Watch out, taxpayers. The IRS can lose your tax return. That's what the First Circuit Court of Appeals essentially said in a recent case. If you're running a small business, you might want to take heed. It's important to keep track of all your tax documents, in case the IRS or the U.S. Postal Service loses your return.
If the IRS claims that it never received your return, you will have to prove that you sent it. That was the problem in this case. The taxpayers, a medical center, filed a claim for tax refund but the IRS claimed that they never received anything from the taxpayers.
The mailbox rule applies here-- if you've put it in the mail, it will be presumed that it got where it needed to go within a reasonable time.
The court was very clear in saying that if the medical center could prove that the claim was put in the mail, then they would give them some leniency. But they couldn't prove it. They had no receipts from the post office, no recollection of putting the documents in the mail and no certified receipt or registered receipt. All they had was evidence that the return had been prepared.
So, here are some fast tips on how to protect yourself from a similar situation:
Use certified or registered mail. When sending tax returns to the IRS, make sure you go to the post office and send the return through registered or certified mail. This way, you may be able to track the document and you will also have a paper-trail that you've sent it.
Send it with one-day delivery. This way, you can have further assurance as to when the return was expected to arrive.
Keep your receipts, photocopies of the envelope with a postmark and/or anything else to prove that you sent it. Documentary proof works better than word-of-mouth. So make sure you file these items in your tax files for the year.
While the IRS may never receive your return, you're safe on the deadline date so long as you can prove that you send it. One of the most important concepts in tax law is substantiation. Keep track of documents, keep a paper trail and keep your tax files in order.
Taxes: The Importance of Record Keeping (FindLaw Small Business)
Small Business Tax Deductions: Current vs. Capital (FindLaw Small Business)
Mailbox Rule (FindLaw Dictionary)
Business Taxation (FindLaw)