|
Resources:
Tax Education: Assessments
What
is hard for many people to understand, especially lawyers who
are not tax lawyers, is the reversal of justice inherent in tax
law. Tax law is
somewhat unique in American jurisprudence in that you are guilty
until you prove your innocence.
Restated, the IRS can assess as tax against you for any
reason whatsoever and the burden is on you to prove that you
don’t owe it.
In
all other areas of creditor-debtor law, the creditor must first
prove that the debt exists before pursuing collection remedies,
executing on assets, or garnishing wages.
In tax law, collection activities are permitted without
proof of the debt. The
only thing needed to trigger collection activities is nonpayment
after an “assessment” of the tax. Assessment is nothing more than
an internal bookkeeping entry by the IRS in its own books and
records.
A
tax lien arises the instant the assessment is made.
Contrast that with “normal” debtor-creditor law where
the creditor must first get consent from the debtor to obtain a
lien (such as a security interest in loan situation) or the
creditor must go to court and get a judgment to create a lien.
Worse
yet, a bedrock concept underpinning tax law is self-assessment.
A tax return, distilled down to its essence, is the means
whereby the taxpayer assesses the tax against himself or
herself.
Alice
in Wonderland would feel right at home.
Even
the quintessential legal concept of prior notice gets perverted
in tax law. It’s true that the IRS cannot proceed with collection
activities until after issuing a 90-day notice to the taxpayer
of the deficiency assessment.
But that notice must be sent only to the “last known
address” of the taxpayer. The last known address does not mean
the IRS must pick up a telephone book and find a current
address. Or
undertake a Yahoo people search.
Or do a Google search.
Or even look in its records for a current address.
No way. The
IRS generally is required only to check the address on the tax
return in question or else the most recently filed tax return.
If the taxpayer has moved and will not receive the 90-day
notice at the taxpayer’s
new address, too bad.
Really
too bad, because that 90-day period is the only time period in
which the taxpayer can file a claim in Tax Court to contest the
liability. What is
significant about Tax Court is that it is the only court that
will hear the question of whether the tax liability is really
owed without the taxpayer
first paying the tax! So
if you don’t get that 90-day notice, or you got it and blew it
off, and you later want to contest the liability in court, what
you do is pay the tax and sue for a refund.
If you can’t afford to pay the tax, well, you have a
problem.
So
guess what happens next? Once
the 90-day period has lapsed and no lawsuit has been filed in
Tax Court, the IRS uses all of its vast computer and
informational resources to locate you and your assets to extract
the taxes it has assessed against you.
It might not do a very good job of getting that 90-day
notice to your most current address, but it’s real good at
getting that “Notice of Intent to Levy” to you.
If
you don’t think this is fair, you are right.
The way to level the playing field is to file with the
IRS Form 8822 letting the IRS know of your most current address.
Remember, if the IRS assesses a tax against you and you
miss the 90-day window to file in Tax Court, you will have to
first pay the tax and sue for a refund if you want to contest
the tax liability in court—no matter how bogus the tax may be.
There
are other ways of contesting the liability, but they all involve
administrative processes without the protections inherent in a
lawsuit. You should
always preserve the right to contest a tax liability in court. You don’t want to forfeit what might be your last line
of defense.
As
a final comment, IRS Form 8822 only works for income taxes.
A separate notice scheme applies for gift, estate, and
generation skipping taxes.
For more information contact
us at taxhelp@taxdefendant.com
or
Toll Free 866-216-1930
|
