When Does The 30-Day Period Commence for Filing a CDP Request? DC Circuit Court Weighs In
The D.C. Circuit stopped an attorney dead in his tracks from skirting a $ 550,000 tax debt when it affirmed a Tax Court decision that a statute of limitations began when a notice was mailed, not when it was dated. In so doing, the DC Circuit affirmed the decision of the United States Tax Court.
To understand this case, a brief recitation of the facts is necessary. Charles J. Weiss, an attorney, owed a staggering tax debt to the IRS. Three bankruptcy cases suspended the statute of limitations on collection. Before the statute of limitations on collection lapsed, a revenue officer arrived on Mr. Weiss’s doorstep to hand deliver the CDP Notice. The notice was dated the same day as the visit. In a sudden twist of irony, the notice was never delivered because an aggressive dog nearly scared the revenue officer out of his skin. It didn’t take long for the revenue officer to realize that it wasn’t worth risking his safety just to deliver this notice. Instead, the revenue officer turned around and went back to his office. And what later followed is the spark that lit the fire of this lawsuit. For some unknown reason, the revenue officer did not mail the notice until two days after the date on the notice.
Mr. Weiss did indeed file a CDP request. However, not within 30 days of the date listed on the notice. Instead, Mr. Weiss filed the CDP request within 30 days of the date on which the notice was actually mailed, which fell outside the 30-day period. Mr. Weiss had an ulterior motive in responding late: He wanted to get out from under paying his $ 550,000 tax debt. After doing some research, he discovered that the IRS treats an untimely request for a CDP hearing as a request for an equivalent hearing, which is the functional equivalent of a CDP hearing with a few exceptions. Unlike a CDP hearing, an equivalent hearing does not suspend the limitations period for collection (however, there is no judicial review of equivalent hearings except as to certain spousal defenses). By responding late, Mr. Weiss would experience a win-fall as the 10-year statute of limitations on his debt would expire before he had to pay.
In court, Mr. Weiss argued that his request should be treated as a request for an equivalent hearing and that the statute of limitations on his debt had expired. Not giving an inch, the IRS argued that the actual date of mailing controls which meant that Mr. Weiss’s request for a CDP hearing was timely and that the statute of limitations on collection had been tolled. As a result, the IRS had timely filed its petition with the U.S. Tax Court. The Tax Court agreed with the IRS that the date of actual mailing controlled but admonished both parties.
The DC Circuit Court of Appeals took the time to review the procedures involving CDP hearings in its opinion. It began by identifying the form that a taxpayer must complete in order to request a CDP hearing or an equivalent hearing: Form 12153. If filed within 30 days of the CDP notice, the taxpayer will receive a CDP hearing with full rights. However, if filed outside of that 30-day period but within one year of the CDP notice, the taxpayer will receive an equivalent hearing.
Weiss timed his response to arrive at the IRS on Day 31 from the date of the notice. But the D.C. Court of Appeals held that the statute started running the day the notice was mailed, two days after the notice date, which brought Weiss’s CDP request under the umbrella of the 30-day statute of limitations, thus tolling the statute of limitations on the debt.
The Court reasoned that using the date stamped on the notice was “common sense.” But using the mailing date was consistent with the language of the IRC, which states that a notice shall be “sent by certified or registered mail, return receipt requested . . . not less than 30 days before the date of the first levy.”
The notice was mailed before the 30 days ran, the court said. As a result, the statute tolled.
The DC Circuit Court of Appeals had some harsh words for both Mr. Weiss and the IRS:
With respect to Mr. Weiss, the court said, “We note in parting the court’s hope that few taxpayers will be as anxious as Weiss to manipulate the law in order to attempt to extinguish tax liabilities.” As for the IRS and its practice of putting a date on the letter that was not the actual date of mailing, the court said: “We further hope that few agencies will be as careless with dates and especially with the rights of the citizens as the IRS in this case. Nonetheless, unattractive as the position of the IRS may be, it does comport with the language of the statute and the apparent meaning of the word ‘send.’”
Now for my two cents. Why shouldn’t a taxpayer be able to request an equivalent hearing during the first 30 days by stating so on Form 12153? Practically speaking, there are some good reasons why a taxpayer would prefer an equivalent hearing to a CDP hearing, not the least of which is the suspension of the statute of limitations that accompanies a CDP hearing.
Weiss made it clear in no uncertain terms that a taxpayer cannot rely on the date stamped on the letter as the official date. For taxpayers seeking an equivalent hearing, I recommend the following: first, state in clear and unambiguous terms that you are requesting an equivalent hearing and second, don’t be in such a hurry to mail your request. This should ring loud and clear in the wake of this opinion. Remember, if you time your response to arrive at the IRS on Day 31, you are asking for trouble. Instead, wait at least a couple of weeks after the 30 day period ends from the date on the CDP notice before mailing it.