What If The IRS Changes Mailing Addresses?

 

I am looking at case filings in the Tax Court electronic filing system.

Not mine, thankfully.

It reminds me of something.

Tax CPAs (likely) use professional preparation software. Over the years I have used several myself. Recent years have introduced the “suites,” whereby preparation software is bundled with other software (research, time and billing, practice management, yada yada). It makes it almost impossible to change, as one then has to change almost all practice software and also learn a new suite It is a monumental pain.

The preparation software has updates, of course. Sometimes I would see a prior year updating, beggaring the question: why? Why is the 2021 preparation software updating in 2025, for example?

Let talk about Boparai. As I write this, there have been 40 back-and-forth filings with the IRS, with the first one starting last spring (May 27, 2025). Rosie Boparai recently lost a motion, and this case will not go to trial.

Rosie extended her 2019 tax return from April 15, 2020 to October 15, 2020.

Rosie did not file a return, however.

Three years later (on July 17, 2023) she appeared in person at the Sacramento Taxpayer Assistance Center and attempted to hand-deliver her 2019 tax return. The TAC employees refused to accept her return, however, because she had not made an appointment.

COMMENT: I have a serious problem here. I can see if someone has a tax issue that needs research and investigation, but Rosie was just dropping off a paper return. Someone could have stamped it received and put it into the processing pipe. Is it unconventional? Yes, but so what? A taxpayer tried to comply.

Facing failure at the TAC, Rosie put the return in the mail. The return showed a refund, but she included a check for $10,000. Rosie was figuring that – sending money and simultaneously requesting a refund – someone would pay attention to her return.

NOTE: Consider the calendar here. The return was due April 15, 2020. It was extended until October 15, 2020. She put it in the mail July 17, 2023. As long as that extension was valid, Rosie is within the three-year statute of limitations for her 2019 refund.

Rosie mailed that return to San Francisco.

An average person would say she filed. A bit late, yes, but still within the rules.

Problem: the IRS closed its Fresno and San Francisco mailing addresses by the end of 2021. 

This would not have been a problem had she filed her 2019 return on time. 

The post office marked the envelope as undeliverable. Rosie asserted she never received the returned mail.

The IRS issued a NOD in February 2025.

Rosie filed a petition in Tax Court.

She also filed (or refiled, possibly) her 2019 return in May 2025.

The IRS agreed that Rosie did not owe money. The IRS however had no intention of refunding her 2019 overpayment. You know why: the return was filed outside the three-year statute of limitations.

Rosie was in Tax Court fighting to have her July 17, 2023 TAC visit/mailing to San Francisco count as filing her return.

Here is Reg 301.7502-1(c)(1):

That “properly addressed to the agency, officer, or office” language was brutal to Rosie.

A return filed in 2023 (yes, that would include a 2019 return filed in 2023) should have gone to Ogden, Utah or Cincinnati, Ohio.

Not San Francisco.

The return was not “properly addressed.”

July 17, 2023 did not count.

Which meant that Rosie had not filed her return within the three-year window. There would be no refund.

My thoughts?

The Court was right.

A lot of tax is procedural: correct form, correct date, address and so on. Rosie missed a step.

I also see Rosie being denied at the TAC as IRS negligence, impeding her attempt to comply and causing her irreparable harm.

My argument is one of equity. The Tax Court is not a court of equity, however; it is a court of law. A court of equity can … bend … the law a smidge to get to fairness. The Tax Court does not have this wiggle room. It has to follow the rules.

I expect cases like this to go away with electronic filing. Oh, I suppose there might be the oddball case here or there where the software glitches, but that should be rare.

And there is a reason why I see my preparation software updating several years after the fact.

Today we looked at the DAWSON filings for Boparai v Commissioner, Docket No. 7789-25.

Personal Liability for Estate Taxes

 

Here is a greeting card for a bad day:

… the Internal Revenue Service … determined that the … Estate of Georgia M. Spenlinhauer (estate) is liable for an estate tax deficiency of $3,984,344.”

