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The Importance of Notice and Hearing Rights for the Advanced Child Tax Credit

Today we welcome first-time guest blogger Jennifer Burdick. Jen is an attorney with Community Legal Services of Philadelphia focusing on SSI benefits. In this post, she explains the notice and appeal rights that typically apply in public benefit programs, and why they are crucial to her clients’ accessing the benefits that they qualify for. She then addresses the promise and shortfalls of the American Rescue Plan’s child tax credit expansion. Christine

Notice and Hearing Rights in Public Benefits: an Example

Jacob is a five-year-old child who receives SSI, a modest Social Security income support for children with disabilities. His mother receives a notice that Jacob is no longer eligible for SSI because a data match shows that his mother has too much money in the bank. In fact, the Social Security Administration (SSA) is mistaken — that’s not her bank account.

The notice of the termination, which SSA must send mom prior to stopping Jacob’s benefits, provides instructions for how she can appeal by seeking reconsideration. 20 C.F.R. § 416.1336. She is given 60 days, plus five for mailing, to appeal the decision. Id. All she has to do to appeal is send in the provided form (or any writing) disagreeing with the termination. She does not have to write much – one or two sentences is sufficient, and she does not need to use any magic words like “appeal,” or even sign the form. POMS SI 04020.020. If she appeals within ten days, plus five for mailing, Jacob’s benefits will remain on during the appeal, until there is a reconsideration decision. 20 C.F.R. § 416.1336(b).

Once Jacob’s mother requests reconsideration, an SSA claims representative who was not involved in the initial termination decision must review the case and issue a new written determination. 20 C.F.R. §§ 416.1413 & 416.1422. As part of that review, Jacob’s mother can select if she wants SSA to do a case review, or if she wants to attend an informal conference; in certain circumstances a formal conference is also available. 20 C.F.R. § 416.1413a. In a case review, SSA will allow Jacob’s mother to review SSA’s evidence, and present additional oral or written evidence, but typically these cases are decided by re-reviewing the case file. 20 C.F.R. § 1413(a). At an informal conference, Jacob’s mother will attend, can testify, and can additionally present witnesses. Id.  SSA regulations indicate the reconsideration proceeding should be scheduled within fifteen days of her request at her local office, either by phone or in person based on Jacob’s mom’s preference. 20 C.F.R. § 416.1413c. Jacob’s mother can bring an attorney or representative to the meeting. A summary of the informal or formal conference will be included in the record. 20 C.F.R. § 416.1413.

If, after the reconsideration proceeding, the SSA claims representative reaffirms the termination of benefits, Jacob’s mother once again has 60 days, plus five days for mailing, to appeal the decision with the opportunity for benefit continuation pending appeal. This time, the Social Security Act entitles her a hearing before a qualified administrative law judge within 90 days. She’s entitled to bring an attorney or other representative to the hearing.

Importantly, throughout this process SSA shares with Jacob’s mother the duty to develop the record in her case. 42 U.S.C. § 423(d)(5)(B). So as long as Jacob’s mother tells SSA about evidence that might support her claim for benefits, SSA has to help her get it if she cannot. Regulations governing SSA proceedings provide they are inquisitorial rather than adversarial. Carr v. Saul, 19-1442, 593 U.S. (2021). The shared duty to develop the evidence and the inquisitorial nature of the proceedings is critical because many claimants appear without the assistance of counsel, although legal services programs do represent claimants as resources allow. Following the hearing, she receives a written decision with further appeal rights if she loses.

Fortunately, though, she doesn’t need to appeal: the judge agrees that she does not have too much money in the bank, and Jacob’s disability income remains intact.

Implications for the Advanced Child Tax Credit

Among Social Security applicants and recipients, Jacob and his mother’s experiences are utterly commonplace, enshrined in decades of constitutional and statutory law that guarantee basic due process rights. Yet with the tax system, which is increasingly administering the American safety net, there is no similar inquisitorial process.  Instead, people with similar issues related to their tax payments and refund face adversarial process. But Congress can fix this. In the coming weeks, it should draft legislation providing notice and hearing rights to taxpayers seeking the refundable advanced Child Tax Credit (AdvCTC), as expanded in the American Rescue Plan (ARP).


The expansion of the Child Tax Credit (CTC), coupled with making it fully refundable and available monthly to sync its availability to need, has the potential to revolutionize the social safety net. If this advanced tax credit is successfully distributed to those eligible, including Jacob and his mother, it will be literally life changing. Millions of families will rely on this benefit to help them pay for life’s necessities. My clients, low-income families where either a caregiver or child has a severe disability qualifying them for SSI, are excited because monthly payments bring the promise of helping them cover recurring expenses including the rent and utility expenses. One of my clients, Mr. McGruder hopes it will allow him to get his grandsons a cable subscription.

The problem is that ARP does not provides for necessary procedural protections in the event someone seeking to claim the advanced CTC credit is denied, or has their advanced payment reduced or ceased. The only legally required notice provided to families under the ARP is one letter, to be provided in January 2022 (after the receipt of any AdvCTC payments), which will list the total amount of advanced CTC the taxpayer received in 2021. IRC Sec. 7527A(b)(3). To be fair, IRS has elected to provide additional notice to families, sending letters to 36 million families who may qualify for AdvCTC payments, and announcing their intention to send a second personalized letter listing an estimate of their monthly payment. However, there is no provision in ARP, and the IRS has not committed, to send written notices at other key moments:

  1. if a family seeks advanced payments and is determined eligible for less than the full amount;
  2. if a family is determined completely ineligible; or
  3. if IRS will use their unilateral power to reduce or stop AdvCTC that the family has been receiving.

As a result, if a taxpayer is denied access to complete AdvCTC payments, or the Secretary uses the modification powers outlined in the ARP to modify or stop the advanced payment (IRC Sec. 7527A(b)(3)), a taxpayer may experience unexpected interruptions in those payments without any sort of advanced warning that the payment isn’t coming, or any information about an opportunity to appeal. In that event, the taxpayer won’t be able to easily contact IRS customer service, as IRS staff are already struggling to answer the current call volume and IRS directs that people not call in with CTC questions.

Can you imagine anything more frustrating? Imagine if Jacob’s mother, based on the promise of the AdvCTC’s additional $250 a month, secures a larger apartment so she and Jacob can have separate bedrooms, affording him the personal space that is recommended by this therapist. After relying on these payments to offset the additional rent, without receiving any notice, the payment does not come in September due to an internal IRS decision. She will no doubt try to call the IRS, but even the IRS website instructs people not to call for assistance.  If she does call and connect to a human, there is a decent chance she will be connected to a contractor who is unable to give her specific information about her tax case.  She will reach out to me, a legal aid lawyer, who will have to inform her that there is no clear avenue for appeal. Hopefully this will not result in their eviction and all the adverse consequences that follow.

There should be legislation, not litigation, creating detailed notice and hearings rights. In the public benefits context, the Fifth Amendment to the U.S. Constitution’s promise that “[n]o person shall be deprived of life, liberty, or property without due process of law” has been interpreted to convey both applicants and recipients a property interest in government benefits, including cash payments like the AdvCTC. U.S. Const. amend V. Because of this property interest, applicants and recipients are entitled to notice and an opportunity to appeal a denial, reduction, or termination of benefits, in many cases before the reduction or termination takes place. U.S. Const. amend V.; Goldberg v. Kelly, 397 U.S. 254 (1970).

Many poverty advocates, public benefits lawyers, and policy analysts have been surprised to learn that the Supreme Court does not necessarily believe that Fifth Amendment’s promise of pre-deprivation due process applies with the same force to tax refunds and credits. See Leslie Book, The IRS’s EITC Compliance Regime: Taxpayers Caught in the Net, 81 Or. L. Rev. 351, n.9 (2002), (reviewing relevant due process and tax cases, and finding that “the Supreme Court has long held that the collection of tax is so essential to the nation’s lifeline that IRS adjudicative actions should remain largely untouched by procedural protections inherent in the Fifth Amendment Due Process Clause”); Nina Olson, Erwin N. Griswald Lecture Before the American College of Tax Counsel: Taking the Bull by its Horns: Some Thoughts on Constitutional Due Process in Tax Collection, Tax Lawyer Vol 63, No. 3, 2010, at  n. 24.

