Limitation Period Not Suspended Where Taxpayer Claims He Filed Hearing Request Late

In a novel approach to avoiding payment on over $550,000 in taxes, a taxpayer claimed that he had intentionally filed his request for a collection due process (CDP) hearing late, and, as a result, that the 10-year collection period had expired (Weiss, 147 T.C. No. 6 (2016)). However, the Tax Court rejected that argument and held that the date the notice was mailed, not the date on the notice, controlled in determining whether he had filed a timely hearing request, 30 days after receiving the notice.

The case involved the years 1986–1991, for which the taxpayer filed delinquent returns in 1994. In response, the IRS assessed tax liabilities plus additions to tax on those returns. The taxpayer filed for bankruptcy three times between 1994 and 2009, which stayed the Sec. 6502(a)(1) 10-year period on collection each time; as a result, the limitation period was set to expire in July 2009.

In February 2009, an IRS revenue officer assigned to the case prepared a Final Notice of Intent to Levy and Notice of Your Right to a Hearing, dated Feb. 11, 2009. The revenue officer tried to hand-deliver the notice on that date, but the taxpayer’s dog prevented him from doing so. So instead, the revenue officer mailed the same notice on Feb. 13 by certified mail to the taxpayer’s last known address. (The revenue officer also sent a notice to the taxpayer’s wife.) The taxpayer’s wife signed for both notices on Feb. 17, 2009, indicating she had received them.

In response to the notice, the taxpayer prepared two Forms 12153, Request for Collection Due Process or Equivalent Hearing, which he dated March 13, 2009. He mailed one form to the IRS on March 13 and the other on March 14. On both forms he indicated that the reason for requesting a CDP hearing was “can’t pay the tax owed” and “levy action will cause hardship.” He did not check the box captioned “Equivalent Hearing” on either form.

The IRS settlement officer assigned to the taxpayer’s case determined that the statute of limitation did not bar collection of the taxpayer’s tax liabilities because the taxpayer had timely requested a CDP hearing and Sec. 6330(e)(1) provides that, “if a hearing is requested … the running of any period of limitations … shall be suspended for the period during which such hearing, and appeals therein, are pending.”

In determining whether the limitation period was suspended, the settlement officer concluded that the critical date was not Feb. 11, the date appearing on the notice, but Feb. 13, the date the notice was actually mailed. Both March 13 and March 14, the dates the taxpayer mailed his Forms 12153, were within 30 days of Feb. 13.

The taxpayer argued that his hearing request was for an “equivalent hearing,” not a CDP hearing, and that his request was untimely since it was made more than 30 days after the Feb. 11 date in the notice. Therefore, because he had not made a timely request for a CDP hearing, the running of the statute of limitation was not suspended, the limitation period had expired, and the IRS could not collect his tax liabilities for the closed years.

According to the court, the taxpayer, who was an attorney, understood the difference between requesting a CDP hearing, which allowed him to appeal any result, and requesting an “equivalent hearing,” where the taxpayer could not appeal the result. A CDP hearing stays the collection statute, and an equivalent hearing does not. Nonetheless, the taxpayer did not request an equivalent hearing when he filed his petition but still claimed that he had requested an equivalent hearing in his unsuccessful attempt to get the IRS’s collection activities invalidated as untimely.

The Tax Court held that the taxpayer, despite his claim to the contrary, had timely filed his hearing request. The court agreed with the IRS that the date the CDP notice was mailed, not the date that appeared on the letter, controlled for purposes of determining the 30-day petition period. Accordingly, the 10-year collection period was suspended.

—Sally P. Schreiber (sschreiber@aicpa.org) is a Tax Adviser senior editor.