The Tax Court has ruled in Chapman, TC Memo 2019-110 that IRS properly mailed a deficiency notice to taxpayers' last known address. The taxpayers did not live at that address at the time the deficiency notice was mailed and had argued that the IRS Appeals Officer should have known that they didn't live at that address.
Before assessing liability for unpaid taxes, IRS must send a notice of deficiency to the taxpayer's last known address by certified mail or registered mail. (Code Sec. 6212(a), Code Sec. 6213(a))
Within ninety days after the notice of deficiency is mailed, the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. Absent proper mailing of the notice of deficiency, subsequent assessments may be enjoined. (Code Sec. 6213(a))
Under Code Sec. 6212(b)(1), a notice of deficiency provides sufficient notice if sent to the taxpayer's last known address. Reg § 301.6212-2(a) provides that a taxpayer's last known address is the address shown on the most recently filed and properly processed return unless the taxpayer gives the IRS clear and concise notification of a different address.
The taxpayers were Mr. and Mrs. Chapman. IRS audited their 2006 return in 2012. At the time of the audit, the Chapmans lived in Hawaii. The last return that they filed before the audit began was their 2011 return, and it showed their address as that of their tax practitioner in Los Angeles. IRS proposed a deficiency, and the Chapmans protested this proposal. They met several times with Appeals Officer Lipetzky. Thereafter, IRS issued a notice of deficiency, which it sent to the Los Angeles address.
The Chapmans filed suit in Tax Court, but they did so well after the 90 days allowed under Code Sec. 6213(a). They claimed they never received the notice of deficiency and that the notice was invalid. They argued that, via their and their tax practitioner's interactions with Lipetzky, IRS should have known that they were living in Hawaii and, therefore, that their Hawaii address was their last known address.
The Court ruled that the Chapmans did not meet the "updated by clear and concise notification of a different address" requirement in Reg § 301.6212-2(a) and, therefore, the notice of deficiency was properly sent to their last known address.
The Court said that the taxpayer's argument was contrary to case law dating back several decades and contrary to the reg.
Additionally, the Court said, accepting the taxpayer's argument would impose an unreasonable administrative burden on IRS; IRS would need to systematically record in a central file all address information acquired in any fashion.
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