In controversies with the IRS, if the parties cannot reach an agreement, the Commissioner’s main recourse is to issue a Notice of Deficiency under section 6212. Referred to as the, “ticket to the Tax Court,” a taxpayer cannot petition the Tax Court for consideration unless the IRS issues a notice of deficiency. Because the court is a court of limited jurisdiction, a taxpayer must receive a Notice of Deficiency and petition the Tax Court within 90 days for the court to have jurisdiction. It is required that the IRS send the Notice by certified mail to the taxpayer at the taxpayer’s “last known address.” A recent tax court case illustrates the problem of determining a taxpayer’s last known address.
What determines your “last known address?”
Facts of the case
In 2015, Damian and Shayla Gregory moved from Jersey City, New Jersey to Rutherford, New Jersey. In October of 2015, the Gregorys filed their 2014 tax return using their old Jersey City address. Subsequently, the Gregorys, now living in Rutherford, filed a Form 2848 power of attorney with the IRS and in April of 2016 filed a Form 4868 Application for Automatic Extension to File U.S. Individual Income Tax Return for the 2015 tax year.
On Oct. 13, 2016, the Commissioner sent by certified mail a notice of deficiency to the Gregorys’ Jersey City address. The U.S. Postal Service was not able to deliver the notice and returned it to the IRS. Both the Gregorys and IRS agree that the Gregorys never received the notice. Later, the Gregorys became aware of the notice of deficiency and in January of 2017 filed a petition for redetermination with the United States Tax Court.
Arguments and issue
The Commissioner filed a motion to dismiss the petition based on lack of jurisdiction; for the Tax Court to have jurisdiction the petition has to be filed within 90 days of the mailing of the notice of deficiency. The Gregorys argued that the notice of deficiency was invalid as it was not sent to their last known address.
The issue was whether the Gregorys, by filing Forms 2848 and 4868, had officially notified the Commissioner of their change in address. Alternatively, could the Commissioner rely on the address on their last filed tax return as the Gregory’s last known address?
Court analysis
The Tax Court found for the Commissioner and dismissed the Gregorys’ petition. Under section 6212, the Commissioner is required to send the notice of deficiency to the taxpayers last known address, whether or not the taxpayer actually received the notice. Regulations under 6212 provide that the last known address is the address that appears on the taxpayer’s most recently filed federal tax return, “unless the Internal Revenue Service receives clear and concise notification of a different address.” Section 301.6212-2(a).
The court relied on two revenue procedures, Rev. Proc. 90-18 and Rev. Proc. 2010-16 to address what constitutes, “clear and concise notification.” Those revenue procedures clearly state that Forms 2848 and 4868 are not “returns” as required under the statute. In addition, the application of “clear and concise notification” is specified in the relevant revenue procedures and instructions to Forms 2848 and 4868. These IRS procedures and instructions specify that neither form meets the standard for clear and concise notification of a change of address. To make a change of address with the IRS, a taxpayer should file Form 8822 or show a new address on the most recently filed tax return.
Conclusion
For taxpayers under IRS examination or otherwise engaged in IRS correspondence, insuring that the taxpayer’s last known address is recorded with the IRS is critical. Due to IRS regulations and procedures, providing a current address through correspondence or filing a power of attorney may not be enough. Taxpayers need to file Form 8822 “Change of Address” with the IRS to avoid missing critical communications that may result in a tax liability.
