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How A Footballer Got His Way With The IRS About Mailing

How A Footballer Got His Way With The IRS About Mailing

Communication between the IRS and US taxpayers take place via certified mail. We know that because the IRS says so in all the filing instructions they provide. But is this the full story? According Journalofaccountancy.com The answer to this question can be found in the IRS playbook.

Your Mail

Taxpayers submit hard-copy filings to the IRS. Sec. 7502 informs us that the postmark on the envelope serves as our proof of timely filing. If the postmark is illegible, OR if the IRS receives it late, the burden of proof falls to the taxpayer. Regs. Sec. 301.7502-1(c)(2) this burden can be satisfied by the postmark date on a US Postal Service (USPS) or IRS approved private delivery service-receipt for certified mail.

IRS Mail

Before the IRS can file a levy on a taxpayer’s real property or property right, it must remind the taxpayer of his Collection Due Process (CDP) hearing. The notice must be given to the taxpayer:

  • In person
  • Left at the dwelling
  • At the usual place of business
  • Sent by certified mail, return receipt requestedto the taxpayer’s last address.

The IRS will then list these mailings in its internal database, which employees can access.

The Playbook

According to the IRS playbook, the so-called Internal Revenue Manual (IRM), in Section, in response to a taxpayer’s insinuation of irregularity, the proof of mailing is USPS Form 3877, Firm Mailing Book for Accountable Mail, or an equivalent IRS-certified mail list that provides the initials of the USPS employee or a USPS date stamp for the mailed article.

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The Jevon Kearse-Matter

Kearse and The IRS

  • Jevon Kearse played NFL football. He was drafted in the first round of the NFL draft in 1999. He subsequently played for the Tennessee Titans and Philadelphia Eagles from 1999 to 2010.
  • In 2010, in his Form 1040, US Individual Income Tax Return, Kearse claimed a deduction. The IRS disallowed it.
  • By the 11th of May 2012, the IRS sent Kearse a notice of deficiency.
  • On the 12th of December, 2012, claiming they received no response to the above notice, the IRS filed a Notice of Federal Tax lien (NFTL) for unpaid taxes and mailed a letter 3172, Notice of Federal Tax Lien Filing and your Right to a Hearing Under IRC 6320, to Kearse.
  • Kearse filed a request for a CDP hearing and made an offer in compromise (doubt as to liability) of $1. He claimed a lack of proper mailing and nonreceipt of the 11th of May, 2012 notice of deficiency.

Kearse and the Appeals Officer

  • The appeals officer rejected the alleged lack of proper mailing based on verification in the IDRS, although Form 3877 was missing. Subsequently, Kearse received a notice of determination stating that all legal and procedural requirements regarding the NFTL had been satisfied. Hence the lien was sustained.

Kearse and The Tax Court

  • Kearse took the case to tax court on the basis that the IRS was wrong when it asserted that the 11th of May, 2012 notice of deficiency was mailed correctly to him. He claimed that he did not receive it and that the IRS determination of his underlying tax liability was erroneous.

The Tax Court and The IRS

  • The court instructed the IRS to prove that the Appeals Officer correctly verified that the notice of deficiency was mailed to Kearse.
  • In response, the IRS showed that the mailing of the notice of deficiency was verified in the IDRS, and they admitted that Form 3877 was missing.
  • In argument, the IRS claimed that the IRM allowed Appeals Officers to base their verification of mail entirely on the IDRS.
  • In reply, the court pointed out that the IRM requires the Appeals Officer to also review a copy of the notice of deficiency AND adequately executed Form 3877 if the taxpayer claims any irregularities took place.
  • The court found that Kearse alleged irregularities in this case.
  • The court held that the IRS, therefore, failed to prove that the Appeals Officer properly verified the mailing, and was guilty of an abuse of discretion.

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After The Judgment: The IRS and The Tax Court

  • After the trial, the IRS suddenly provided Form 3877, which they apparently found. The court rejected this remedy because the IRS never asked the court to relieve them from their stipulation that the form was missing, and reiterated that stipulations can only be amended in extraordinary circumstances. As a result, the court refused to relieve the IRS from the binding effect of the stipulation.

In the Kearse case, the IRS acted against a taxpayer. However, they did not have all the documentation they require to prove their case in terms of their own administrative procedures. This time the court caught them out. As a result, we can learn the following:

  1. Verify Procedures

Taxpayers must keep transmittal envelopes from notices of deficiency. Your tax practitioner needs it to verify proper mailing. We learn from the Kearse case that when the IRS doe not follow an appropriate method of transmittal, it might provide taxpayers with a cause of action.

  1. Always advise the IRS when you change your address

Taxpayers must file Form 8822, Change of Address, if they move to ensure they will receive notices and refund checks timely. The IRS updates their mailing lists when certain returns are filed and processed. Rev. Proc. 2010-16 defines these returns. The interval between your change of address and the next applicable filing might be too long; if you do not inform the IRS, you will not receive IRS mail, and you will be held responsible.

  1. Get the playbook

The IRM is publicly available on the IRS website. This can be a helpful resource for those who want a better understanding of the interaction between the IRS and taxpayers.

Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. This article cannot serve as a substitute for such professional services or advice. Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation. This article is subject to change at any time and for any reason.

If you are currently dealing with IRS debt, be sure to contact us and discuss which debt resolution option would be most beneficial for your present situation and future goals and opportunities.

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Fulton Abraham Sánchez, CPA I am Certified Public Accountant, specialized in Tax Planning & Offshore Strategies for Real Estate, Hedge/Equity Funds, Fintech, Crypto, Expats, IRS Debt Resolution. You can email me fa@fascpaconsultants.com and follow us on Facebook : FAS CPA & Consultants.

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