In Buffano v. United States, T.C. Memo. 2016-122, the U.S. Tax Court concluded that that the taxpayer was not liable for tax because the IRS failed to properly assess the tax because the IRS did not mail notices of the tax deficiencies to the taxpayer’s last known address.
This case is a good example of why taxpayers should not accept what the IRS says without first verifying that it followed the law.
Facts & Procedural History
Mr. Buffano did not file Federal income tax returns for tax years 2000-2003.
The IRS prepared and mailed notices of deficiency to Mr. Buffano for each year.
At least one of the notices (the one for 2000) was returned to the IRS as undeliverable. The IRS mailed Mr. Buffano a Notice of Federal Tax Lien and a Notice of Intent to Levy.
Mr. Buffano requested a hearing with the IRS to verify that “the IRS followed proper procedure and to ensure that this ‘liability’ is authentic or even owed.”
The IRS sustained the lien and levy collection actions, but noted that “the Service could not show that a statutory Notice of Deficiency [for any of the years at issue] was issued to you at the correct address.”
Mr. Buffano asked the U.S. Tax Court to review the IRS’s determination.
Mr. Buffano argued that the IRS did not properly mail a notice of deficiency to him for any of the years at issue.
IRS Invalid Assesment? -Notice Not Being Mailed
The IRS argued that notices of deficiency were mailed to Mr. Buffano for each year, but that Mr. Buffano did not receive them as the notices were returned to the IRS by the post office as undelivered. The IRS also argued that the notice of deficiencies for each year were mailed to Mr. Buffano’s last known address.
The law does not require the notice of deficiency actually be received. Rather, the law only requires that the notice be mailed to the taxpayer’s last known address. To the extent the notice was not mailed to the taxpayer or not mailed to the taxpayer’s last known address, the IRS’s tax assessment is invalid. This means that the taxpayer does not owe the tax liability to the IRS. The court reached this conclusion in the case.
The court noted the problem with the IRS’s two arguments. If the notices were mailed, the IRS would have proof of the mailing. The IRS often addresses this issue by having IRS employees testify as to the IRS’s records, which establishes that the notice was in fact mailed. The IRS did not present any proof of this to the court.
Also, if the notices were mailed and returned as undelivered, it would appear that they were not mailed to the correct address. The court noted that the IRS did not harmonize this argument. So the court concluded that either the notices were not mailed or they were mailed to the wrong address.
It should also be noted that despite the IRS’s arguments in court, the record even included a letter from the IRS indicating that it could not verify that the notices were mailed to the correct address. This is somewhat unusual. Given this fact, it would seem that the IRS should have conceded the case based on this without the need for court.