IRS Defines “Last Known Address”

Clarifications may still not result in all notices making it to the right taxpayer.

The IRS generally has three years from the date a federal tax return is filed (or the due date for the return if the return is filed early) to audit the return and assess additional taxes and penalties. However, the IRS may not assess additional taxes and penalties unless it mails a “notice of deficiency” to the taxpayer giving the taxpayer an opportunity to challenge the IRS position before the United States Tax Court. An IRS notice of deficiency must be mailed to the taxpayer’s “last known address,” even if it is not received by the taxpayer. In the past, the term “last known address” was not defined by the tax code or regulations.

The IRS has released regulations defining this important term. There are two key points to note. First, the regulations define “last known address” as the address that appears on a taxpayer’s most recently filed federal tax return, unless the IRS is given clear and concise notification of a different address. Second, while the tax code does not require the IRS to check with the United States Postal Service concerning a change in a taxpayer’s address, the new regulations provide that beginning in May 2000 (and every November thereafter) the IRS will refer to the Postal Service’s National Change of Address (NCOA) database to obtain a taxpayer’s address for purposes of determining the taxpayer’s last known address. Any citizen can update his or her residential address with the Postal Service by submitting a Form 3575 containing a new address, and the new address is thereafter maintained in the NCOA database.

Beginning in May, before sending correspondence to a taxpayer, the IRS will review the NCOA database to see if the taxpayer has submitted a Form 3575 to the Postal Service with a more recent address. If so, the following will occur: (1) the correspondence will be mailed to the address obtained from the NCOA database, and (2) the IRS will use the new address from the NCOA database to update the automated master file. This updated address will be the taxpayer’s last known address. A new NCOA address will be the taxpayer’s last known address, unless the IRS is given clear and concise notification of a different address.

Using the NCOA database will increase customer service by allowing faster delivery of IRS correspondence to a taxpayer. Rather than mailing correspondence to an address which is no longer a taxpayer’s address and relying on the Postal Service to forward mail to the taxpayer’s most recent address, the IRS will mail the correspondence directly to the taxpayer’s most recent address. In addition, by updating the automated master file with the most recent address, future IRS correspondence will be mailed to the taxpayer’s most recent address.

Key point.Since the IRS will review the NCOA database only once each year, it is still possible if not likely that many IRS notices of deficiency will be mailed to the wrong address. Taxpayers can avoid this possibility by completing and submitting to the IRS a Form 8822. This form is used to notify the IRS of a change in address.

Tip. Place a notice in your church newsletter reminding members who have moved recently to inform the IRS of their new address by submitting Form 8822. Here’s an example: “Notifying the IRS of a new address. If you recently changed addresses you may want to inform the IRS of your new address. Failure to do so could result in a delay in receiving refunds or important tax notices. You can use Form 8822 to let the IRS know your new address. You can obtain this form by calling 1-800-TAX-FORM.”

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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