A taxpayer successfully challenged the IRS’s filing of a notice of federal tax lien against him for a trust fund recovery penalty on the basis that he did not have an opportunity to contest the liability on which the assessment underlying the lien was based. The taxpayer argued he had not had this opportunity because he never received Letter 1153, the trust fund recovery penalty letter, even though the IRS sent a Letter 1153 to his last known address, and it had been accepted at that address by his son ( Lepore, T.C. Memo. 2013-135).
When a taxpayer receives Letter 1153, he or she has 60 days to appeal the proposed trust fund recovery penalty assessment to the IRS. (The 100% penalty is imposed on “responsible persons” for unpaid employment taxes.) In Antonio Lepore’s case, the letter came to his house, and his 23-year-old son, who did not live at the house, signed for it and, as the son testified, threw the letter in the basement where the father and another son both had offices. The son also testified that he never told his father anything about the letter.
Because Lepore claimed he had not actually received the letter, he argued he had not been notified of the opportunity to contest the liabilities assessed against him. The IRS argued that delivery of the letter to his last known address was sufficient. It claimed it would be burdensome to require it to personally deliver every Letter 1153 and that doing so would impair the IRS’s ability to assess the trust fund recovery penalty. The Tax Court found that for purposes of providing a taxpayer the opportunity to dispute the liability underlying an assessment, the standard is actual receipt of the Letter 1153, not delivery to the taxpayer’s last known address. The court found that this would not impair the IRS’s ability to assess the trust fund recovery penalty because to assess the penalty, the letter only had to be sent to the taxpayer’s last known address.
The IRS also argued that Lepore’s testimony about not actually receiving the letter was unreliable, in part because he had misled the court by testifying that he was current in his tax filings, when he was not. The Tax Court found that, based on the testimony at trial, Lepore had not actually received the letter. The court interpreted Lepore’s testimony to support its decision that he was a credible witness, explaining that when he said he was current with his tax obligations, he was referring only to the time when the letter was mailed, not the time of trial. It also gave full credit to his son’s story regarding his treatment of the letter.
Thus, because it found that Lepore had not received the Letter 1153, the Tax Court held he had not had the opportunity to dispute the trust fund penalty that was assessed against him. Therefore, the court remanded the case to the IRS Appeals office for a determination of whether Lepore was liable for the trust fund penalty.