Although there is some legal basis to support a finding that there is a protectable property interest that would confer due process rights on tax benefits that target alleviating poverty like the AdvCTC, the jurisprudence in this area is murky. Compare, e.g., In re Hardy, 787 F.3d 1189, 1190-91 (8th Cir. 2015) (holding child tax credit qualified as a “public assistance benefit”); Flanery v. Mathison, 289 B.R. 624, 628 (W.D. Ky. 2003) (recognizing trend that refundable tax credits fall within the classification of public assistance designed to combat poverty and are not merely tax refunds); In re Vazquez, 516 B.R. 523, 526 (Bankr. N.D. Ill. 2014) (holding child tax credits can be claimed as exempt public assistance benefits); with, Phillips v. Comm’r, 283 U.S. 589, 596-97 (1931).

Because of the complex legal ground in this area, it would be helpful if Congress would legislate a notice and hearing process. This process must include the following elements:

  1. Plain language notice of approval, denial, termination, or reduction of advance CTC payments, with the reason for the approval, denial, termination, or reduction of the payment;
  2. A clear deadline to protest (or appeal) an adverse action (denial, reduction, or termination), with an additional explanation that if the taxpayer disagrees they can still file a tax return claiming the CTC, which would then be subject to deficiency procedures;
  3. With each notice of payment denial, reduction or termination, a plain language worksheet and sample affidavits to allow claimants to easily file a written protest, with no requirements that people use *magic words* to appeal;
  4. An appeals conference (in person, or over the phone) with an impartial officer must be scheduled promptly after receipt of a protest;
  5. A plain language notice to appellants with the conference information, including its time and date, information about what to have on hand, what to expect, and how to reschedule;
  6. The ability to attend the conference virtually or by phone, plus an in-person option if public health measures allow;
  7. Information to appellants detailing their right to an authorized representative of their choice (including an LITC representative) via phone or video conferencing;
  8. Written procedures for conduct of the conference, including use of interpreters and assistive technology;
  9. Appeals to issue a decision within 30 days of the conference, as well as notification making it clear that the denial does not mean the underlying CTC is decided, and does not prevent the taxpayer from seeking it through a subsequent tax return.

The creation of an accessible appeal conference is critical. Some of the disputes about the ability to claim the AdvCTC will revolve around which caregiver a child lives with, and from whom the child gets more support. These may seem like a straightforward questions, but many families are complex. Real disputes may exist: for example, do you know where a child’s official residence is if she has a bedroom at her mother’s house, but usually sleeps at her grandmother’s house because her mother works overnight shifts? These sorts of questions will not likely be resolvable with dueling pieces of paper, but will require testimony and possibly witnesses. Absent the creation of notice and hearing rights, many children who most need the support the AdvCTC promises may be unable to benefit.

Misdated Notices Continue

Last summer the National Taxpayer Advocate reported that the IRS was sending out millions of notices to taxpayers with dates that bore no relationship to the date of actual mailing.  I wrote a post about it here criticizing the decision to send out these notices, not only because they would confuse many recipients but also because the IRS database shows the date of the notice generation rather than the date of mailing.  I updated the information in an October post after gaining more information.  This type of broad based improper recordkeeping will have the effect of casting doubt on the accuracy of IRS records that could have lasting impact for the IRS when it tries to prove some event occurs and relies on a certified transcript.

In the last section of the post I will mention a disturbing recent interaction with the IRS regarding the collection statute of limitations and request anyone with a similar interaction to provide comments.


The original batch of wrongly dated notices resulted from the closure of the IRS Service Centers due to the pandemic.  As bad as sending out the wrongly dated notices is for taxpayers and for the IRS, at the time the story first broke it appeared to be a once and done as a result of the pandemic lockdown.  Last month, the National Taxpayer Advocate issued a second blog describing a second round of misdated or backdated notices the IRS starting sending out this fall and continuing into January.  The IRS announced this second round of back dated notices here.  So, now we learn that instead of sending out bad notices in one batch because of the shutdown, the problem continues and may occur again in the future creating ongoing confusion for taxpayers and an even greater threat to the integrity of the IRS database system.

Extended Dates to Respond to Misdated Notices

If you have not already read the NTA’s second post on this issue you should do so as the issues created by the second round of bad notices are still playing out.  The NTA notes that once again the IRS is placing into the envelope with the misdated notice a stuffer providing additional information and additional time.  Here are the three types of misdated notices in which a stuffer will be placed:

The notices scheduled to include the Notice 1052-D insert are:

  • IRC § 6303 Notice and Demands that informs taxpayers of tax due and demands payment;
  • IRC § 7524 Annual Reminder Notices that remind the taxpayer of an existing balance due; or
  • IRC § 6213(b) Math Error Notices that inform taxpayers of a change to their return.

The insert provides the taxpayer a new due date, January 29, 2021, to make a payment to avoid additional interest, and additional failure-to-pay penalties, if applicable. The insert also provides taxpayers with math error adjustments until March 9, 2021, to contact the IRS and request the math error be reversed.

The annual reminder notices, while required by statute, do not create the same type of issues as the notice and demand letter or the math error notices.  I discussed the consequences of delayed math error notices in my original post on this issue.  The stuffer provides the taxpayer with additional time to pay until January 29, 2021, which means that there is additional time before the federal tax lien comes into existence.  The stuffer provided in the math error notices give taxpayers until March 9, 2021, to object to the assessment based on math error and trigger the sending of a notice of deficiency (or convince the IRS the original return position was correct.)

The NTA post alerts taxpayers that the notices the IRS sends out in the collection stream may arrive out of order because of the failure to send out the notices timely during November.  For individual taxpayers this should not create a significant problem as the second notice in the collection stream is not statutorily required.  The result may be different for business taxpayers if they received the notice of intent to levy before receipt of notice and demand.

Prior Misdated Notices

The NTA circles back at the end of her post to talk about the prior round of misdated notices:

During the spring and summer of 2020, the IRS digitally created approximately 31.2 million notices that it was unable to mail on the dates planned. Of these, the IRS purged approximately 12.3 million notices as they were not statutorily required. Of the remaining late notices, only a small percentage included an insert notifying the taxpayer of additional time to act. Originally, the IRS identified 1.8 million notices requiring an insert providing an extension of time for the taxpayer to act. Unfortunately, some notices containing statutory deadlines didn’t include the necessary insert. Once identified, the IRS sent supplemental letters to taxpayers informing them of additional extensions. For example, taxpayers who originally did not receive an insert providing additional time to request a Collection Due Process hearing received another letter providing more time. Similarly, taxpayers receiving late-mailed notices of refund disallowance were subsequently sent a supplemental letter clarifying the two-year period to challenge the refund disallowance in court. Although the IRS made efforts to provide additional time for taxpayers to respond, it created much confusion for taxpayers and practitioners. After all of the challenges the IRS and taxpayers faced during the previous backlog, it is difficult to understand how the IRS finds itself in the same position. Let’s hope this backlog mailing goes more smoothly.

It is surprising that the NTA does not understand how the second round of misdated notices occurred.  TIGTA or GAO needs to take a hard look at what has happened here leading to the inability to send out notices on dates that match the date on the statutorily required notice and the decision making for knowingly sending out these notices rather than stopping the process and getting it right.  Someone at the IRS should be able to explain why this has happened again; how many more time we might expect it to happen; and when the system might be fixed to prevent it from happening.

At the Mid-Winter ABA Tax Section meeting there will be a panel discussing the late issued notices on Thursday January 28 from 3-4:00 ET.

Making All Your Arguments in Collection Due Process Cases. Designated Orders, August 10 – 14, 2020 (Part Three)

The first two installments of this trilogy covered arguments that you are likely to raise in the hearing itself (the underlying liability), then moved to issues you might not be aware of until after the notice of determination is issued (procedural defects in assessment, or at least defects in the Appeals Officer verifying that the “applicable law or administrative procedures have been met.” IRC § 6330(c)(1). We end with an issue that is really only relevant after the hearing and in litigation: the record the Court will be able to review.

read more…

Issue Three: The Administrative Record is Incomplete (Mitich v. C.I.R., Dkt. # 4489-19W (here))

Full disclosure: this order is not a CDP case (it’s a whistleblower case). But the admin record is critical for CDP cases. (And whistleblower cases. And innocent spouse cases.) So questions on the completeness of the administrative record are worth focusing on.

In cases where the reviewing court is confined to the administrative record, the agency is the party that submits that record. But that doesn’t mean the agency gets to dictate everything that is or should be in it. Still, the agency does have a fair amount of control over that record. And perhaps (though perhaps not -more on that later) the agency has even more control over what constitutes the administrative record in the first place when they promulgate regulations specifically defining the contents of administrative record.

