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What is a Return, and When is it Good Enough?

As Supreme Court Justice William Brandies noted so eloquently in a 1930 opinion, “[t]he word ‘return’ is not a technical word of art.”[1] Translated from circumlocution and niceties to frank and righteous indignation, this means that Congress (via the IRS), which exerts so much time, energy, resources, and three to four shared administrative brain cells to the task of assigning and perfecting the definitions of definitions, beating a dead horse until even the glue factory won’t take it, failed to define return, one of the most essential words in the entire Code…arguably the second most important word after tax…which, I might add, is similarly not defined.[2]

Because neither the courts nor Congress saw fit to define the metes and bounds of what a return might be, some taxpayers have been accused of coloring outside the lines when it comes to filing a “return” with the IRS. Try as some taxpayers have, filing an income tax return on a cocktail napkin won’t get the job done to avoid the failure to file penalty under IRC § 6651(a)(1). A taxpayer must make a return or statement according to the forms and regulations prescribed by the IRS.[3] Further, the return or statement must include therein the information required by the applicable regulations or forms.[4]

The Supreme Court has observed that the purpose of using the prescribed forms is not alone to get tax information in some form but also to get it with such uniformity, completeness, and arrangement that the physical task of handling and verifying returns may be readily accomplished.[5] Filing on official forms also reduces a taxpayer’s “opportunity for deceit.”[6]

IRS’s Anti-Bullshit Policy

Simply put, the IRS is “certainly not required to accept any [bullshit] the taxpayer sees fit to submit.”[7] If it were obligated to do so, this would result in “insurmountable confusion” for the IRS,[8] which, like a toddler crashing from a sugar high because you let him have that piece of birthday cake and juice box in an ill-advised moment of parental weakness, must have the lines of what is acceptable clearly drawn or it (the IRS and the toddler) will lose its mind…and you can’t put the IRS in time-out.

Tentative Returns

It should be noted, however, that a cocktail napkin may be used in a pinch to avoid the failure to file penalty, so long as the taxpayer supplements the napkin with a return made on the proper form.[9]  According to the Treasury Regulations, in the absence of a prescribed form, a statement made by a taxpayer disclosing his gross income and the deductions therefrom may be accepted as a tentative return, and, if filed within the prescribed time, the statement so made will relieve the taxpayer from liability for the addition to tax imposed for the delinquent filing of the return, provided that without unnecessary delay such a tentative return is supplemented by a return made on the proper form.[10]

Please note—Briefly Taxing is not endorsing the “cocktail napkin” approach to filing a tentative return. A whiskey-soaked scrap of tissue submitted to the Federal government should be an absolute last resort.  That’s just good life advice in general.

In any event, even a tentative return must contain certain elements.[11] The Supreme Court test to determine whether a document is sufficient for statute of limitations purposes has several elements.

  1. There must be sufficient data to calculate tax liability.
  2. The document must purport to be a return.
  3. There must be an honest and reasonable attempt to satisfy the requirements of the tax law.
  4. The taxpayer must execute the return under penalties of perjury.[12]

Even if the return meets these four tests, the IRS is still not required to accept the “return” as such.[13] Also, don’t fiddle with the forms.  The IRS frowns on that, and the courts do, too.[14]

Sufficiency of Return

The “acid test” for determining whether a document constitutes a valid tax return is whether it contains sufficient data from which the IRS can compute and assess a tax liability.[15] The return must purport to be a specific statement of the items of income, deductions, and credits in compliance with the statutory duty to report information; to have that effect, it must honestly and reasonably be intended as such.[16]

Perfect accuracy or completeness is not necessary, so long as the “return” purports to be a return, is sworn to as such, and it evinces “an honest and genuine endeavor to satisfy the law.”[17] At the very least, the return must contain information related to the taxpayer’s gross income, deductions, exemptions, taxable income, and credits.[18] Doodling zeros, asterisks, or “X” in every box, as some protesters are wont to do, is—and I know it will come as a shock—also not sufficient.[19]

Signature Requirement

With respect to the signature requirement, the appropriate person must sign the return under penalties of perjury.[20]  Both the Supreme Court and the Tax Court have held that a return form unsupported by oath could not constitute a valid return.[21]  An unsigned return is a nullity.[22]  Once again, don’t fiddle with the form—particularly the jurat.  This is a hot button issue for the IRS and the courts.[23]

The signature should be original, although the IRS has shown some willingness recently to permit “faxed” signatures—but only when such signatures are authenticated reliably by the IRS.[24] Nevertheless, an original signature is best; doing otherwise is just asking for a fight.  As with a schoolyard bully, so too with the IRS, it is best to pick your battles wisely.  If you absolutely, positively cannot get an original signature on time, seek an extension.  If you’re on extension, beg for another one (when possible). If your client is shanghaied on a desert island with only a fax machine powered by coconuts and no rowboat, then best of luck my friend.

