The Internal Revenue Service is giving a Wisconsin couple their long-sought $7,386 refund — plus seven years of interest — after government lawyers admitted they overlooked 20-year-old points of law about when a tax return is technically filed.
But the government admission this week came after it already convinced Western District of Wisconsin Judge William Conley to dismiss Mark and Ellen Harrison’s case because the couple supposedly missed the filing deadline by two days.
The underlying case hinged on what counted as the date of filing: when the return was postmarked or when the IRS received the return.
That was too little, too late for Conley, who fumed Wednesday over the “egregious missteps” and ordered the IRS to pay the Harrisons. (The feds acknowledged they had to send the refund in their court papers admitting the oversight.)
Conley also ordered lawyers at the IRS and the Justice Department’s Tax Division to read his decision and the underlying case to make sure a mix-up like this didn’t happen again.
The Justice Department was reviewing the decision, “but has no comment at this time,” a spokeswoman said. The IRS could not be immediately reached for comment.
The La Crosse county couple put their 2012 tax return in the mail on Oct. 11, 2016, after getting a six-month extension back in April 2013.
However, the IRS received the return on Oct. 17, 2016 — which its lawyers said was two days too late. In March 2017, the IRS said the refund claim was too late.
The Harrisons filed their lawsuit in March 2019, insisting they were correct and due a refund. The IRS, represented by an attorney in the Justice Department’s Tax Division, fought the case in litigation that stretched for almost a year.
The general rule, with added caveats, is taxpayers have three years to claim a refund, a deadline the IRS publicizes. (There’s no penalty for late filing if a person doesn’t owe taxes.)
The IRS also publicizes the importance of the postmark. In a link about timely returns filed during tax season, not in the context of a late filed return like the Harrisons, the IRS said, “your return is considered filed on time if the envelope is properly addressed, has enough postage, is postmarked, and is deposited in the mail by the due date.”
In any event, Conley sided with the IRS in early January, even though admitting the outcome “seems harsh.”
The Harrisons had asked Conley to reconsider his first decision because their lawyers, the government’s lawyers and the judge himself all missed an important legal point saying the postmark date is the formal filing date.
They pointed to a 2000 decision from the Second Circuit Court of Appeals about the “mailbox rule” and a 2001 Treasury Department regulation.
In contrite court papers, the feds said the Harrisons were right. “We apologize for this failure and sincerely regret the resulting expense of judicial resources on this matter,” wrote federal attorney Gretchen Ellen Nygaard.
The IRS did not bring up the 2000 case or resulting regulation when the Justice Department lawyer consulted the agency on the case, according to the filing. Likewise, Nygaard said Justice Department research found the case, “but did not find it controlling in this Circuit.”
She added that “regrettably,” she also overlooked the Treasury Department regulation.
Conley used the same word in his assessment of the situation.
“Regrettably,” the Harrison’s didn’t invoke the case law, but also said it was up to the IRS and the Justice Department to enforce the law.
The Harrison’s lawyer, Galen Pittman, could not be immediately reached for comment. But Conley’s first decision floored him. “It’s just unfair they could deny this claim,” he told MarketWatch at the time.