It just so happens that whistleblower cases (like CDP cases) have a regulation on point for what comprises the administrative record. For whistleblower cases, the regulation is at Treas. Reg. § 301.7623-3(e) which provides in relevant part that the administrative record is comprised of “all information contained in the administrative claim file that is relevant to the award determination and not protected by one or more common law or statutory privileges.” In turn, the “administrative claim file” includes pretty much everything the Whistleblower Office reviews, as well as a final, catch-all category of all “other information considered by the official making the award determination.”

In the Mitich order, the whistleblower-petitioner thinks the tax return of the person they “blew the whistle” on should be in the administrative record. The IRS thinks that the return is not part of the administrative record, because the return was “not considered” in denying the whistleblower’s request. That may appear to be something of a head-scratcher, because in this instance the IRS clearly looked at the return (and the whistleblower’s information pertaining to it) before deciding not to pursue the tip. Indeed, the initial notes recommending denying pursuing the tip state “Rejecting claim as speculative after reviewing the taxpayers returns.” [emphasis added.]

There is nuance to the IRS’s position, however. The IRS argues that the official making the award determination didn’t rely on the return but rather relied on the initial employee (the “classifier”). Yes, the classifier relied on the return, but the classifier isn’t the official that made the determination, and in this case isn’t even a member of the IRS Whistleblower Office.

Judge Halpern isn’t entirely sold on that rationale, which leads to this order: that the parties provide a legal memo on why the return is or is not a part of the administrative record. This isn’t the first time the Tax Court has grappled with these sorts of issues. I was reminded of a previous order I covered in Whistleblower 6388-17W v. C.I.R. There, Judge Guy assigned extra homework to the parties (again, legal memos) on the tensions between IRC § 6103 and the parties’ (specifically, the whistleblowers) need to see the administrative file. Obviously, the IRS does not want to disclose any protected, confidential information, which may also provide some reason for them pushing so hard on why the tax return is not part of the administrative record here.

In any event, I somewhat doubt that whether the return is part of the record will have any bearing on Ms. Mitich getting any money. If the IRS never acted on her tip, and no proceeds were ever recovered, I am at a loss for how the tax returns help her. Yet looking at the order more broadly one can draw some other important lessons relevant beyond just the whistleblower context.

And this is where I return to the question, teased earlier: how much (legal) control does an agency have to restrict the administrative record? Because judicial review of whistleblower cases is limited by the “record rule,” exactly what the administrative record is and contains carries great importance. Two issues come to mind on that.

First, there is the issue of what should be in the record when both parties agree on the types of information that comprise the record rule but disagree on the contents. When problems arise under this category, the dispute is usually about the “completeness” of the record, and not the sorts of things that properly should be in it. For example, if both parties agree that all communications between the taxpayer and Appeals should be part of the record but a fax that the taxpayer sent to Appeals is not included, that would be an argument about completeness. This can be more fraught than it would otherwise appear.

One reason for discord is that the agency is generally the custodian of the administrative record. Taxpayers should be vigilant and keep their own “mirror” file and be ready to challenge the IRS’s version. And the Tax Court will likely entertain these challenges: in whistleblower cases, the Tax Court has held that “the Commissioner cannot unilaterally decide what constitutes an administrative record.” (T.C. 145 No. 8 (2015)) Problem (basically) solved.

But there is a second issue that I think is worth exploring: when the parties dispute the scope of the administrative record. Specifically, my concern is whether an agency can shield information from court review through promulgation of regulations narrowly defining the administrative record. Because I am more familiar with CDP than whistleblower cases, I will use CDP as the example.

The applicable regulation (Treas. Reg. § 301.6330-1(f)(2)(A-F4)), defines the administrative record in CDP cases pretty broadly, so arguments about its scope would likely be rare. Further, even where the “record rule” is in effect, it doesn’t render the administrative record unassailable: a petitioner can supplement the record where something needs to be explained. This, I believe, is most common with “call notes” from Appeals. Whatever notes Appeals takes during a call are part of the administrative record. Notes from the petitioner… not so much (at least not under the regulation). As a matter of course, my tax clinic always sends a fax to Appeals memorializing the conversation after a call so that it becomes “written communication […] submitted in connection with the CDP hearing.”

To be sure, I don’t have serious problems with the definition of the administrative record as provided by the regulation. But it isn’t impossible for me to imagine things I’d like to have as part of the administrative record which, by a strict reading of the regulation, might not be. One that comes to mind are communications made with Appeals after the Notice of Determination. On this point you may say, “well those conversations are plainly irrelevant since the Court is only looking at the Notice of Determination. Also, didn’t you write something about the Chenery doctrine before?”

I have. Also, it is entirely plausible to read the regulation such that those conversations would be part of the administrative file. My cause for concern is that when you’re dealing with a genuine abuse of discretion from IRS Appeals, you are often dealing with a constellation of questionable behaviors that does not end with the Notice of Determination. When IRS Appeals is being unreasonable I want every incidence of their unreasonable behavior to be in the administrative record. “Abuse of discretion” is a mushy and extremely difficult standard for the Tax Court (or practitioners) to work with. I would argue that demonstrating a pattern of IRS Appeals behavior, even if some if it occurs after the Notice of Determination is written, is relevant to that determination. I also think that regulations limiting court review, absent pretty explicit Congressional language supporting it, raises separation of powers concerns and arguably could be subject to being stricken down (see Carl Smith’s post on a related matter, here.)

Perhaps I am making a big deal of nothing in the CDP context, given the expansive language of the regulation. But what about in Innocent Spouse cases?

Recall that the Taxpayer First Act changed the scope of review in Innocent Spouse cases to “the administrative record established at the time of the [IRS] determination.” (IRC § 6015(e)(7)(A)) What does that administrative record entail?

Bad news for those who look to the regulations: they haven’t been updated since 2002. At numerous points, the regulations do not apply present law and are essentially obsolete. The regulation specifically dealing with Tax Court review (Treas. Reg. § 1.6015-7) provides one such example, taking the position that collection activity need not be suspended while requests are pending for equitable relief under IRC § 6015(f). This is not the case under the law as it currently stands (see IRC § 6015(e)(1)(B)(i)).

But apart from getting the law wrong, the regulation is also completely silent on the issue of what comprises the administrative record. Perhaps after the IRS crawls out from the heap of CARES Act and other guidance projects it has been tasked with, updates to that regulation may also be in order (it isn’t presently on the IRS priority guidance plan). But what is the Tax Court to do until then? What should be in the administrative record?

The Supreme Court has provided a little guidance on that topic. Judge Halpern cites to Citizens to Protect Overton Park v. Volpe, 401 U.S. 402, 420 (1971) for the proposition that “the record amassed by the agency consists of ‘the full administrative record’ before the agency.” Judge Halpern emphasizes the word “full” and notes that lower courts have interpreted that “fullness” to entail “all documents and materials that the agency directly or indirectly considered.” That seems pretty expansive. But I suppose we’ll have to wait and see… the issue is likely to come up sooner than later now that petitions being filed are subject to this record rule (see Christine’s post here).

Making All Your Arguments in Collection Due Process Cases. Designated Orders, August 10 – 14, 2020 (Part Two)

Welcome back to second of this three-part installment of “Making All Your Arguments in Collection Due Process Cases.” In Part One, we looked at a threshold question of when you are entitled to even raise certain arguments to begin with. The statute (IRC § 6330) precludes taxpayers from getting “two bites at the apple” in certain circumstances. These include arguing the underlying tax if you received a Notice of Deficiency or otherwise had an opportunity to argue the tax (IRC § 6330(c)(2)(B)). Note that while you do not have the right argue the underlying liability in those circumstances, you still can raise the issue and hope that the IRS Appeals officer decides to address it. See Treas. Reg. § 301.6330-1(e)(3)(A-E11). But it is in the “sole-discretion” of IRS Appeals whether to consider the issue in that case, and the decision (so the Treasury says) is not reviewable by the Tax Court.

Today, instead of relying on the goodness of the IRS Appeals Officer’s heart, we’ll dive into issues that the taxpayer almost always has the right to raise.

read more…

Issue Two: The IRS Screwed Up (Procedurally) In Assessing the Tax (Mirken v. C.I.R., Dkt. # 18972-17L (here))

In a Collection Due Process hearing, if you focus on issues in the tax process the Tax Court will usually hear them out (go figure). If it was even remotely catchy, I’d suggest the following mnemonic device: In CDP, Subtitle F Gets You A’s and Subtitle A Gets You F’s. Feel free to never, ever think of that phrase again.

