Ok, we have had the current poll question up for a long time, and are sure many of you are ready for an answer. As such, here is not only what your AP department needs to know, but also a good look at the kind of detailed guidance our subscribers enjoy access to on a regular basis:

On August 22, 2011 the IRS issued final regulations effective on August 23, 2011 regarding the issue posed of proving a timely mailing so as to meet the requirements of a timely filing; and thus avoid a proposed penalty or other negative interaction with the IRS. In essence what the IRS is doing here is addressing the ongoing confusion over what constitutes “prima facie” evidence of the successful delivery of documents that have a tax filing deadline when there is no direct proof of actual delivery. To that end the new regulations clearly and unequivocally state that the proper use of registered or certified mail, or the use of a private delivery service (PDS) as defined by the IRS, will constitute “prima facie” evidence of delivery. The IRS will follow up and intends on further defining what does and does not constitute a PDS for the purpose of the delivery rule contained in the final regulations. Overall, these regulations build on long standing common law customs as well as statutory law.

As to the statutory law, Internal Revenue Code (IRC) Section 7502 has long since articulated what exactly constitutes a timely mailing or filing – providing that when a return is required to be filed by a particular date but, for some reason, is received by IRS after that date of filing, that the postmark on the envelope in which the return is mailed is considered to be the date of filing.  IRC 7502 goes on to provide that if a return is delivered via registered or certified mail, that the proof the document was correctly registered or certified and that the envelope had the correct address serves as prima facie evidence of delivery. This law builds upon long-standing common law conventions most commonly expressed as the “mailbox rule” holding that assuming the mail was properly addressed, postage paid, and turned over to the U.S. Postal Service that in essence it can be presumed to be received by the designated recipient absent facts to the contrary. All of this may seem crystal clear, but for reasons beyond the scope of this post, federal courts have split on rulings as to how the law works in practice when there is a dispute regarding whether or not the mailing was properly effectuated. This dispute, and comments from the information reporting and taxpaying community, prompted the IRS to issue proposed regulations finalized by Treasury Determination 9543 which was issued last August.

 The takeaway for you is that that, absent direct proof of actual delivery, for instance regarding your mailed payee statement, proof of proper use of registered or certified mail (registered or certified mail sender’s receipt), and proof of proper use of a PDS to be designated under criteria established by the IRS, are the only means by which you, as a third party reporter, can establish “prima facie” evidence of delivery of documents that have an IRS proscribed filing deadline. Now, in plain English and what this means regarding the use of the US Postal Service is that the following USPS services are NOT appropriate for establishing prima facie evidence of delivery: Priority Mail, Certificate of Mailing, Express Mail Receipt, Delivery Confirmation Receipt, and Signature Confirmation. For instance, the IRS singles out first class mail as an example of this policy, justifying its decision regarding the inadequacy of first class mail because “Absent actual delivery, however, first class mail without additional services provides nothing, such as certified or registered mail receipt, to establish proof of delivery.” The IRS explains its decision making as premised on the fact that IRC Section 7502 does not authorize the Treasury Department or the IRS to adopt a rule that would permit USPS services in addition to certified and registered mail to establish prima facie evidence of delivery because it is up to Congress, just as it did in the past when it added certified or registered mail as being acceptable for proof of timely filing, and therefore if Congress’ intent is to add such USPS services then the IRS will wait for Congress to act.

This means that going forward you will want to pay attention and look for further IRS regulations on what exactly qualifies as a PDS so that once filing season begins you can issue your payee statements and file with confidence – knowing that you have the documentation and procedures necessary to prove that you know and are following the law. We hope that those of you who answered "no" to our poll question have not only discovered something new, but also take the time to make sure that your entire AP department is up to speed on what you have learned. To enjoy further such guidance subscribe to the TIR Answer Center today!