LarkenRose, IRS Crooks and Rick Santorum

[LPC]

In the video, Rose points out that his "employees" have already filed as self-employed, and paid self-employment tax. If the IRS collects from him without giving refunds to the employees, then the IRS will have collected the same tax twice.

It's possible that the statute of limitations has passed for the employees to claim refunds, but that the statute of limitations has not yet passed for the collection of the employment taxes from Rose.

[The Observer]

IRM 4.23.10.8  (11-15-2011) seems to indicate that taxpayers do get notices, appeal rights and that Tax Court has jurisdiction. What am I getting wrong?


30–Day Letters

The 30-day letter will be issued in employment tax cases to advise taxpayers of all unagreed proposed adjustments to their tax liabilities and of conclusions reached in no-change cases involving the disallowance in full of claims for refund. 30–day letters are not issued on cases accepted for Fast Track resolution.

A copy of the examination report and agreement forms:

Form 2504, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment – Excise or Employment Tax,

Form 2504-S, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment (including section 530 statement), and/or

Form 2504-WC, Agreement to Assessment and Collection of Additional Employment Tax and Acceptance of Overassessment in Worker Classification Cases.

will accompany the 30–day letter.

30–day letters are designed for specific types of cases. These letters advise taxpayers of appeal rights. Available letters are listed below:

Letter 950 series — For all unagreed employment tax cases except those involving claim disallowances or reconsideration of disallowed claims. Separate 30–day letters should be issued when both IRC 7436 and non-section 7436 issues are present.

Letter 950-C, Employment Tax 30-Day Letter-WC - Issued in cases involving IRC 7436 issues. This applies to the reclassification of at least one worker and/or the determination that the taxpayer was not entitled to section 530 relief.

Letter 950-D, Employment Tax 30-Day Letter - Issued for all other (i.e., non-section 7436) employment tax audit issues.

Letter 569 (SC/DO), Full/Partial Preliminary Claim Disallowance Letter - For claim disallowance cases.

Letter 953 (DO), 30 Day Letter Claim Disallowance - For reconsideration of disallowed claims, no modification of prior determination warranted.

Publication 3498, The Examination Process, will accompany each of the letters listed in (3) above.

Form 13683, Statement of Disputed Issues, will be enclosed for all Letter 950-C and Letter 950-D mailings for which the small case request applies: where the total amount of proposed additional tax, additions to tax and penalties, proposed overassessment, or claimed refund, credit, or abatement for each referenced tax return for each tax period does not exceed $25,000.

Formal protests are required if the total tax or additions to tax and penalty for any referenced tax return for any tax period exceeds $25,000. See IRM 4.10.8.11.9, Response to Preliminary (30-Day) Letters.

Note:

Publication 3498 states: "You must file a formal written protest in all partnership and S corporation cases, regardless of the dollar amount." For employment tax purposes, the taxpayer does not need to file the protest to meet the formality requirements of a Tax Attorney for cases that would otherwise meet the small case criteria, as long as the protest contains that necessary information required of a Formal Protest as stated in the Pub 3498. However, it must be written such that Appeals can understand the basis for the disagreement and the authority for which the taxpayer is basing their position.

If separate letters are used for section 7436 issues and non-section 7436 issues, the tax and penalties for each period on BOTH reports are combined to determine if the amount exceeds the $25,000 limit.

30-day letter signature authority is delegated to the group manager:

For SB/SE Employment Tax, the signature line for the letters should contain the name of the Chief of the Employment Tax Program and title "Chief, Employment Tax Operations."

For SB/SE general program, the signature line should contain the name and title of the Area Director.

For LB&I, the signature line should reflect the name of the LB&I Commissioner and title.

For ITG, the signature line should contain the group manager name and title.

30–day letters will be sent by ordinary mail, except when in the judgment of the SB/SE Area Director, SB/SE Chief Employment Tax Operations, LB&I Program Manager, or ITG Group manager, the use of certified mail is deemed advisable. If certified mail is used, return receipts will be requested.

After the 30-day letter has been mailed, the case will be placed in the 30-day suspense file pending further action by the taxpayer. To ensure consistent monitoring, the examiner must update the case to Status "13" by completing Form 5348 when the letter is forwarded to the group manager. This will start the suspense period for 30-day monitoring.

It is the examiner's responsibility to take timely actions during the 30-day period. In cases where the taxpayer responds with additional information, the case will be put back into Status "12" until agreement is reached or another 30-day letter is issued.

Assemble the case for closure and forward to the manager for review. See IRM 4.23.10.20 for LB&I case file assembly. See IRM 4.23.10.20.1 for SB/SE.

If an agreement is received in response to the 30-day letter, close the case as agreed within 10 days.

If payment is received with the agreement, follow the procedures in IRM 4.23.11.3, Advance Payments.

If an agreement is not received, follow the procedures in paragraphs (13) through (18) below. The case should be closed within 20 calendar days.

When a taxpayer submits a protest in response to the 30-day letter and requests that the case be referred to the Appeals Office, the procedures in Review of Protests should be followed. See IRM 4.23.10.17.4 However, assessments prior to appeal may be granted if they are in the best interest of the government for non-section 7436 issues.

If the taxpayer does not file a protest letter seeking review by Appeals, the proposed tax involving IRC 7436 issues (worker reclassification/Section 530) may not be assessed. Instead, upon expiration of the 30-day period, the taxpayer must be issued a Notice of Determination of Worker Classification (NDWC notice). This suspends the statute of limitations for employment taxes dependent on the worker classification and section 530 determinations. Follow procedures in IRM 4.23.10.9, Special Procedures for Notices of Determination of Worker Classification or Section 530 Relief.

If the taxpayer does not respond to proposed adjustments involving only non-section 7436 issues, the case should be closed promptly after the 30-day period (including extensions) has expired as unagreed and the tax assessed.

