The
IRS botches things every now and then.
I
walked in Friday morning to a botch.
And
before leaving Friday I was reading a near-botch that a taxpayer was able to
rescue.
Let’s
talk about it.
I
received a client collection notice for approximately $25 grand. The entire
amount represents penalties, and we are appealing the penalties. Generally
speaking, an appeal puts a stay on collection activity.
I
did what you would do: I called the phone number.
About
an hour and a half later (seriously, IRS?) I spoke with an IRS representative.
I
explained what happened and inquired about the stay. He asked for a few minutes
while he investigated.
He
found our appeal arriving in Memphis and then transferring to Kansas City. The
file then went cold.
Got
it: Kansas City never opened the file. Once Memphis closed, the IRS collection
machinery went back online.
This
was easy to resolve: I faxed him the appeal while on the phone; he forwarded
the appeal; he then granted a stay on collection activity.
Point
is: the IRS makes mistakes. Protect yourself.
One
of the easiest ways to protect yourself is to certify your mailings. Granted, I
would not certify an estimated tax payment, but I would certify more
significant transactions with the IRS, such as (paper) filings, responding to
correspondence audits or entering the procedural carousel.
Some
procedural steps (think notices) have defined response periods. Miss them and
you make your advisor’s job much more difficult – if not near impossible.
The
granddaddy of defined response periods is the Statutory Notice of Deficiency, sometimes
called a “NOD” or a “SNOD” and also known as the 90-day letter.
The
90-day letter means that the IRS intends to assess, a necessary procedural step
(generally, there is always an exception) before the IRS can bring its full
Collections weaponry to bear. If you want to contest the assessment without
paying it first, you had better file with the Tax Court.
You
have 90 days.
Not
91.
Let’s
talk about Seely v Commissioner.
The
IRS audited Michael and Nancy Seely’s 2013, 2014 and 2015 tax returns. The IRS
issued the SNOD. The last day to respond was June 26, 2017.
The
taxpayers’ attorney prepared and mailed a Tax Court petition in response to the
SNOD.
The
Tax Court received the petition on July 17, 2017.
Oh,
oh.
Like
night follows day, the IRS motioned to dismiss.
The
taxpayer will lose this argument 999 times out of 1,000.
But
there was something peculiar about the Seely’s petition. It had all the
necessary postage but had no discernable postmark. For all practical purposes,
it was like it was never mailed.
There
is a special rule for this unlikely occasion: the Court looks at extrinsic
evidence, and both parties (the taxpayer and IRS) are allowed to present such
evidence.
The
Seelys came out strong: their attorney filed a declaration with the Court that
his office had mailed the petition on June 22, 2017 at a specified mail
location.
The
IRS came with their argument:
(1) It takes approximately 8 to 15 days for the
Postal Service to deliver mail from the Seeley’s city to Washington, D.C.
(2) If mailed on June 26, then it would have
arrived at the Tax Court no later than Friday, July 14.
(3) It didn’t. It arrived instead on Monday, July
17.
This
argument is standard IRS play.
But
the Court allowed for one more factor: unusual volumes of mail or staffing
issues due to the intervening July 4th holiday.
The
Court reasoned that might explain the one day the IRS was
disallowing.
The
Court decided for the Seelys.
This
is a rare taxpayer win.
You
know what else would constitute extrinsic evidence and have also handcuffed the
IRS?
Certify
the mailing with the Post Office.