The Mirken order highlights the importance of CDP as a way to check the processes in assessment and collection. It also is worth giving Judge Copeland kudos for ensuring that justice is done where the pro se taxpayers may not have used the precise tax jargon a practitioner would.

As noted before, if you don’t raise issues in your petition you run the risk of conceding them. Sometimes you have a way out by arguing that the issues were tried by consent under Rule 41(b), but you don’t want to have to rely on this. You also need to allege facts supporting your assignments of error if you are the party with the burden of proof on them. On the rare occasion that you (petitioner) don’t have the burden of proof, you only need to raise the issue.

In CDP, one area where the IRS has the burden of proof is in verifying that all applicable law or administrative procedures have been met (IRC § 6330(c)(1)). Note again that you still have to raise that issue in your petition in the first place. Here, the unrepresented taxpayers did not raise this issue in their petition, but arguably did in their objection to the IRS’s summary judgment motion. Judge Copeland finds this to be sufficient to amend the pleadings under Rule 41(a), and then takes a look at the IRS’s records on the issue.

As is so often the case, the IRS records do not inspire confidence. A testament (again) to putting IRS records at issue at.

There are three assessments leading to liabilities here: (1) taxes assessed on the original return, (2) assessable penalties relating to the original return, and (3) taxes assessed through the deficiency procedures -in this case through the IRS Automated Under Reporter (AUR) program. In the Notice of Determination, the IRS Settlement Officer stated that she had “verified through transcript analysis that the assessment was properly made per [section] 6201 for each tax[.]”

This is something of a twist on the usual boilerplate I receive in my Notice of Determinations, which are extraordinarily unhelpful and usually just say, “I have verified that all procedures were met.” But even this twist (referring to transcript analysis and an actual code section!) won’t save the IRS. Being slightly more specific isn’t enough for the Tax Court to simply “trust” the determination.

For one, Judge Copeland notes that the taxes assessed under the deficiency procedures would not be assessed under IRC § 6201, but rather the deficiency proceedings (see IRC § 6201(e)). The most important component of deficiency proceedings is the Notice of Deficiency (again, go figure). With regards to the Notice of Deficiency, validity depends on the taxpayer actually receiving the notice with time to petition the court or the notice being properly mailed to the taxpayer’s “last known address” even absent actual receipt. See IRC § 6212(b).

There does not appear to be a record of the IRS Settlement Officer looking up if or where the Notice of Deficiency was mailed. In fact, as Judge Copeland notes, it doesn’t appear that the Settlement Officer knows what the taxpayers “last known address” would even be in determining the validity of a Notice of Deficiency. Should we just trust that the IRS did it right?

No, we should not. Especially not on a summary judgment motion from the IRS. And especially not when, as in this case, the Settlement Officer already sent a letter to the petitioners at the wrong address for this hearing.

Accordingly, Judge Copeland has no problem finding there to be a “genuine issue of material fact” that precludes summary judgment. And that is surely the correct outcome.

But before ending the lessons of Mirken I want to bring practitioners back to a threshold problem, and something I began this post on: raising issues in your petition. Frequently, in my experience, at a CDP hearing you are really only discussing the appropriateness of collection alternatives. A best practice would be to raise the procedural issues of assessment in the hearing, but when that doesn’t happen is it still acceptable to assign error to it in a petition? Can you do that under Tax Court Rule 33 when you don’t actually have a concrete reason (just general history and skepticism) to question that the IRS properly followed procedures?

I have two thoughts on that. My first thought is to amend the petition after getting the admin file. Hopefully that will happen soon enough that you can amend as is a matter of right, but often I doubt that will be the case. Fortunately, even if it takes a while to receive the administrative file my bet is that the Tax Court would freely allow an amended pleading if you are only able to learn of the problem later (I also doubt most IRS attorneys would object in those circumstances).

My second thought is that your standard practice should always be to request the administrative file as it exists in advance of the hearing. It is always a good idea to have as full a picture as possible on what information the IRS is working off. But beyond that, because of the Taxpayer First Act, you have a statutory right to the admin file in conferences with Appeals (see IRC § 7803(e)(7)(A)).

The most recent letters from Appeals I have received setting CDP hearings have specifically referenced the right of the taxpayer to request the file. It is always wrong (and not even an “abuse of discretion”) for the IRS not to follow a statute, and failure to send information you are legally entitled to certainly could be part of a Tax Court CDP petition. This isn’t an attempt to “set a trap” for IRS Appeals, but information that would be critically important for us to raise all potential issues at the CDP hearing. I know that I’ve made such requests to IRS Appeals and am still waiting…

Breakout Session Reports From the Collection Due Process Summit Initiative

Last year, Procedurally Taxing reported on the Collection Due Process Summit Initiative here.  The Initiative grew out of the American Bar Association Section of Taxation 2019 May Meeting and continued for an in-person meeting in Washington, D.C. for the Section of Taxation’s Low Income Taxpayer Representation Workshop.

At the Workshop, we gathered individuals in IRS Chief Counsel, LITC personnel, Taxpayer Advocate Service representatives, private practitioners, law school professors and others interested in discussing CDP reform.  The Workshop included breakout sessions where the group solicited feedback and asked if individuals were willing to volunteer for committees that would discuss CDP issues and bring potential solutions to the IRS for evaluation.  You can still sign up – send me an email:  schmidtw at


This year, there were some setbacks from the COVID-19 pandemic and shifts in the leadership of the CDP Summit Initiative.  While the larger discussion in the tax arena during this year has been on various pandemic issues regarding the distribution of Economic Impact Payments and interruptions of IRS services, we do believe that problems in CDP areas will be another tax concern resulting from the pandemic.  As taxpayers face difficult economic times based on unemployment or other financial situations, that will ultimately result in tax issues dealt with in the CDP process. 

Most recently, there has been a small group working to continue the focus on CDP issues and advance goals from the Summit Initiative.  We are working to build out our committees and regularly seek for people to contact us if they would like to take part.  An additional goal has been to organize and submit the findings from the breakout sessions for you to read.  For those efforts, I would like to thank Matthew James, Low Income Taxpayer Clinic Director at North Carolina Central University School of Law and Nikki McCain, in private practice and former Low Income Taxpayer Clinic Director at the University of South Dakota School of Law.  They are helping to drive CDP Summit Initiative efforts and edited these session reports.

As we provide you with the reports from the breakout sessions, we also included the introductory notes from the session descriptions to give you context and acknowledge the session leaders.  Thank you also to Erin Stearns and Christine Speidel for providing the notes for their sessions that made up these reports.

Today’s post will provide the reports of the breakout groups discussing notices and the administrative process.  Tomorrow’s post will discuss the report of the litigation breakout group.

Breakout: Improving IRS CDP Notices and Communications

Panelists: William Schmidt, Jeff Wilson, Beverly Winstead

This session will educate participants about IRS communication approaches as they pertain to CDP rights and procedures and known issues with the communications. The session leaders will facilitate an exchange of ideas for more effective messaging to increase taxpayer participation in CDP and more effective engagement with Collections at the earliest possible stage.

Prompts provided by the steering committee.

  1. IRS Publications and Website:
    1. Improve communication effectiveness of CDP publications and IRS website’s CDP content to educate taxpayers to make informed procedure choices;
    1. Emphasize to taxpayers and practitioners the importance, at the earliest possible stage, of creating a comprehensive record supporting a fair and sustainable collection alternative.
  2. IRS Notices (Section 6320 –lien and 6330 –levy). Improve CDP notices to look less like a bill for tax, with CDP hearing rights offered later in the notice without highlight or comment about the value of exercising CDP rights. For example, among other strategies and tactics, pursue the rights-based notice test developed by TAS that was suspended.
  3. IRS Form 12153: Revise CDP hearing request Form 12153, without losing its ease of completion, to make it more functional for the taxpayer. Potential changes include content clarifying lien vs. levy circumstances and explaining collection alternatives.

