The Impact of the Last Known Address Rule on United States Taxpayers

March 10, 2020

The Internal Revenue Service sends various documents and required correspondence to a taxpayer’s “last known address” as required by the Internal Revenue Code.  The meaning of the phrase “last known address” is significant, because the legal validity of a notice or document sent by the Internal Revenue Service to the taxpayer, hinges on whether it was sent to a taxpayer’s last known address.  Therefore, a taxpayer should take the appropriate measures to ensure that their current mailing address is the address the Internal Revenue Service has on file.

The significance of the issue of whether the Internal Revenue Service mailed the required correspondence to one’s last known address could not be overstated.  For example, case law has supported the invalidity of assessed trust fund recovery penalty liabilities against a taxpayer, merely on the basis that the Internal Revenue Service failed to mail the Letter 1153. This letter informs taxpayers of their right to appeal the Internal Revenue Service’s determination and that the taxpayer is the responsible party for trust fund recovery penalties, to the correct address.  In other words, the United States Tax Court has ruled that where the Internal Revenue Service fails to follow the “last known address” rule, the liability which was proposed in the letter that was sent to the incorrect address, may be abated in its entirety.

Another context where the determination of the taxpayer’s last known address is crucial, is when the Internal Revenue Service issues a Statutory Notice of Deficiency.  A Statutory Notice of Deficiency is the Internal Revenue Service’s written and formal notification of its intention to assess a tax deficiency and inform taxpayers of their opportunity to petition the United States Tax Court and dispute the proposed adjustments.  Generally, a taxpayer loses their ability to dispute the liability before the United States Tax Court, if he or she does not timely file a petition within 90 days of the mailing of a Statutory Notice of Deficiency.  However, a taxpayer loses that right only if the Internal Revenue Service sends the Statutory Notice of Deficiency to one’s last known address.  In other words, if a taxpayer could showt the Internal Revenue Service never sent him or her a Statutory Notice of Deficiency to the taxpayer’s last known address, the notice would be legally invalid and the taxpayer’s right to petition the court would be re-instated.

The general definition for one’s last known address is the address that was stated on a taxpayer’s last filed tax return unless the taxpayer gives clear and concise written notification of a change in address.  As such, if a taxpayer’s current mailing address differs from that on the taxpayer’s last filed return, he or she must be wary of the address the Internal Revenue Service has on file and the notification of address change requirements.  These requirements were previously less stringent.  Previously, submitting a Form 2848 power of attorney form containing the taxpayer’s new and current mailing address, was sufficient notice to alert the Internal Revenue Service that a taxpayer’s current address differs from that on the latest filed return.

However, new case law has clarified what is considered clear and concise notification of a new address.  The case that provides this clarification was decided on March 13, 2019 by the United States Tax Court in the case of Gregory v. Commissioner, 152 T.C. No. 7 (2019).  Rather than alternative forms of written notice, such as providing a new address on a power of attorney form, the court in Gregory mandates that taxpayers file a Form 8822 Change of Address.  Thus, to ensure that the Internal Revenue Service follows its procedural requirements, taxpayers can protect themselves by filing the Form 8822.

The Gregory decision already has, and will continue to have, a significant impact because the case law has narrowed a taxpayer’s ability to notify the Internal Revenue Service of a change of address.  Many taxpayers have been successful in getting their assessed federal tax liabilities abated by arguing that the Internal Revenue Service failed to follow proper procedural requirements, by failing to send required correspondence to one’s last known address.  Ultimately, taxpayers may be able to void an otherwise valid assessment, or challenge an already assessed liability, in situations where the Internal Revenue Service has failed to follow proper procedures.

Please do not hesitate to contact our firm if you have any questions regarding whether the IRS has followed proper legal procedures with regards to the last known address rule. 

Author: A. Lavar Taylor, Managing Partner