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WHY THE IRS NEEDS TO KEEP 'WHITE-OUT' ON HAND

November 27, 2007

Next time the IRS makes a mistake on a tax notice, they should use White-Out. Or maybe they should just throw the sheet away and start over. That's the lesson of a Tax Court case yesterday.

When the IRS issues a "notice of deficiency," a taxpayer has 90 days to file a Tax Court petition to challenge the tax. The IRS issued such a "90 day letter" to John S. Burke on March 22, 2007, which would give Mr. Burke until June 20 to file with the Tax Court. Mr. Burke filed his petition June 21, which would normally be too late.

Not this time. Mr. Burke said the date on the letter was March 24, not March 22, so he thought he had until June 22 to file. The Tax Court took a good hard look at the letter:

At the hearing on respondent's motion, petitioner produced the original notice of deficiency, and the Court examined it.2 The date of the notice is reasonably legible and it certainly looks like March 24, 2007. However, in using a magnifying glass and a high-powered halogen light to examine the date, it appears that respondent originally stamped the notice March 21, 2007, and then restamped it March 22, 2007. This interpretation is consistent with the Declaration of respondent's employee who was responsible for the mailing of the notice.

The stamp-over of the date on the notice of deficiency had no effect on the legibility of either the month or the year or the first digit of the day. However, the stamp-over of the "1" and the "2" of the second digit of the day ended up producing what clearly looks like a "4" to the unaided eye.

The Tax Court said taxpayers aren't required to use a magnifying glass to figure out what the IRS means, so the 90-day period starts March 24.

Cite: Burke, T.C. Summary Opinion 2007-200.

UPDATE: The Tax Prof has more.

Tags: tax court.