Refund claim is timely, even though return was filed late.

In Weisbart, 7/28/00, the Second Circuit held that an individual's claim for refund in a return filed more than three years late was nevertheless a timely refund claim under Sec. 6511(a).

Weisbart received an extension to file his 1991 tax return until Aug. 17, 1992. The return, which showed an overpayment of withholding taxes of $4,867 (and thus served double duty as a claim for refund), was not mailed until Aug. 17, 1995 (three years after the return's extended due date). The IRS did not receive the return until Aug. 21, 1995 and denied the claim on the grounds that it was filed late.

Weisbart eventually filed a refund suit. In Weisbart (DC NY 1999), the district court granted summary judgment for the government on the grounds that the refund claim was late and therefore barred under Sec. 6511 (b)(2)(A), because it was deemed filed when received by the Service -- three years and four days after its due date. Weisbart appealed.

Is a Timely Filed Return Required Under Sec. 6511?

As a preliminary matter, the Second Circuit determined that it had an independent obligation to consider whether the district court had properly exercised jurisdiction over the refund claim. Noting that Sec. 6511(a) will deem a refund claim to be timely if it is filed within the later of three years from the time the return is filed or two years from time the tax is paid, the court observed that the "sticking point" in the instant case was the fact that Weisbart's 1991 return was untimely filed.

The IRS urged the court to decline to follow Miller, 38 F3d 473 (1994) (in which the Ninth Circuit held that a return had to be timely filed to satisfy Sec. 6511 (a)'s three-year deadline), in favor of Rev. Rul. 76-511, which held that a refund claim need only be filed within three years of the filing of a tax return, regardless of the timeliness of that return. Citing several decisions opposite to Miller, the court declined to follow Miller and concluded that a timely filed return is not required to satisfy the three-year rule of Sec. 6511 (a). Citing Regs. Sec. 301.6402-3(a)(5), the court further determined that Weisbart's refund claim was timely, as the 1991 return served as both a return and a refund claim within the same document.

Was the Refund Claim Timely Filed?

The court then considered whether Weisbart's refund claim, which was filed on Aug. 17, 1995 but not received by the Service until Aug. 21,1995 (i.e., four days beyond Sec. 6511 (a)'s three-year deadline), was nevertheless timely filed under the so-called "mailbox rule" of Sec. 7502. Sec. 7502 deems a return filed on the date it is postmarked rather than the date received by the IRS, if the postmark date falls on or before the "prescribed date" for filing.

The Service argued (and the district court agreed) that the "prescribed" period applicable to Weisbart's return should also apply to his refund claim, thus rendering the refund claim untimely because the return was filed late. The Second Circuit observed, however, that such a construction would deprive the refund claim of the benefit of the mailbox rule and was contrary to the IRS's own Regs. Secs. 301.6402-3(a)(5) and 301.7502-1, which, taken together, provide that the applicability, of the mailbox rule to a refund claim should be analyzed independently of the timeliness of the tax return regardless of whether they are within the same document. The court then concluded that, even though the 1991 return was untimely, the refund claim was deemed filed on Aug. 17, 1995, which was within three years of the date Weisbart was deemed to have paid his withholding taxes under the three-year look back rule of Sec. 6511(b)(2)(A) (i.e., Aug. 17,1992).

FROM KENNETH S. SAVELL, J.D., LL.M, KPMG LLP, WASHINGTON, DC

Editor's note: Mr. Ely is the immediate past chair of the AICPA Tax Division's Relations with the IRS Committee. Messrs. VanDeveer and Corbet, and Mdmes. Barnes, Hyde and Gervie, are committee members.

Mark H. Ely, J.D., CPA Partner Washington National Tax KPMG LLP Washington, CD