During this session, the group brainstormed revisions to the CDP Notices, which included:

  • Work towards simpler, layman’s notification letter available in various languages (as required by IRM, but also noting issues with determining taxpayers’ primary language), including term definitions such as garnishment;
  • Notice should clearly explain information to taxpayers and representatives and provide the expectations at and from a CDP hearing. Such information may include:
    • What can be achieved through a CDP hearing; 
      • E.g., collection alternatives available, methods of addressing liens (discharge, subordination, withdrawal, and explanations), ability to address issue of liability.
    • What documents IRS will require and why they need them;
    • What else taxpayers need to do to prepare for their CDP hearings.
      • Note: this information is not readily available on the IRS website. Pub 1660 addresses CDP hearings but could more plainly and thoroughly explain the process and options involved, e.g., Pub. 1660 does not mention Currently Not Collectible status at all.
  • Adjust the appearance of the notice informing the taxpayer of the right to request a CDP hearing (e.g., emphasize the difference/importance of the notice so the taxpayer does not disregard this notice as they would other notices);
  • Add a cover letter to the notice that explains taxpayer rights, collection alternatives (written in bold), availability of LITCs, and references important information listed elsewhere;
  • Appeals should be more consistent in acknowledging when it receives CDP cases;
    • E.g., standardize the letter that indicates the CDP hearing is in progress.
  • Develop a mechanism for taxpayers and representatives to track case status similar to the “Where’s My Refund” tool on the IRS website;
    • Alternatively, a call-in line to track CDP hearing status based on an assigned CDP hearing number.
  • Include contact information for LITCs that serve the taxpayer’s geographic area as part of the notices giving the taxpayer a right to a CDP hearing (LT 11 or Letter 1058).
    • Appeals could send out the current IRS Pub. 4134, which lists all LITCs by state but does not indicate each LITC’s geographic coverage area. Some attendees expressed concerns that Pub. 4134 is too long to send with CDP notices. As something of an aside, someone suggested it would be helpful to modify Pub. 4134 to better indicate each LITC’s geographic coverage area.

The group then discussed potential modifications to Form 12153, Request for a Collection Due Process or Equivalent Hearing:

  • Changing the “I can’t pay” answers to add a Comment box rather than an “other” box in order to better explain the situation;
  • Possibility of adding a collection information statement (e.g., 433-F) with Form 12153.

The group also developed questions for the Service:

  • Are there ways to get clients to respond to notices sooner or convince them to open letters faster?
    • Perhaps there is a way to emphasize taxpayer rights, such as printing on the outside of the envelope or putting in a different stuffer notice.

Breakout: Improving CDP Administrative Proceedings

Panelists: Soree Finley, Susan Morgenstern, Erin Stearns

Participants will learn about opportunities for more effective engagement with IRS Appeals, including when a taxpayer may challenge the accuracy of an assessed liability, the critical role of a record in establishing a sustainable collection alternative to immediate full payment, and procedural traps for the unwary. Participants will collaborate to identify improvements yielding more efficient and effective application of CDP through constructive interaction between taxpayers (or their representatives) and Appeals.

This breakout session was very well attended with approximately 35 attendees (standing room only). The discussion was built around the three priorities identified by the Steering Committee, then transformed into the following questions:

  1. What if IRS expanded telephone outreach efforts and contacted taxpayers in CDP to request a completed Form 433-F or -A?
    1. IRS could proactively assist taxpayers early on with a sustainable collection alternative. If no collection alternative results, then IRS could assign a settlement officer for a CDP hearing.
  2. How could the IRS better promote availability of LITC assistance earlier in the CDP process?
  3. What could be done to educate taxpayers and representatives on how to challenge liability through CDP?

The discussion focused most on the first question. The group spent some time discussing pre-CDP hearing screening measures but primarily discussed work with Appeals generally and improvements to the Appeals process. On this question, the group offered the following suggestions:

  • Remedy some of the staffing challenges by hiring more Settlement Officers;
    • Noted effects of staffing challenges included instances where settlement officers missed CDP hearings without advanced warning and delays in processing hearings and receiving communications scheduling hearings.
  • IRS should consistently apply pre-CDP hearing screening by geographic region;
    • Attendees from all over the U.S. in the breakout session and many indicated they had never been contacted by an IRS employee screening the case prior to sending it to a Settlement Officer for a full-blown hearing, and overall the group expressed interest in having the IRS do this.
    • One concern expressed by a participant was that taxpayers (and perhaps representatives) might feel railroaded by the screening person into agreeing to a collection alternative that might not be the best long-term option. However, most of the group welcomed the idea of being able to resolve cases without a full-blown CDP hearing.
  • Allow representatives (even if just at LITCs) to engage in email dialogue with IRS;
    • This could enable an LITC representative to receive emails from either Collections or Appeals – verifying that the CDP hearing was timely requested, identifying what needs to be submitted, and allowing representatives to submit documents via email.
    • Alternatively, develop an online portal system, like medical providers, which allows taxpayers and representatives to engage with the IRS in a secure setting, and to upload documents, receive messages, schedule phone calls or in person appointments at a Taxpayer Assistance Center, etc. CDP hearings could be handled through such a portal more efficiently than they are handled now and with required privacy protections.
    • Briefly discussed that not all taxpayers are connected and online and there would still need to be opportunities for less connected taxpayers to engage that do not require online interaction.
  • Appeals should provide more face-to-face hearing opportunities (in-person or virtual), which several attendees indicated, were useful for taxpayers facing anxiety;
  • Improve interpreter services available to taxpayers with language barriers.
    • Taxpayers should not have to provide their own interpreters for CDP hearings.

The next question addressed how the IRS could better promote availability of LITC assistance earlier in the CDP process. The group provided the following suggestions:

  • Better inform Appeals offices of LITCs, the location of local LITCs, and the work performed by LITCs;
    • Attendees discussed that the Taxpayer First Act now permits all IRS employees, including those within Appeals, to inform taxpayers of not just the presence of LITCs, but to tell them about LITCs local to them who might be able to help them.
  • Discussed whether more involvement with taxpayers in CDP would be undesirable on any level, e.g., increasing workload in an undesirable way, but attendees did not see this as a problem and indicated they would like to be involved in CDP cases earlier so they could provide more assistance.

Sending Notices with Bad Dates

On June 22, 2020 National Taxpayer Advocate Erin Collins issued a blog post advising readers to keep an eye out for notices with expired action dates.  The post notes that “during the shutdown, the IRS generated more than 20 million notices; however, these notices were not mailed.  As a result, the notices bear dates that now have passed, some by several months and some of the notices require taxpayers to respond by deadlines that have also passed.” I will repeat myself once or twice in this post but if I am reading it correctly the IRS is knowingly and intentionally creating a false entry on thousands, perhaps tens of thousands, of taxpayers’ official records of account.

The NTA describes as a silver lining the fact that the IRS is granting additional time to respond before interest or penalties apply and that the IRS is putting inserts with the letters to explain something about the mismatch in the date of mailing and the dates on the letters.  I will talk more about some of the letters the NTA mentions in her blog post.  I found myself wondering about several things that were not explained in the NTA’s blog post.  Why did the IRS print these notices?  Why doesn’t the IRS shred the notices and recycle the paper in order to issue new notices with the proper dates on the notices?  Why hasn’t the IRS issued a news release or Tax Tip about the notices to alert taxpayers and practitioners?  Prior to the NTA blog post, the IRS only released this information though its National Public Liaison (NPL), which, while helpful, does not reach a wide audience. And while many people read the NTA blog posts, I don’t think it has a readership on a par with broadly released statements from the IRS.

The IRS might think it has communicated to practitioners. It pushed this news out through the NPL on June 9. The stakeholder liaison is an inadequate way to disseminate important news. On the day of the stakeholder liaison email, IRS quietly updated the page on IRS operational status to include the information. It also posted this news as a “Statement on Balance Due Notices” here.  I do not want to detract from the important discussion of the decision itself, but it is also worth mentioning that the information the IRS has made public on this situation and the method and medium of making it public, fails to signal the importance of this action.

Yesterday the NTA released her 2021 Objectives Report to Congress, which confirms the information in her blog post. Kudos to the NTA for including the problem of outdated notices in the news release accompanying the report. This will help get the word out to practitioners.

In a letter to Commissioner Rettig, Representatives Neal and Lewis expressed their concern over the outdated notices and suggested that the IRS take steps to “ensure no taxpayers are penalized” for the IRS’s inability to timely process correspondence. For the reasons explained below, this will not be easy to do if the IRS moves forward with its plan to mail the outdated notices.


The NTA states that several dozen kinds of IRS notices will be mailed in the next month or two.  Maybe there is still time for the IRS to reconsider its decision to send out-of-date notices.  I hope so.  Here, I will discuss a few of the notices she mentioned.  Before starting the specific discussion, I note that many of these notices are required by statute.  I draw a distinction between statutorily required notices and other types of IRS notices.  While the best practice would be to send out notices on the date listed on the notice for all notices, the purposeful mailing of misdated statutorily required notices creates a more serious problem.

