CCA 200448045: Overstated withholding credits and the tax assessment deadline

Plain-English summary

Chief Counsel generally agreed that the IRS could assess overstated withholding credits using the math error procedures, though the credits themselves were not math errors. It also cautioned that a conviction for filing a false return under § 7206(1) did not conclusively prove intent to evade tax. That intent would have to be established for the unlimited assessment period under § 6501(c)(1) to apply. The advice asked the recipient to contact Counsel if the taxpayer contested that point.

Ruling snapshot

• Question: How may overstated withholding credits be assessed, and does a false return conviction establish an unlimited assessment period?
• Outcome: Advice given; math error procedures may be used, but intent to evade tax is a separate question.
• Key authorities: IRC §§ 6201(a)(3), 6213(b), 6501(c)(1), 7206(1); Wright v. Commissioner, 84 T.C. 636 (1985).

Full text (IRS public release)

Office of Chief Counsel

Memorandum
Internal Revenue Service

Number: 200448045
Release Date: 11/26/04
CC:PA:APJP:B02: NMGalib
POSTS-120107-04

UILC: 6201.00-00, 6201.03-00

date: July 08, 2004
to: Associate Area Counsel (Cleveland) (Small Business/Self-Employed)
CC:SB:4

from: Carol P. Nachman
Special Counsel, Administrative Provisions & Judicial Practice (Procedure & Administration)
CC:PA:APJP

subject: Advisory Opinion on Collection of Taxes

This Chief Counsel Advice responds to your request for assistance. This advice may not be used or cited as precedent.

We have reviewed the proposed memorandum entitled “Advisory Opinion on Collection of Taxes” and generally concur with your conclusion that I.R.C. § 6201(a)(3) allows the overstated withholding credits to be assessed using the math error procedures of I.R.C.
§ 6213(b). To reflect that the withholding credits are assessed in the same manner, but are not themselves math errors, we recommend reworking the concluding paragraph on page 5 to read:

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In addition, for the unlimited statute of limitations under I.R.C. § 6501(c)(1) to apply, the taxpayer must have had an “intent to evade tax.” Although the taxpayer’s conviction under I.R.C. § 7206(1) conclusively establishes that the taxpayer filed a false return, it does not conclusively establish that the taxpayer had the requisite intent to evade tax.
See, e.g., Wright v. Commissioner, 84 T.C. 636 (1985). We request that you contact this office if the taxpayer claims that the facts in this case, and the conviction under I.R.C. § 7206(1), are not sufficient to establish an intent to evade tax.

Please call 202 622-4940 if you have any further questions.