When a taxpayer needs to defend against an assessment or collection of tax, often the taxpayer has legitimate defenses to the additional tax or to collection. However, many taxpayers are unfamiliar with the tax law and the strict deadlines in which they have to contest tax assessments or collections. As a consequence, the taxpayer may miss important deadlines to contest the tax and collection and may feel he or she is stuck with the adverse tax result.
There are numerous defenses that a taxpayer can assert even if the taxpayer missed key deadlines. One such defense is to make sure that the IRS has sent required tax notices to the taxpayer’s correct address. This defense was in play in a recent decision of the Third Circuit Court of Appeals in Gregory v. Commissioner of Internal Revenue.[1]
In Gregory, the IRS sent a Notice of Deficiency to the taxpayers’ last known address. A Notice of Deficiency is a statement from the IRS informing the taxpayer of additional amounts of tax owing and giving the taxpayer the right to appeal the tax to US Tax Court.[2] The appeal to Tax Court must be made within 90 days of the Notice or the taxpayer loses the right to appeal.[3]
In this case, the taxpayers had moved from the last known address the IRS had on record from the tax return at issue. The taxpayer had not yet submitted a change of address update with the post office or with the IRS on its official address change form (Form 8822). Unsurprisingly, the taxpayer didn’t receive the Notice of Deficiency in time and its petition to Tax Court beyond 90 days was dismissed as being filed too late.
However, the accountant for the taxpayer had actually submitted an IRS power of attorney and an IRS extension form with the taxpayers’ new address on them. The accountant had also verbally informed the IRS of the new address. The Court of Appeals sided with the taxpayer and ruled that the forms filed with the IRS as well as the IRS being verbally informed of the new address by the taxpayers’ accountant was sufficient notice to the IRS of the new address. Thus, the IRS had not sent the Notice to the taxpayers’ last known address. The Tax Court’s dismissal of the petition was thus overturned.[4]
Practice Point: Taxpayers who have purportedly missed IRS deadlines should review the address used by the IRS to determine if the correct address was used. If it was not, the IRS’s action may be invalid. However, the taxpayer’s victory typically at best only buys the taxpayers time to correctly appeal or address the taxpayer’s situation. The IRS need only send the notice again to the correct address. So the taxpayer must be prepared to address the substance of the IRS’s notice promptly. But in a tax deficiency or resolution, this extra time can be critical in allowing the taxpayer to work toward a good tax result.
Taxpayers who have been denied appeal rights can contact Jared Le Fevre to determine if arguments exist to show that the IRS failed in its notice requirements, possibly giving the taxpayer another chance to appeal.
About the author: Jared M. Le Fevre is a tax attorney and partner in the Tax, Trusts and Estates Practice Group of Crowley Fleck PLLP. Mr. Le Fevre represents taxpayers before the IRS, IRS Independent Office of Appeals, Tax Court, Federal District Court and state tax agencies throughout Montana, Wyoming, North Dakota, Idaho, and Utah. Mr. Le Fevre is involved in federal and state and local tax audits, appeals, and tax resolution throughout these western states. Mr. Le Fevre also advises clients on the tax effects of business and real estate transactions. what effect the notice may have on taxpayer rights.
[1] —Fed.Appx—(2020), 2020 WL 7775506.
[2] IRC § 6212.
[3] IRC § 6213(a).
[4] Gregory at 2.