On June 30, 2020, I wrote a post discussing the IRS’s decision to send out millions of notices with bad dates. I believe this was a bad idea for the reasons articulated in the post; however, new information suggests that the problem did not extend as far as I reported in the June post. Last week, I was on a panel at the ABA Tax Section meeting regarding these notices. One of my co-panelist, Julie Payne, who serves as the Tax Litigation deputy to the head of the SBSE division of Chief Counsel, had updated information on the notices I wrote about in the earlier post. In that post I relied for my information on a post by the National Taxpayer Advocate. Based on Julie’s information, the IRS did not send out as many notices with bad dates as was first thought. In this post I will explain what happened in the sending of the notices with bad dates in greater detail based on the information now available to me.
The initial reporting of this issue placed the number of notices with bad dates as exceeding 20 million. The IRS term for these notices is backlogged. Some have described them as backdated. The IRS computers generated these notices during the period of the IRS shut down. When IRS employees began returning to work, they found that the computer system had queued the notices waiting for the employees to print and mail them. The computer had not caused the printing of the notices and the IRS had to decide whether to print them or not but, if printed, they would bear the date the computer generated the notice and not the date the IRS printed them for mailing. The IRS decided not to print the vast majority of the notices but to regenerate those notices at a future time with a date coextensive with their mailing.
Apparently, the IRS decided to print certain statutorily mandated notices. I imagine the IRS obtained a legal opinion concerning the printing of these notices with dates as much as three and one half months before the time of mailing. I have not seen the legal advice rendered. The IRS mailed most, and maybe all, of the notices with the bad dates on July 14, 2020. These statutorily mandated notices came in three types: 1) notice and demand – letters CP14 (individuals) and CP16 (businesses); 2) math error/notice and demand combination letters; and 3) CDP levy notices – letters CP90; 90C; 297; 297-A and 297-C. Instead of printing 20 million notices with wrong dates, it printed and mailed about 1.5 million notices from these three types. The vast majority of the notices the IRS printed and mailed were notice and demand letters. That makes sense because the statute requires the sending of that notice with every assessment where an outstanding balance exists.
Notice and Demand
Knowing it was sending out notices with bad dates, the IRS created an insert, or stuffer, to go in each envelope. Each type of letter had a different insert. The notice and demand letter had Notice 1052-A inserted into the envelope. This notice tells the recipient that for certain liabilities, including 2019 income taxes, the IRS will not charge interest and penalties if the taxpayers pay the liability prior to July 15, 2020. For assessments based on older liabilities or certain types of taxes, such as employment taxes, the taxpayer needed to pay by July 10 to avoid penalties. Of course, taxpayers would receive the letter after these dates have passed if the letters, together with the inserts, were mailed on July 14. So, the insert to the notice and demand letter would alert taxpayers that interest and penalties would not run from the date on the letter, but the insert would not have given the taxpayer the opportunity to pay prior to the time interest and penalties would begin to run. The timing of interest and penalties here is governed by the invocation of IRC 7508A as we discussed here in Notices 2020-18 and 2020-20. To change that timing the IRS would have had to issue another notice like Notice 2020-18 giving taxpayers more time to pay and it did not do that.
Math Error Notices
In the envelope containing the Math Error notices, the IRS inserted Notice 1052-B. Like the notice inserted into the Notice and Demand letter envelope, this notice explains that the pandemic has caused the IRS to mail the Math Error notice later than the date on the letter and notes that the 60 days from the letter may have already run. The insert gives the taxpayers until August 21 to respond to the Math Error notice instead of the date 60 days from the date on the Math Error notice itself. IRC 6213(b)(2) gives a taxpayer 60 days to request an abatement of a math error assessment:
(2) Abatement of assessment of mathematical or clerical errors
(A) Request for abatement
Notwithstanding section 6404(b), a taxpayer may file with the Secretary within 60 days after notice is sent under paragraph (1) a request for an abatement of any assessment specified in such notice, and upon receipt of such request, the Secretary shall abate the assessment. Any reassessment of the tax with respect to which an abatement is made under this subparagraph shall be subject to the deficiency procedures prescribed by this subchapter.
I am concerned about this if I understand the timing of the mailing correctly. Consider an example: if the IRS computer generated a Math Error notice with a date of April 10 giving the taxpayer 60 days to respond, and thus triggering the sending of a statutory notice of deficiency, is instead sent on July 14 ((i.e., until the August 21 date I mention above). I do not understand why the recipient would not have 60 days from July 14 instead of 38 days. I am unsure if I misunderstood the date of mailing of these Math Error notices with bad dates or if the IRS chose to give taxpayers less than the statutorily mandated time to respond to the Math Error notice or if some other explanation exists. I do not see how the IRS could cut short the time within which the taxpayer could object to the Math Error notice no matter what date appears on the notice itself.
In the envelope containing the CDP notices the IRS inserted Notice 1052-C. This insert also explains to the taxpayer that the taxpayer should not be concerned by the date on the CDP notice itself and gives the taxpayer until August 13, 2020, to file a CDP request that will result in a hearing that will allow the taxpayer to go to Tax Court if the taxpayer does not agree with the result. In other words, the taxpayer has until August 13 to request a CDP hearing rather than an equivalent hearing. Here the date the IRS provides in the stuffer for timely requesting a CDP hearing perfectly matches with the timing of mailing of the CDP notice on July 14. This provides support for the timing of the mailing of the documents on that date.
As we have discussed before, the date to request a CDP hearing is not a date that creates a jurisdictional time frame. Taxpayers might miss this date for good reason and still request a CDP hearing. Tomorrow, I will discuss how the IRS made mistakes in the mailing of the CDP notices and how it corrected the mistakes giving taxpayers more time to make the CDP request. Keep in mind that even that additional time might have the possibility of extension under the right circumstances based on the arguments in the post linked above.