<div>    CC:SB;6:AUS:2:DNPrice GL-119892-16   date: June 30, 2016 to: _______________ Program Analyst ATAT (SB/SE Collection Policy-GSC) Supervisory Revenue Officer International/ATAT Revenue Officer from: Daniel N. Price Attorney (Small Business/Self-Employed)   subject: Collection issues and Streamlined Foreign Offshore Procedures submission Taxpayer: ___ -— SSN: _________________   This advice applies only to the unique facts and circumstances of this case and should not be relied upon in any other context. Some of the conclusions set forth in this advice are tailored to the unique aspects of the Streamlined Foreign Offshore Procedures component of the 2014 Streamlined Filing Compliance Procedures; the conclusions tailored to the 2014 Streamlined Filing Compliance Procedures cannot be applied in other circumstances. Collection Policy requested SBSE Headquarters Counsel’s advice on this case during the pendency of a Taxpayer Advocate Service (TAS) inquiry which resulted in an Operations Assistance Request. In arriving at our advice, we reviewed facts directly provided by the International/ATAT Revenue Officer and documents including an extensive ISC case history, Examination’s activity record relating to tax years! ~l (t throughCZ^,-certain IDRS transcripts, documehts provided by TAS relating toi (t residency, and the taxpayer’s Form 14653, Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures. We coordinated the analysis and conclusion relating to the first issue with Chief Counsel’s National Office, Procedure &amp; Administration.   Issues 1. Whether assessments fori 3 tax years! I tax (^(3- years are valid. 2, WhetherT Imade a proper submission under the Streamlined Foreign Offshore Procedures and the impact of that submission on potential liabilities for prior tax periods.   Conclusions 1. The assessments fori______ttax years! I are not valid because the Service did not issue notices of deficiency to! ~1last (b)(3)/2 known address. 2, lappropriatelv made a submission under the Streamlined Foreign OffshciV^^^^^ Procedures, and this memorandum discusses the ramifications ofl 1 (b)(3)/2 CM iKnniecinn   Facts I is a U.S. citizen. She was born in____________________ in [ 1 her _ parents moved the family td I. and! I grew upnrir A!thougi(&amp;)(85 educated from high school through college in the U.S..1 I spent the vast majority her life living overseas with! | as her home. After her education.“she spent (b)(3; very little time in the U.S.L I filed income tax returns for”several tax years in the (b)(3; I I She worked fori Tor most of her adult life with postings ail over the vrarldW(3; She was under the impression that she was not required to file income tax returns based on her employment with! ~lanrt other factors. For tax years| (reported! "Icompensatidh on Forms (b)(3: 1Q99-MISC to the Service.! loreoared the Forms 1099 referencing the followin^b)(3' address as! e address: ~ ^'^^3. (b)(3 |used its! bffice address as! ~! address oh thOsO Forms'1099. Icredibiv represents that she never received copies of those Forms 1099 and (b)(3 had no knowledge of the information returns. The Service began examinations apparently in two batches- the early tax years ! I) and lax (b)(3 yearsi _ I. The examiner that prepared the notice~of deficiency for tax (b)(3 years! ! made the following entry dated! IWO   The same examiner made another entry on   The IRS’ FINDS database has only three historical addresses for| [as follows;   The examination for tax years_______________resulted in the issuance of a notice deficiency. The Service mailed the notice of deficency tol _ address.l I did not know of the notice of deficiency and did not receive It. We inf^JC that the prior exam activity for the earlier years generated the posting of the first address record in the FINDS database and that the notice of deficiency for those tax years was also issued to the _____________________pddress. We cannot conclusively establish whether the notices of deficiency issued tol ~1(^)C were returned as undeliverable.Although the revenue officer interpreted transcript codes as showing no evidence of returned notices, the available evidence provides an inference that the notices of deficiency were likely returned as undeliverable. Specifically, the revenue officer's correspondence to the same address wasret^urned as undeliverable. See ICS case history entry datedl , The underlying administrative file is not available. If the notices were returned as undeliverable, they should have been associated with the examination administrative files.   BecauseT Idid not receive the notices of deficiency, she never contested the (b)(3) proposed deficiencies in the United States Tax Court. The Service made default assessments based on those notices of deficiency resulting in cnmii iitive liabilities in _ excess oti I — •“ (b)(3i The collection case was assigned to an ATAT international revenue officer. The revenue officer located a levy source at a financial institution of a family trust that made periodic distributions to I I. The Service collected by levy aoproximatelvl from the trust. Eventually the revenue officer sapiirprl fc contact information based on her (b)(3: passport information and made contact with her I .phired counsel and made a (b)(3i Streamlined Foreign Offshore submission for tax yearsi counsel has requested that the Service processEZ_____I tax retums for tax yearsf I , lundor the Streamlined Foreign Offshore Procedures and that the (t))(31 Service abate the assessments for all prior tax years. TAS made the same requests based on its review of the case. Brief Discussion and Analysis We begin our analysis with a discussion of the last known address issue. Then, we discuss the application of the Streamlined Foreign Offshore Procedures to this case. Last Known Address Issue I.R.C. § 6212(b) states that a notice of deficiency shall be mailed to a taxpayer’s last known address. Last known address has been interpreted to mean ‘“the taxpayer's last permanent address .. . known by the Commissioner or the last known temporary address of a definite duration to which the taxpayer has directed the Commissioner to send all communications.”’ Mark v. Commissioner. 947 F.2d 983, 984 (D.C. Cir. 1991) (quoting Crum v. Commissioner. 635 F.2d 895, 898 (D.C. Cir. 1980)). “Last known address" has been discussed in a long line of cases in the Tax Court. See generally Abeles v. Commissioner, 91 T.C. 1019 (1988). And it was later defined in the regulations at § 301,6212-2. Treas. Reg. § 301.6212-2(a) provides the general rule for last known address: Except as provided in paragraph (b)(2) of this section, a taxpayer's last known address is the address that appears on the taxpayer's most recently filed and properly processed Federal tax return, unless the Internal Revenue Service (IRS) is given clear and concise notification of a different address. Further information on what constitutes clear and concise notification of a different address and a properly processed Federal tax return can be found in Rev. Proc. 90-18 (1990-1 C.B. 491) or in procedures subsequently prescribed by the Commissioner.   Rev. Proc. 2010-16 is now the current Revenue Procedure relating to last known address, and it explains how the Service is informed of a change of address and how the Service updates a taxpayer’s address of record. Besides using the last address provided on a filed income tax return, last known address information is also gleaned from the USPS national change of address database, Treas. Reg. § 301.6212-2(b)(2) and Rev. Proc. 2010-16, section 4.05. But both the current Revenue Procedure and the regulations do not anticipate the fact pattern presented in this case, to wit, a taxpayer absent from the Service’s databases and lacking an address history based on filed returns and USPS change of address records.l I last known address should have been the address used on her_last(b)(: income tax return filed in thel 1 But that address had been lost from the Service’^h)(. records. As a theoretical matter | had no "last known address" because she w^)( not in the Service’s databases. Case law interpreting Treas. Reg. § 301.6212-2 has required the Service to exercise reasonable due diligence based on information the Service knew or should have known in order to ascertain a taxpayer's last known address. See Program Manager Technical Advice 2008-1634 (January 9, 2008). "The question of the required amount of due diligence the Service is required to exercise to ascertain a taxpayer’s correct address is therefore a question of fact.’’ [d. In this case, the Service had a duty to conduct a reasonable investigation of I address before issuing a notice of deficiency. With no filing history and indicators that [did not live in the United States, the Service should have used all information sources to investigate the address on the Form 1099 issued by T^( Service could have contacted! Ifor more information onl J status with the(b)( organization and her horne address. The examining officer’s case activity records foyax years] [ provide "red,flags’* abou] [last known address. The ®( case activity record noted that] lhad not responded to the priQf'ex:aminations ar#)( acknowledges that the address the Service used for] p address is the] tb)( address in I j — ~ ....(b)t Additional facts available to the Service should have also prompted additional inquiry.. concernind I last known address. A third party payor reported to the Service (b)( information returns using the taxpayer’s SSN under another name (her husband’s name). Specifically] reported Schedules K-1 issued to: (b)( (b)( 2 To summarize, the Service did not issue the notices of deficiency for the relevant tax This presentation is taken directiy from the Service’s IRPTN records. We do not know/ why ] (b)i husband,I ~1 is referenced with her soctai security number, in iatsr years, the information return@b}( used the name]" | Cb)i   years td ~ last known address. Therefore, the notices of deficiency are not under I.R.C. § 6212, and the related assessments cannot be enforced. Streamlined Foreign Offshore Procedures In general, the 2014 Streamlined Filing Compliance Procedures offer noncompliant taxpayers a unique opportunity to come into compliance with their income tax and FBAR reporting requirements. Two separate avenues are available under the Streamlined Filing Compliance Procedures: StreanMined Domestic Offshore (often abbreviated SDO) and Streamlined Foreign Offshore (often abbreviated SFO). Broadly speaking, SDO and SFO require only the most recent three years of tax returns (amended returns only for SDO) and six years of delinquent/amended FBARs while not imposing most penalties. Specifically, the procedures for SFO state: A taxpayer who is eligible to use these Streamlined Foreign Offshore Procedures and who complies with all of the instructions outlined below will not be subject to failure-to-file and failure-to-pay penalties, accuracy- related penalties, information return penalties, or FBAR penalties. Both SDO and SFO have some common general eligibility requirements including the following; IRS has initiated a civil examination of taxpayer's returns for any taxable year. If the IRS has initiated a civil examination of taxpayer's returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures. Taxpayers under examination may consult with their agent. Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures. This eligibility requirement was written from the perspective of current examinations when a taxpayer makes a Streamlined submission. The direction to consult with their agent" illustrates the intent of the drafters to disqualify taxpayers currently under examination, Additionally, this eligibility requirement has been interpreted by OVDP/Streamlined Program Management to not include delinquent return inquiries by Collection. Contact by Collection does not disqualify a taxpayer from using the Streamlined Procedures. In most cases, closed examination activity pre-dating a Streamlined submission will not impact eligibility for the Streamlined Procedures. But making a Streamlined submission after closed examination activity will not vitiate the prior examination results, in this case, the validity of the results of the prior examination activity compels a different conclusion. In this case,! ~!had been under examination for various tax years. But she was n&lt;tt&gt;(3)   aware of the examinations or the resulting notices of deficiency and subsequent default assessments. Because of the conclusion reached earlier in this memorandum regarding the invalidity of the notices of deficiency, the prior examination activity must be considered a nuliity and should not disqualify Ifrom using SFO. '(b)G Imade an SFO submission including tax/eturns for tax years I and I I and that submission shduid be afforded routine treatment under SFO. That Wv treatment does not foreclosure future examination of those tax years or potentially earlier tax years. The Form 14653 specifically mentions the possibility of examination, and the SFO website states on this point: Even if returns properly filed under these procedures are subsequently selected for audit under existing audit selection processes, the taxpayer will not be subject to failure-to-file and failure-to-pay penalties or accuracy- related penalties with respect to amounts reported on those returns, or to information return penalties or FBAR penalties, unless the examination results in a determination that the original tax noncompliance was fraudulent and/or that the FBAR violation was willful. Any previously assessed penalties with respect to those years, however, will not be abated. Further, as with any U.S. tax return filed in the normal course, if the IRS determines an additional tax deficiency for a return submitted under these procedures, the IRS may assert applicable additions to tax and penalties relating to that additional deficiency? Hence, if the Service examinesi 1SFO submission and determines she acted (b}( willfully or_fraudulently, then the Service may pursue prior tax years inciudingL_J throughCZ^. But absent a finding of fraud or willfulness, those tax years should not fc(b)( reopened or examined based on the published terms of the Streamlined Filing Compliance Procedures. Recommendations 1. Wejecommend abating the assessments for tax years!------, Jthrough^^^' I I Release all levies issued for those periods. Apply any overpayments tb)i The general Sireamlined Procedures websile under the heading "General treatment under the streamlined procedures" also contains the following concerning potentiai examinations: Returns submitted under either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures will not be subject to IRS audit automatically, but they may be selected for audit under the existing audit selection processes applicable to any L). S, tax return and may also be subject to verification procedures In that the accuracy and completeness of submissions may be checked against Inforrnation received from banks, financial advisors, and other sources. Thus, returns submitted under the streamlined procedures may be subject to IRS examination, additional civil penalties, and even criminal liability, if appropriate.... (emphasis added)   resulting from the abatements for tax years! _ Ito (b)( balances for tax yeard I (b)( 2. We recommend applying the terms of SFO to I ISFO submission for ta&gt;ib)( yearsl J 1. Based on our analysis and review of her SFO submission and the available facts, it appearsi Icompilance failures nonwillful. Absent new facts clearly contradicting the narrative statement of facts set forth ini IForm 14653, we do not recommend examining I j tatfei years) |. We are copyinql |LS&amp;I National Technical Specialist, on this memorandum in order to consider this recommendation for LB&amp;I WIIC.   Please associate a copy of the memorandum with the Collection case file. If you have any questions, please contact Attorney Dan Price at 512-499-5281. Brock E. Whalen Associate Area Counsel (Small Business/Self-Employed)   claniel.n.price@irs counsel.treas.gov   By: ____________________________ Daniel N. Price Attorney (Small Business/Self-Employed)   CC: I I- National OVDP Technical Specialist (LB&amp;I IIC) Mark Eblen Acting Assistant Division Counsel (Small Business/Self-Employed)</div>

