Opinion ID: 2783088
Heading Depth: 2
Heading Rank: 1

Heading: The IRS’s Collection Efforts

Text: From 2001 through 2003, Gyorgy earned taxable income from various sources, including wages from Goodby Silverstein & Partners (an advertising agency) and interest and dividends from his investments. But he filed no federal income tax returns for those years. In fact, he neglected to file any income tax returns from tax year 2001 through at least tax year 2007. During that same period, he moved frequently, living at eight different addresses in four cities and two states. To determine Gyorgy’s tax liability for 2001, 2002, and 2003—the years relevant to this appeal—the IRS had to rely on W-2 forms, 1099 forms, and other information submitted by third parties to create substitute returns. See I.R.C. § 6020(b). When the substitute returns revealed deficiencies for all three years, the IRS began the process of notifying Gyorgy and attempting to collect his debts. No. 13-3363 3 The IRS’s computer system shows that it sent notice of Gyorgy’s 2001 deficiency on or shortly after March 9, 2004, to his apartment on Octavia Street in San Francisco. That was the address he had reported on his most recently filed tax return, for the 2000 tax year, and it was the most recent address in the IRS’s computer system. It is unclear whether the notice was in fact mailed, but in any event Gyorgy no longer lived on Octavia Street and did not receive it. In August 2004, the IRS assessed his deficiency for tax year 2001. The IRS had no record of any address update from Gyorgy. But the forms submitted to the IRS by third parties showed a few possible addresses. Gyorgy’s 2002 W-2s listed Octavia Street as well as an address on Lee Street in Oakland, California. His W-2 and one of his 1099s for 2003 listed an address on Jean Street in Oakland. In addition, his 1099s and other forms for both years listed his business address at Goodby Silverstein in San Francisco. On November 29, 2004, the IRS mailed a form 2797 “R-U- There” letter to Jean Street. The letter requested Gyorgy’s assistance in updating IRS records. It asked him to check a box if Jean Street was his current address, or to write in another address if it was not, then sign and return the form. The IRS received no answer to its letter. The IRS continued to use Octavia Street as Gyorgy’s address. It sent a deficiency notice there for tax year 2003 on December 11, 2006, demanding payment of $68,954 in income taxes, penalties, and interest. 1 Gyorgy did not 1 All figures are rounded to the nearest dollar. 4 No. 13-3363 receive the notice, and the postal service returned it to the IRS marked “not deliverable as addressed” and “unable to forward” with a date stamp of “12/17/06.” The IRS took no further steps (at least none reflected in the record) to locate Gyorgy or to re-issue the notice after it received the returned mail. In May 2007, it assessed his deficiency for tax year 2003. On July 30, 2007, the IRS mailed another deficiency notice to Octavia Street, this time for tax year 2002. It demanded payment of $27,621 in taxes, penalties, and interest. Again, Gyorgy did not receive the notice, and the postal service returned it to the IRS marked “attempted – not known” and “unable to forward” with a date stamp of “08/03/07.” The IRS again took no further steps to locate Gyorgy or re-issue the notice. In December 2007, it assessed his deficiency for tax year 2002. Gyorgy did not pay his debts or petition the tax court for a redetermination of his deficiencies under I.R.C. § 6213(a) (a procedure for contesting one’s tax liability after the IRS issues a deficiency notice). Two years later, his debts were still outstanding, so the IRS proceeded with collection efforts. It filed a notice of federal tax lien in the recorder’s office in Cook County, Illinois, in August 2009 with respect to Gyorgy’s residence at 8900 Forestview Road in Evanston, where he had been living since 2008. 2 By then, Gyorgy’s tax liability had grown to $120,644 ($12,684 for 2001; $30,416 for 2 It is unclear from the record exactly how and when the IRS first located the property on Forestview Road and connected it to Gyorgy. No. 13-3363 5 2002; and $77,544 for 2003). The IRS sent notification of the lien filing to the subject property on Forestview Road. Gyorgy received the notice and timely requested a CDP hearing. He questioned whether the IRS had followed the necessary procedures and claimed he was not liable for the assessed taxes.