There are a number of dates that must be met when it comes to taxes. Many of these dates are triggered by some action by the IRS. This raises the question as to what happens if the taxpayer is not aware that the IRS took the action and the IRS destroys the primary evidence that would show that it acted timely? The court addressed this in Woody v. Commissioner, T.C. Memo. 2016-201, in the context of a notice of determination and a tax court petition filing deadline.
The Facts & Procedural History
The facts and procedural history are as follows:
- The taxpayer requested a collection due process hearing for his unpaid taxes.
- The IRS asserted that it issued notice of determination to the taxpayer on January 30, 2013.
- The taxpayer asserted that he did not receive the notice of determination and he requested a second copy
- The IRS provided an unsigned and undated version of the notice of determination to the taxpayer on November 10, 2014.
- The taxpayer then filed a petition with the U.S. Tax Court within 30 days of this November 10, 2014 notice date.
The petition had to be filed within 30 days of the notice of determination in order for the U.S. Tax Court to have jurisdiction over the case. So the issue in dispute was whether the IRS met its burden to show that it timely mailed the determination notice on January 30, 2013.
The IRS’s Secondary Evidence
The IRS was not able to produce the original dated copy of the notice of determination sent to the taxpayer. The IRS asserted that it had already destroyed the files.
Instead of producing the notice, the IRS presented written declarations of two IRS employees and one of the employees testified at the hearing. The IRS also presented a Certified Mail Return Receipt Approval Form prepared by one of the IRS employees and a U.S. Postal Service (USPS) Form 3800, Certified Mail Receipt, bearing a USPS stamp dated “JAN 30 2013”, the taxpayer’s name and address, and a certified mail number.
The taxpayer did not dispute that the IRS mailed something to him on this date. Rather, he disputed whether the IRS could show that the letter was a notice of determination. The law makes it clear that the IRS has the burden to make this showing.
Inconsistencies in the IRS’s Evidence
The court weighted the evidence and concluded that the IRS had met its burden. It reached this conclusion in large part because it found that the testimony and the documents were consistent with each other. There does seem to be inconsistencies in the case, however.
When an IRS settlement officer closes a case, the case is handed off to the Account and Processing Support or APS unit. APS then handles the case closing. In doing so, APS has procedures whereby it segregates the determination notices and the remainder of the file. The determination notices are generally kept in a separate filing system. The bulk of the file is then sent to storage or destroyed.
So there is an inconsistency in this case. APS has a process to segregate and retain the notice. Once the file is separated, APS then keeps the separated file and waits a period of time for the mail to be returned and, if it is returned, the returned mail is associated with the file. The IRS may then try to locate the taxpayer or, if contacted by the taxpayer after time has elapsed, the IRS can re-open the case. The IRS apparently did not follow this process in this case.
Interestingly, the IRS did not introduce evidence that the mail was actually delivered. It did not argue that the taxpayer received the notice. It also did not explain whether the mail was returned to the IRS. The taxpayer was not able to confirm this in this case given that the IRS destroyed the file. That the IRS did not follow its procedures is an inconsistency, however.
It does not appear that the taxpayer raised this issue and it was not considered by the court. Had the taxpayer required the APS unit employee to testify in court, he may have been able to put sufficient evidence in the record to establish that the IRS’s procedures were not followed. This may have been sufficient to show that the IRS had not met its burden in this case.