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Glen E. Frost

Attorney at Law *
Certified Public Accountant **
Certified Financial Planner®
Master of Laws in Taxation
Every Tax Problem has a Solution

10480 Little Patuxent Pkwy, Ste. 400
Columbia, MD 21044
Phone:  (410) 497-5947
Fax:      (888) 235-8405

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Permalink 12:02:55 pm, by dmerritts Email , 1013 words   English (US) latin1
Categories: News

Tax Court Lacks Overpayment Jurisdiction in CDP Cases When Statute of Limitations is Up

By: Mary Lundstedt, Esq., Associate

On September 11, 2018, the Tax Court in McLane v. Commissioner ruled that the Tax Court lacked overpayment jurisdiction under Internal Revenue Code (IRC) §6512(b) where Petitioner failed to raise the refund issue within the time limits provided under IRC §6511. This is the first time the Tax Court has reconsidered and upheld its ruling in Greene-Thapedi v. Commissioner. Pending a different result in a Fourth Circuit appeal, taxpayers and their representatives must remain vigilant whenever non-frivolous refund claims present themselves and ask for such refund as soon as possible.

Facts in McLane

Petitioner filed his 2008 income tax return, reporting a tax liability of $2,426. Along with the return, Petitioner requested an installment agreement in order to pay off the 2008 liability with monthly payments of $100. From December of 2009 through October of 2010, Petitioner made payments per this agreement for nearly a year. He also made some additional payments towards the liability outside of the agreement between November of 2010 and September of 2012.

In February of 2013, the Internal Revenue Service (IRS) determined a deficiency for Petitioner’s 2008 income tax return; however, Petitioner did not receive the notice of deficiency. Once the Petitioner received a Notice of Federal Tax Lien (NFTL) for both 2006 and 2008, he timely requested a CDP hearing. After the hearing, the IRS sustained the NFTL. Petitioner responded by filing a “Petition for Lien Action Under Code Sections 6320(c) and 6330(d)” with the Tax Court. While Petitioner assigned no error regarding 2006, he maintained that the IRS failed to mail a notice of deficiency for 2008 and that IRS Appeals had not provided him with sufficient opportunity to substantiate expenses.

A supplemental hearing was held after the Tax Court’s remand of the case during which IRS Appeals considered Petitioner’s substantiation and permitted nearly half of the deductions Petitioner had claimed.

Subsequently, in Tax Court, Petitioner successfully substantiated business expenses such that the IRS conceded that Petitioner was actually entitled to more deductions than those he claimed on his return. Accordingly, the IRS agreed to abate the assessment of a deficiency for 2008 and release the corresponding lien.

With 2008 established as a year for which Petitioner owed nothing, he understandably wanted the money back that he had paid pursuant to the installment agreement along with any amounts he’d paid outside of the agreement. So, Petitioner asked the Tax Court to determine an overpayment of his 2008 income tax and order its refund.

Statutory Authority

Under IRC §6511, taxpayers must file refund claims within three years of filing a tax return or two years from the time they pay the tax—whichever is later.

Per IRC §6512(b)(1), the Tax Court has jurisdiction in a deficiency case to determine a taxpayer’s amount of overpayment of income tax. Upon such determination, the overpayment must then be refunded or credited to the taxpayer.

However, IRC §6512(b)(3) restricts the Tax Court’s jurisdiction to determine overpayment. First, the taxpayer must have already received a statutory notice of deficiency. Next, even if the taxpayer failed to file the refund claim, it must be shown that the taxpayer could have filed a timely claim on or before the mailing date of the statutory notice of deficiency. Finally, jurisdiction exists when a timely refund claim was filed before the statutory notice of deficiency was mailed and any of the following conditions are present:

1.) The credit or refund claim was not disallowed before the mailing date of the statutory notice of deficiency.

2.) A timely credit or refund claim could have been filed as of the statutory notice of deficiency’s mailing date.

3.) Before the statutory notice of deficiency was mailed, and during the time period allowed under IRC §6532, the taxpayer commenced suit for a credit or refund.

Ruling in McLane

The Tax Court ruled that, under IRC §6330(d)(1), it lacked jurisdiction to determine and order a refund of an overpayment of Petitioner’s 2008 income tax. The Tax Court considered the timing involved, emphasizing that, under IRC §6512(b)(3), its jurisdiction to order a credit or refund is limited “to only that portion of a tax paid after the mailing of a notice of deficiency or in regard to which a timely claim for refund was pending (or could have been filed) on the date of mailing of the notice of deficiency.” Thus, the Tax Court determined that Petitioner’s failure to raise the refund issue within the statute of limitations (SOL) prevented the Tax Court from having jurisdiction over the matter.

