The recent decision in Rewwer v. United States, 1:20cv495 (S.D. Ohio 2022) regarding a misfiled refund claim later corrected reaches the opposite conclusion from the Court of Federal Claims’ recent decision in Dixon v. United States, (Ct. Fed. Cl. 2022) (Dixon 2) (blogged here) and contradicts the decision in Fulham v. United States, 1:20-cv-05871 (N.D. Ill. 2021), that I blogged about on December 17, 2021, which took a very narrow view of what could pass muster as an informal claim. In each case the taxpayer did not properly file the original claim. Rewwer more or less combines the mistakes made in Fulham and the Dixon cases, yet the taxpayer in Rewwer moves on to the merits while the taxpayers in Fulham and Dixon can’t get out of the starting gate. Another recent case, Deeb v. United States, 1:20-cv-01456 (N.D. Ga. 2022), doesn’t concern itself with whether the form is correct but dismisses on variance. Credit to Carl Smith for staying on top of these issues and providing much of the language for this post.
In Fulham, the taxpayer filed a Form 843, seeking a refund of income taxes. After not getting a response, he filed a refund suit. While in court, he learned that he should have used a Form 1040X, so he filed a Form 1040X with the court using PACER, not with the IRS. The court dismissed the case for lack of jurisdiction (LOJ) because the Form 843 was the wrong form, and the right form was not filed with the IRS before suit began.
In Dixon 1 (at 147 Fed. Cl. 469 (2020)), the taxpayer filed Forms 1040X with the IRS, but those forms were signed for the taxpayer by his attorney, John Castro, who held a POA, but not one entitling him to sign tax returns for the taxpayer. The signature on the taxpayer signature line was hard to read, and the IRS did not realize until the first Dixon case was in court that Castro had signed the Forms 1040X. Prior to the suit being brought, the IRS had reviewed the claims and denied them on the merits. The Court of Federal Claims (CFC) held that the lack of signatures from the taxpayer on the Forms 1040X was fatal to jurisdiction because the requirements to sign and to verify under penalties of perjury were statutory and not waivable. The court distinguished the Supreme Court’s opinion in Angelus Milling Co. v. Commissioner, 325 U.S. 293 (1945), which held that the IRS could waive the non-statutory claim specificity requirement by rejecting a claim on the merits. The Dixon court said that the signature and verification requirements are statutory and not waivable.
The Dixon 2 case arose after Mr. Dixon went back and properly signed identical Forms 1040X to the ones originally signed by Mr. Castro and filed them with the IRS. They were filed, however, after the statute of limitations for refund claims expired. When the IRS did not allow the corrected refund claims, Mr. Dixon then brought a new CFC refund suit on the new Forms 1040X, where he argued that the original Forms 1040X were informal claims that were perfected by the corrected Forms 1040X, so the corrected Forms 1040X were deemed to relate back to the originals for purposes of the timely filing requirement. In the Dixon 2 opinion, the CFC again dismisses for LOJ, holding that the improperly-signed Forms 1040X cannot constitute informal claims because of the lack of the taxpayer’s signature and compliance with the verification requirement.
Rewwer presents a combination of facts from both the Fulham and Dixon cases. In Rewwer, the taxpayers timely filed Forms 843 with the IRS for a few years, which the IRS considered on the merits, granting one and denying two. The Forms 843 were signed on the taxpayer signature lines by a holder of a POA, as “[taxpayer] POA”. During consideration of the claims, the IRS told the taxpayers that Forms 843 were not the right forms, so the taxpayers then submitted Forms 1040X in replacement. The Forms 1040X were not properly signed and verified by the taxpayers, either. The Forms 1040X were filed after the 3-year SOL under 6511 had expired. After two Form 1040X claims were disallowed, the taxpayers brought suit in district court. Only then did the taxpayers learn that the Forms 1040X were not properly signed, so the taxpayers prepared new, identical Forms 1040X and filed them with the IRS during the refund suit. The court rejected an IRS motion to dismiss, finding the Forms 843 to be informal claims for refund that had been timely filed, even though on the wrong form and with the wrong person signing and verifying. Here’s a quote from the Rewwer opinion:
An informal claim must have ‘a written component . . . and should adequately apprise the Internal Revenue Service that a refund is sought and for certain years.’” Estate of Hale v. United States, 876 F.2d 1258, 1262 (6th Cir. 1989) (quoting American Radiator & Standard Sanitary Corp. v. United States, 318 F.2d 915, 920 (Ct. Cl. 1963)). “[T]he writing should not be given a crabbed or literal reading, ignoring all the surrounding circumstances which give it body and content. The focus is on the claim as a whole, not merely the written component.” Id. Accord Wilshire v. United States, No. 1:07-CV-00377, 2008 WL 4858256, at *1 (S.D. Ohio Nov. 10, 2008) (two years of oral and written communications from the executor of the taxpayer’s estate, along with a copy of the will and original tax return were sufficient to constitute a valid informal claim for a refund).
