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.

If Only

 

It isn’t much. The Tax Court decision itself is scarcely 4 pages long.

Still, it made me laugh.

It also made me think that - if he could pull it off - this might have been best tax planning idea I ever came across.

His name is Kelby Daniel Reyes Barrios (Barrios). He lives in California and he appears to be a gig worker.

He filed a 2022 tax return showing $8,964 of total income.

The IRS was chasing him for $3,842 of additional tax on unreported income of $15,206.

COMMENT: I still don’t see how that is enough money to live on, not to mention … California.

Barrios filed a timely petition with the Tax Court.

Then he disappeared.

The IRS motioned for summary judgement. The Court, to its credit, provided Barrios a final opportunity to respond.

He ghosted.

The only thing the Court had to review in his favor was his declaration on the Court filing:

On his petition he asserted that he did not report the income because the tax ‘forms were mailed to a [previous] address’ and he received them only after filing his return.”

We have probably all heard a version of this logic: no form, no tax.

The IRS held for the IRS, of course. The tax Code asserts that all income is reportable, whether it draws a 1099 or not (granted, the “not” is an increasingly endangered species).

Still, think about it: one could beat the tax man by getting a return in before 1099s are distributed.

If only.

Our case this time was Kelby Daniel Reyes Barrios, T.C. Memo 2026-32.

Proving A Timely Tax Filing

 

I admit that I am biased, but I am not a fan of filing late tax returns.

Call it Murphy’s Law:

If anything can go wrong, it will.”

I am looking at a Tax Court order. An order takes place while the case is at trial. Somebody makes a motion, the Court reviews and decides. That decision is called an order, and they are common.

The IRS filed a motion that it sent a timely Notice of Deficiency to a taxpayer.

COMMENT: A Notice of Deficiency (also called a 90-day letter, a NOD or SNOD) is the IRS determining that you owe additional tax and wanting to reduce it to assessment. Why an assessment? For one thing, the IRS (usually) has 3 years to examine and adjust your return. It has 10 years to collect an assessment. That alone is a powerful incentive.

There are rules, of course. The IRS has only so much time to send the SNOD, and you have only so much time to respond to it. In general, the IRS has three years from when you filed the return or when the return was originally due, whichever is later. There are exceptions. A key one, and one will talk about today, is if you never file a tax return.

Milton Thomas Roberts failed to file a timely return for 2014. He received a notice from the IRS in 2015 asking about it. In February 2016 he went to the post office and mailed four packages: two to the IRS and two to New York state.

COMMENT: He was filing his 2013 and 2014 taxes with the IRS and New York – hence four packages. He did so correctly: he used certified mail. Yes, it costs a few dollars, but – if you ever must prove the mailing – those are the best dollars you ever spent.

About a week later the IRS acknowledged receiving his 2013 return.

COMMENT: Having the benefit of hindsight, one wonders why the IRS did not confirm 2014. To his credit, Roberts went online and confirmed that all four packages had been delivered.

For 2016 through 2019 Robers received notices from the IRS about this tax year or that, but he never received a notice about 2014.

That changed in October 2019, when the IRS sent a notice saying it never received a 2014 return.

Roberts did not immediately respond.

In February 2020, the IRS issued a SNOD showing over $275 grand of tax due.

That caught his attention.

Roberts (re)prepared his 2014 return and sent it to the IRS on or around June 2020. It showed adjusted gross income of $587 grand and a small refund of $804.

What happened to his copy of the original 2014 sent in 2016?

No idea.

Having attracted unwanted attention, Roberts was now audited for 2014. The IRS issued a second SNOD in January 2022 for $79 grand in additional tax, along with the usual interest and penalties.

You already know they are in Tax Court. Both sides agree that Roberts filed a 2014 return. Roberts argues that he filed twice – once in 2016 and again in 2020. The IRS says: nay, nay; he filed only once and that was in June 2020.

Does it matter?

Oh, yes it does.

Remember that the IRS has three years (barring oddities) to adjust his return and assess additional taxes. Roberts asserts that he filed 2014 in February 2016. Add three years and the IRS had until February 2019 to adjust and assess.

Roberts received nothing from the IRS in 2019.

Roberts says the IRS is too late. The second SNOD is incorrect and without effect.

The IRS disagrees. They say they never received the 2014 return until June 2020. Add three years and they had until June 2023 to adjust and assess. They were easily within the window.

The IRS just filed a motion requesting the Tax Court to determine that 2014 was within the window and they had filed a correct and effective SNOD.

Judge Toro denied the motion.

Why?

There is enough doubt as to what happened. Roberts had certified mail receipts, confirmation from New York of receiving 2013 and 2014 returns, confirmation from the delivery company that all four packages had been delivered, as well as a conspicuous absence by the IRS for three ½ years concerning the 2014 tax year.

Judge Toro was not going to say that the IRS had proved their case.

Mind you, that does not mean that Roberts proved his case either.

It does mean that the case revolves on whether there was a 2014 filing in 2016.

The IRS usually has the upper hand in such matters.

But Roberts brings the receipts.

You may wonder: does the IRS sometimes lose returns?

Oh yes. They have done so with me. I remember one client specifically because it impacted a scheduled real estate closing. We resolved the matter, but it involved considerable time and stress.

I will be keeping an eye out for the resolution of the Roberts story.

My hunch: he will win.

But he is in Tax Court. He is not pro se, so he is paying for an attorney. And he will keep paying, as a motion has been decided but the case itself marches on.

Which makes me wonder: could he have avoided this by simply filing a timely tax return?

As I said, I am biased.