Unfortunately for the Petitioner, the Tax Court dismissed any attempt to distinguish between the challenges to the taxpayer’s amount of tax liability and the challenges related to alleged IRS procedural failures to collect. Rather, the Tax Court saw “no reason why the issuance of a notice of deficiency that petitioner never received should allow him to pursue a claim for refund that would otherwise have become time barred long before he manifested any awareness of it.”


Some practitioners thought a footnote in Greene-Thapedi may have left a door slightly open for finding jurisdiction under circumstances analogous to those in McLane—i.e., where the taxpayer never received a notice of deficiency. That footnote reads:

We do not mean to suggest that this Court is foreclosed from considering whether the taxpayer has paid more than was owed, where such a determination is necessary for a correct and complete determination of whether the proposed collection action should proceed. Conceivably, there could be a collection action review proceeding where (unlike the instant case) the proposed collection action is not moot and where pursuant to sec. 6330(c)(2)(B), the taxpayer is entitled to challenge “the existence or amount of the underlying tax liability”. In such a case, the validity of the proposed collection action might depend upon whether the taxpayer has any unpaid balance, which might implicate the question of whether the taxpayer has paid more than was owed.

It seems clear now that the Tax Court has closed that door. Again, pending a different result on appeal, taxpayers and their representatives must pursue non-frivolous refund claims as soon as possible.

If you have questions or concerns about tax refund or credits, contact Frost & Associates, LLC today.


Permalink 07:27:02 pm, by jjbisnar Email , 695 words   English (US) latin1
Categories: News

Is Jail a Possibility If You Fail to Pay Your Taxes?

Consequences Not Paying Taxes

It is possible for some people to have genuinely overlooked their tax deadline and not paid their taxes that year. And in the case of other individuals, they may have neglected to pay taxes over the course of two or possibly more years due to various reasons including not having the money to do so. If you find yourself in this situation and fear that you will be sent to jail, please know that this may not have to be the outcome. It is true that you can go to jail for not paying your taxes just as you can for filing a fraudulent tax return. But, the one thing that's important to understand is that you cannot go to jail because you don't have enough money to pay your taxes.

Criminal Versus Civil Penalties

It is important to remember that if you make an honest error in your tax return, you won't be facing jail time. A majority of issues surrounding tax liability are not criminal. For example, if you are audited and it turns out that you owe money to the Internal Revenue Service (IRS), a civil judgment will be placed under you so the IRS can collect the money that is due. You can only go to jail if the government files criminal charges against you and you are prosecuted and sentenced.

Some of the most common tax crimes include tax fraud and tax evasion. Tax evasion is when taxpayers use illicit means to avoid paying taxes. Claiming more dependents than you actually have is an example of committing tax fraud. Tax fraud means the individual is deliberately attempting to deceive the IRS. This is significantly different from someone being confused by a tax form or making calculation errors.

What Can Actually Land You in Jail

The IRS won't file criminal charges against taxpayers just because they don't have the money to pay. This is a fact. So, when you file your taxes late, the penalties are much higher than when you pay your taxes late. However, the following actions are what could land you in jail:

  • Tax evasion: This is when taxpayers perform actions such as filing fraudulent returns. Those who engage in this practice could face up to five years in prison.
  • Failing to file a tax return: Failing to file a return could lead up to a year in jail for every year you failed to file.
  • Aiding someone to evade taxes: If you help someone else to evade their taxes, you could be looking at a five-year prison sentence depending on the type of allegation.

What Can You Do to Avoid Jail Time?

If you owe more taxes than what you can pay, there are a much better options than not paying your taxes or filing your tax returns. If you owe under $50,000 in taxes, interest and penalties, you could set up an installment agreement with the IRS that allows you to pay down the entire amount over the period of time using regular monthly payments. You could arrange an installment agreement even if you owe more than $50,000. You might just need to provide additional information to the IRS regarding your assets, investments and expenses.

The other option is an Offer-in-Compromise, which is essentially an agreement between the taxpayer and the IRS to settle tax liability for a fraction of the entire amount that is owed. You will most likely not have this option when the IRS has reason to believe that you can pay down your tax debt with a monthly payment plan. So, in order to negotiate an Offer-in-Compromise, you may have to provide the IRS with a detailed account of your income, expenses, assets and investments and prove that you will otherwise be unable to pay off the debt.

A failure to comply with state or federal tax laws can result in serious civil and criminal penalties. The longer you fail to pay taxes or file tax returns, the more dire your situation will get. If you are looking at a mounting tax debt and fear criminal or civil penalties, please contact an experienced Maryland tax lawyer right away to better understand your options.



Permalink 02:38:12 pm, by dmerritts Email , 916 words   English (US) latin1
Categories: News

Untimely CDP Arguments Worth Consideration

By Eli S. Noff, Esq., CPA, Partner and Mary Lundstedt, Esq., Associate

The taxpayer in Berkun v. Commissioner1 ultimately raised two collection due process arguments too late for consideration on appeal, but the Eleventh Circuit apparently found them worthy enough to highlight in a published opinion. Although the Eleventh Circuit uses a popular Seinfeld reference to describe its own non-substantive ruling in Berkun as potentially appearing to be an opinion “about nothing,”2 the opinion puts practitioners on notice of two arguments that could actually be something when properly raised.


