A recent Tax Court order in the case of Zonies v Commissioner combined with a 2013 PMTA issued by Chief Counsel indicates a shift has occurred within the IRS concerning Collection Due Process (CDP) notices sent to the wrong address at the IRS. The IRS signaled the position it won in the Zonies case in PTMA 2013-011 (June 7, 2013). The IRS Manual gives instructions to IRS employees concerning what they should do if they receive a CDP request at the wrong location like IRM 18.104.22.168.2(1) (quoted below) takes those requests pretty seriously – and requires the service to “immediately” send them to the right office via fax (and mail) and if fax isn’t possible, to overnight it. I.R.M. § 22.214.171.124.1.3 instructs the IRS to give more latitude to requests hand-delivered to Taxpayer Assistance Centers. The relevant regulations, 26 C.F.R. 301.6330-1 (c) QC6 and AC6, require that the taxpayer send the CDP request to the appropriate address.
Guest blogger Marty Davidoff wrote last fall about the problem with the notice of intent to levy letter and how difficult it can be to understand it in order to follow the instructions the IRS is giving on what to do in order to properly make the CDP request or even to realize that the letter is a notice of intent to levy creating CDP rights. CDP petitions in Tax Court are down from a high in 2010 of around 2,000 to only 1,665 last year. Are less taxpayers utilizing CDP because the IRS has reduced its collection activity, are less petitions filed in Tax Court because of policies making it more restrictive to successfully make a CDP request or some combination of these factors. I suspect most of the reduction in CDP Tax Court petitions has resulted simply from the filing of fewer NFTLs after the adoption of the Freshstart initiative in 2011 and the reduction in levies due to the reduction in IRS employees because Congress chooses not to allocate resources to the IRS.
Figure 3. on page 47 of the Treasury Inspector General Report dated March 28, 2016, entitled “Several Changes Sought by the Internal Revenue Service Restructuring and Reform Act of 1998 Remain a Challenge” shows that over 3.5 million notices of federal tax liens (NFTL) and over 3.5 million levies were filed in 2014. The number of both NFTLs and levies dropped to under 2 million by 2014 no doubt a combination of the Fresh Start initiative and declining resources at the IRS. Some small part of the downturn, however, may result from tightening policies at the IRS about timely requests.
The Zonies case must serve as a wake up call for practitioners seeking to obtain a CDP hearing. They must carefully read the CDP notice and get from the notice the correct location for sending the request. Because a taxpayer has only 30 days in a CDP case within which to make the request and sometimes taxpayers reach out to the representative during the 30 day period for the first time, the window within which to send this notice can be extremely tight and the practitioner may occasionally be sending the request based on a description of the letter from the taxpayer. Of course, many if not most CDP requests are filed by unrepresented taxpayers for whom this is a once in a lifetime experience. As Carl noted in his recent post concerning the 30 day window, little room for error exists.
The Relevant Manual Provisions
IRM 126.96.36.199.2 (02-03-2014) Collection Due Process (CDP) Hearing Requests provides the following information concerning requests for a CDP hearing:
- ACS CDP cases are received and prepared in the four ACS Support sites. The SBSE sites are Philadelphia and Cincinnati. The W&I sites are Kansas City and Fresno. Only CDP caseworkers in the four consolidated ACS Support sites have the authority to work the Form 12153, Request for Collection Due Process or Equivalent Hearing or its written equivalent. Any Forms 12153 or written equivalent received in Customer Account Services, ACS Call Site, Collection Operations, etc., must be immediately forwarded to the appropriate ACS Support, CDP Unit. The appropriate site may be determined by getting on to SERP, click the tab for Who / Where, ACS CDP Coordinators. The names, phone numbers and addresses of the CDP Coordinators along with the states that each CDP Unit covers can be obtained as well. If a Form 12153 is received at an incorrect CDP site, fax the form including all supporting documents and envelope, the same day to the CDP Coordinator at the correct site. After faxing, write in the top margin of the request in red:” FAXED TO (PSC/CSC/FSC/KC) CDP Unit ON (Date)” and then mail the original to the correct site also. If there are too many for faxing, forward via express overnight mail
But if a taxpayer’s account has been assigned to Field Collection, then you refer to IRM 188.8.131.52.2.1 (02-07-2014) Timeliness of the CDP Hearing Request
When the RO instructs the taxpayer to submit the CDP or equivalent hearing request to the RO’s address rather than the address on the CDP notice, timeliness is measured from the postmark of the request mailed to the RO, or the date received by the RO if the request is delivered to the RO by hand. Example: The taxpayer receives a systemic CDP notice, such as a FPLP notice, while the case is assigned to an RO and the taxpayer submits the hearing request to the RO as instructed by the RO. The RO determines timeliness by either the postmark date or date received at the RO address even if it is not the address in the notice.