Our case (or motion, actually) this time is from Milton Thomas Roberts v Commissioner, Tax Court docket 7011-22.

A Ponzi Scheme And Filing Late

I am reading a case involving a late tax return, a Ponzi scheme, and an IRS push for penalties.

It made me think of this form:

It is used for one of two reasons:

(1)  Someone is filing a tax return with numbers different from a Schedule K-1 received from a passthrough entity (such as a partnership).

(2)  Someone is amending a TEFRA partnership return.

That second one is a discussion for another day. Let’s focus instead on the first reason. How could it happen?

Easy. You are a partner in a partnership. You bring me your Schedule K-1 to prepare your personal return. I spot something wrong with the K-1, and the numbers are large enough to matter. We contact that partnership to amend the return and/or your K-1. The partnership refuses.

COMMENT: We would use Form 8082 to inform the IRS that we are not using numbers provided on your K-1.

This is a tough spot to be in. File the form and you are possibly waiving a flag at the IRS. Fail to file it and the IRS has procedural rights, and those include the right to change your numbers back to the original (and disputed) K-1.

There is another situation where you may want to file Form 8082.

Let’s look at the Rosselli case.

Mr. Roselli (Mr. R) was a housing appraiser. Mrs. Rosselli was primarily a homemaker. Together they have five children, three of whom have special needs.

Through his business, Mr. R came to know the founder of a solar energy company (DC Solar). Turns out that DC Solar was looking for additional capital, and Mr. R knew someone looking to invest. The two were introduced and – in gratitude – Mr R became a managing member in DC Solar via his company Halo Management Services LLC.

This part turned out well for the R’s. In 2017 DC Solar paid Halo approximately $300 grand. In 2018 DC Solar paid approximately $414 grand. Considering they had no money invested, this was all gravy for the R's.

COMMENT: Notice that Halo was paid for management services. Halo in turn was Mr. R, so Mr. R got paid over $700 grand over two years for services performed. This was a business, and Mr. R needed to report it on his tax return like any other business.

In late 2018 the FBI raided DC Solar’s offices investigating whether the company was a Ponzi scheme. The owners of DC Solar were eventually indicted and pled guilty, so I guess the company was.

Let’s roll into the next year. It was tax time (April 15, 2019) and there was not a K-1 from DC Solar in sight.

COMMENT: You think?

The accountant filed an extension until October 15. It did not matter, as the R’s did not file a tax return by then either.

The IRS ran a routine check on DC Solar and its partners. It did not take much for the IRS to flag that the R’s had not filed a 2018 return. The IRS contacted the R’s, who contacted their accountant, eventually filing their 2018 return in January 2022.

You know what was on that 2018 return? The $414 grand in management fees.

You know what was not on that 2018 return? A big loss from DC Solar.

Here is Mr. R:

Mr. Carpoff informed me that I was to receive Schedule K-1s showing large ordinary losses for 2018 from DC Solar, and as a result I would not have a tax liability for that year. However, before the K-1s could be issued … DC Solar’s offices were raided by the FBI.”

All of DC Solar’s documents and records were seized by federal authorities in the ensuing investigation. As a result, I was unable to determine any tax implications because I did not receive a K-1 or any other tax reporting information from DC Solar.”

Got it: Mr. R was expecting a big loss to go with that $414 grand. And why not? DC Solar had reported a big loss to him for 2017, the prior year.

But the IRS Collections machinery had started turning. By August 2022, the IRS was moving to levy, and the R’s filed for a Collection Due Process (CDP) hearing.

COMMENT: There is maddening procedure about arguing underlying tax liability in a CDP hearing, which details we will skip. Suffice to say, a taxpayer generally wants to fight any proposed tax liability like the third monkey boarding Noah’s ark BEFORE requesting a CDP hearing.

At the conclusion of the CDP hearing, the IRS decided that they had performed all the required procedural steps to collect the R’s 2018 tax. The R’s disagreed and filed with the Tax Court.

The R’s presented three arguments.

• They reasonably assumed that they would not be required to file or pay tax for 2018 because of an expected loss from the DC Solar K-1.

The Court was not buying this. Not owing any taxes is not the same as not being required to file. This was not a case where someone did not work, meaning they dd not have enough income to trigger a filing requirement. The Rs instead had a more complicated return, with income here and deductions or losses there. Granted, it might compress to no tax due, but they needed to file so one could follow how they got to that answer.

• The R’s reasonably relied on advice from their accountant and others.

The Court did not buy this either. For one thing, the Rs had never informed their accountant about the $414 grand in management fees. If one wants to rely on a professional’s advice, one must provide all available pertinent information to the professional. The Court was not amused that the R’s had not shared the LARGEST number on their return with their accountant.

• The R’s argued that they would experience “undue hardship” from paying the tax on its due date.

The R’s argued that their income died up when DC Solar was raided. Beyond that, though, they had not provided further information on what “drying up” meant. Without information about their assets, liabilities and remaining sources of income, the Court found the R’s argument to be self-serving.

Also, the Court did not ask – but I will – what the R's had done with the $700 grand in management fees they received in 2017 and 2018.

Yeah, no. The Court found for the IRS, penalties and all.

And here is what I am thinking:

What if they had timely filed their 2018 return, showing a loss from DC Solar equal to the management fees?

Problem: there was no K-1 from DC Solar.

Answer: attach the 8082.

I think the tax would eventually have turned out the same.

But I also think they would have had a persuasive case for abatement of penalties for late filing and late payment. The penalty for late file and pay is easily 25%, so that abatement is meaningful.

Our case this time was Rosselli v Commissioner, TC Bench Opinion, October 23, 2023.