If the taxpayer does not respond to proposed adjustments in a case involving both IRC 7436 issues and non-section 7436 issues, follow the quick/partial assessment procedures for the non–section 7436 issues before closing the case. See IRM 4.23.10.16.1 This will ensure that the non-section 7436 issues are promptly assessed. For the section 7436 issues, follow the procedures in IRM 4.23.10.9.

When a taxpayer's case involves an issue which is recurring in nature, or for other reasons immediate consideration by Appeals Office is desired, the words "RECURRING ISSUE" should be annotated on Form 3198 or Form 3198-A in red.

To assist Technical Services and other reviewers, a disc with copies of all report files should be included by the examiner in the case file.


4.23.10.9  (10-19-2010)
Special Procedures for Notices of Determination of Worker Classification or Section 530 Relief

IRC 7436 provides Tax Court review rights concerning certain employment tax determinations. IRC 7436 only applies to employment tax cases in which the Service determines that at least one worker should be reclassified as an employee and/or that the taxpayer is not entitled to relief under section 530 of the Revenue Act of 1978. The law requires that any employment tax that depends upon such determinations cannot be assessed unless the taxpayer has been given an opportunity to file a petition for Tax Court review of the Service's determinations on those two issues.

IRC 7436 also authorizes the Tax Court to determine the proper amount of employment tax and penalties (IRC sections 6651–6665) with respect to the determinations of worker classification and section 530 treatment. See Notice 2002-5, (2002-3 IRB 320, January 22, 2002) and Publication 3953, Q & A's About Tax Court Proceedings for Determination of Employment Status Under IRC Section 7436, for more information.

IRC 7436(a) does not provide the Tax Court with authority to review any employment tax determinations other than the three listed in the statute. They are:

Review the Service's determination that one or more individuals performing services for the taxpayer are employees,

Review the Service's determination that the taxpayer is not entitled to treatment under section 530(a) of the Revenue Act of 1978 with respect to those individuals, and

Determine the proper amount of employment tax under the above determinations.

For purposes of providing taxpayers with notice of its determinations on worker classification and section 530 relief, the Service will utilize a Notice of Determination of Worker Classification (hereinafter referred to as Notice of Determination or NDWC notice). The Notice of Determination has been officially designated as "Letter 3523." Refer to Notice 2002-5 and Publication 3953 for additional information.

The Notice of Determination is similar to a statutory notice of deficiency. Technical Services will prepare, review, sign, and issue the Notice of Determination and all attachments. For assistance in the preparation of Table 1 of the Notice of Determination, the examiner will prepare a list of reclassified workers as defined in IRM 4.23.10.9.1(5). In addition, examiners should prepare a work copy draft of Table 2 to assist Technical Review in the preparation of Letter 3523. Both the list of workers and the table of taxes should be included with the Revenue Agent Report (RAR) package in the front of the case file for use by Technical Services in preparation of the NDWC notice.

Note:

To assist Technical Services on preparing Notices of Determination of Worker Classification (NDWC), it is recommended that examiners include the RAR spreadsheet and associated workpapers on a diskette, and include in the file when closing. See IRM 4.23.10.20.1(3) for instructions on case file enclosure.

In the future, the Notice of Determination may be revised in response to statutory amendments, court opinions, and feedback from Service employees and the public. Employees should use the Letter 3523 on the Form/Pubs/Products Repository page on the IRWeb to ensure use of the most current version. Service employees should NOT make changes to the language of the Notice of Determination.

4.23.10.9.1  (10-19-2010)
General Overview of Section 7436 Procedures

In most reclassification cases, a taxpayer who is issued a Letter 3523 will have previously received a "30-day letter," which the Service sends to taxpayers in unagreed examination cases. If the taxpayer does not respond to the 30-day letter by agreeing to the proposed adjustments or by filing a protest to Appeals, the taxpayer will receive a NDWC notice. If the taxpayer files a protest to Appeals and the IRC 7436 issues are not settled in Appeals, the taxpayer will be sent a NDWC notice. Tax Court proceedings seeking review of IRC 7436 issues may not be started prior to the time the Service sends the NDWC notice.

Tax Court Rule 34(b)(8) requires that the petition shall include a copy of the Notice of Determination and all relevant enclosures, as listed below. Thus, if a case goes to the Tax Court, the explanatory paragraphs become a part of the basic pleadings for the Commissioner. They set the pattern upon which the Government's case may be tried, and care must be exercised in the statement of grounds for the determination of the asserted liability.

Enclosures with Notice of Determination — Every Notice of Determination (Letter 3523) should have the following enclosures:

Form 2504–WC, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment in Worker Classification Cases,

Form 4666, Summary of Employment Tax Examination,

Form 4667, Examination Changes – Federal Unemployment Tax,

Form 4668, Employment Tax Examination Changes Report,

Any schedules with explanations of the proposed assessment, and

Publication 3953, Questions and Answers About Tax Court Proceedings for Determination of Employment Status Under IRC section 7436.

Taxpayer Notification — Letter 3523 advises the taxpayers of the opportunity to seek Tax Court review and provides information on how to do so. Publication 3953 contains additional information and should always be sent to the taxpayer as an enclosure with the NDWC notice. The NDWC notice and Publication 3953 also advise taxpayers of the right to contact a Taxpayer Advocate.

Names of Reclassified Workers — Table 1 of the Notice of Determination must be completed to identify the workers the Service has determined should be classified as employees. The Tax Court has indicated that a NDWC notice that does not contain the names of reclassified workers is flawed.

Table 1 on page 2 of the Notice of Determination is used by examiners to list the reclassified workers' names and to mark (using an "x" or "✓" ) the quarters for which the workers are being reclassified. Do not list dollar amounts in Table 1.

