions and credits along with supporting documentation, and was executed under penalties of perjury.
The U.S. Tax Court’s opinion in Beard v. Commissioner enumerated several factors to determine the presumptive validity of a taxpayer submission as a tax return. See 82 T.C. 766, 777 (1984), aff’d per curium, 793 F.2d 139 (6th Cir. 1986) (commonly referred to as the “Beard test”). The Beard test provides that when a taxpayer mails a paper income tax return to the IRS, the return is treated as valid as long as:
- the information on the return is sufficient for the IRS to calculate the tax liability;
- the filed document purports to be a tax return;
- the return makes an honest and reasonable attempt to comply with the tax laws; and
- the taxpayer executes the return under penalties of perjury
The IRS's argument that IP PIN was part of signature requirement was unsupported and otherwise failed where internal IRS guidance stated that element other than e-signature could be needed to authenticate electronic returns; where electronic return originator was instructed to verify taxpayer's identity; and where 1st submission included PPIN, which Form 1040 instructions identified as e-signature.
Also, taxpayer established delivery of his 1st submission to IRS with accountant's affidavit, accounting firm's transmission log, and IRS's acknowledgement of his submission/that taxpayer's e-filing attempt was unsuccessful due to above omission.
Possibly the Fowler case will persuade the IRS to change its practices of rejecting E-filed returns with issues having nothing to do with whether the taxpayer actually filed a return. While this opinion seems correct, we will see whether given the administrative importance of the issue, the IRS will appeal.