No matter what an insert says, the taxpayer will receive a statutorily mandated notice triggering statutorily prescribed duties and response times with the wrong date on the notice and the wrong date(s) for responding.  In the last two sentences of her blog post the NTA mentions that the IRS computer system will show as the business record of the IRS the wrong date.  She says “[c]ompounding confusion surrounding notice dates, IRS transcripts for taxpayers’ accounts will also reflect incorrect dates for some of the notices.” 

This could have grave consequences for both taxpayers and the IRS if the dates on the letters compromise the IRS business records.  First, taxpayers who do not keep the envelope and the letter may have trouble proving that the dates on the letter did not reflect the actual mailing date when making a future challenge.  Second, if the IRS builds a business record which it knows contains inaccurate information it makes all of its records suspect.  Courts regularly rely on certified transcripts from the IRS for the accuracy of the date an action took place.  If the IRS knowingly puts the wrong dates into its system of records, that calls the entire system into question.  This could have consequences for the IRS far beyond the consequences of recycling these letters and making sure that its records accurately reflect actions taken.

Here you have the NTA saying that the IRS business record is inaccurate.  That could be powerful evidence in court to strike at many IRS actions taken that stem from 2020.  It also has the potential to support grounds for damages if certain collection actions occur after a wrongful assessment or wrongful filing of a notice of federal tax lien.  It may present the possibility that in a CDP case a taxpayer may wish to lean on a rights-based failure to inform argument as a grounds to invalidate the proposed collection action.

Notice and Demand

IRC 6303 requires that the IRS send out a notice and demand letter within 60 days of the making of an assessment.  Case law going back at least three decades holds that the failure to send the notice and demand letter within the 60-day period does not invalidate the assessment but there is some possibly contrary case law.  The failure impacts the timing of the creation of the federal tax lien.  IRC 6321 and 6322 provide that the federal tax lien arises upon assessment, notice and demand and failure to pay within the demand period.  Ordinarily, failure to pay within the demand period causes the federal tax lien to relate back to the date of assessment.  If the IRS sends out the notice and demand beyond the 60-day period, the FTL will only arise upon non-payment and will not relate back to assessment.

You might say “so what,” because who cares about the FTL.  Only after the IRS filed the notice of federal tax lien (NFTL) does the IRS create a perfected lien.  The unperfected FTL still, however, has meaning.  For example, it attaches to property transferred for less than full value.  If a fight arises regarding the attachment of the FTL, the actual date of the mailing of the notice and demand letter matters.  Because of the pandemic, the IRS could not avoid sending out many notice and demand letters after the 60-day period.  Sending them out beyond the time frame must occur due to no fault of the IRS but sending a significantly backdated letter will undoubtedly confuse many recipients and may cause some to even challenge the validity of a notice which on its face asks the taxpayer to do something impossible.  If the notice and demand letter is invalid, the IRS has real problems because it would not have created the FTL, which has many consequences, including but certainly not limited to violating disclosure of a taxpayer’s liability if the IRS records a notice of federal tax lien when no underlying lien exists.

There is also the problem of the address.  The IRS must mail the notice and demand letter to the taxpayer’s last known address.  The IRS must use the taxpayer’s address as shown on the taxpayers most recently filed and properly processed return, unless clear and concise notification of a different address is provided. See, e.g., Duplicki v. Comm’r, T.C. Summary Opinion 2012-117.If these notices have been sitting in the bowels of a service center for months during the filing season, it is quite possible that many taxpayers have filed returns between the time of the creation of the notice and demand letter and the mailing of that letter.  The NTA does not mention if the insert changes the address on the letter.  I imagine it does not.  While many paper returns filed in the past few months remain in the parking lots of the service centers to which they were sent, the vast majority of taxpayers filed electronically.  Many of those returns will have gone through processing, and the IRS will know the taxpayer’s new address before these musty notices get mailed.  Mailing the notice and demand letters to something other than the taxpayer’s last known address will create an invalid notice and demand letter creating the same problems described above.  Maybe these are all notice and demand letters based on returns filed with insufficient remittance and processed early in the filing season, so the notice on the letter is the address on the most recent return.  If these notices do not come from that source, the likelihood that a fair percentage will bear an address other than the last known address is reasonably high.  This means taxpayers should be prepared to challenge the notices on this basis, which is not often done.

Math Error Notices

As most readers know the name math error notice is a misnomer.  Subsection 6213(g)(2) provides the definition of math error notice.  Sixteen different actions trigger the sending of a math error notice only one of which is 1+1=3.  Earlier this year, Les updated Chapter 10 of the treatise “IRS Practice and Procedure” and adopted the practice of the Taxpayer Advocate Service of calling this notice the summary assessment authority notice.  For this post I will stick with the misleading language of the statute, but errors in math play a small role in these notices.

The math error notice provides an exception to the need for the IRS to send a notice of deficiency in order to make an assessment.  Instead of a 90-day letter offering the chance to go to Tax Court, the taxpayer receiving a math error notice has 60 days to write back to the IRS expressing disagreement or the IRS will make the assessment.  We have not written enough about math error notices but some of our prior posts on this topic exists here, here, here and here.  Nina Olson wrote often about these notices as the NTA.  Find some of her writings here, here, here and here

This notice cuts off rights.  Most taxpayers fail to respond giving the IRS a shorter, easier path to assessment than the notice of deficiency.  Math error notices confuse taxpayers in the best of times as discussed in some of the NTA annual reports.  If you couple the ordinary confusion of these notices with dates that make no sense, the likelihood of a failure to response undoubtedly goes up.

Note that the math error notice must be mailed to the taxpayer’s last known address and the discussion above concerning notices with something other than the last known address applies here.  If the math error notice goes to the wrong address but the IRS makes an assessment following a failure of the taxpayer to respond, then the IRS has a bad assessment and all of the things that flow from a bad assessment.  These “things” can take a lot of time and effort to unwind.  They can also cause the IRS to lose the right to assess if the unwinding occurs after the statute of limitations on assessment has passed.

On a smaller scale the government faced a similar problem in the government shutdowns of 2013 and 2018-2019.  The system seems to generate notices automatically at certain points in time.  The system does not understand when the government ceases to operate.  In the prior shutdowns it sent out notices of deficiency and collection due process notices while the government was closed, but those letters didn’t have the wrong date and the taxpayer could still file a Tax Court petition or CDP request in the right time frame.

Collection Due Process Notices  

I wrote a blog post in 2018 about a CDP case in which the Revenue Officer went to the taxpayer’s house to deliver the CDP notice but the taxpayer’s dog deterred the RO from making delivery.  He went back to his office and mailed the CDP notice to the taxpayer to avoid bodily injury; however, he mailed the notice two days later.  When he mailed the notice, it still bore the date of his canine-thwarted personal delivery effort.  The Tax Court concluded that the time to make a CDP request runs from the date of mailing (or delivery) and not the date on the CDP notice.

Now the IRS will throw into the system potentially thousands of wrongly dated CDP notices, causing the recipients confusion and filing dates that may or may not fall within 30 days of the actual date of mailing.  How many taxpayers will keep the letter and the envelope?  Will the IRS have the correct date of mailing in its database or the original date of mailing?  Remember that these mailings result not from a single RO working a case but from a mass-produced effort at the service centers.

Are CDP notices sent by the IRS with knowingly wrong dates valid CDP notices?  If invalid, it makes all downstream levy actions wrongful.  Will the CDP notices be sent to the taxpayer’s last known address or to some other address?  If sent to something other than the taxpayer’s last known address, the CDP notices are not good.


The IRS should throw away these letters.  (Recycle them please with appropriate taxpayer identification precautions.)  Send new letters in which the dates on the letters match the dates of mailing.  Yes, this will be expensive in cost of production of the letters and the time it takes to create the new letters.  But it may prove less expensive than the alternative.  It certainly will create less confusion among the taxpayers receiving the letters, the representatives trying to assist the letters, and the courts interpreting the IRS actions.

Taxpayer’s Depression From IRS Improper Collection Action and A Claim for $34 Million in Damages

What happens when a taxpayer goes into a tailspin following mistakes that the IRS makes in connection with trying to collect taxes? Wrhel v. United States is a district court opinion out of Wisconsin where a taxpayer sought over $34 million in damages for the IRS’s wrongful collection actions. The case caught my attention because it requires the courts to consider the limits of responsibility when someone’s life goes off kilter as a result of what the court framed as relatively minor IRS mistakes.


