CPA's Signature on Client's Refund Claim Doesn't Pass Muster; No Refund Allowed

(Parker Tax Publishing May 2021)

The Court of Federal Claims held that a couple was not entitled to a refund claimed on an amended return prepared and filed by a CPA firm where the return was signed by an employee of the firm and no power of attorney authorizing such employee to sign the return was attached. The court held that the signature verification requirement, which requires that the individual seeking a refund must sign the refund claim, is a statutory requirement that cannot be waived by the IRS. Mattson v. U.S., 2021 PTC 110 (Fed. Cl. 2021).

Background

Andrew Mattson and his wife, Lindsey, sought a refund in the amount of $21,190 for federal income taxes paid for 2016, based upon the foreign earned income exclusion under Code Sec. 911, plus interest, attorney's fees and other costs. The couple are U.S. citizens who live in Alice Springs, Australia where they work for the Raytheon Company. In 2015, the Mattsons signed a closing agreement as a condition of their employment with Raytheon. The closing agreement provided that the Mattsons waived the right to claim the foreign earned income exclusion pursuant to Code Sec. 911.

On April 10, 2017, the Mattsons timely filed their original 2016 Form 1040 and paid $21,191 in income taxes. They subsequently retained the services of a tax accounting firm - Castro & Co., LLC - to prepare an amended tax return for tax year 2016. Castro & Co. concluded that the Mattsons were entitled to claim the foreign earned income exclusion on their amended tax return. Castro & Co. timely filed a Form 1040X amended tax return for tax year 2016 on behalf of the Mattsons, which claimed this exclusion. The couple did not sign their amended tax return. Instead, an employee of Castro & Co. - Tiffany Michelle Hunt - signed the amended tax return on the Mattsons' behalf. No power of attorney authorizing Tiffany Michelle Hunt, or any other representative of Castro & Co., to sign the Mattsons' amended tax return was attached.

On or about November 14, 2018, Castro & Co. sent the IRS a Form 2848 stating that three of its employees - John Anthony Castro, Tiffany Michelle Hunt, and Kasondra Kay Humphreys - had the authority to represent Andrew Mattson before the IRS with respect to, among other things, the Mattsons' 2016 tax return. Tiffany Michelle Hunt initialed the Form 2848 on behalf of Mr. Mattson. But the box on Line 5a of the Form 2848, which would authorize John Anthony Castro, Tiffany Michelle Hunt, and Kasondra Kay Humphreys to sign the Mattsons' amended 2016 tax return, was not checked on the form. Several months later, the IRS sent the Mattsons a letter, commonly known as a Letter 569, stating that the IRS examined their tax refund claim and were going to fully disallow the refund claim. The Mattsons filed a tax refund action in the Court of Federal Claims.

The government moved to dismiss the tax refund matter for lack of subject-matter jurisdiction, upon the ground that the Mattsons did not "duly file" the amended tax return upon which they based their tax refund claim, as was required by Code Sec. 7422. Specifically, the government argued that the Mattsons neither signed their amended tax return nor provided a power of attorney with the amended tax return, as required under Code Sec. 6061 and Code Sec. 6065 and Reg. Sec. 301.6402-2. As a result, the government maintained that the Mattsons' failure to comply with the signature verification requirement deprived the Federal Claims Court of jurisdiction to consider the tax refund claim.

While the Mattsons acknowledged that they neither signed their 2016 amended tax return nor provided a power of attorney with the amended tax return, they countered that the court could nonetheless consider their tax refund claim for two reasons. First, they argued that the IRS waived the deficiencies in their amended tax return by investigating the merits of their tax refund claim. According to the Mattsons, the signature verification requirement is a regulatory requirement that can be waived by the IRS and the IRS had waived the requirement in this case. Second, the couple argued that their amended tax return was an informal tax refund claim that could be perfected by an amendment.

Analysis

The Court of Federal Claims sided with the IRS and held that the Mattsons had not duly filed their amended return upon which their refund claim was based and thus the court did not have subject matter jurisdiction over the case. The court concluded that the signature verification requirement is a statutory requirement that cannot be waived by the IRS. As a result, the court stated that, because it was undisputed that the Mattsons failed to comply with the signature verification requirement in connection with the filing of their amended tax return, the couple had not "duly filed" their tax refund claim as required under Code Sec. 7422.

The court also found that the undisputed facts in the tax refund case showed that the informal claim doctrine was inapplicable to the couple's tax refund claims because the couple failed to file an amended tax return to correct the deficiencies in their 2016 amended tax return before beginning the instant action. And so, for those reasons, the court granted the government's motion to dismiss the Mattsons' complaint.

For a discussion of jurisdiction and timing of refund claims, see Parker Tax ¶261,190.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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