Deficiency Notices Weren’t Valid; Offshore Submission Was Proper

Deficiency Notices Weren’t Valid; Offshore Submission Was Proper

Internal Revenue Service

In a legal memorandum, the IRS recommended abating assessments for tax years for which notices of deficiency weren’t valid because they weren’t issued to the last known addresses of an individual who made a proper streamlined foreign offshore submission under the 2014 streamlined foreign offshore procedures; the IRS also addressed the impact of that submission on potential liabilities for prior tax periods.

In a legal memorandum, the IRS recommended abating assessments for tax years for which notices of deficiency weren’t valid because they weren’t issued to the last known addresses of an individual who made a proper streamlined foreign offshore submission under the 2014 streamlined foreign offshore procedures; the IRS also addressed the impact of that submission on potential liabilities for prior tax periods.

In a legal memorandum, the IRS recommended abating assessments for tax years for which notices of deficiency weren’t valid because they weren’t issued to the last known addresses of an individual who made a proper streamlined foreign offshore submission under the 2014 streamlined foreign offshore procedures. The IRS also addressed the impact of that submission on potential liabilities for prior tax periods.

In a legal memorandum, the IRS recommended abating assessments for tax years for which notices of deficiency weren’t valid because they weren’t issued to the last known addresses of an individual who made a proper streamlined foreign offshore submission under the 2014 streamlined foreign offshore procedures. The IRS also addressed the impact of that submission on potential liabilities for prior tax periods.