In a decision that highlights the importance of both knowing and being able to prove mailing dates, the Tax Court recently issued new precedent on the issue of how to determine the date of an IRS Final Notice of Intent to Levy and Notice of Your Right to a Hearing, where there is a mismatch between the date the notice was mailed and the date printed on the letter. This notice triggers a taxpayer’s right to a collection due process (“CDP”) hearing, which must be requested within 30 days of the date of the IRS notice. This general question more commonly arises where a taxpayer is trying to prove that his submission was timely. However, in Weiss v. Commissioner, 147 T.C. No. 6 (August 17, 2016), the taxpayer was trying to prove that his request for a collection due process hearing was untimely.
Collection Due Process Hearing vs. an Equivalent Hearing. Before the IRS can levy a taxpayer’s property, the IRS is required to issue a notice informing taxpayers of the Service’s intent to levy and notifying taxpayers of their right to a hearing.[i] Within 30 days of the date of the notice, the taxpayer has a right to request a CDP hearing to have the intended levy activity reviewed by IRS Office of Appeals.[ii] During a CDP hearing, the taxpayer can raise (1) innocent spouse defense; (2) challenges to the appropriateness of the collection actions at issue; and (3) offers of collection alternatives, which may include the posting of a bond, the substitution of other assets, an installment agreement, or an offer-in-compromise.[iii] A taxpayer may also dispute the merits of the underlying tax liability, if the taxpayer did not receive a statutory notice of deficiency for the liability or otherwise did not have an opportunity to dispute the liability.[iv]
If the taxpayer does not resolve the collection issue with Appeals, the Taxpayer then has the right to judicial review by the Tax Court of the IRS’s decision.[v] While this process is pending, collection activity is suspended and the statute of limitations on collection is tolled.[vi]
If a taxpayer does not file a timely request for a CDP hearing, the taxpayer has the option to request an “equivalent hearing” instead, within 1 year of the notice.[vii] An equivalent hearing allows the taxpayer to have the Office of Appeals review the collection activity within their discretion, but the Tax Court does not have jurisdiction to review the decision of IRS Appeals. Unlike a CDP hearing, an equivalent hearing does not prevent the IRS from continuing to collect the underlying tax liability while review by IRS Appeals is pending and it does not toll the running of the statute of limitations for collecting a tax liability.[viii]
The key issue in Weiss was whether the taxpayer’s request for a CDP hearing was filed within the statutorily prescribed 30 days for filing the request – if it was timely, the statute of limitations would have been tolled; if it was untimely, the statute of limitations would have run, preventing the IRS from pursuing any further collection activity, including levying the taxpayer’s assets.
Date on Notice vs. Date of Mailing. The dispute in Weiss resulted from a mismatch between the date printed on the notice to the taxpayer and the date the notice was mailed. Although the Taxpayer had not indicated on the Form 12153 (Request for a Collection Due Process or Equivalent Hearing) that he was requesting an equivalent hearing, the Taxpayer’s position in the Tax Court was that he intentionally filed the CDP hearing request a day late, based on the date printed on the letter.[ix] The IRS argued that the notice was in fact mailed two days after the date on the letter, causing the taxpayer’s request to be timely. The IRS did not dispute the Petitioner’s position that if the request was filed within the 30-day period, the statute of limitations would not have been tolled.
Even though the taxpayer had not saved the envelope from the IRS and had not been aware that the letter had been mailed two days after the date shown on the notice, the Tax Court held that the 30-day period to request a CDP hearing began on the date the notice was mailed, not the date printed on the notice. Relying on other Tax Court decisions addressing whether a taxpayer’s petition to the Tax Court was timely, the Tax Court explained that a mismatch between a date on an IRS notice and the date the notice was mailed is resolved in favor of the outcome that provides the taxpayer with the greater period for seeking judicial review. That is, if the date printed on the IRS notice is before the date of mailing, the date of mailing is considered to be the date of the notice; if the date printed on the IRS notice is after the date of mailing, the date appearing on the notice is considered to be the date of the notice.[x] The court noted that for many years, the Tax Court “[has] reached the same conclusion regarding notices of deficiency” and has done so “ regardless of whether the taxpayer was aware of the actual mailing date.”[xi]
Although it was not the outcome sought by the taxpayer in this case, the Tax Court applied that principle and held that the date of mailing would begin the 30-day period for filing a timely CDP request, because it was after the date printed on the notice. This case is an important reminder to taxpayers of the importance of looking at and saving envelopes received from the IRS where the date of the notice may be relevant.
Proving the Date of Mailing. After holding that the date of mailing would control if the date of mailing was after the date shown on the letter, the Tax Court had to determine the date the IRS’s notice was mailed. Because the IRS had used a private postage meter for mailing the certified mail, there was no postmark by the USPS on the envelope. Instead, Respondent introduced testimonial and documentary evidence to establish that the revenue officer left the levy notice in the outgoing mail bin on February 13, that that an IRS staff person collected the notice from the mail bin and ran it through a private postage meter, which imprinted February 13as the date; then the IRS staff placed a notice in to a postal box outside the IRS office.
