I am looking at a Tax Court case.
I presume it
was an act of desperation by the taxpayer, otherwise it makes no sense.
Let’s say that
you get yourself into a quarter million dollars of tax debt.
You know the
Collection bus is coming. You probably should get ahead of it, but it escapes
your attention.
You receive IRS
notice LT-11.
You are in
the Collections sequence.
Let’s talk
about the general order of tax collection notices.
CP-14 Balance
Due
CP-501 Reminder Notice
CP-503 Reminder Notice
CP-504 Notice of Intent to Levy
LT-11 Notice of Intent to Levy and Notice of Your
Right to a Hearing
Some observations:
First, you
are deep into the machinery at this point. There were at least 4 notices sent
to you before you received this one.
Second, a
levy means that someone is going to take your stuff. This is different from a
lien. The IRS can put a lien on your house, as an example. The lien will sit
there, damaging your credit along the way, but it will not spring to action
until you sell the house. A levy is not so nice. The IRS can drain your bank
account with a bank levy, or it can divert (some of) your paycheck with a wage
levy.
Third, you
have taxpayer rights in response to receiving a LT-11, but there is a time
limit. If you respond within 30 days you have full rights; respond after 30
days and you have lesser rights.
Granted, depending on the situation, it may be that both the 30 and
30-plus varieties will have all the rights you need.
You may
wonder what the difference is between the CP-504 Notice of Intent to Levy and
the LT-11 Notice of Intent to Levy. It is confusing. I wish the IRS used
different wording on these notices, but it is what it is.
The
difference is the type of Collections rights the taxpayer has. Both the CP-504
and LT-11 give you rights, but the rights under the LT-11 are more expansive.
An appeal
under a CP-504 is referred to as Collection Appeal Program (CAP). An appeal
under a LT-11 is referred to as Collection Due Process (CDP). There are
differences between the two, and a huge difference is that the CAP is non-appealable
whereas the CDP is.
If you want
the safety net of a possible appeal, you are waiting until the LT-11.
BTW do not
assume that all CPAs know this notice sequence and its significance. All CPAs
have had some tax education, but not all CPAs practice tax or – more importantly
– practice tax procedure to any meaningful extent. Tax procedure is rarely taught
in school, and – to a great extent – it is learned through mentoring and
practice.
Our protagonist
(Ramey) had several businesses, and he used the same address for all of them. There
were other businesses at this address, so I presume we are talking about a shared
office space facility. Anyway, the IRS sent the LT-11 notice, return receipt requested.
The notice was delivered and someone signed the receipt, but that someone was
not Ramey’s employee.
At this point,
I am thinking: no big deal.
There is a 30-day
time limit if one wants to request a CDP. The 30 days lapsed.
Oh, oh.
Mind you,
there is a fallback option if one exceeds 30 days, but the downside is that any
decision under the fallback is non-appealable.
Ramey wanted
the option to appeal.
He figured
he had a card left to play.
The IRS notice
has to meet several requirements under Section 6330 before the IRS can actually
levy. The notice has to be:
(1) Given in person;
(2) Left at the dwelling or usual place of
business; or
(3) Sent by certified or registered mail, return
receipt requested, to such person’s last known address.
Ramey argued
that he had not signed for the mail, and the person who did sign did not have
authority to sign on his behalf.
Seems like
weak tea.
The Court
agreed:
Mr. Ramey’s chief complaint appears to be that multiple businesses use that address, so mail might be accepted by the wrong person. But, even if that is so, Mr Ramey does not explain how the IRS could have taken this fact into account. Mr Ramey is free to organize his business affairs as he sees appropriate, including by choosing to share a business address with other businesses. But, having made that choice, and having provided the IRS an address shared by multiple businesses, he cannot properly complain when the IRS uses that very address to reach him.”
Ramey blew
the 30- day window. He failed to protect his right to appeal to the Tax Court.
The Court
correctly pointed out that Ramey still had options. He could, for example, pay
the underlying tax, request a refund, and appeal the denial of that refund request
in District Court, for example.
So why the fuss
about the 30 days?
One does not
have to pay the tax before being allowed to file in Tax Court. One however does
have to pay the tax in order to file with a District Court or the Court of
Federal Claims.
Ramey owed a
quarter of a million dollars.
Our case for
the home-gamers was Ramey v Commissioner 156 T.C. No. 1.