Per Internal Revenue Code (I.R.C.) §§6320 and 6330, when the IRS issues a Notice of Intent to Levy (NOIL) or a notice of a federal tax lien, the IRS must provide the taxpayer with both written notice and an opportunity for an administrative hearing. The taxpayer has 30 days from the mailing of the notice to request a collection due process hearing. If that request is timely, the taxpayer is then entitled to have the Tax Court review the administrative determination. On the other hand, if the request is untimely, then the taxpayer is only allowed an "equivalent hearing," which is not subject to further judicial review.


The case involves a collection due process (CDP) request and focuses on the sufficiency of notice. In 2010, taxpayer pled guilty to filing a false income tax return, and a variety of other federal charges. He was incarcerated and ordered to pay the Internal Revenue Service (IRS) restitution in the amount of $390,595. In January of 2013, while incarcerated, taxpayer asked the IRS to send all notices to his federal prison mailing address. However, taxpayer later filed tax returns while in prison—both of which listed his home address in Florida.

In September of 2014, the Revenue Officer (RO) assigned to collect the restitution-based assessment resulting from the false tax return attempted to call taxpayer at the prison, but the call was not answered. Shortly thereafter, the RO visited the home address and left his card there, because no one was at the residence. Subsequently, taxpayer’s attorney contacted the RO and advised him that taxpayer would be in a halfway house in November.

The IRS issued a NOIL on November 3, 2014, in order to collect the assessment. This NOIL was mailed to the Florida address. Taxpayer’s girlfriend signed the NOIL’s receipt card on his behalf.

On January 5, 2015, taxpayer and the revenue officer spoke for the first time. The revenue officer provided taxpayer with the NOIL, and taxpayer stated that this was the first he had heard of the NOIL.

Taxpayer filed a request for a collection due process hearing with thirty days of that meeting, and the revenue officer treated the requests as timely since taxpayer had not received the NOIL earlier. However, the IRS Office of Appeals determined that the request was untimely and held an equivalent hearing, instead. The Office of Appeals issued a notice of decision, explaining to taxpayer that he could not appeal to the Tax Court, unless he could show that his collection due process request was timely.

Taxpayer went to Tax Court, where the IRS moved to dismiss for lack of jurisdiction due to an untimely request. The motion was granted when taxpayer failed to respond. Subsequently, the Tax Court denied taxpayer’s motion to vacate dismissal, and taxpayer appealed to the Eleventh Circuit.


At trial, taxpayer first argued that under the due process clause, the IRS was required to send the NOIL to his Miami prison address. This argument relied on non-tax case law related to notices of forfeiture which indicates that such notices must be sent to an incarcerated person’s prison address3. As such, taxpayer maintained that the notices were insufficient and his request was timely since he filed it within thirty days of receipt of the notice from the revenue officer; thus, Tax Court had jurisdiction over the matter.

The IRS maintained that per treasury regulations, "a taxpayer's last known address is the address that appears on the taxpayer's most recently filed and properly processed Federal tax return." 4

Although the court would not consider this argument since the taxpayer failed to raise it in Tax Court, the Eleventh Circuit still noted that:

Mr. Berkun's argument that due process requires the IRS to send NOILs to incarcerated taxpayers at their prison addresses presents one plausible application of Dusenbery and its progeny, particularly in a situation like this one where the incarceration is based in part on a criminal tax offense and the taxpayer has requested the IRS to send tax correspondence to his place of incarceration.5

Next, taxpayer presented the legislative history behind the development of the collection due process procedure, arguing that:

[F]or the purpose of CDP hearings the Conference Committee was concerned with actual receipt of notices of deficiency, rather than simply constructive receipt accomplished through mailing notice to a taxpayer's last known address.6

The IRS deflected the argument rather summarily by stating that it was not properly raised in Tax Court, and that the Tax Court had dismissed the matter based on the existing I.R.C. §6330 language, regulations and precedent.

Ultimately, the court agreed with the IRS that both arguments were not properly raised in Tax Court, and thus, could not be considered. However, it is noteworthy that the court wrote a published opinion highlighting the two arguments that it couldn’t rule upon. Going forward, taxpayers and practitioners working with similar circumstances should consider properly raising these arguments when applicable.

If you have questions or concerns regarding tax matters, contact Frost & Associates, LLC today.

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* Licensed to practice in Maryland, Florida, and the District of Columbia. May represent taxpayers nationwide in IRS disputes.
** Licensed in Maryland

10480 Little Patuxent Pkwy, Ste. 400
Columbia, MD 21044
(410) 497-5947
© 2018 Glen E. Frost