Based on the evidence introduced, the Tax Court concluded that the IRS notice was mailed at least two days after the date printed on the letter. The Tax Court noted that “While it seems plausible that USPS personnel collected the notice from the IRS postal box on February 13, the evidence does not conclusively establish that they deposited it into the U.S. mail that same days.”[xii] The Tax Court held that it was not necessary for the IRS to prove the exact date of mailing in this situation, because ascertaining the notice’s exact mailing date would not affect the outcome.[xiii]
From a taxpayer’s perspective, it is important to note that the Tax Court in this case could not conclude based on the IRS’s evidence that the notice was in fact mailed on the date claimed by the IRS, notwithstanding the fact the notice was sent by certified mail, return receipt requested. This conclusion demonstrates the problem with using private postage meters for certified mailings where a taxpayer intends to rely on the timely mailed rule under Section 7502. If the Tax Court had instead been trying to determine, for examples, the date a taxpayer’s CDP request was mailed for purposes of deciding whether it was timely, evidence proving the earliest date that the request could have been mailed may not be sufficient to prove that the request was in fact mailed timely.
Moreover, the Tax Court regulations specify that for Section 7502 to apply, there are specific mailing requirements that must be satisfied and a taxpayer may have a challenge proving a document was timely mailed if it was sent using a private postage meter and there was a delay in the delivery. Treasury Regulation Section 301.7502-1 provides that a taxpayer can eliminate the risk that the document or payment will not be postmarked on the day that it is deposited in the mail by the use of registered or certified mail. However, a taxpayer may only rely on certified mail if the sender’s receipt is postmarked by the postal employee to whom the document or payment is presented.[xiv] Alternatively, taxpayers have the option under the regulations of sending by approved private delivery services, such as certain delivery services offered by UPS and FedEx.[xv]
LACEY STRACHAN – For more information please contact Lacey Strachan at Strachan@taxlitigator.com. Ms. Strachan is a senior tax attorney at Hochman, Salkin, Rettig, Toscher & Perez, P.C. and represents clients throughout the United States and elsewhere in complex civil tax litigation and criminal tax prosecutions (jury and non-jury). She represents U.S. taxpayers in litigation before both federal and state courts, including the federal district courts, the U.S. Tax Court, the U.S. Court of Federal Claims, and the Ninth Circuit Court of Appeals. Ms. Strachan has experience in a wide range of complex tax cases, including cases involving technical valuation issues. She routinely represents and advises U.S. taxpayers in foreign and domestic voluntary disclosures, sensitive issue civil tax examinations where substantial civil penalty issues or possible assertions of fraudulent conduct may arise, and in defending criminal tax fraud investigations and prosecutions. Additional information is available at http://www.taxlitigator.com.
[i] IRC § 6330(a).
[ii] IRC § 6330(a)(3)(B), (b)(1).
[iii] IRC § 6330(c)(2)(A).
[iv] IRC § 6330(c)(2)(B).
[v] IRC § 6330(d)(1).
[vi] IRC § 6330(e).
[vii] Instructions to IRS Form 12153.
[viii] Although the IRS has the right to continue collection activity, IRS policy is generally to not seize assets while the equivalent hearing is pending. Publication 594: The IRS Collection Process; Instructions to Form 12153.
[ix] Checking the box to request an “equivalent hearing” is a requirement under the Instructions to the Form 12153.
[x] “When considering the timeliness of notices of deficiency under section 6213, we have encountered situations where the date on the notice did not match the date on which the notice was successfully mailed to the taxpayer. Where the date on the notice was earlier than the date of mailing, we have held that ‘[t]he critical date is the date the deficiency notice was “’mailed.”’ August v. Commissioner, 54 T.C. 1535, 1536 (1970); see, e.g., Lundy v. Commissioner, T.C. Memo. 1997-14, 73 T.C.M. (CCH) 1693, 1695 (ruling that the date of mailing is generally ‘the date that the Commissioner actually places the notice of deficiency in the mail’); United Tel. Co. v. Commissioner, 1 B.T.A. 450 (1925). By contrast, when the date appearing on the notice of deficiency is later than the date of mailing, we have held that the former date controls. See Loyd v. Commissioner, T.C. Memo. 1984-172, 47 T.C.M. (CCH) 1450, 1453-1454; Jones v. Commissioner, T.C. Memo. 1984-171, 47 T.C.M. (CCH) 1444.” Weiss v. Comm’r, 147 T.C. No. 6 (Aug. 17, 2016).
[xi] Weiss v. Commr, 147 T.C. No. 5 (Aug. 17, 2016).
[xiv] Treas. Reg. § 301.7502-1(c)(2).