The Tax Court held that the taxpayers' submission of a power of attorney form and an extension for filing their income tax return did not update their last known address with the IRS. For change-of-address purposes, the forms did not constitute "returns" and they did not provide "clear and concise notification" to the IRS of the taxpayers' new address.
Background
Damian and Shayla Gregory moved from Jersey City, N.J., to Rutherford, N.J., on June 30, 2015. But when they filed their 2014 federal income tax return on Oct. 15, 2015, they incorrectly used their old Jersey City address.
The Gregorys first used the Rutherford address in correspondence with the IRS when they submitted Forms 2848, Power of Attorney and Declaration of Representative, in November 2015. In April 2016, they used the Rutherford address again when they submitted a Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.
On Oct. 13, 2016, the IRS sent a notice of deficiency to the Gregorys at their Jersey City address. At that time, the Gregorys had not yet filed their 2015 federal income tax return. On Nov. 11, 2016, the U.S. Postal Service marked the notice "Return To Sender/Unclaimed/Unable to Forward" and returned it to the IRS. The Gregorys and the IRS agreed that the couple did not actually receive the notice of deficiency.
The Gregorys became aware of the notice of deficiency on Jan. 17, 2017, and they filed a petition with the Tax Court contesting the IRS's determination that same day. The couple claimed that the notice was invalid because it was not sent to their last known address. The IRS countered that it was valid because it was sent to their last known address and that therefore the taxpayers had not timely filed their Tax Court petition.
The law
Sec. 6214(a) generally gives the Tax Court jurisdiction to redetermine the correct amount of a taxpayer's deficiency. However, the court has jurisdiction over the taxpayer's deficiency only if the IRS mails a valid notice of deficiency to the taxpayer and the taxpayer timely files a petition disputing the deficiency (i.e., the taxpayer files the petition within 90 days of the mailing date of the notice of deficiency) (Sec. 6213(a)).
Under Sec. 6212, the IRS has properly sent a notice of deficiency if it mails the notice to the taxpayer at the taxpayer's last known address regardless of whether the taxpayer actually receives the notice. Regs. Sec. 301.6212-2(a) states that 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." The regulations further allow the IRS to provide the details about what constitutes clear and concise notification of a different address and a properly processed federal tax return. At the time at issue in the Gregorys' case, the IRS provided these details in Rev. Proc. 2010-16.
The Tax Court's decision
The Tax Court held that neither the submission of a Form 2848 nor of a Form 4868 updates a taxpayer's last known address with the IRS under Regs. Sec. 301.6212-2(a), because the forms are not returns for purposes of updating a taxpayer's last known address and are not a clear and concise notification of a different address. The court found the notice of deficiency the IRS sent to the Gregorys was valid because it was sent to their last known address and the Gregorys' petition was not timely filed with the Tax Court because it was not filed within 90 days of the mailing of the deficiency notice. Thus, the court dismissed their case.
Most recently filed and properly processed return: To be the Gregorys' most recently filed and properly processed return, the Form 2848 or Form 4868 would necessarily have to be considered a return. The court gave two reasons why neither form was a return.
First, the court found that the forms did not fall within the class of documents that are typically considered returns. Citing Beard, 82 T.C. 766 (1984), aff'd, 793 F.2d 139 (6th Cir. 1986), the court stated that a return must meet four requirements: It must contain sufficient data to calculate tax liability; it must purport to be a return; there must be an honest and reasonable attempt to satisfy the requirements of the tax law in the return; and the taxpayer must execute the return under penalties of perjury. In the court's view, Forms 2848 and 4868 do not meet any of these requirements because they do not provide any data necessary for calculation of a taxpayer's tax liability, they do not purport to be returns, and they cannot reasonably be considered attempts at making a return.
Second, in Rev. Proc. 2010-16, the IRS, as it was allowed by the regulations, had set out the details of what will be considered a return for purposes of updating a taxpayer's last known address, including a list of IRS forms that are and are not returns. The revenue procedure explicitly states that Form 1040, U.S. Individual Income Tax Return, is a return for these purposes but that a Form 2848 or a Form 4868 is not, and thus the forms were precluded from being returns for purposes of updating a last known address.
Clear and concise notice: The Gregorys argued that even if the Forms 2848 and 4868 were not returns, they provided the IRS with clear and concise notification of their new address. The Tax Court, however, looking at the plain text of the forms and their instructions, found that the instructions for both forms for the year in issue state outright that they cannot be used to update a taxpayer's address, and thus they do not meet the requirements for clear and concise notification. According to the court, "[i]n effect, the Gregorys used forms that explicitly state that they are not to be used to update a taxpayer's address but now want the [IRS] to honor those forms to update . . . their address."
The court further determined that its conclusion based on the plain text of the forms and instructions was consistent with the guidance in Rev. Proc. 2010-16. The court found that while the revenue procedure did not specifically address whether Forms 2848 and 4868 could be used to give clear and concise notice, it implied that they could not by stating the IRS will not use the forms to update the addresses of taxpayers filing the forms.
In addition, the court pointed out that, under the revenue procedure, clear and concise notification in written form is a signed statement mailed to the IRS at an appropriate address that tells the IRS that the taxpayer has a new address and contains the taxpayer's full name, old address, and the taxpayer's Social Security number (SSN), individual taxpayer identification number (ITIN), or employer identification number (EIN). Forms 2848 and 4868 did not meet these standards because they do not purport to inform the IRS that they should be considered as a request for a change of the taxpayer's last known address and they do not include the taxpayer's old address.
Prior case law: The Tax Court also concluded that prior case law of the Tax Court and the Third Circuit (to which an appeal of the case would lie) did not support the Gregorys' position. In Hunter, T.C. Memo. 2004-81, the Tax Court had held that because the IRS was not compelled to ask for a taxpayer's address on a Form 2848, by doing so the IRS bore the burden of using the address information it received on the form to update its records, and the taxpayer could reasonably assume that the IRS had used the address information to update the taxpayer's records. However, the court concluded that this assumption was no longer reasonable because, since 2004, the IRS has through revenue procedures issued clear guidance informing taxpayers of what actions will and will not change their last known address. The court also found it notable that the Form 2848 in use at the time of the Hunter case was silent regarding a taxpayer's last known address, while the Form 2848 used by the Gregorys expressly stated that it would not be used by the IRS for any purpose other than representation before the IRS.
The Third Circuit, in Expanding Envelope & Folder Corp. v. Shotz, 385 F.2d 402 (3d Cir. 1967), held that taxpayers changed their last known address to that of their authorized representative through powers of attorney. The power of attorney form in use at that time also did not have language disavowing the form's use as a change-of-address form, so the Tax Court again concluded that this holding did not apply to the Gregorys' case.
Reflections
To inform the IRS of a change in address in writing, a taxpayer should use Form 8222, Change of Address (For Individual, Gift, Estate, or Generation-Skipping Transfer Tax Returns). However, the use of the form is not mandatory, and a taxpayer may submit a written statement other than the form that contains the information required by Rev. Proc. 2010-16.
A taxpayer may also provide a clear and concise notice of an address change orally. Clear and concise oral notification is a statement made by a taxpayer in person or directly via telephone to an IRS employee who has access to the Service Master File, informing the IRS employee of the address change. In addition to the new address, the taxpayer must provide the taxpayer's full name and old address as well as the taxpayer's SSN, ITIN, or EIN.
The revenue procedure also contemplates an online change-of-address form "through one of the secure applications" on the IRS website — a "secure application" being one that requires the taxpayer to verify his or her identity before getting access to the application — but the IRS website does not offer this as a method for changing an address.
Gregory, 152 T.C. No. 7 (2019)
