The Early Bird Doesn’t Always Catch the Worm

A fascinating case came out of the Tax Court today. Being late when you file a challenge is never a good idea; in almost all cases, your filing can be thrown out. But what happens if you file too early?

The petitioners in today’s case received a notice of lien for 1996 to 2000. Then the petitioners received a notice of levy for tax years 1990 to 1994. The petitioners requested a collection due process hearing (CDP) before the thirty day period before the first day of levy.

In appellate court cases, if you file early, your date of filing is presumed to be the first day of filing (your filing date is “related forward” under Federal Rule of Appellate Procedure 4(a)).

But that wasn’t the view of the Tax Court. Instead, it took the statute literally, noting that a request must be made during the 30-day period. The regulations promulgated under the statute use the same terminology: four times the words “during the 30-day period” (or synonyms) are used.

The Court concluded,

Allowing premature CDP requests to be effective, incontrast, would cause prejudice to the Commissioner. The IRS is a bulk-processing organization that sends and receives hundreds of millions of notices and returns each year. If the system is to work, almost all of those notices and returns have to quickly fit into pigeonholes (or their modern-day equivalent, the database field), rather than become the object of contemplation by a IRS clerk charged with finding the right place to put a particular piece of correspondence….We think the Commissioner is right when he argues that allowing a taxpayer to disrupt this sequence with a premature CDP request would be quite likely to cause prejudice.

So if you’re going to contest an IRS notice, check the dates carefully. Being early is just as bad as being late.

Case: Andre v. Commissioner, 127 T.C. No. 4

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