Form 4340 is Sufficient Corroborating Evidence Proving Issuance of Notice of Deficiency

Eli S. Noff, Esq. CPA, Partner
Mary Lundstedt, Esq., Associate

On January 28, 2018, the court in U.S. v. Meyer,1 considered a challenge to the proper mailing of Notices of Deficiency for two tax years and found Form 4340 sufficient as corroborating evidence for both years.

Background

A deficiency assessment results from the Internal Revenue Service’s (IRS) finding that a tax return understated the liability, or that a taxpayer failed to file a return.2 However, before the IRS makes a deficiency assessment, the IRS must (1) determine the deficiency amount and (2) provide the taxpayer with notice of the proposed deficiency (also known as Notice of Deficiency, or NOD) and an opportunity for judicial review.3 The IRS may not make an assessment, levy or initiate collection proceedings in court until 90 days after an NOD has been mailed to the taxpayer’s last known address.4

When challenged, the IRS bears the burden of proving that the NOD was properly mailed by "competent and persuasive evidence."5 A rebuttable presumption of proper mailing in favor of the IRS exists when the IRS (1) proves existence of the NOD and (2) produces a completed U.S. Postal Service Form 3877 certified mail list (or equivalent).6

If the IRS is not entitled to the rebuttable presumption, then "[S]ufficiently corroborative evidence in the form of testimony, correspondence, habit evidence, or otherwise" is necessary to establish a timely mailed NOD.7 For this, the IRS frequently produces Form 4340, "which is a computer generated form that reflects the taxes assessed to and paid by the taxpayer in a particular year."8

Facts and Analysis

In United States v. Meyer, taxpayer failed to timely file income tax returns for tax years 2002 and 2009. Ultimately, the IRS made tax assessments. Taxpayer argued that the assessments were invalid, because the IRS failed to mail a Notice of Deficiency (NOD) per Internal Revenue Code (IRC) §6212(a) for each tax year before making the assessments.

The court considered that the IRS was not entitled to the rebuttable presumption of proper mailing, because it did not produce a U.S. Postal Service Form 3877 for either tax year 2002 or 2009. However, the IRS did produce Forms 4340 for both years. Additionally, the IRS produced a copy of the NOD for tax year 2002, along with a Case History Report for tax year 2009.

According to the court, the Forms 4340 did not show the dates the NODs were mailed, but they did show the dates that the IRS assessed deficiencies. Significantly, the court emphasized that the Forms 4340 explained that the assessments were made "per default of 90 day letter." Citing United States v. Rohner,9 the court stated that such explanation "is sufficient to establish that the NOD was mailed when a copy of the NOD was also produced during discovery."10 Thus, the court found that, since the IRS produced the copy of the 2002 NOD and the corresponding Form 4340, the IRS established the existence and proper mailing of the 2002 NOD.

Next, the court noted that the IRS lacked a copy of the 2009 NOD, but that it provided a 2009 Case History Report which detailed the steps taken by Meyer’s IRS officer. The court found additional evidence of mailing in the Case History Report. Specifically, the court explained that "[i]t states that on January 3, 2013, the officer was ‘[s]ending to have 90 day letter issued’ and indicates that the NOD was, in fact, issued on January 25, 2013."11 The court also pointed out that the district court had considered that the 2009 Form 4340 indicated the tax was assessed "per default of 90 day letter" on a date exceeding 90 days from the alleged NOD mailing. As such, the court concluded that the Case History Report and the Form 4340 established both existence and mailing of the 2009 NOD.

Conclusion

United States v. Meyer makes it easier for the IRS to successfully establish the existence and proper mailing of NODs. Even where the IRS is not entitled to the rebuttable presumption of mailing, a Form 4340 is likely sufficient corroborating evidence to prove the issuance of the NOD.

If you have tax questions or concerns, contact Frost & Associates, LLC today at 410-497-5947.


1 United States v. Meyer, No. 17-3463 (8th Cir. 2019).

2IRC §6211(a); Reg. §301.6211-1(a).

3IRC §6213(a).

4IRC §6213(a); Reg. §301.6212-2(a). Note that for taxpayers located outside the US, the 90-day period is increased to 150 days.

5Welch v. United States, 678 F.3d 1371, 1378 (Fed. Cir. 2012).

6O’Rourke v. United States, 587 F.3d 537, 540 (2d Cir. 2009).

7 Welch v. United States, 678 F.3d 1371, 1380 (Fed. Cir. 2012).

8 United States v. Jimenez, 513 F.3d 62, 79 n.4 (3d Cir. 2008).

9634 F. App’x 495, 501-02 (6th Cir. 2015).

10United States v. Meyer, at 3.

11 Id. at 4.