Tax law is full of requirements the IRS must follow and that a taxpayer can rely upon to contest tax audits and collections. However, when a taxpayer stretches credulity and too stubbornly insists on rights that only peripherally exist or protests too much without enough substance, the taxpayer can set himself up to lose.
A prime example is the taxpayer in Province v. Commissioner of Internal Revenue,[1] a recent decision from the Fifth Circuit Court of Appeals. The taxpayer did not file a tax return, so the IRS filed a substitute for return and sent the taxpayer a deficiency notice and, eventually, a Notice of Intent to Levy.
The taxpayer claimed he never received the Notice of Deficiency and thus the tax assessment was not valid. But the IRS’s records showed it was mailed to the taxpayer’s last known address. So the taxpayer lost the argument. The taxpayer requested a Collection Due Process Hearing following the Notice of Intent to Levy. A Collection Due Process hearing before the IRS Independent Office of Appeals allows the taxpayer to challenge the procedures the IRS uses to collect tax before the levy occurs. However, the taxpayer refused a telephonic hearing with IRS Appeals and instead demanded a face to face meeting with the Appeals Officer. When denied a face to face meeting, the taxpayer refused to participate and IRS Appeals subsequently ruled against the taxpayer. The Fifth Circuit Court affirmed and reiterated that a face to face meeting was not required:
As we have recognized and as Treasury regulations make clear, CDP hearings are valid and satisfy the demands of due process if conducted by telephone or correspondence instead of face-to-face ….” Burnett v. Comm’r, 227 F. App’x 342, 343 (5th Cir. 2007); see 26 C.F.R. § 301.6330–1(d)(2) Q&A–D6.[2]
Thus, the taxpayer who insisted on his tax procedural rights let his stubbornness get the best of him, bet heavy based on his misunderstanding of tax procedure, and lost by the application of tax procedure.
Practice Point: Taxpayer should confirm that the IRS is following assessment and collection procedures and insist on those rights. However, the taxpayer needs to make sure that common sense is used and that the taxpayer doesn’t insist upon rights that he or she doesn’t have.
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] Province, v. Comm’r of Internal Revenue, 2021 WL 726088, at *1 (5th Cir. Feb. 24, 2021).
[2] Id. at *1.