I will summarize the facts to get to the heart of the case. Mr. Wrhel timely filed his 2010 tax return and received a refund. Unfortunately for Mr. Wrhel he neglected to include on the return about $1,100 in gambling winnings from a casino run by the Ho-Chunk Nation.

IRS issued an automated underreporting (AUR) notice and eventually a stat notice. The problem with those notices was that they were sent to a prior address of Wrhel’s in Iowa, and not to the Wisconsin address that was on his 2010 tax return. IRS wound up assessing $287 tax on the unreported gambling winnings. IRS then sent multiple collection letters to his old Iowa address; eventually IRS updated its records and sent collection letters to Wrhel at his Wisconsin address. Wrhel sent in a payment for the bill and also had about $100 of his state refund taken as a result of the assessment.

Because Wisconsin was his last known address for tax purposes, when Mr. Wrhel  petitioned the US Tax Court, the Tax Court eventually concluded that the stat notice (and thus the assessment) was invalid, leading the IRS to abate the assessment and issue a refund. Wrhel refused to cash the refund check because he believed that the IRS had miscalculated the amount he was owed. Part of the current dispute included Wrhel’s claim that he was entitled to a greater refund, and the consequences of his failing to cash the check that the IRS had sent him. I will skip that part but basically the court said he was not entitled to a greater refund and provided some information as to how Wrhel could get a replacement refund check.

The 2010 tax dispute led to problems in future years. Following the 2010 tax situation, Mr. Wrhel did not timely file his next three years’ tax returns. That inspired a visit to Mr. Wrhel’s home from a friendly revenue officer who left “literature” and information about the IRS collection process.  While Mr. Wrhel eventually filed the returns, Mr. Wrhel did not take kindly to the visit, and he believed that it violated Section 6304, which provides that IRS employees should not engage “in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of any unpaid tax.”

This takes us to Section 7433, which provides that taxpayers may recover the “costs of the action” and “actual, direct economic damages sustained by the plaintiff as a proximate result of the reckless or intentional or negligent actions of the [IRS] officer or employee.”

What were the actions that Wrhel claimed were improper? The first related to the home visit from the revenue officer which he believed amounted to harassment. The second stemmed from the collection notices that were erroneously issued to his wrong address that also generated the improper seizure of his small state tax refund. All of this business with the IRS seemed to really upset Mr. Wrhel. His distress is apparent from his filings:

I have suffered unnecessary anxiety, unnecessary unrest, unnecessary depression which caused me an inability to effectively operate my pepperidge farm business. This was unnecessary and not fair to pepperidge farm. . . . It further has wrecked all trust, faith, and belief in the United States Internal Revenue Service.

I have no desire to continue living in this country as a direct reckless disregard by the IRS and the subsequent seizure that took place.

Part of Wrhel’s unhappiness stemmed from being contacted directly and personally by a revenue officer, which Wrhel alleged was improper. The government fought hard on this point. Its first argument was that the revenue officer visit was not collection action as it was in connection with securing the filing of tax returns and only improper collection actions are within Section 7433. While the case law narrowly defines collection action, the opinion noted that the revenue officer left information about the collection process so it concluded that the revenue officer visit was collection activity. But the visit was not improper. An improper action would occur if, for example, the agent cursed or verbally abused the taxpayer or if the IRS bypassed a representative to visit the taxpayer. The opinion notes that there was no harassment, and without a Form 2848 on file there was no need for IRS to contact a representative about its house call. So the court found that there was no 7433 violation stemming from the visit. (BTW IRS has a brief info page on its website detailing when an IRS may make a visit—an important issue in today’s world of scammers).

For purposes of its motion for summary judgment, the government conceded that the IRS’s sending of the collection notices to the old Iowa address was a negligent improper collection action. This takes us back to Section 7433, which provides for a capped recovery for “actual, direct economic damages”, as well as reimbursement for costs of the action. The cap is $100,000 for negligent violations and $1M for reckless or intentional violations. The regulations also forbid recovery for emotional distress unless the distress leads to pecuniary damages. In the lawsuit, Wrhel tried to connect his emotional distress to actual economic damages. He alleged that the improper IRS actions led to his depression, substantial medical bills, repossession of his car and his ultimate sale of his business. For good measure, there was an affidavit from a psychiatrist who corroborated Wrhel’s distress being tied to his dealings with the IRS:

“[Wrhel] does perseverate somewhat on the belief that the Federal Government has stolen money from him. . . . I am somewhat uncertain about the nature of this perseveration on the government having taken money from him. It does certainly have a certain delusional quality to it, but at the same time, Mr. Wrhel denies any other psychotic symptoms, and notably as well his concerns are somewhat rooted in truth.”).

The court though pushed back on the damages issue, essentially saying that Wrhel’s desire for substantial damages was not reasonable in light of the IRS’s minor misconduct:

So what the § 7433 claim boils down to is Wrhel’s reaction to the notices sent to the wrong address, the levy of $94 from his state income tax refund, and the IRS’s bill for about $400, all for taxes on gambling winnings that Wrhel knew that he had avoided and that he would have had to pay if not for the IRS’s mistake. No one would be happy to learn that the IRS had been trying to recover taxes and had violated its own mailing rules in doing so, but again, this was not a completely fabricated bill: Wrhel indeed failed to disclose his gambling winnings. Put another way, I take Wrhel to be contending that he should be able to recover at the very least thousands of dollars in damages because the IRS sent mail to the wrong address and then recovered about $500 from him before reimbursing him.

To consider the issue of the appropriate amount of damages , the opinion circles back to tort law, and cites the Restatement (Third) of Torts, which provides that for allegations of negligent conduct inflicting emotional harm

“the actor’s conduct must be such that would cause a reasonable person to suffer serious emotional harm. . . . Objectively, an unusually susceptible person may not recover if an ordinary person would not have suffered serious emotional harm.” (emphasis added)

The court accepted that Wrehl in fact was suffering deeply, and that the evidence suggested that the IRS conduct contributed to his suffering. Yet that did not justify substantial damages as it was unreasonable to connect the alleged harm with the relatively minor misconduct:

Wrhel’s medical records provide some support for his position that he has suffered substantial mental distress from the interactions with the IRS [citing to the psychiatrist affidavit]…. And his many filings in this court underscore his anger at the IRS. He has repeatedly said that he has lost faith in the government and that he intends to move to another country. But the substantial harm that he says he suffered is simply not the type of harm that could reasonably be expected to be caused by the IRS’s violations in this case. So I conclude as a matter of law that Wrhel is not entitled to any damages flowing from emotional distress.

At the end of the day, the court awarded Mr. Wrhel $400, which was the filing fee for his district court action. The opinion concluded by recognizing Mr. Wrhel’s anger and his sense that the IRS conduct was tied in part to some sort of conspiracy relating to his father. But, as the opinion notes, IRS collection notices stem from an automated process, and it was not clear why the system failed in his case:

[T]here is no evidence to support this [conspiracy] theory, and the government maintains that its system is automated and it does not know why the system failed in this case. Hopefully in addition to his admittedly meager $400 judgment, Wrhel can take away from this case the knowledge that the IRS is as capable of making mistakes as taxpayers are.

I doubt that Mr. Wrhel will take solace in the closing words of the opinion.


Trends and Tactics in Collection Due Process Litigation During 2018

Despite reaching the age of 20 this past July, CDP continues to create new issues for practitioners to learn and advocate. Twenty years ago I headed the project to write the regulation for the new CDP statute. Writing the regulation proved challenging because CDP was such a departure from federal tax collection practice to that point.   As we have learned over the past 20 years, we failed to anticipate many CDP issues as we wrote the regulations and new issues continue to present themselves.

Over the course of 2018, we have written a number of CDP posts. I have collected the posts here. The issues are broken down into categories for ease of organization. Along with panelist Tom Thomas (who presided over the publication of the CDP regulations 20 years ago), Steve Milgrom, an attorney who is the Litigation and Volunteer coordinator for San Diego Legal Aid, and Scott Hovey, an attorney with the Washington, D.C. field office of Chief Counsel (IRS)(and an intern in the Richmond District Counsel’s office 20 years ago when I headed that office), I participated in a panel on the CDP developments in 2018 at a recent ABA Tax Section conference for low income taxpayers.

Perhaps the most remarkable feature of the presentation was that when we ran over our time, we were the last panel of the day, and the moderator went to stop the discussion the audience insisted that Steve finish telling his story of the Dang case. This is a case which he handled/continues to handle in which the IRS refused to levy on his client’s IRA in order to help the client by allowing the client to satisfy the tax liability without incurring the 10% excise tax under IRC 72(t). Steve’s persistent and effective advocacy for his client in that case resulted in the client paying tax due without having to pay a penalty for making the payment. Read more about the case in the link below if you missed it when we first wrote about that case.



