Filing a tax return during a global pandemic is proving to be an interesting feat. In addition to the myriad of law changes and stimulus programs impacting taxpayers’ returns, there continue to be structural issues caused by the various shutdowns that occurred in 2020 and linger in places today. Two structural issues specifically impacting taxpayers are the IRS and the US Postal Service (USPS).
The Main Issues of Tax Season 2020
The IRS was forced to shut its offices for several weeks in 2020 and IRS employees worked from home when possible. While the IRS is back up and running, they are still navigating the safety rules and stay-at-home orders that other businesses in the US and around the world face. As such, there are delays in most services, including the processing of tax returns and other correspondence mailed to them. Items mailed to the IRS likely will not be processed immediately, as has been the norm historically.
In addition, the US and other countries have dealt with delays in their postal systems. The USPS dealt with significant delays in mail service in 2020. While service in 2021 appears to be better, we’ve still noticed some issues.
How to Avoid Delays When Filing Your 2020 Return
The solution? Efile forms and pay online whenever possible. However, we realize this is not always possible; the IRS still does not allow e-file for a myriad of business and individual forms and there are times when online payments aren’t an option. In these cases, you must mail items to the IRS and it’s important that you mail them using methods that allow you to retain the proof of mailing and delivery.
The IRS generally will treat something as filed on the date it’s received by the IRS – this is the physical-delivery rule. Historically the courts enforced a second method called the mailbox rule, which stated that documents properly addressed and deposited in US mail by taxpayers were presumed to be received as of the date it was mailed, as evidenced by the postmark. This created two positions and confusion. The IRS acted to resolve this by issuing regulations, which were finalized in 2011. Their solution? They eliminated the mailbox rule, thus stating that a document was considered filed on the date it was physically received by IRS.
The regulations do provide an exception to the physical delivery method in certain cases. Long story short, the mailbox rule is still in place when taxpayers either:
- Use the USPS certified mail service or registered mail service, or
- Use a private delivery service that is pre-approved by the IRS.
Taxpayers who are physically in the US at the time they mail their documents to IRS often find it easiest and cheapest to use the USPS certified mail or registered mail service. It is vital that these taxpayers retain the proof of mailing and delivery in their tax documentation. These receipts become very important if IRS assesses penalties for late filing or claims that tax payment was not made because it has not yet been applied to the taxpayer’s account.
What International Tax Payers Need to Know
Taxpayers who are physically outside the US generally must use one of the IRS-approved private delivery services. This is expensive, but very important for proving that forms and payments are mailed timely. For example, Form 3520-A and Form 3520 are common forms filed by US taxpayers living outside the US. Each form carries a roughly $10,000 penalty for late filing. When faced with the possibility of a $10,000+ penalty, the cost of overnighting a document using a private delivery service pales in comparison.
The IRS has a list of approved private delivery service providers and services online. The page also contains a link to the addresses taxpayers must use when using private delivery as they will not deliver to PO Boxes. The list can be found here:
Good luck with this filing season and remember – keep that proof of mailing! If you need assistance filing your 2020 taxes, the experts at Anderson ZurMuehlen are happy to be a resource to you. Please contact us.
This article was written by Erin Stockwell, International Tax Team Lead, CPA, and Shareholder in our Great Falls office.