If there is confusion among similarly named individuals or if names are not available, examiners should provide the job description of the workers and make sure that an attachment to the Notice of Determination explains what steps were taken to obtain the names and why the names were unavailable. Examples of identifying information include the shift worked, the specific job performed, etc.

The use of SSN's for identification of workers is not allowed on an NDWC.

Amount of Tax — Table 2 of the Notice of Determination must include the Service's determination of the proper amount of employment tax, additions to tax, and/or penalties that arise from treating the workers listed in Table 1 as employees.

The information about the proposed employment tax assessment must be moved from the attachments (Form 4667 and/or Form 4668) to Table 2 of the Notice of Determination.

The amounts must be organized by type of employment tax (Old Age, Survivor & Disability Insurance, Hospital Insurance, Income Tax Withholding and FUTA) rather than by type of return and listed separately for each quarter.

The total FUTA tax will be reported in the December 31 period.

Copies of Forms 4666, 4667, and 4668 must be attached to the Notice of Determination to show the taxpayer which rates were used in calculating the employment taxes.

Note:

To assist Technical Services on preparing Notices of Determination of Worker Classification (NDWC), it is recommended that examiners include the RAR spreadsheet and associated workpapers on a diskette, and include in the file when closing. See IRM 4.23.10.20.1(3) for instructions on case file enclosure.

Form 2504–WC — A Form 2504–WCmust be included as an attachment with Notice of Determination to provide taxpayers with an opportunity to agree to the proposed employment tax adjustment administratively. Form 2504–WC contains the statement that allows taxpayers to waive restrictions on assessments under IRC 7436(d) and IRC 6213(a). Therefore, the taxpayers must be informed that Tax Court review is not available for agreed cases. It can only be sought if there is a controversy with respect to the proper amount of tax under the determinations of worker classification and/or section 530 issues, i.e., an unagreed case.

Last Day to File a Tax Court Petition — On the front page of Letter 3523, the Service will provide the taxpayer with the date that represents the last day on which a timely Tax Court petition may be filed by the taxpayer. A taxpayer must file its petition with the Tax Court before the 91st day after the date the Notice of Determination was mailed by certified or registered mail. That means that the last day on which a timely Tax Court petition may be filed by the taxpayer is the 90th day after the date the Notice of Determination is mailed by certified or registered mail. If, however, that 90th day falls on a Saturday, Sunday, or legal holiday in the District of Columbia, the last day to file a petition is the next day which is not a Saturday, Sunday, or legal holiday in the District of Columbia. See IRC 7503.

For example, if the Notice of Determination is mailed on January 29, 2007, the last day for taxpayer to file a timely Tax Court petition is calculated as follows: The Julian date for January 29, 2007, is 29 (that is, it is the 29th day of the year). Add 90 to the Julian date (29) to obtain the Julian date 90 days after the petition is mailed (119). Since the 119th day of the year (April 29, 2007) falls on a Sunday, the last day to file a petition will be the next day that is not a Saturday, Sunday, or legal holiday in the District of Columbia. The following Monday, April 30, 2007, is not a legal holiday in the District of Columbia. Thus, the last day for a taxpayer to file a timely Tax Court petition with respect to a Notice of Determination mailed by certified or registered mail on January 29, 2007, is Monday, April 30, 2007.

Early Referral — If, during the course of the employment tax examination, the taxpayer and examiner are unable to agree on worker classification and/or section 530 issues, the taxpayer should be strongly encouraged to request early referral of these unagreed issues to Appeals. The enactment of IRC 7436 does not change the early referral procedures. See IRM 4.23.5.13.1, Alternative Dispute Resolution, for more information on early referrals.

LB&I/Appeals Fast Track Settlement Program (FTS) — FTS offers LB&I examination personnel a way to resolve audit issues in a way that utilizes the settlement authority and mediation skills of Appeals while retaining jurisdiction of the case. The FTS process allows people who developed the issue to have a voice in the settlement process. It also provides the taxpayer a way to resolve their case in a significantly shorter time span than the traditional Appeals process. See Rev. Proc. 2003-40, the LB&I/Appeals Fast Track Settlement web site and IRM 4.51.4, "LMSB/Appeals Fast Track Settlement Program (FTS)."

Fast Track Mediation (FTM) — Another method designed to expedite the resolution of tax disputes with taxpayers at the earliest opportunity is through Fast Track Mediation (FTM). Either the examiner or the taxpayer can propose mediation. See IRM 4.23.5.13.1, Alternative Dispute Resolution, and Publication 3605, Fast Track Mediation - A Process for Prompt Resolution of Tax Issues, for more information on FTM. See also: http://appeals.web.irs.gov/tech_service ... efault.htm.

Erroneous Assessment — If the Service erroneously makes an assessment of taxes attributable to any IRC 7436 issues without issuing a Notice of Determination or obtaining a waiver of restrictions on assessment (e.g., Form 2504–WC ) from the taxpayer, the taxpayer is entitled to an automatic abatement of the assessment. However, once any such procedural defects are corrected, the Service may reassess the employment taxes to the same extent as if the abated assessment had not occurred.

Statute of limitations — Mailing of the Notice of Determination by certified or registered mail will suspend the statute of limitations only for assessment of the employment taxes that are dependent upon the worker classification and section 530 issues. The restrictions on assessment in IRC 7436(d) and IRC 6213 and the suspension of the limitations period for assessment in IRC 6503(a) generally apply in the same manner as if a notice of deficiency had been issued. Thus, the statute is suspended for the 90-day period during which the taxpayer can begin a suit in Tax Court plus an additional 60 days thereafter. If the taxpayer does file a suit, the statute of limitations for assessment will be suspended during the Tax Court proceedings and for 60 days after a final court decision. To ensure that no assessment is made during the 90-day period following mailing of the Notice of Determination, follow the same suspense procedures that apply after a statutory notice of deficiency is issued.

