By: A.J. Cook


The Internal Revenue Service said it had mailed the refund check; it wasn't its fault the taxpayer hadn't received it.

The saga began when William S. Haase, attorney for Thomas J. Doolin's estate, estimated an estate tax of $50,000. He mailed a check for that amount requesting a filing extension.

Haase was pleasantly surprised when the completed return showed no taxes due. Nearly two years later, the IRS notified the estate it approved the return. Because the estate didn't receive a refund, the attorney asked for one -- then asked again and again. The agency said it mailed the check a year and a half earlier. It said it sent a $53,361 check for the refund and interest.

The attorney insisted several times that the estate had not received it. Finally, an IRS agent directed him to file Form 3911. He immediately prepared the form and sent it in. Still no check. Despite many follow-up letters to the IRS, Haase heard nothing.

Four years after he filed the return, his patience exhausted, he sued the IRS. This finally got the agency's attention. It admitted it had received Form 3911 and would look into the missing check.

After more discussions, the IRS then agreed the check hadn't been cashed. It said if the estate dropped the suit, it would write a replacement check. It would be a duplicate of the missing one, so would not include the three and a half years' interest the estate requested. The estate was not interested.

Then the agency backed down -- partially. Despite its earlier demand that the estate first drop the suit, it mailed a check for the original $53,361. The estate continued its suit.

The district court ruled the IRS owed no additional interest. Undeterred, the estate appealed.

The IRS argued it wasn't the agency's fault the taxpayer didn't receive the check. The appeals judge disagreed. The IRS had created confusion by the unusual envelope address. To send the estate's check to the attorney, the IRS used a "%" sign instead of the usual "c/o" or "in care of."

Furthermore, the agency's argument that it can assume a check is delivered if mailed does not wash. The IRS must come clean with the money. To absolve the IRS, the taxpayer must have the opportunity to accept the check.

The appeals judge ruled for the estate requiring the IRS to pay interest for four years. To prove his point, he invited the IRS to look at the flip side of its argument: The IRS demands that taxpayers pay interest until it receives their checks.

The Moral: What's sauce for the goose is sauce for the gander.

A.J. Cook is a lawyer and CPA. His tax column appears weekly in numerous newspapers. Why isn't it published in your hometown newspaper? Ask its Business Editor to subscribe.

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Released 6-26-95