The IRS sends taxpayers letters and notices from quite a few different IRS offices. As a result, taxpayers are often confused as to what IRS office to respond to. This is particularly true if the IRS letter or notice includes more than one IRS address.
The IRS has maintained a harsh stance on taxpayers who inadvertently mail responses to the wrong address listed in the IRS letter.
But it appears the IRS is about to change this rule. The IRS recently addressed this in a Chief Counsel Memorandum entitled “Treatment of incorrectly-addressed CDP hearing requests.”
About IRS Collection Letters & Notices
The IRS Memorandum addresses several IRS collection notices.
These IRS collection notices inform taxpayers of their right to request a collection due process (“CDP”) hearing.
The CDP hearing is a remedy provided by Congress, to allow taxpayers an independent review by the IRS Office of Appeals before certain collection actions are taken. This right was added by Congress in response to perceived IRS collection abuses in the 1990s.
The Code specifically requires the IRS to send the taxpayer this CDP hearing notice before it can take certain collection actions, such as issuing a lien notice or levying on the taxpayer’s assets. This requirement is set out in Sections 6320 and 6630.
The IRS’s CDP hearing notice alerts taxpayers to their right to file a Form 12153 to request a CDP hearing. Not only does a timely response by the taxpayer requesting a CDP hearing guarantee a collection hold, it is also required to preserve the right to have the U.S. Tax Court consider the case at a later date (see this article for when the IRS fails to send the required notice and this article for the employment levy, which doesn’t require notice).
The IRS Letters 503 and 504
But as those who owe the IRS back taxes know, the IRS doesn’t just send one notice. The IRS sends multiple notices to delinquent taxpayers.
The IRS will typically start with the CP503 and CP504 notices. These notices refer to liens and/or levies, and ask for payment, but they are not “final” notices. Thus, they do not trigger CDP rights.
The IRS will eventually send the taxpayer a Letter LT11 or Letter 1058. These letters are the “final” notices and they do trigger CDP rights. These letters are usually issued by the IRS Automated Collection System (“ACS”) office and include only one IRS address to respond to (here are the IRS addresses in Houston, Texas, which CDP hearing request are sent to if there is an IRS revenue officer working the collection case).
The IRS Memorandum notes that some Letter LT11s have more than one IRS address:
.Some notices, like the LT11, serve the dual purpose of informing the taxpayer of their CDP rights and soliciting payment. To facilitate this dual purpose, the notices have one address for submitting the hearing request printed at the top of the first page, and another address for submitting payment printed on a removable payment voucher at the bottom of the first page. These notices are printed double-sided, and the payment address is printed to appear through the cellophane window on the envelope enclosed with the letter. Because the notices are printed double-sided, in addition to appearing on the top of the first page, the mailing address for the CDP hearing request may also be printed on the reverse side of the payment voucher. The payment voucher and CDP hearing request addresses may be the same, but often times they are not.
But the LT11 is just one example.
The IRS Letter 3172
The IRS Letter 3172 is a better example. The IRS Letter 3172 is the notice of an actual lien.
Like the IRS CP503 and CP504, the IRS Letter 3172 mentions the lien and instructs the taxpayer to file a CDP hearing request if they do not agree with the lien. But the Letter 3172 includes two IRS addresses–one at the top of the IRS letter and then one in the body of the IRS letter.
The text of the IRS letter says that the taxpayer is to send their CDP hearing request to the IRS address in the body of the letter. The IRS letter includes a return envelope with the address that is listed at the top of the IRS letter.
How the IRS Handles Incorrectly Addressed Responses
Suffice it to say that many taxpayers have responded to the IRS Letter 3172 by sending their CDP hearing request to the IRS address listed at the top of the IRS letter, rather than the IRS address listed in the body of the IRS letter. How does the IRS handle these incorrectly addressed responses?
The IRS policies say the IRS office that receives the CDP hearing request is to forward it to the correct IRS office. In doing so, the IRS office receiving the CDP hearing request is to research the issue and then take the actions needed to forward the CDP hearing requests.
No doubt most of these incorrectly addressed CDP hearing requests are never processed by the IRS. But even if they are, they are deemed to be received late in most cases.
The IRS has taken the position that the mail-box rule does not apply in this case (the mail box rule allows the IRS to treat the document as being received on the date of mailing, rather than the date of receipt by the IRS). It has maintained this position for nearly twenty years.
IRS Change to Adopt the Mailbox Rule
This brings us back to the IRS Memorandum. It notes that this is an issue and recommends that the IRS change its policies to say that the mail box rule applies.
This is a much needed change. Those who would suffer a hardship due to the IRS collections have the most to gain by this change.
While an IRS policy change is welcomed, it doesn’t necessarily create a legal right. Even if the IRS chooses not to follow the updated guidance, taxpayers may still find that the IRS collection actions are lawful.
Once updated, taxpayers will avoid losing their CDP rights due to an inadvertent mailing error.
In the meantime, taxpayers who find themselves in this position before the change may want to press the issue with the IRS and/or consider filing a timely U.S. Tax Court petition to challenge the determination.