It arrived on June 5, 2015: that dreaded envelope with the IRS in the upper left. The recipient was a small law firm in North Dakota, and when they opened the letter, it accused the business of failing to file copies of W-2 and W-3 forms (employee records) with the Social Security Administration. They were confused because they had filed the forms. They ended up ignoring the letter.
The IRS does not like being ignored. 45 days later, the IRS automatically imposed a 10 percent “intentional disregard” penalty on the firm, and on July 28, 2016, sent a much more alarming letter: a notice of intent to levy to collect $19,250, plus interest.
The firm immediately requested a due process hearing, where they argued that they had in fact provided the forms. That hearing was in May 2017, and on July 28, 2017, the IRS appeals office denied the appeal and sustained the levy. This letter, which arrived on July 31, started a 30-day clock for the firm to petition the Tax Court for an independent review. They filed their petition on August 29, the 31st day and one day late.
This case is therefore now a case about whether the Tax Court filing deadline — which appears in federal law at 26 U.S.C. § 6330(d)(1) — is “jurisdictional” or “claim-processing”; legal terms of art for “mandatory” or “not mandatory.”
The IRS and the Tax Court think it is jurisdictional: if someone misses the deadline, that strips the taxpayer of all ability to appeal the case and the jurisdiction of the courts to hear it. A three-judge panel of the U.S. Court of Appeals for the Eighth Circuit agreed with them, although three of the 11 judges wanted to rehear the case with the full court.
The petitioner law firm says the deadline is claim-processing — a step in the process, but one that the judge can order waived as part of equitably evaluating case-specific circumstances and any harm to the parties. The petitioner argues that nothing in the statute clearly shows it was meant to strip jurisdiction if the deadline is missed. The Ninth Circuit has previously held that the statute is jurisdictional, and the D.C. Circuit held that a similar tax deadline law is claim-processing.
The federal government, in its brief, predictably argues that the sky will fall if deadlines are waived. Congress could not have meant for the sky to fall, they argue, so therefore the deadline must be mandatory even if it wasn’t stated explicitly. They also argue that no appeals court has ruled differently and that even if the petitioner is right, they have no equitable reason to justify waiving the deadline in their case.
While the IRS is hammering a taxpayer for replying one day late, there is no deadline on its own responses to taxpayers. As of the end of May the IRS had a backlog of 35 million unprocessed individual and business returns, and only 3 percent of 85 million calls placed to the agency reached a live person. As former National Taxpayers Advocate Nina Olson put it to The Washington Post: “It is very frustrating to hear everyone talk about enforcement, enforcement, enforcement when the IRS is not picking up the phone to talk with people who need to resolve issues, especially when the issues are created by the IRS itself.”
The case is Boecher v. Commissioner, U.S. Sup. Ct. Docket No. 20-1472. We should hear by October if the Supreme Court will hear the case.