Jurisdiction (The Request) – CDP cases have two separate 30 day periods that taxpayers must successfully navigate in order to obtain an administrative and then a judicial review of their case. The first 30 day period starts with the issuance of a CDP Notice. The IRS must issue a CDP notice prior to taking most levy action. The IRS also must issue a CDP notice when it files a notice of federal tax lien. Because it does not know exactly when the local court will file the notice of federal tax lien, the IRS builds five days into the period after it sends the notice of federal tax lien to the local courthouse for filing. When it issues the CDP notice the taxpayer has 30 days (or 35 days for a lien notice) to send a request to the IRS seeking an administrative hearing with Appeals. The IRS has not made it easy to send in the requests and will deny a CDP hearing to taxpayers who do not carefully follow its procedures. The issue with which the Tax Court is now grappling is whether the failure to strictly follow the IRS procedures is a basis for denying a CDP hearing or whether substantial compliance might suffice. (For those with a subscription to Tax Notes, I published an article entitled “The Jurisdictional Ramifications of Where You Send a CDP Request,” there on November 12, 2018 that covers this issue in greater detail than our blog posts.)

Untimely CDP request –


Jurisdiction (The Petition) – If the taxpayer successfully requests a CDP hearing and Appeals decides to sustain the lien or levy, it will issue a determination letter giving the taxpayer 30 days within which to petition the Tax Court. If the taxpayer misses the 30 day deadline for a good reason, can the Tax Court accept the case based on equitable tolling or is the 30 day period to file the petition jurisdictional such that the Tax Court must deny the taxpayer entry into the court no matter how compelling the reason for late filing might be?

Is time to file CDP petition in Tax Court jurisdictional –


Starting the 30 day period – The taxpayer has 30 days to file the request or petition the Tax Court in a CDP case but when does that 30 day period begin? IRS letters do not always get mailed on the date on the letter. Many IRS employees flex and generate letters from their home which they do not print and mail until they come to work in the office on a later date. The date on the letter may be the date it was generated and not the date it was mailed. In the Weiss case the Revenue Officer dated the CDP Notice and took it to the taxpayer’s house; however, he did not personally deliver the notice as he had intended because the taxpayer had a large dog. The Revenue Officer mailed the letter two days later but the letter still contained the original date on which he had intended to effect personal service. The Tax Court decided that the date of mailing and not the date stamped or written on the letter that controlled.

When does period begin for arguing CDP –


Impact of CDP Request or Petition on the Statute of Limitations on Collection – Taxpayers who receive a CDP Notice must decide whether to request a hearing in part based on the impact the request will have on the statute of limitations on collection. Sometimes taxpayers do not seem cognizant of the impact their actions will have downstream. Every action in a CDP case should be taken with an eye on the statute of limitations clock. In addition to the cases discussed in the blog post see also Gilliam v. Commissioner, 121 AFTR 2d 2018-2211 (4th Cir. 2018)(unpublished opinion holding that taxpayer’s incorrect request for the IRS to review a levy could be perfected after the 30 day period and result in a CDP hearing rather than an equivalent hearing.)

Statute of Limitations and CDP –


Should Taxpayer Sign the Waiver Form Ending CDP – If the taxpayer reaches an agreement with Appeals, the Settlement Officer will ask the taxpayer to sign a waiver form terminating their CDP rights. While signing the form seems logical in some ways, what happens if the IRS does not follow the bargain you think you have struck? Would it be best to have the determination letter issued and go to Tax Court in order to get a more formal recordation of the agreement?

Waiving CDP rights –


Standard of Review – When the Tax Court reviews the CDP case it generally reviews the issue de novo if the taxpayer contests the underlying liability and reviews for an abuse of discretion if the taxpayer seeks a collection alternative. If the taxpayer contests the application of a payment made by the taxpayer to the IRS, what is the standard of review for that contest?

Standard of review –


Summary Judgment – When a taxpayer files a CDP petition in Tax Court seeking review of an issue decided on an abuse of discretion standard, Chief Counsel IRS frequently seeks to resolve the case by filing a motion for summary judgment. In seeking the motion for summary judgment, the government must follow certain steps and prove certain items. The Tax Court has criticized Chief Counsel attorneys regularly for seeking summary judgment without following the correct steps. How can you identify when you might have a defense to summary judgment based on the failure of the motion to include all necessary items?

Filing a correct summary judgment motion –


TBOR and CDP – CDP is a natural place to argue the application of the Taxpayer Bill of Rights. It could apply to the balancing test. The IRS could be required to verify that its actions complied with TBOR. In the recent case of Dang v. Commissioner, taxpayer argued that requiring him to liquidate his IRA in order to pay the tax liability violated the TBOR provision that a taxpayer should pay no more than the correct amount of tax. The taxpayer argued that the IRS should levy on the retirement account in order to save the cost of the 10% excise tax under IRS 72(t).  The Appeals officer who first heard the CDP case issued a determination letter saying that Appeals did not have the authority to grant the requested relief.  When the case reached Tax Court the Chief Counsel attorney almost immediately requested a remand to Appeals to allow Appeals to make a determination based on the requested relief.  The taxpayer opposed the requested remand as a waste of time but the Court granted the request and back in Appeals the relief requested by the taxpayer was granted.

There is another interesting TBOR case brewing in Tennessee, Freels v. Commissioner, Dk. No. 26674-17L.  Petitioner, like the petitioner in the Dang case discussed in the link below, faced a motion to remand filed by the IRS when the IRS attorney realized that the position taken by Appeals and Collection would not result in an affirmation by the Tax Court of the position taken in the determination letter.  Unlike the Dang case in which Judge Armen granted the requested remand, Judge Guy denied the remand in Freels in an order dated December 19, 2018.  Mr. Freels’ counsel, Mary Gillum who directs the low income taxpayer clinic at Legal Services of Middle Tennessee and the Cumberlands, made arguments similar to the arguments made by Steve Milgrom in Dang.  She argued that the IRS had failed to provide Mr. Freels with due process and violated his rights.  While the underlying nature of the violation of TBOR in the Freels case differs from the violation alleged in Dang, the nature of the argument is similar.  The Tax Court’s willingness to deny the remand and push forward for a resolution of the case (in taxpayer’s favor) may signal a new willingness to short circuit the dance back through Appeals to reach the right result and a victory for TBOR.

Arguing TBOR in CDP cases –


Seeking a Refund in a CDP case – The Tax Court position is that taxpayers cannot obtain a refund in a CDP case. Although the court issued a precedential opinion on this issue over a decade ago, it revisited the issue in some detail this year perhaps in anticipation of a challenge of the issue in the circuits.

Refund Jurisdiction in CDP cases –


Third parties and CDP – The IRS files nominee and alter ego liens and occasionally collects administratively from a third party. The IRS takes the position that third parties have no CDP rights. Third parties continue to push for some type of due process protection.

CDP rights of non-taxpayers –


When is CDP case in Tax Court over – Because of the unlimited ability to have a CDP case bounce back and forth between the Tax Court and Appeals, an issue exists concerning the end of the case. At some point the Tax Court case concludes. When that time arises, anything further the Tax Court has to say does not matter.

Ability of Tax Court to comment on CDP case after dismissal –


Can the Settlement Officer in a CDP case take actions that would trigger an action for wrongful collection – Occasionally, the Appeals employee handling a CDP case will do something that the IRS believes violates their rights. If the action occurs during the CDP phase of the case, is that a collection phase such that the wrongful action gives the taxpayer a right to bring an action for wrongful collection or is the CDP process something different from collection action?

Misconduct in CDP case does not permit wrongful collection case – 


What is an administrative proceeding – A taxpayer can bring a CDP case to challenge the merits of a liability if the taxpayer did not have a prior opportunity to do so. The issue of prior opportunity implicates the ability to raise the innocent spouse issue as well. If the taxpayer can show that it did not have a prior administrative hearing in the innocent spouse context the taxpayer should have the ability to raise innocent spouse as a defense in a CDP hearing.

Administrative hearing –


Consideration of non-CDP Years – Can the IRS or the Tax Court consider years not included in the CDP notice in fashioning a remedy? Administratively, CDP would not prevent the IRS from providing relief if it chose to do so but the Tax Court is limited to the years in the notice. Morgan v. Commissioner, T.C. Memo 2018-98