The statute of limitations for assessment of employment taxes with respect to issues independent of worker classification and section 530 is not suspended. Thus, you should solicit consents from the taxpayer to extend the limitations period for assessment with respect to employment taxes that are independent of the worker classification and section 530 issues, or assess those taxes using the normal procedures.

For purposes of suspending the period of limitations only, backup withholding with respect to workers included in the reclassification may be considered dependent upon the worker classification and section 530 issues. There is the possibility that an employer might ultimately be liable for backup withholding with respect to those workers if the Tax Court disagrees with the Service's determination (i.e., the Notice of Determination) and rules that the individuals are not employees. Therefore, assuming the statute of limitations on assessment of backup withholding taxes has not already expired, the mailing of a Notice of Determination by certified or registered mail should also suspend the running of the period of limitations for purposes of asserting backup withholding with regard to such individuals while the Tax Court's determination under IRC 7436 is pending. However, the Tax Court does not have jurisdiction over backup withholding. As an alternative, the examiner may choose to treat the backup withholding issue as independent and seek a consent to extend the limitations period for assessment, or immediately assess but suspend collection until after the Tax Court proceeding is finished.

If there are other issues involved not relating to IRC 7436 and the taxpayer agrees with those adjustments, the examiner should secure a "partial agreement" and have the agreed taxes for those issues assessed. See IRM 4.23.10.16 for the procedure for partially agreed cases.

Effect on Refund Litigation — The taxpayer may file a refund suit in District Court or Court of Federal Claims to contest the Service's employment tax determinations (including worker classification and section 530) as an alternative to filing a Tax Court petition. The District Court or Court of Federal Claims do not have jurisdiction over worker classification or section 530 issues unless the taxpayer has paid the tax and has filed a claim for refund. If the taxpayer contests the worker classification/section 530 issues in Tax Court, the Tax Court only has jurisdiction over IRC 7436 issues and may not consider other employment tax issues. Following a determination by the Tax Court of the worker classification and section 530 issues, there is nothing to preclude the taxpayer from later filing a refund suit with respect to other issues that were not previously considered by the Tax Court, assuming the taxpayer has satisfied the jurisdictional prerequisites of paying, at a minimum, the employment tax assessment attributable to one employee for any one quarter and filing a timely claim for refund pursuant to IRC 6532. However, res judicata principles will preclude the taxpayer from relitigating the Tax Court's determinations with respect to worker classification and section 530 for the same tax periods in the refund suit.

Interest-Free Adjustments — The taxpayer is not eligible for interest-free adjustments after receipt of a Notice of Determination. The taxpayer may make a cash bond deposit to stop the accrual of any interest. See IRM 4.23.8.3, Interest Free Adjustments, for more information on interest-free adjustments.

Effect on Self-Employment Taxes — If a taxpayer files a suit in Tax Court concerning the worker classification and/or section 530 treatment, the statute of limitations for its workers to file claims for refund for self-employment (SECA) taxes is extended until the last day of the second year after the calendar year in which such Tax Court determination becomes final. See IRC 6511(d)(7).

4.23.10.9.2  (04-10-2009)
Prompt Issuance of NDWC Notices

Notices of determination of worker classification (Notice of Determination) in field examination cases will generally be issued within 60 days after the expiration of the 30–day period specified in the 30–day letter or any extensions. In office examination cases, notices will generally be issued within 45 days of receipt by Technical Services.

If a Notice of Determination is based on an examination of a retained copy of the taxpayer's return, the Notice of Determination will be issued without securing the original return. A transcript (BMFOLT) must be obtained to insure that the tax shown on the retained copy is the same as the tax assessed as tax shown on return.

The Notice of Determination writer will review the case to the extent needed to prepare a proper Notice of Determination.

4.23.10.9.3  (04-10-2009)
Authority for Issuance

Under IRC 7436, if, in connection with an audit of any person, there is an actual controversy involving a determination by the Secretary as part of an examination that:

One or more individuals performing services for such person are employees of such person for purposes of subtitle C, or

Such person is not entitled to the treatment under subsection (a) of section 530 of the Revenue Act of 1978 with respect to such an individual,

the Commissioner is authorized to send a Notice of Determination to such person. The Service will issue a Notice of Determination only after the Service has determined both that the taxpayer is not entitled to section 530 treatment and that one or more individuals performing services for the taxpayer are employees for purposes of subtitle C. The amount of employment tax under those determinations will also be determined and set forth in the Notice of Determination.

The Territory Manager for Technical Services and other designated officers are specifically authorized to prepare, sign, and mail the statutory Notice of Determination (see Delegation Order No. 251) on behalf of the Commissioner. The Notice of Determination may be issued at any time it appears that the taxpayer is seeking merely to prolong consideration and to postpone final action by dilatory tactics or by raising frivolous issues.

4.23.10.9.3.1  (04-10-2009)
Authority to Issue NDWC Notices

Delegates who are listed in Delegation Order 251 will either:

manually sign the name of the approving official followed by the delegate's initials, or

imprint the name of approving official by use of a signature stamp followed by the delegate's initials, and

manually sign their own name, or

imprint their signature and title by use of a rubber stamp.

Signature stamps will be procured locally and only the delegates will be permitted to use the stamps. To prevent unauthorized use, signature stamps will be protected in accordance with the procedures found in the Physical Security Handbook.

4.23.10.9.3.2  (04-10-2009)
Campuses

Delegates redelegated the authority to sign Notice of Determination from the Campus Director will:

manually sign the Director's name followed by the delegate's initials,

imprint the Director's name by use of a signature stamp followed by the delegate's initials, or

arrange for the machine imprinting of the Director's signature on the Notice of Determination.

