IRS fails to meet its burden that a valid notice of deficiency was mailed timely

The Tax Court recently held that it lacked jurisdiction to hear a case because the IRS failed to prove that it mailed a valid notice of deficiency to the taxpayer’s last known address.

Facts: In January 2023, the IRS issued a notice of deficiency in the amount of $4,422 to Luis Carlos Ibarra Cano for tax year 2020. The deficiency resulted from the IRS’s determination that Cano failed to report wage income on his Form 1040, U.S. Individual Income Tax Return.

Cano’s last known address at the time the notice was mailed was 220 6th St., Hempstead, Texas 77445. The notice, however, was erroneously addressed and mailed by the IRS to “2206 TH St. Hempstead, TX 77445-4761.” U.S. Postal Service (USPS) Form 3877, Firm Mailing Book for Accountable Mail, showed that the notice was sent by certified mail to this erroneous address. Cano sought a redetermination of the deficiency with the Tax Court on Feb. 26, 2024, which was 400 days after the notice was mailed to him on Jan. 23, 2023.

On March 20, 2025, the IRS filed a motion to dismiss for lack of jurisdiction, claiming that Cano’s petition was not timely filed. Cano failed to respond to the IRS’s motion in the time prescribed by the court. When the case was called from the court’s calendar, there was no appearance by or on behalf of Cano. The IRS requested that its motion be granted. However, the IRS apprised the court of additional facts that had come to its attention. The court then directed the IRS to file a supplemental motion for that purpose. In the supplement, filed May 13, 2025, the IRS acknowledged that the address on the notice was different than Cano’s actual mailing address. It also produced USPS Form 3877, which also bore the same erroneous address. The IRS claimed, though, that Cano must have received the notice “without delay” because a copy of it was attached to his Tax Court petition, proving that the notice was valid for purposes of the court’s jurisdiction.

The IRS also said that after conducting additional research on the unreported income in the notice, it determined that the income belonged to Cano’s father with the same name and that it would handle the case administratively “to ensure the correct tax outcome” for Cano’s 2020 tax year.

Issues: The Tax Court’s jurisdiction in a deficiency case is “predicated on a valid notice of deficiency and a timely filed petition” (Secs. 6213, 7442). A notice will generally be deemed valid if it is mailed to the taxpayer’s last known address (Sec. 6212(b)). The IRS bears the burden of “proving by competent and persuasive evidence” proper mailing of the notice (Coleman, 94 T.C. 82 (1990)). The IRS is entitled to a presumption of proper mailing if it can establish that the notice existed and produce documentary evidence showing that it was mailed to the taxpayer’s last known address (id. at 90). In Magazine, 89 T.C. 321 (1987), the court held that USPS Form 3877 constituted “direct evidence” of the date of mailing.

After reviewing the notice and USPS Form 3877, the court concluded that the IRS failed to issue Cano a valid notice of deficiency for tax year 2020. Both forms, according to the court, showed an incorrect address. The court stated that this was not a “harmless typographical error” but a nonexistent address. Thus, it had “no way of knowing” how the USPS handled delivery of the notice. The court, therefore, concluded that the IRS was not entitled to a presumption of proper mailing.

A notice of deficiency may be deemed valid, even if addressed incorrectly, if the taxpayer was not prejudiced by the error. This requires that the taxpayer received the notice with sufficient time remaining to petition the Tax Court within the required 90-day period (Coleman, 94 T.C. at 90—91). In Clodfelter, 527 F.2d 754 (9th Cir. 1975), aff’g 57 T.C. 102 (1971), the Ninth Circuit found that a taxpayer is not prejudiced if they timely filed their petition with the court, even if the address on the notice of deficiency is incorrect.

The IRS claimed that the notice of deficiency attached to Cano’s Tax Court petition was valid to confer jurisdiction to the court and proved that he received it “without delay” and was not prejudiced by the error. Based on the date of Cano’s petition filing (400 days late), the court found that the IRS had not proven that Cano received the notice “without delay.” Accordingly, the court concluded that the notice was not valid.

Holding: The court dismissed the case for lack of jurisdiction because the IRS failed to carry its burden of proving that a valid notice of deficiency was mailed to Cano’s last known address, and the facts did not show that Cano received the notice in time to petition the court before the expiration of the 90-day filing period.

• Cano, T.C. Memo. 2025-65

— John McKinley, CPA, CGMA, J.D., LL.M., is a professor of the practice in accounting and taxation in the SC Johnson College of Business, and Matthew Geiszler, Ph.D., is a lecturer in accounting in the Brooks School of Public Policy, both at Cornell University. To comment on this column, contact Paul Bonner, the JofA’s tax editor.