With respect to an individual return, the individual taxpayer must sign.[25] With respect to a corporate return, the president, vice president, treasurer, chief accounting officer, or any other authorized officer must sign.[26] With respect to a partnership or other unincorporated organization return, a responsible and duly authorized member or partner must sign.[27] With respect to a trust or an estate return, the fiduciary must sign.[28]

An authorized agent of the taxpayer may sign the return in certain circumstances, but it must be accompanied by a power of attorney authorizing the agent to represent the taxpayer in making, executing, or filing the return.[29] If an agent signs, however, the taxpayer and his agent, if any, are responsible for the return as made and incur liability for the penalties provided for erroneous, false, or fraudulent returns.[30]

Takeaways

Use the form that the IRS provides. Fill in all of the required information. Sign the jurat. File the form properly.

This is not rocket science, people.

Nonetheless, as the plentitude of cases in the footnotes suggest, neither are taxpayers rocket scientists. Knuckleheads will be knuckleheads, and it is our job as practitioners to know the precise metes and bounds of the rules and regulations to come to the rescue—where possible—of said knuckleheads.


Footnotes:

[1] Florsheim Bros. Drygoods Co. v. United States, 280 U.S. 453, 462 (1930).

[2] United States v. La Franca, 282 U.S. 568, 572 (1931) (defining “tax” (in the absence of a statutory definition) as an “enforced contribution to provide for the support of government”).

[3] IRC § 6011(a).

[4] Treas. Reg. § 1.6011-1(a). He

[5] Commissioner v. Lane-Wells Co., 321 U.S. 219, 223 (1944).

[6] Beard v. Commissioner, 82 T.C. 766, 776 (1984).

[7] Parker v. Commissioner, 365 F.2d 792, 800 (8th Cir. 1966).

[8] Id.

[9] Treas. Reg. § 1.6011-1(b).

[10] Id.

[11] Beard, 82 T.C. at 777.

[12] Zellerbach Paper Co. v. Helvering, 293 U.S. 172, 180 (1934); Florsheim Bros., 280 U.S. at 462; Badaracco v. Commissioner, 464 U.S. 386, 402 (1984); see also IRC § 6011(a); IRC § 6065; Treas. Reg. § 1.6011-1(b).

[13] Parker, 365 F.2d at 800 (failure to file penalty assessed where taxpayer filed his return on a plain piece of paper, provided no reason for doing so, and failed to file a proper return after being contacted by the IRS).

[14] Beard, 82 T.C. at 776; Bachner v. Commissioner, 81 F.3d 1274 (3d Cir. 1996).

[15] White v. Commissioner, 72 T.C. 1126, 1129 (1979); see also Lane-Wells Co., 321 U.S. at 223; Zellerbach Paper Co., 293 U.S. at 180; McCaskill v. Commissioner, 77 T.C. 689 (1981).

[16] Florsheim Bros., 280 U.S. at 462.

[17] Beard, 82 T.C. at 778 (citing Zellerbach Paper Co., 293 U.S. at 180).

[18] White, 72 T.C. at 1129.

[19] Caton v. Commissioner, T.C. Memo 2012-92; Cabirac v. Commissioner, 120 T.C. 163 (2003); Halcott v. Commissioner, T.C. Memo 2004-214 (2000).

[20] IRC § 6065.

[21] Lucas v. Pilliod Lumber Co., 281 U.S. 245 (1930); Theodore R Plunkett v. Commissioner, 41 B.T.A. 700, 710-11 (1940), aff’d. 118 F. 2d 644 (1st Cir. 1941); Cupp v. Commissioner, 65 T.C. 68, 79 (1975).

[22] See IRM 1.2.1.4.5; Varia v. Commissioner, 52 T.C. 986 (1969). However, where an income tax return is intended by both spouses as a joint return, the absence of the signature of one spouse does not prevent the return from being valid. See Estate of Temple v. Commissioner, 67 T.C. 143 (1976); Estate of Campbell v. Commissioner, 56 T.C. 1 (1971).

[23] See Williams v. Commissioner, 114 T.C. 136, 141 (2000); Cupp, 65 T.C. at 78-79; Mosher v. IRS, 775 F.2d 1292, 1294 (5th Cir. 1985); Jenkins v. Commissioner, T.C. Memo. 1989-617; Andrews v. Commissioner, T.C. Memo. 1999-281; Hodge v. Commissioner, T.C. Memo. 1998-242; Counts v. Commissioner, T.C. Memo. 1984-561.  This includes striking out words, deleting words, or even adding a disclaimer to the effect of “I know I signed ‘under penalties of perjury,’ but I didn’t mean it.” Don’t try to be cute, and don’t be a dick.

[24] See SCA 200137053; SCA 200117036.

[25] Treas. Reg. § 1.6061-1(a). Note that the IRS has determined that a parent or guardian of a minor may sign the child’s name in the proper place of the return followed by the words “By (signature) Parent (or guardian) for minor child.” See Rev. Rul. 82-206.

[26] IRC § 6062; Treas. Reg. § 1.6062-1.

[27] IRC § 6063; Treas. Reg. § 1.6063-1.

[28] Treas. Reg. § 1.6061-1(a).

[29] Treas. Reg. § 1.6012-1(a)(5).

[30] Id. (flush language).

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