Note:

Signed Notices of Determination will be associated with the respective case files for review and further processing.

Delegates who are listed in Delegation Order No. 251 will either:

manually sign their own name, or

imprint their signature and title by use of a rubber stamp.

Statutory notices signed by use of a "facsimile signature plate" will be controlled as follows:

Completed Notice of Determination, Form 2504-WC, and computerized certified mail list will be returned to the delegate who is responsible for signing the Notice of Determination.

Arrange for the machine imprinting of his/her signature on the Notice of Determination.

Signed Notice of Determination will be associated with the respective case files for review and further processing.

Hand-stamp the following statement on the computerized certified mailing: "Notices listed hereon were issued by: (Manual Signature)" .

The signed certified mailing lists and delegation orders will be disposed of in accordance with the disposal authority to be granted by the Archivist of the United States which will be included in Items 3 and 38 of Records Control Schedule 206. This requirement is necessary to provide proof of the delegated authority and the fact the person having the delegated authority did, in fact, cause the signature to be affixed should the validity of the Notice of Determination be questioned.

Signature stamps and facsimile signature plates, when not in use, will be protected from unauthorized use.

4.23.10.9.3.3  (04-10-2009)
Disposition of Copies

Notice of Determination and attached explanatory statements issued by Area Directors will generally be prepared in triplicate. The original and copies will be distributed as follows:

The original and one complete copy (including all statements and attachments) will be transmitted to the taxpayer by certified mail, and

One copy will be attached to the file in the case, which will be retained in the office of the Area Director subject to the call of the Area Director, Appeals, pending its ultimate disposition.

If the taxpayer is represented by an attorney or agent, an additional copy of the Notice of Determination should be prepared for transmittal to such attorney or agent.

If the Notice of Determination contains more than one taxable period and the Power of Attorney does not specify all of the same periods, the Notice of Determination should not be sent to the representative. Rather, an additional copy of the Notice of Determination should be sent to the taxpayer with an explanation as to why a copy cannot be sent directly to the representative. Suggested language is:
"Due to disclosure considerations, we did not send a copy of this Notice of Determination to the representative you named on Form 2848, Power of Attorney and Declaration of Representative. The notice includes a taxable period(s) not covered under the power of attorney. We have provided an extra copy of the notice that you may wish to give to your representative."

4.23.10.9.4  (04-10-2009)
Period for Filing Petitions if Notice of Determination is Addressed to Taxpayer Outside the United States

In the context of a IRC section 7436 proceeding, IRC 7436(d)(1) provides that the Notice of Determination is treated like a notice of deficiency for purposes of IRC 6213. Thus, if a Notice of Determination is addressed to the taxpayer outside the United States, the taxpayer has 150 days after the mailing in which to file a petition with the Tax Court.

4.23.10.9.5  (04-10-2009)
Protests, Correspondence and Waivers Received After Issuance of NDWC Notices

Letter 556, Acknowledgement of Protests, Correspondence and Requests for Interviews, may be used to acknowledge receipt of protests, correspondence, and requests for interview or conference which are received by the Area Director after the issuance of a Notice of Determination.

Following acknowledgment, the protest, correspondence, or request will be transmitted with the administrative file (or a statement of the pertinent facts if the files are extremely bulky) to the area Appeals office which serves the area responsible for the Notice of Determination.

Examination control records will be kept open pending either the return of the files or notification that Appeals will consider the case during the 90-day period. The foregoing will not apply if the Notice of Determination contains an obvious error of omission or commission and if correction will properly reflect the position of the Area Director and permit an immediate closing of the case. Neither will it apply to a case in which Appeals has waived jurisdiction. See IRM 4.23.10.9.6 for procedures in such cases.

If, during the 90-day period the taxpayer executes a Form 2504–WC to waive the restrictions on assessment and collection of the employment tax adjustments proposed in the Notice of Determination in full, associate all employment tax issues independent of those in the Notice of Determination and transmit immediately to the Campus for assessment of the proposed assessment of employment taxes.

If, during the 90-day period the taxpayer executes a Form 2504–WC to waive the restrictions on the assessment and collection of the employment tax adjustments proposed in the Notice of Determination in part, Examination will transmit the waiver and the return or returns which may be involved to the Campus for assessment of the agreed portion of the proposed assessment of employment taxes as a partial agreement.

After necessary action in this latter case, the waiver and the return or returns will be returned for restoration to the file of the case. If the file in the meantime has been transmitted to Appeals, the waiver and the return or returns should be transmitted to that office upon receipt by Examination.

When answering questions from taxpayers or representatives on Notice of Determination, the data should be taken from the administrative file rather than referring to AIMS. See IRM 4.23.10.9.6 for procedures on preparing a revised examination report based on additional information received after the issuance of the Notice of Determination.

4.23.10.9.6  (04-10-2009)
Appeals Waiver of Jurisdiction in NDWC Cases

Delegation Order No. 66 (as revised) vests settlement jurisdiction in Appeals offices during the 90-day period in all protested cases in which the Area Director issued the Notice of Determination. The delegation order permits the Area Director of Appeals to relinquish this jurisdiction by waiver to the office of the Area Director which issued the notice, except in those cases in which criminal prosecution is pending or the ad valorem fraud penalty is involved. Similarly, the Area Director of Appeals may relinquish jurisdiction to the office of the Director, Compliance, if that office issued the Notice of Determination. Appeals may waive jurisdiction in all cases which were handled by the Examination function, regardless of the amount involved.

When issued, the waiver of jurisdiction operates to vest in the office of the Area Director complete jurisdiction of the case during the 90-day period, including the authority to transfer the case to another area.

All communications addressed to taxpayers in Notice of Determination cases should clearly state that reconsideration of the case will in no way serve to suspend or extend the 90-day period in which a petition for redetermination may be filed with the Tax Court.

