What Happens if Your Tax Deficiency Petition is Filed Late?

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Anything can cause you to miss a deadline, from illness to mailing issues. But the IRS doesn’t tend to excuse those delays. This can raise the question, what happens if your tax deficiency petition is filed late? Can you ask for an extension? Can the United States Tax Court pause the clock when circumstances justify it?

What is the Deadline to Contest a Notice of Deficiency?

If you receive a statutory notice of tax deficiency (NOD) from the IRS, you have 90 days from the date of the letter to file a petition with the United States Tax Court for a pre-payment review of the decision. If your mailing address is outside the United States, that deadline is extended to 150 days. You may also pay the amount on the deficiency notice, and then file a lawsuit in federal court for a refund of improperly assessed taxes or incorrectly imposed penalties.

The IRS’s NOD specifically describes the 90-day deadline to file a tax deficiency petition. It also says:

The time you have to file a petition with the Tax Court is set by law and can’t be extended or suspended, even for reasonable cause. We can’t change the allowable time for filing a petition with the Tax Court.

There are certain tiny exceptions to the 90-day limit. If the 90th day falls on a Saturday, Sunday, or legal holiday in the District of Columbia, it can buy you one more day. According to law, the NOD must also state the last day to file your tax deficiency petition.

Can You Get an Extension if Your Tax Deficiency Petition is Filed Late?

If you miss the deadline and file your tax deficiency petition late, the United States Tax Court will dismiss your case on its own initiative. In Hallmark Research Collective v IRS, the petitioner missed its deadline by one day. Hallmark, a California business, missed its filing deadline for its 2015 tax return and failed to file its 2016 return entirely. The IRS issued a substitute return and then a NOD to Hallmark by mail on June 3, 2021. The NOD stated the determined deficiencies, tax additions, and penalties against Hallmark, and set the last day to file its petition as September 1, 2021.

Unfortunately, Hallmark’s CPA contracted COVID and didn’t file the petition until 9:36 pm on September 2, 2021, one day late. The Tax Court sent an Order to Show Cause asking the parties why it shouldn’t dismiss the petition for lack of jurisdiction since the petition was filed late. Hallmark asked the Court to wait for the Supreme Court’s decision in another case, but the Court didn’t. It dismissed the case, allowing the IRS to move forward with collecting the penalties.

Is Your Petition’s Time Limit Jurisdictional?

Earlier this year, the Supreme Court of the United States decided Boechler, P.C. v Commissioner. In that case, the Supreme Court said that a filing deadline in a different part of the tax code could be tolled or extended, for good cause. That case dealt with a collections due process appeal, where the taxpayer had just 30 days to file a petition to review an IRS decision collecting tax penalties. The Supreme Court said that, based on the specific language of the statute, the deadline was a procedural rule, not a jurisdictional limit. That meant the courts could toll the limit and consider a petition that was filed a day late for good cause.

In Hallmark, the petitioner went back to the United States Tax Court, asking the judge to reconsider its dismissal, after the Boechler decision was issued. Hallmark said that based on Boechler, the tax deficiency petition deadline wasn’t jurisdictional either, and the Court should excuse it for filing its petition one day late. The U.S. Tax Court disagreed. It issued a new opinion reaffirming its earlier dismissal because, unlike the due process appeals rule in Boechler, the Court said the language in this part of the tax code was jurisdictional. The Court quoted an earlier Supreme Court decision, saying:

“To determine whether Congress has made the necessary clear statement, we examine the ‘text, context, and relevant historical treatment’ of the provision at issue.”

Jurisdictional statutes:

  • Speak of the court’s power in jurisdictional terms
  • Define the court’s authority to hear suits and limit its equitable powers
  • Are imbued with jurisdictional consequences through their context and history

The Tax Court found each of these to be true of the 90-day tax deficiency petition deadline. It said that the deficiency procedures required both the mailing of the NOD and the filing of a petition within 90 days before the Court has authority to make a deficiency determination. The statute states:

The Tax Court shall have no jurisdiction to enjoin any action or proceeding or order any refund under this subsection unless a timely petition for a redetermination of the deficiency has been filed…

Just like the Court had no jurisdiction over a deficiency determination until an NOD was issued, it also had no jurisdiction when the petition was filed late. The jurisdictional requirement was in the same sentence of the statute. The law also limited the Court’s equitable powers, preventing it from entering an injunction or refund unless a timely petition had been filed, and then only on the subject of that petition, and not, for example, over a related refund claim. It found that, given Congress’s history of making marginal extensions for weekends and holidays, it was clear the Tax Court did not have the power to extend the jurisdictional tax deficiency petition deadline.

The Court considered how a non-jurisdictional reading of the statute would be applied, and how changes to the tax code affected the jurisdictional statute. Ultimately it held that the tax deficiency petition filing deadline was jurisdictional, and could not be tolled. Based on those decisions, it refused to vacate the dismissal of Hallmark’s petition for being filed a day late.

Hallmark shows how important it is to talk to a tax attorney as quickly as possible when you receive a Notice of Deficiency from the IRS. Delays that have nothing to do with you can delay the filing of your petition. If you miss your deadline, Hallmark says there is nothing the courts can do to restore your right to have them review the assessment.

Attorney Joseph R. Viola is a tax attorney in Philadelphia, Pennsylvania with over 35 years experience. If the IRS is trying to collect unpaid taxes and penalties from you or your clients, contact Joe Viola to schedule a free consultation.

Categories: Tax / IRS Penalties