Let’s talk about
an IRS trap.
It has to do
with procedure.
Let’s say
that the you start receiving notices from the IRS. You ignore them, perhaps you
are frightened, confused or unable to pay.
Granted, I
would point out that this is a poor response to the chain-letter sequence you
will be receiving, but it is a human response. It happens more frequently than
you might think. Too many times I have been brought into these situations
rather late, and sometimes options are severely limited.
The BIG
notice from the IRS is called a 90-day letter, also known as a Statutory Notice
of Deficiency. Tax nerds refer to it as a SNOD.
This is the
final notice in the chain-letter sequence, so one would have been receiving correspondence
for a while. The IRS is going to assess, and one has 90 days to file with the
Tax Court.
Assessment
means that the IRS has 10 years to collect from you. They can file a lien, for
example, and damage your credit. They might levy or garnish, neither of which
is a good place to be.
I have
sometimes used a SNOD as a backdoor way to get to IRS appeals. Perhaps the
taxpayer had ignored matters until it reached critical mass, or perhaps the
first Appeals had been missed or botched. I had a first Appeals a few years
back with a novice officer, and her lack of experience was the third party on our
phone call.
Let the 90
days run out and the Tax Court cannot hear the case.
NOTE: Most times a Tax Court filing never goes to court. The Tax Court does not want to hear your case, and the first thing they do is send it back to Appeals. The Court wants to machinery to solve the issue without them getting involved.
Our case
this time involves Caleb Tang. He filed pro se with the Tax Court, meaning that
he represented himself. Technically Caleb does not have to go by himself – he can
hire someone like me – but there are limitations.
There is a
game here, and the IRS has used the play before.
The taxpayer
makes a mistake with the filing. In our story, Caleb filed but he forgot to pay
the filing fee.
Technically
this means the Court would not have jurisdiction.
Caleb also
filed an amended return.
As I said,
sometimes there are few good options.
The IRS
contacted Caleb and said that they would not process his amended return unless
he dropped the Tax Court petition.
Trap.
You see, Caleb
was past the 90-day window. If he dropped his filing, the IRS would automatically
get its assessment, and Caleb would have no assurance they would process his
amended return.
Caleb would then
not be able to get back to Tax Court. Procedure requires that he pay the tax
and then sue in District Court or Court of Federal Claims. There is no pro se in
that venue, and Caleb would have no choice but to hire an attorney.
That will
weed out a lot of people.
Fortunately,
the Court (Chief Judge L Paige Marvel) knew this.
He allowed
Caleb additional time to pay his application fee.
Meaning that
the case got into the Tax Court’s pipeline.
What happens
next?
It could go
three different ways:
(1) Both parties drop the case.
(2) They do not drop the case and the matter
goes back to Appeals.
(3) The Court hears the case.
I suspect
the IRS will process Caleb’s amended return now.
