Some estate tax filings being sent to the IRS via private delivery services (PDS) got caught being in transit at the wrong time when the IRS closed its Kansas City Service Center due to the COVID-19 outbreak. When the packages arrived in Kansas City the Center was closed and, in many cases, the PDS returned the packages to the sender as undeliverable.

The IRS has issued an FAQ page on its website to explain to affected taxpayers how to deal with this situation.[1] The FAQ provides answers to three questions.

The first question looks generally at the issue of having a package with a Form 706 in transit that arrived at Kansas City after the Service Center had closed, one that the taxpayer believed was going to be covered by the “timely mailing as timely filing” rule under IRC §7502. The IRS makes the following initial suggestion if the taxpayer has received a notification of a failed delivery and observation:

Ask the PDS to attempt delivery again to the Kansas City Service Center. In general, your return will be considered timely filed if the original mailing was timely postmarked, regardless of when delivery actually occurs. In the absence of receipt before the due date, timeliness will be based on the date recorded by the PDS.

All well and good to ask them to try and deliver the package again, but what if the PDS goes ahead and sends it back to the taxpayer? In that case the IRS suggests:

Maintain the integrity of the original package (i.e., do not open it; just place it inside a new envelope or shipping box) and refile it. Keep the original proof of mailing along with the new proof of mailing and any record of the date the PDS attempted delivery for your records. In general, your Form 706 will be considered timely filed if the original mailing was timely postmarked. In the absence of receipt before the due date, timeliness will be based on the date recorded by the PDS.

Of course, the taxpayer may not realize the tax return is in the package or have not been aware of the guidance not to open the package—and, thus, the taxpayer has now opened the package. In that case the IRS suggests the following:

Keep a copy of the original envelope with the date recorded by the PDS and any other documentation that would establish your original mailing date and the date that the PDS attempted delivery, so that proof will be available when needed. You should also keep a copy of the contents of the original package. Refile the entire package, including the original envelope and proof of mailing.

[1] “Frequently Asked Questions: Estate tax Form 706 deliveries returned due to COVID-19,” IRS Webpage, April 13, 2020, https://www.irs.gov/newsroom/frequently-asked-questions-estate-tax-form-706-deliveries-returned-due-to-covid-19, retrieved April 13, 2020