Missing IP PIN does not toll the limitation period

The Tax Court granted summary judgment to a taxpayer, holding that the collections limitation period had expired because it had started when the taxpayer first e-filed his return, even though the return lacked his identity protection personal identification number (IP PIN). According to the court, the return nonetheless was properly filed for purposes of the limitation period.

Facts: Robin Fowler’s 2013 federal income tax return was e-filed on Oct. 15, 2014, by a CPA firm, after Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, had been timely filed. The taxpayer e-signed Form 8879, IRS e-file Signature Authorization, that authorized the CPA to e-file Fowler’s return. The firm submitted the return electronically with the proper practitioner personal identification number (practitioner PIN). The IRS rejected the return due the lack of an IP PIN.

On Oct. 28, 2014, the CPA firm submitted by certified mail with return receipt a paper 2013 tax return signed by the taxpayer to the IRS. The mail return receipt showed that the IRS received the tax return on Oct. 30, 2014. In December 2014, however, Fowler received a notice that the IRS had not received his 2013 tax return. On April 30, 2015, the CPA e-filed another 2013 return for the taxpayer, which included the taxpayer’s IP PIN, and the return was accepted by the IRS. The only difference in the content of the three tax returns was the IP PIN included on the third return the taxpayer submitted.

On April 5, 2018, the IRS issued a deficiency notice to Fowler for the 2013 tax year. Fowler petitioned the Tax Court for relief on the grounds that the statute of limitation had expired.

Issues: Generally, under Sec. 6501(a), the IRS has three years from the date of filing to assess a tax liability. The statute-of-limitation period begins on the due date for a timely filed return or on the date of filing for a late return. The proper filing of a document will start the limitation period if the document is a required return. A document is a required return if it (1) purports to be a return and includes enough information to compute the tax liability, (2) the taxpayer made an honest and reasonable attempt to comply with the tax law, and (3) the taxpayer signed the document under penalties of perjury. A tax return is properly filed if the taxpayer’s method of filing the return is consistent with the IRS’s prescribed filing requirements.

The IRS argued that the Oct. 15, 2014, and Oct. 28, 2014, submissions were not required returns because, due to the missing IP PIN, they failed the signature requirement.

Holding: The Tax Court granted summary judgment in favor of Fowler. The court held that the Sec. 6501(a) limitation period started on Oct. 15, 2014, because the return filed on that date was a required return that had been properly filed. It was a required return because it was on a Form 1040, so it purported to be a return. It included Fowler’s claimed income, deductions, exemptions, and credits necessary to compute his tax liability, and Fowler appeared to have made an honest and reasonable attempt to comply with the tax laws. The practitioner PIN was a valid e-signature, and, thus, the taxpayer satisfied the signature requirement. The court rejected the IRS’s argument that the IP PIN requirement was part of the signature requirement, because it could not find any IRS instructions or guidance that indicated that was the case.

The court also held that the return had been properly filed. The court explained that this requirement deals with the mode of filing the return, not its content. Generally, a return that is a required return is considered to be properly filed upon delivery to the IRS, even if the IRS does not accept or process it.

After considering the evidence and testimony before it, as well as the IRS’s admission in its own cross-motion for summary judgment, the Tax Court concluded that there was no genuine dispute that the 2013 return Fowler submitted on Oct. 15 had been properly delivered to the IRS. The issue of whether an IP PIN had been included within the document submitted related to the content of the document, not its mode of filing, the court held. The court therefore found that the return had been properly filed.

Because the court concluded that Fowler properly filed a required return on Oct. 15, 2014, the statute-of-limitation period began on that date, and thus the April 5, 2018, notice of deficiency was filed over three years from the filing date of the return. Consequently, the notice was held to be untimely.

• Fowler, 155 T.C. No. 7 (2020)

— By Charles J. Reichert, CPA.