Waiver of jurisdiction over these cases does not increase the authority of an Examination function examiner. The authority of an examiner in a Notice of Determination case is the same as his/her authority in any other case.

Nothing herein is to be construed so as to deny any taxpayer a hearing before Appeals if he/she desires one and sufficient time remains during the 90-day period. Situations arising in this area should be coordinated with Appeals on a case-by-case basis.

If additional information is received that would change the Notice of Determination, prepare a revised examination report. On this revised report, adjust the amounts as shown on the original tax return. It is not necessary to prepare a supplemental report showing the amounts "as previously adjusted."

Clearly label the top of this revised examination report "Supplement to the Notice of Determination of Worker Classification." This revised report does not nullify or supersede the original notice, nor does it extend the statutory period for filing a petition with the Tax Court. Use Letter 555-T, Reconsideration after Statutory Notice, or Letter 555, Notification of Findings based upon Taxpayer's Recent Data re Tax Liability, to send the revised report to the taxpayer.

If it is ascertained that an agreement cannot be reached during the 90-day period, the taxpayer will be notified in writing sufficiently in advance of the expiration of the 90-day (or 150-day period if the NDWC is addressed to a taxpayer outside the United States) so as not to jeopardize his/her right to file a timely petition with the Tax Court. This contemplates expeditious consideration of such cases in Examination.

4.23.10.9.7  (04-10-2009)
Notice of Petitions Filed

To ensure that timely information is provided to determine whether a petition has been filed within the prescribed time in Notice of Determination cases, Chief Counsel’s office will furnish a daily list of newly docketed Tax Court cases. The docket list reflects the following information:

docket number,

name and address of petitioner,

TIN (if known),

name of office issuing the Notice of Determination, and

date of notice.

It will be the responsibility of the designated office, by reference to the above docket list, to take the necessary action to ensure that assessment of the proposed assessment of employment taxes on any defaulted Notice of Determination is made within the statutory period. If any case, in which the Area or Campus issued the notice, does not appear on the docketed cases list during the 90-day period plus an additional period of 30 days for Areas and Campuses, the case will be transmitted immediately for assessment of the proposed assessment of employment taxes.

Any such case in which a timely petition has been filed should be transmitted within 10 calendar days on Form 3210, Document Transmittal, by Technical Services to the Appeals office which serves the Area or Campus making the determination of tax liability. In unusual cases, the reason for failure to meet the deadline will be documented.

A dummy case file will be assembled by Technical Services and should contain the required number of copies (usually four) of the Notice of Determination and statement. If an untimely petition appears to have been filed (for this purpose field offices should assume that the petition was filed approximately three days prior to its appearance on a docketed cases list), the dummy case file should be forwarded to Appeals containing information to show the exact date on which the Notice of Determination was presented for mailing. All questions, including those relating to petitioned tax periods, should be referred to TE/GE Area Counsel.

4.23.10.9.8  (04-10-2009)
NDWC Notices Transferee, Bankruptcy and Receivership Cases

Special instructions relating to the preparation of Notice of Determination involving tax liability of transferees under IRC 6901 , as well as the preparation of letters involving bankruptcy and receivership cases, can be found in the Bankruptcy Handbook, IRM 4.27.

If the taxpayer is a debtor in bankruptcy, the automatic stay provision (i.e., 11 U.S.C. § 362(a)(8)), precludes "the commencement or continuation of a proceeding before the United States Tax Court." Thus, the taxpayer may not file a petition contesting the Service’s Notice of Determination without first obtaining relief from the automatic stay in bankruptcy court. Publication 3953 contains language advising the taxpayer of this fact. However, the Service is permitted to issue a Notice of Determination while the automatic stay is in effect and should do so to prevent expiration of the statute of limitations on assessment, which continues to run during the bankruptcy proceeding.

4.23.10.9.9  (04-10-2009)
NDWC Notices on Assessment in Jeopardy and Termination Cases

All jeopardy assessments have the common characteristic that, prior to assessment, it is determined that collection will be endangered if regular assessment and collection procedures are followed. Jeopardy assessments should be used prudently and care should be taken to avoid excessive and unreasonable assessments.

All examiners should be alert for conditions, as set forth in Policy Statement 4–88, where a jeopardy assessment may be necessary to protect the government's interest. It is important to note that the conditions set forth in Policy Statement 4–88 must exist for a jeopardy assessment to be considered.

It is incumbent upon all examiners to be alert for conditions as set forth in Policy Statement 4–89, where a termination assessment may be necessary to protect the government’s interest.

4.23.10.9.10  (04-10-2009)
Precautions Against Expiration of Limitation Period

All field examiners responsible for disposition of cases at any stage will take every precaution necessary to protect the Government against expiration of the statutory period for assessment. Refer to IRM 25.6.22, Extension of Assessment Statute of Limitations By Consent.

No case in which such period will expire in less than 180 days (including reference returns where the period for assessment should be protected) will be transmitted to Appeals by the Area Director unless a consent sufficiently extending the statutory period has been filed. If an appropriate and timely consent was not filed in any such case, a Notice of Determination will be issued or other necessary steps taken to protect the Government’s interests.

A Notice of Determination may be issued before referring a case to Appeals if it is determined that acceptance of a consent will be injurious to the Government's interests because of provisions of IRC 6511(c)(1) . Alternatively, area officials may take any other appropriate action to protect the Government’s interests before accepting the consent and referring the case to Appeals.

If you believe a jeopardy or termination assessment is appropriate, contact TE/GE Area Counsel.

4.23.10.9.11  (04-10-2009)
NDWC Notices on Magnetically or Electronically Filed Returns

Examination personnel should follow normal closing procedures even though the return is magnetically or electronically filed. This includes issuance of the Notice of Determination.

