Do you have any clients who are moving? It’s important to inform the IRS about the address change. Otherwise, the agency will send notices to the “last known address,” unless an exception applies. And, as shown in a new case, Gregory, 152 TC No. 7, 3/13/19, the list of exceptions is limited.
Generally, when the IRS is notifying a taxpayer about an impending action, it is required to mail the notification to the individual’s last known address on record. There are about 20 such instances when the IRS might take action. To find the complete list, refer to Revenue Procedure 2010-16.
Under federal regulations, a taxpayer’s last known address is the one on the most recent federal tax return that has been filed and processed. Usually, this is place the taxpayer still receives his or her mail. If the IRS mails a notice to this address, it creates a presumption that it has met its obligations.
However, this presumption may be overcome by one of two exceptions:
1. If the taxpayer provides the IRS with “clear and concise notice” of an address change, the agency can no longer rely on the one provided on the last-filed tax return. The notice must be specific and indicate that the taxpayer intends the address of record to change. For example, this may be accomplished in the course of a taxpayer responding in writing to an inquiry, but merely corresponding with the IRS on a different letterhead isn’t sufficient.
2. Even of the taxpayer hasn’t provided notice, the IRS has a duty to investigate if it has “good reason” to know that the taxpayer’s address has changed or the address on the last-filed return is invalid. This is based on the applicable facts and circumstances.
In the new case, a couple moved from Jersey City, New Jersey, to Rutherford, New Jersey, on June 30, 2015. But when they filed their 2014 federal income tax return on October 15, 2015, they incorrectly used the old Jersey City address. The couple first used the Rutherford address in correspondence with the IRS when they submitted Form 2848, Power of Attorney and Declaration of Representative, in November of 2015. In April of 2016, the couple used the Rutherford address again when submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.
On October 13, 2016, the IRS sent by certified mail a notice of deficiency to the couple at their Jersey City address. At that time, the couple had not yet filed their 2015 federal income tax return. On November 11, 2016, the U.S. Postal Service marked the notice “Return To Sender/Unclaimed/Unable to Forward” and returned it to the IRS. The couple didn’t actually learn of the deficiency until January 17, 2017—too late to avoid tax penalties.
The Tax Court determined in this case that neither the form for the power of attorney nor the form for the tax return extension constitute a tax return for purposes of the last-known address rule. Furthermore, they are not clear and concise notice of an address change under the first exception. Absent other circumstances, the Court ruled that the deficiency notice was sent by the IRS in a timely and appropriate manner.
Moral of the story: It doesn’t take much time and effort to meet the tax law requirements for an address change. Make sure your clients provide proper notice.
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a...