The impact of Boechler v. Commissioner on your payroll
Yes, the U.S. Supreme Court issued more mundane decisions this past term. One decision—Boechler v. Commissioner—has a direct impact on your payroll operations, at least if you’re late filing a Tax Court petition and the reason for your tardiness was beyond your control. It’s widely considered to be a win for taxpayers.
As you might expect, the IRS doesn’t like being slapped back and it isn’t taking the Boechler decision lightly. Instead, it’s reading the decision as narrowly as possible.
What happened in Boechler v. Commissioner
Boechler was small law firm. It didn’t file its W-2s on time, didn’t respond to IRS notices on time and mailed its petition to the Tax Court contesting the results of a collection due process hearing one day past the 30-day deadline.
The IRS wanted the CDP petition dismissed because it was one day late; the lower courts obliged. The Supreme Court reversed, ruling the 30-day deadline for filing CDP petitions wasn’t a hard deadline. Taxpayers can skirt it if their reason is good enough, the court said. This is called equitable tolling. The Supreme Court, however, didn’t say whether Boechler was entitled to equitable tolling. This issue will be fleshed out in the lower courts.
Statutes of limitations, like the 30-day filing deadline, exist for a reason—to ensure the orderly administration of the law. Any law.
The Supreme Court was specific in Boechler. It applies only to petitions related to CDP hearings, which fall under IRC § 6330(d)(1).
After Boechler, a new case
Hallmark Research Collective, a pot dispensary in California, deducted its expenses, like any other business does. Hallmark’s problem: Pot is a controlled substance at the federal level, so pot businesses can’t deduct their expenses. The deduction caused the IRS to issue a deficiency notice.
Hallmark also filed its Tax Court petition one day late. It’s now challenging the 90-day filing deadline for filing a Tax Court petition to contest a deficiency notice under IRC § 6213(a). Its mitigating circumstance: Its accountant contracted covid, so it filed the petition itself.
According to the IRS, the 90-day filing deadline is jurisdictional. In other words, miss it by even one day and you’re out of luck, regardless of how compelling your reason is for missing the deadline. This IRS made the same argument in Boechler.
The IRS pointed to the historical context, legislative history and the uses of the word jurisdiction and shall in IRC § 6213(a). As one example, the section says:
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.
More persuasive for the IRS is wording in Boechler stating IRC § 6330(d)(1) appears in a section of the tax code—Chapter 64 (Collection), Subchapter D—that’s unusually protective of taxpayers and a scheme in which laymen, unassisted by trained lawyers, often initiate the process. IRC § 6213(a) appears in Chapter 63 (Assessment), Subchapter B, which has a much longer history and isn’t parked in a section of the code particularly suited to laymen.
Don’t take a chance
You shouldn’t count on any court ruling against the IRS any time soon. If you’re not e-filing, your best bet is to mail your documents certified, return receipt requested. Admittedly, it’s inconvenient—you have to trudge down to the post office, fill out all those receipts and postcards and wait on line to pay more for the privilege. But you’re covered. Under the mailbox rule, your tax returns or Tax Court petition will be timely filed, even if the IRS or the court never receives it.
