ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – NOTICE OF ASSESSMENT – DO YOU HAVE TO RECEIVE IT?
By Robert S. Schriebman
The end result of most tax audits is an assessment. The EDD version is a Notice of Assessment (NA). The IRS version is a Notice of Deficiency or 90-Day Letter. Both notices have one thing in common – if you do not timely respond by challenging the assessment, you will have to pay the bill. After you pay the bill, you can start the refund claim process. Do you still have to pay the taxman if you did not actually receive the assessment? This article will discuss this question in light of the recent 5th Circuit decision of Kevin Province.2021-1 USTC ¶50, 108 (Feb. 24, 2021).
Do I Have to Pay an Assessment That I Did Not Receive? (The IRS Version)
Kevin Province (Kevin) was audited by the IRS and got a bill. He challenged the bill in a Collection Due Process (CDP) hearing. Here is the story.
Kevin did not file an IRS income tax return for the year 2012. The IRS has the right to prepare a "dummy return" based on the information in its possession. This is provided for in IRC § 6020(b). As part of this process, the IRS is required to issue a Deficiency Notice (90-Day Letter) and send it to the taxpayer’s last known address pursuant to IRC § 6212(b) and the US Tax Court decision in Pyo v. Commissioner 83 TC 626 (1984). Does the taxpayer actually have to receive the assessment notice? No. So long as the IRS can prove that the address on the Notice was the most current address in its system nothing more need be done at the IRS’ end. Kevin’s argument that he was not required to pay because he never received the Notice carried no weight with the US Tax Court, and the 5th Circuit agreed.
IRS deficiency notices are required to be sent by certified mail. If you receive notice from the USPS that a certified letter is waiting for you, you have the responsibility to go get it. If you move and leave no forwarding address, you do so at your peril.
Do I Have to Pay an Assessment That I Did Not Receive? (The EDD Version)
The EDD Notice of Assessment (NA) is also sent by certified mail. However, there is no statute that requires the NA to be sent to the employer’s last known address. The EDD does not take the care that the IRS does to make sure its assessment is properly issued. For example, the EDD may have a Power of Attorney from a lawyer or a CPA directing that correspondence be sent to the representative. The EDD will pay no attention to this directive and send the NA to a different address such as an old former business address of the employer. No one gets the NA, and the matter goes to final assessment. The next thing you know is that a collector has just levied the business bank account. This creates quite a mess.
Due process of law requires two things: Notice and an opportunity to be heard. This applies to both federal and state laws. An assessment notice must be properly issued in order to comply with due process. Having said this, one does not have to receive an assessment notice in order for the assessment to be legal, but the assessment notice must be properly issued.
Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.
Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.
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