In general, when I see estate tax numbers of this size, I presume that there are hard-to-value assets. The estate will argue that the assets are illiquid, near unmarketable, and that it would be fortunate to get a thousand or two thousand dollars for them. The IRS of course will argue that the real numbers approach the GDP of many small countries. The Court will often decide somewhere between and call it a day.

Let me see what was at play.

• Whether the estate timely elected an alternative valuation date;
• Whether the estate may exclude $200,000 pursuant to a qualified conservation easement; 
• Whether the value of (yada, yada) was $5.8 million or $3.9 million.

So far it looks like another valuation pay per view Friday night fight.

• Whether the petitioner is liable as transferee for the estate tax deficiency.

That was unexpected.

What happened here?

In February 2005, Georgia Spenlinhauer passed away at the age of ninety-five. She appointed her son as executor. After paying expenses and specific bequests, the son/executor received the residue of the estate. Probate was closed in March 2009.

The executor/son requested and received an extension for the estate tax return until May 2006.

The accountant cautioned the executor/son that he did not have expertise in estate taxation and did not prepare or file estate tax returns as part of his practice.

As a practitioner myself, I get it. The executor/son had to find another practitioner – attorney or CPA – who did estate work.

The executor/son decided not to file an estate return.

COMMENT: I believe we have pinpointed the genesis of the problem.

In 2013 the executor/son filed for bankruptcy.

Through the bankruptcy proceeding, the IRS learned that he had never filed a tax return on behalf of the estate.

In 2017 he finally filed that estate tax return.

The return was audited.

In January 2018, the IRS disagreed with the numbers. It wanted money. It issued a Notice of Deficiency.

Of course.

In March, the IRS made a jeopardy assessment against the estate.

COMMENT:  Whoa! A jeopardy assessment usually indicates that the IRS suspects concealed assets or otherwise anticipates that a taxpayer will make collection difficult. Jeopardy makes the tax, penalty, and interest immediately due and payable. The IRS is authorized to begin immediate collection, without the usual taxpayer safeguards baked into the system.

A jeopardy assessment is not routine, folks.

Did I mention that the IRS was also simultaneously pursuing the assessment against the executor/son personally? Why? Because he had drained the estate to zero with the distribution to himself.

This would not turn out well. There are certain elections - such as an alternate valuation date - that must be made on a timely-filed return. Filing 11 years late is not a timely filing. There were the usual valuation disputes (I can use municipal assessment amounts as asset values! No, you cannot!). There was even a self-cancelling promissory note that got added to the estate (to the tune of $850 grand).

COMMENT: I have not seen a self-cancelling note in a moment. The attorneys worked hard on this estate.

A brutal audit adjustment involved certain litigation fees on an estate asset. The Court decided that the litigation benefited the executor/son and not the estate itself, meaning the estate could not deduct the fees. There went a quick half million dollars in deductions.

Yep, up the asset values, disallow certain deductions. The estate was going to owe - a lot.

And penalties.

The executor/son protested the penalties. To be fair, he had to. His argument?

He had relied on his accountant.

The same accountant who told him that he did not do estate work.

You gotta be kidding, said the Court. They approved the penalties in a hot minute.

There were no assets left in the estate, of course. How was the IRS to collect?

Oh no.

Oh yes.

The executor/son had exhausted the estate by distributing assets to himself. He had transferee liability to the extent of the assets distributed.

Personal liability.

This was not the routine valuation case that I first expected. This instead was closer to a Greek tragedy.

But why? The estate was large enough to obtain creative legal advice. A reasonable person must have suspected that there would be tax reporting, which work was beyond the skill set of the family’s regular accountant. Heck, the accountant was clear that he did not practice in this area. Rather than seek out another accountant (or attorney) with that skill set, the executor/son did … nothing.

Granted, the tax was the tax, whether the return had been timely filed or not. The additional weight was the penalties and interest. What were the penalties? I saw them near the beginning ….

$524,520.

Wow.

Our case this time was Estate of Spenlinhauer v Commissioner, T.C. Memo 2025-134.