Reliance on Foreign Postmarks to Establish Timely Filing of U.S. Tax Returns

Taxpayers generally rely on the "mailbox" rule in Sec. 7502 to ensure that returns and other documents are treated as filed timely with the IRS. However, returns filed outside the U.S. are not covered by the Sec. 7502 mailbox rule; instead, these returns are subject to a different rule, set forth in Rev. Rul. 80-218. Thus, taxpayers filing outside the U.S. should be aware of the differences between the rules so that their returns are not considered late.

Returns Filed in the U.S.

Individual income tax returns made on the basis of the calendar year must be filed on or before the 15th day of the following April; corporation income tax returns are due on or before the 15th day of the following March (Secs. 6072(a) and (b)).

Sec. 7502(a)(1) provides, in relevant part:

If any return, claim, statement, or other document required to be filed...within a prescribed period or on or before a prescribed date...is, after such period or such date, delivered by United States mail to the agency, officer, or office with which such return, claim, statement, or other document is required to be filed,...the date of the United States postmark stamped on the cover in which such return, claim, statement, or other document...is mailed shall be deemed to be the date of delivery.

The "timely-mailed/timely-filed" or "mailbox" rule of Sec. 7502, which is taxpayer-favorable, is well known and often relied on by taxpayers. In 1996, the rule was extended to returns or other documents delivered by certain "designated delivery services" rather than by U.S. mail (Sec. 7502(f)).

Foreign-Postmark Rule

A related, similarly taxpayer-favorable rule, but one that is less well known and of more narrow application, is set forth in Rev. Rul. 80-218:

United States federal tax returns mailed by taxpayers in foreign countries will be accepted as timely filed if they bear an official postmark dated on or before midnight of the last date prescribed for filing, including any extension of time for such filing. If the last date for filing falls on a Saturday or Sunday, returns will be considered timely if postmarked on or before midnight of the following Monday.

IRS Policy Statement P-2-9, IRM 1.2.1.3.4, basically reiterates the holding of Rev. Rul. 80-218.

It is critical to note, however, that the foreign-postmark rule of Rev. Rul. 80-218 applies only to "tax returns" and does not extend to claims, statements or other documents.

Further, the Service's acceptance of foreign postmarks is not based on Sec. 7502, but rather on Sec. 6081, which grants a reasonable extension of time to file any return, declaration, statement or other document required by the Code or regulations. The inapplicability of Sec. 7502 to returns mailed in foreign countries is based on the "mailing requirement" set forth in Sec. 7502(a)(2)(B) that, on or before the applicable due date, the return must be "deposited in the mail in the United States."

In Pekar, 113 TC 158 (1999), the IRS argued, and the Tax Court held, that a return mailed in a package that had a timely foreign postmark was late because it was received after the due date. In that case, the IRS Chief Counsel focused on Sec. 7502 and its inapplicability to returns (or other documents) not deposited in the U.S. mail. However, in Letter Ruling (CCA) 200012085, the Service (1) conceded that the position it had taken in Pekar was "mistaken" and (2) reaffirmed the holding of Rev. Rul. 80-218, described in the letter ruling as a "reasonable and proper exercise of the Commissioner's administrative authority."

Alternative Interpretation

Rev. Rul. 80-218 could be read in such a way that would require a taxpayer to be in a foreign country to gain the advantage of the rule. This would call into question the ruling's applicability to a domestic corporation that operates exclusively in the U.S., but whose return physically is in a foreign country on the return due date (presumably because that is where the signing officer happens to be at the time). However, GCM 38295, which underlies Rev. Rul. 80-218, supports a view that a return is timely, as long as it is mailed and officially postmarked in a foreign country on or before the due date, regardless of the taxpayer's location.

As a precaution, taxpayers in major foreign cities might also consider filing returns with the local IRS representative. Having that official accept and date-stamp the return timely (and date-stamp the taxpayer's retained copy) should be persuasive on the issue of timely filing.

From Michael A. Urban, J.D., MLT, Washington, DC