4.23.10.9.12  (04-10-2009)
Mailing of NDWC Notices

Notice of Determinations will be sent by certified mail to the last known address of the taxpayer. Registered mail will be used when the address of the taxpayer is outside the United States. The notice is intended to furnish, to the taxpayer liable for the payment of the tax, legal notice that such controversy exists. It is therefore necessary that notices be issued in compliance with the provisions of the statute. Although the statute authorizes that notices be sent by certified or registered mail, it does not preclude manual or other means of delivery. Any Notice of Determination issued by other than certified or registered mail should be approved by TE/GE Area Counsel prior to issuance.

A Notice of Determination may be held invalid if it is not addressed to the proper taxpayer or is mailed to the wrong address. Therefore, it is very important that the correct address of the taxpayer be secured when a Notice of Determination is being sent.

Be very careful in determining the address to be used. A thorough search of the administrative file should be made. The rule of law provides that unless the taxpayer has clearly and concisely notified the Service of a change of address, the address on the most recently filed (and reasonably processed) tax return is the last known address of the taxpayer.

If the Notice of Determination will be issued without any contact between the taxpayer and the Service, or if the last contact from the taxpayer disclosed by the administrative file occurred more than 90 days prior to the date the Notice of Determination will be issued or less than 60 days remain on the statute of limitation, it is imperative that a search be made beyond the administrative file for a last known address.

The last known address should be secured by requesting a transcript (CC MFTRA) of the latest filed return. The transcript also identifies when the latest address change posted and prior year information regarding filing status, name, and spousal SSN for IMF research on sole proprietors.

A check of the Master File must be made by the taxpayer's identification number (TIN), which is generally the employer identification number (EIN). The taxpayer's EIN and social security number (SSN) should be researched for sole proprietors. Research the address using CFOL command code INOLE. If there is any doubt as to what constitutes the last known address of the taxpayer, duplicate original Notice of Determination should be sent by certified mail to each known address.

Other IDRS command codes should be utilized only if adequate computer research is provided and as necessary to secure the correct address for the taxpayer. For instance, CC INOLE does not show when an address was input into the computer records. However, CC TXMOD will show pending transactions.

Copies of all IRS computer searches should be retained in the administrative file.

If a Notice of Determination is returned to the Area Director because of an incorrect address, it will be remailed to the correct address by certified mail; in such cases, the date of remailing is the effective date of the notice.

4.23.10.9.13  (04-10-2009)
Records of Mailing NDWC Notices

At times, questions arise as to the date on which the Notice of Determination is mailed. The burden of proof in establishing the date is on the Commissioner. Accordingly, it is necessary that a record be maintained by each Area Director showing the date on which the Notice of Determination was sent by certified mail.

It is important that employees in each office, who will be responsible for the recording and sending of certified mail, be fully informed as to the applicable regulations of the postal service.

The record of certified mailing of Notice of Determination should be kept on Postal Service Forms 3877 (P.S. Forms 3877), which are supplied in booklet form by the U.S. Postal Service. These books together with a series of certified numbers may be obtained from the local postmaster, provided an average of three or more letters are mailed at one time. In the interest of legibility it is preferable that P.S. Forms 3877 be removed from the book and the information entered thereon be typewritten. The following heading will be typed or imprinted by rubber stamp across the first line of each page of P.S. Form 3877: "NDWC notice, for the years indicated, have been sent to the following taxpayers."

A rubber stamp, such as shown below, will be used by the designated Service employee to stamp the envelope containing the 90-day letter:

   CERTIFIED MAIL


   No.—

The Service employee will then enter the certified number on the envelope, and list the same number together with the name and address of the addressee on P.S. Form 3877.

The year(s) for which the notice is applicable will be entered in the remarks column opposite the taxpayer's name and address. The notices to be mailed together with P.S. Form(s) will then be presented to the post office.

The postal employee first compares the certified mail numbers, and names and addresses, on the envelope with those on P.S. Form 3877 and counts the number of envelopes. He/she then indicates post office receipt of this mail by signing and inserting the post mark on P.S. Form 3877, and returns the forms to the Service employee.

The Service employee should initial and date P.S. Form 3877 as part of the permanent record of mailing, in order that, if called as a witness, he/she could testify as to the exact date on which the letters were presented for mailing. The receipted forms will be numbered consecutively and retained in a separate file.

Under no circumstances will the receipted P.S. Forms 3877 pertaining to the mailing of Notice of Determination be commingled with any other mailing records.

4.23.10.9.14  (04-10-2009)
NDWC Notices Returned by the Post Office

If a Notice of Determination is forwarded by certified mail and cannot be delivered by the U.S. Postal Service because the addressee has moved and left no forwarding address, the Area Director will, provided there is sufficient time remaining on the statute, follow the procedures for locating taxpayers.

The address on Master File will be considered the taxpayer's last known address if the taxpayer cannot be located or a new address is not provided or verified by the taxpayer. Research the address using CFOL command code INOLE or by requesting MFTRA to determine if the address was updated after the notice was mailed. If Master File shows a different address the notice should be reissued to that address.

In such cases where there is not sufficient time to reissue the notice or where the address on the latest filed return is the address to which the notice was delivered, upon expiration of the 90-day period, the employment taxes will be assessed by default in the absence of a petition to the Tax Court or an agreement. The envelope in which the letter was originally mailed and the notice itself should be securely stapled in the taxpayer's file, as such envelope (and letter) are evidence that the Internal Revenue Service has complied with the law and mailed the notice by certified mail to the taxpayer's last known address.

4.23.10.9.15  (04-10-2009)
Correspondence Indicating Change of Address

If correspondence sent by the Service that solicits or requires a response by the taxpayer is returned to the Service by the taxpayer with corrections marked on the taxpayer's address information, the correspondence will constitute clear and concise notification of a change of address.

