JacobsReport
on International Financial Planning

The JacobsReport is a free email newsletter that will discuss investment, business, tax and financial planning in an international context. Reports will be issued as the author's work schedule permits, but will usually be issued on a weekly schedule.

Certified Mail Tip for
Tax Filing Extensions

If you need more time to file a corporate tax return or the Form 3520-A for a foreign trust, you can get an automatic six month extension by sending in Form 7004. No signature is required and it can be filled out and mailed by a tax preparer on behalf of a taxpayer client. It should be mailed on or before March 15th.

If you use the U.S. postal service, the date the form is mailed is the date it is filed. According to tax code section 7502 and IRS regulation 301.7702, timely mailing is deemed to be timely filing. The regulations also provide that delivery to certain designated private delivery services (like Fed Ex) are treated as timely mailing. But you need to check to see which services the IRS recognizes. (http://www.irs.gov/pub/irs-regs/11543398.pdf)

However, the extension form 7004 does not provide any way to prove that the IRS received the form by the 15th of March. They are supposed to retain the envelope in which all correspondance is received, in order to ascertain the mailing date. But last year, I encountered a situation where they denied that a form was filed on time and attempted to impose a late filing penalty of $95,000 -- which was 5% of the assets in a foreign trust.

This year, I'm taking some extra steps to make it a lot more difficult for them to deny that a return was mailed on time. First, I'm using Certified Mail. Second, I'm writing the Certified mail article number on the margin of the form that I'm submitting before I put the form in the mailing envelope. Fourth, I'm making copies of the tax form with the certified mail form overlaid on the bottom of the form. Fifth, I'm asking the Post Office to use their printed postage (instead of a stamp) which shows the date very clearly.

Some may say that's severe over-kill. But if some IRS agents are going to be aggressive about disputing the filing date, then I'm going to be aggressive about making it really hard for them to win that argument.

Following the distribution of the comments above, Neil Sullivan, CPA sent me the following response.

"I agree with your methodology. I take it one step further and use return receipt requested. The green postcard has helped me deal with the tax authority's allegation/ assertion they have no record of receiving the form (extension or return).  I include the taxpayer's name, tax return form number and tax year on the green return receipt postcard."

Neil Sullivan, CPA
http://www.itcgpros.com/NAJS.htm