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Favorable Ruling from the U.S. Tax Court in 2013 Unpaid Payroll Tax Case

During 2013, Penzien & McBride, PLLC obtained a favorable ruling from the United States Tax Court related to the requirement of the IRS to properly notify a taxpayer of his rights to appeal a proposed assessment of a Trust Fund Recovery Penalty (an assessment against a business owner or other responsible person for the business failing to remit payroll tax to the IRS).

In a Memorandum of Fact and Opinion issued on May 30, 2013, the U.S. Tax Court, for the first time, ruled that actual receipt of a Letter 1153 is required before the IRS can move to levy or lien a taxpayer’s property. The Letter 1153 is a notice that the IRS intends to assess an individual for unremitted payroll (or excise) taxes that have been collected or withheld from employees or others. The Letter 1153 states that the taxpayer has 60 days to file a formal protest of the proposed assessment. If protest is not made within the 60 day period provided by the Letter 1153, the IRS may assess the penalty against the taxpayer and the taxpayer loses the right to argue the merits of the assessment before the United States Tax Court.

The IRS has historically taken the position that mailing the Letter 1153 to the last known address of the taxpayer is sufficient notice to the taxpayer of his or her right to file a formal protest to the IRS Office of Appeals. In the case of Lepore v. Commissioner (T.C. Memo 2013-135) Matt McBride of Penzien & McBride, PLLC challenged the position of the IRS, and insisted that actual receipt of the Letter 1153 is required by the law before the IRS could levy against the taxpayer’s property…assuming the taxpayer did not intentionally avoid receipt of the notice. The Tax Court agreed with Mr. McBride’s arguments and remanded Lepore’s case to the IRS Office of Appeals to give the taxpayer his “day in court” and preserved his right to challenge the validity of the tax assessment.

The full opinion of the United States Tax Court can be found here: Lepore v. Commissioner, T.C. Memo 2013-135