If a taxpayer's address is outside of the United States or its possessions or territories, the following information is required: number, street, city, province or state, postal code, name of country, and apartment/room/suite number if applicable. The examiner should not abbreviate the country name.

A new complete address provided over the telephone or in an interview with the taxpayer or their representative would suffice as "clear and concise" notification if there is an ongoing examination and there is no reason to believe that the caller or person being interviewed is not the taxpayer or an authorized representative.

The elements of a new complete address are as follows:

Number and street (or P.O. Box number if mail is not delivered to street address).

Apartment or suite number.

City, town, or post office, state, and ZIP code.

Foreign address information: see (2) above.

The examiner should make a record on the contact sheet of the telephone conversation or interview with the taxpayer or representative about the new address. The record should contain the date of the phone call or interview and the name and phone number of the caller (employee/relative/representative). The record should also contain the taxpayer's full name, old address, social security number and/or employer identification number and the new address.

The examiner should determine whether the taxpayer is establishing a separate address from his or her spouse (for Schedule H audits).

4.23.10.9.16  (04-10-2009)
Authorized Representative Defined

An authorized representative is an individual who is granted authority to represent a taxpayer before the IRS.

Form 2848, Power of Attorney and Declaration of Representative, may be used to grant authority to a person. This form provides that a person has to fall into one of the following categories:

Attorney,

Certified Public Accountant,

Enrolled Agent,

Officer,

Full-Time Employee,

Family Member,

Enrolled Actuary,

Unenrolled Return Preparer, or

Students in Qualified Low Income Taxpayer Clinic (QLITC) or Student Tax Clinic Program (STCP) under special order issued by the Office of Professional Responsibility.

Unenrolled return preparers have limited authority. See Publication 470, Limited Practice without Enrollment, and Rev. Proc. 81-38 for more information.

[Famspear]

EDIT: Comment removed -- I see that I just missed something.

[Quixote]

IRC 7436 provides Tax Court review rights concerning certain employment tax determinations. IRC 7436 only applies to employment tax cases in which the Service determines that at least one worker should be reclassified as an employee and/or that the taxpayer is not entitled to relief under section 530 of the Revenue Act of 1978. The law requires that any employment tax that depends upon such determinations cannot be assessed unless the taxpayer has been given an opportunity to file a petition for Tax Court review of the Service's determinations on those two issues.

I stand corrected. I was relying on the language in IRC §§ 6211 et seq., which exclude employment taxes from deficiency procedures.

[Quixote]

I find it interesting that Larken, who claims to believe that "statutes are not the law" is using his misreading of the statute as his excuse for not seeking judicial review of the IRS's rejection of his CDP hearing request. IRC §6330(g) states that if the IRS determines any portion of a CDP hearing request to be frivolous, they can ignore that portion and such portion will not be subject to judicial review. Larken insists that provision, and not his reluctance to make the facts of the case public, is why he has not petitioned the Tax Court. Has the Tax Court ever dismissed a CDP case for lack of jurisdiction based on an IRS determination that the CDP request was frivolous? We've seen several cases in which the IRS had decided the CDP request was wholely frivolous, but in which the court never seems to have doubted it had jurisdiction.

[The Observer]

I can't recall seeing any, but that doesn't mean it couldn't have happened. I would think that some judge would have been seriously tempted to rely on IRC 6330(g) to get the case off of their calendar. Even more to the point, this would have been the perfect opportunity for Larken to get his arguments before the court if he had contested the audit properly from the very beginning. Since he had a good idea that he wasn't going to prevail, he decided to rely on rhetoric, sophistry and misleading statements before the Tax Protestor Court of Public Opinion to make his case.

In other words, he chickened out.

[LPC]

Has the Tax Court ever dismissed a CDP case for lack of jurisdiction based on an IRS determination that the CDP request was frivolous? We've seen several cases in which the IRS had decided the CDP request was wholely frivolous, but in which the court never seems to have doubted it had jurisdiction.

See James Bruce Thornberry et ux. v. Commissioner, 136 T.C. No. 16, No. 580-10L (4/19/2011), discussed in this thread.

I'm not sure I understand the court's reasoning:

Sections 6702(b) and 6330(g) were enacted together and should be interpreted and applied in pari materia. See Espinosa v. Commissioner, 107 T.C. 146, 152-153 (1996). Section 6703(a) provides that in any proceeding involving the issue of whether any person is liable for a penalty under section 6702, the Secretary has the burden of proof with respect to that issue. In such a proceeding, the Secretary has the burden of proving that a portion of the submission is based on a position identified by the Secretary as frivolous under section 6702(c) or reflects a desire to delay or impede the administration of Federal tax laws. Section 6703(a) clearly contemplates judicial review of a determination by the Appeals Office that a specified submission, including a request for an administrative hearing under sections 6320 and 6330, is a specified frivolous submission. Consequently, while section 6330(g) prohibits judicial review of the portion of a request for an administrative hearing that the Appeals Office determined is based on an identified frivolous position or reflects a desire to delay, it does not prohibit judicial review of that determination by the Appeals Office.

If the Appeals Office determines that a portion of the taxpayer's request for an administrative hearing is based on a position identified by the Secretary as frivolous under section 6702(c) or reflects a desire to delay or impede the administration of Federal tax laws and issues a notice of determination to proceed with collection and the taxpayer timely petitions for review, we have jurisdiction under section 6330(d)(1) to review the determination. If we sustain that determination, we may not further review the frivolous portion of the taxpayer's request.

Thus, we have jurisdiction in this case to decide whether the Appeals Office determined that all portions of petitioners' requests for an administrative hearing meet the requirements of clause (i) or (ii) of section 6702(b)(2)(A) and properly treated the entire request as if it were never submitted.