So, in situations in which the RO sends the CDP notice, the field office where the assigned revenue officer works will be the place to send the CDP notice. This means that in addition to the four quasi centralized locations for sending CDP requests, there are a couple hundred places you might be required to send a CDP request because it equals the number of RO field offices in the country. In our clinic we just mailed a CDP request to the location designated in a CDP notice generated by an RO. The certified letter was returned as undeliverable even though we had properly addressed it. Inquiry with the RO brought forth the unapologetic explanation that the RO office had moved – as though we were to know that. We faxed a copy of the request to the RO and are sending it to the new RO address within the 30 day period but the experience has further shaken our comfort with this system. Even though the IRM instructs the office receiving the request for a CDP hearing to immediately send the request to the proper office, the PMTA cited above makes clear that the internal mailing within the IRS does not give the taxpayer the benefit of the timely mailing rules of 7502 and the “correct” office must receive the CDP request by the 30th day:
“Sometimes, a taxpayer will send a COP hearing request to an incorrect IRS office. When that happens, the taxpayer cannot benefit from section 7502. See section 7502(a)(2)(B) (requiring a properly-addressed envelope for the rule to apply); sections 301.6320-1(b)(2) and 301.6330-1(b)(1). As a result, the taxpayer’s hearing request must arrive at the correct collection office by its due date to be timely.”
The PMTA points out that sometimes the IRS office that initially receives the CDP request will mail it to Appeals or to another wrong office. If that happens, the failure of timely delivery still falls on the taxpayer seeking the CDP hearing and Appeals is not to give the taxpayer a CDP hearing in those circumstances. The process means that a foot fault by the taxpayer in sending the CDP request will likely turn the request for a CDP hearing into an equivalent hearing. Many times getting an equivalent hearing will be just as good or better than a CDP hearing because the statute of limitations on collection is not suspended in the equivalent hearing and taxpayers may achieve the same result through that process; however an equivalent hearing is not the same as a CDP hearing and losing the right to go to Court often removes a very meaningful step in the process of resolving a collection matter.
Observations for Practitioners and for the IRS
If you have concerns about where to send the CDP request, you might consider sending requests to all locations you think might possibly be proper. This will no doubt create confusion at the IRS and the IRS may not endorse this strategy but nothing in the statute or regulations suggests that shooting multiple arrows at the target has a down side for the taxpayer. As long as one of them gets to the proper IRS office by the deadline, it seems that the CDP request meets the timeliness rule.
An easy solution to this problem would be for the IRS to create a central location for submission of CDP requests and a fax machine at that location. I have never seen the fax machine at the Centralized Authorization File Unit (CAF) which I envision must be the world’s largest fax machine. The IRS has created one fax number for sending in power of attorney forms and that one centralized unit handles all of the requests. If the IRS had one CAF like location for processing all CDP requests and it made the Fax # and address clear on all of its correspondence, I am sure that taxpayers and practitioners would still send some CDP requests to the wrong place but I am also confident that this could clear up most of the confusion that currently exists regarding where to send CDP requests. Mr. Zonies is not the only person with this problem. Because getting the CDP request to the IRS within the 30 day period is a prerequisite to getting a CDP hearing, the IRS should create one location just as there is one location to file your Tax Court petition and not multiple locations depending on where in the country your notice of deficiency originated. Creating one location will eliminate confusion, eliminate most Zonies type mistakes and introduce logic into a process that currently lacks logic from the perspective of the customers of the process.