The Rewwer court also discussed a Sixth Circuit decision, Thomas v. United States, 166 F.3d 825, 831 (6th Cir. 1999), in which that court addressed the specific issue of Form 843 as an informal claim, holding:
the “Forms 843” dated November 1, 1995 are sufficient administrative claims. Although filed on the wrong form, the “Forms 843” dated November 1, 1995 put the IRS on notice. This fact is evidenced by the corresponding IRS rejection letters dated June 27, 1996, which refer Thomas to the IRS’ initial examination of his tax returns. Therefore, the IRS was aware of the nature of Thomas’ claims.
In Rewwer, the court based its decision on the totality of the facts. It found that:
the IRS understood that Plaintiffs were seeking a refund, even though the proper form was not used. The Form 843s which were submitted made it clear which years were being claimed
The court described the information in the Form 843 and explained that in the correspondence back and forth between the IRS and the taxpayer that followed the filing of the Form 843,
there is no indication that the IRS did not understand Plaintiffs’ request. Rather, the IRS asked for more time to conduct research, sent the claims to the Cincinnati Service Center for processing, and at one point, actually appeared to allow the requested adjustment for tax year 2007. Moreover, the IRS allowed the full amount of Plaintiffs’ claim for tax year 2008, which was also filed on Form 843.
The Rewwer court then quoted from Angelus Milling, where the Supreme Court stated:
If the Commissioner chooses not to stand on his own formal or detailed requirements, it would be making an empty abstraction, and not a practical safeguard, of a regulation to allow the Commissioner to invoke technical objections after he has investigated the merits of a claim and taken action upon it.
The Rewwer court also found that any deficiencies in the informal claim were cured by the filing of the formal claims. The Court concludes that the IRS should be estopped from asserting this formal requirement since it waived strict compliance until Plaintiffs filed their claim here.
Note the use of estoppel. Only non-jurisdictional claim processing rules are subject to waiver, forfeiture, and, in some cases, estoppel and equitable tolling. Implicit in the court’s holding is that the signature and verification requirements are not jurisdictional and are subject to waiver, forfeiture, and estoppel.
One more case presenting this issue has recently come out, Deeb v. United States, 1:20-cv-01456 (N.D. Ga. 2022). He sought refunds of income tax deficiencies and accuracy-related penalties which he had paid for 2010 and 2011. For the 2010 year, the court cites Dalm for the proposition that a late-filed refund claim is a jurisdictional defect to a refund suit, but then inconsistently grants an IRS merits motion for summary judgment for 2010 because the refund claim was filed late. Of course, if Dalm is the law, the 2010 year should have been dismissed for LOJ. For the 2011 year, the court finds a variance between the refund claim and the refund suit and so doesn’t allow the taxpayer to contest certain non-travel disallowed business expenses. The court (citing precedent) calls the variance doctrine jurisdictional, though this is not necessarily the case. No court I know of has discussed whether variance is still jurisdictional.
The court then goes on to rule on the deductibility of certain travel expenses and finds them not deductible for reasons of the taxpayers not being away from home (a tax home issue) and substantiation. The court grants summary judgment to the IRS on these travel expenses. The court finds the accuracy-related penalties to apply because the taxpayers made no separate contest of the penalties beyond arguing that the travel expenses were deductible.
The claim was filed on a single Form 843 covering both years and covering both penalties and income taxes. There is no discussion in the opinion that the Form 843 would not be the right form (other than possibly for the accuracy-related penalties). Deeb shows that, at least for some courts, Form 843 can at least constitute an informal claim that can be perfected prior to suit when a Form 1040X is filed after the SOL has passed. In Deeb, the Form 843 was never perfected by the filing of Forms 1040X. The IRS did not argue that he had filed the wrong claim form and did not move for dismissal based on lack of jurisdiction. What seem like odd rulings from the court based on the other cases litigated probably flowed from the arguments the court received (and did not receive).