There are times when errors are noted on the examination report after the 30-day letter is issued.

If the corrected report reduces the deficiency reflected on the 30-day letter report and no new issues are raised, the notice of deficiency procedures can proceed. No new 30-day letter is required.

If the new report substantially increases the proposed deficiency or raises new technical issues, a new 30-day letter is required. The reviewer will forward the case back to the group for the new 30-day letter and the case will be suspended for 30 additional days at the group level, if sufficient time remains on the statute of limitations.

For this purpose, "substantial" is defined by reference to the Return Case Criteria in IRM 4.8.2, Case Processing.

Automatic adjustments inadvertently omitted from the 30-day letter report are not considered new technical issues. Similarly, correction of the categorization of an issue (i.e., a prepayment credit incorrectly categorized as an Other Credit) is not considered a new technical issue that would require a new 30-day letter.

If the corrected report raises a new technical issue, a new 30-day letter should be issued regardless of the amount of the tax increase.

The objective behind issuing a new 30-day letter is to ensure the taxpayer is provided the opportunity to appeal all issues administratively before a notice of deficiency is issued.

Cases that meet the above requirements will be returned to the group by Technical Services for issuance of a new 30-day letter prior to preparation and issuance of the notice of deficiency. If the statute of limitations is imminent (less than 210 days), the case will not require a new 30-day letter and the reviewer will proceed to prepare and issue the notice of deficiency.

Rev. Proc. 2001–18, 2001-1 C.B. 798, defines "last known address" as the address on the most recently filed and properly processed tax return unless the taxpayer has clearly and concisely notified the IRS of a change of address. The Service may also update the taxpayer's address of record by using the United States Postal Service's (USPS) National Change of Address database (NCOA database) in accordance with Treas. Reg. 301.6212-2. The NCOA database is forwarded weekly to the IRS, at which time master file is updated with any changes.

If there is any doubt as to what the last known address is, additional duplicate original notices should be sent to each known address.

A statement signed by the taxpayer informing the Service to change the address of record is considered clear and concise notification. The statement must also contain the taxpayer's full name, signature, old address, and social security number and/or employer identification number.

Form 8822, Change of Address, may be used to make the change.

Correspondence sent by the Service that solicits or requires a response from the taxpayer, which is returned to the Service by the taxpayer with corrected taxpayer address information, constitutes clear and concise notification of a change of address (even if the taxpayer's signature is not on the correspondence).

Standing alone, the following situations will not constitute clear and concise notification of a new address and, therefore, should not result in a change to a taxpayer's address of record. A new address reflected on the:

The following are elements of a new, complete address.

There should be no abbreviations in the taxpayer's address, except for the two-letter state code. However, if the last known address reflected on the last filed and properly processed tax return contains abbreviations, then that address (with abbreviations) may be used. If notices are sent to foreign countries, the name of the country should not be abbreviated.

Address changes may only be made from the taxpayer's oral statement (i.e., telephone or walk-in contact) to perfect an error in the existing address or if the conversation concerns an open account or adjustment request from the taxpayer.

Authentication of the caller's identity using the criteria in IRM 21.1.3.2.3, Required Taxpayer Authentication, and IRM 21.1.3.2.4, Other Third Party Inquiries, is required before making changes to the taxpayer's address of record.

Any request solely for an address change, other than for perfection or in connection with an open account or adjustment request, must be in writing.

The following steps should be taken to determine the taxpayer's "last known address" :

Form 56, Notice Concerning Fiduciary Relationship, is used by an individual to notify the IRS of a fiduciary relationship. Other legal documents establishing fiduciary relationships may be substituted for the Form 56. If a document other than Form 56 is submitted, check with Area Counsel to determine if the document is sufficient to establish a fiduciary relationship.

A statutory notice of deficiency must be mailed to the fiduciary's mailing address as well as to the taxpayer's last known address as: "John Doe (Deceased) and Mary Doe, Richard Doe, Executor" .

If the Service is aware that a taxpayer is deceased, it must be determined if a fiduciary exists prior to issuing the notice of deficiency. Do not assume the surviving spouse is the personal representative of the decedent.

Separate original notices will be sent to each spouse at their last known address. The notice letters and waivers will identify the names of both spouses but will only include the address of the spouse to whom the notice is sent without reference to the address of the other spouse.

For a married filing joint return where the taxpayers are divorced or separated, one or both have changed their name or address since the return was filed, and the Service was informed of the name or address change via Form 8857, Request for Innocent Spouse Relief, the Service cannot disclose the new name or address to the spouse or ex-spouse. Use the name as shown on the return as filed but only include the address of the spouse to whom the notice is sent without reference to the address of the other spouse.

For a married filing joint return where the taxpayers are divorced and one spouse remarries, duplicate joint notices are sent as follows:

If a power of attorney address is the taxpayer's last known address, the notice should be addressed as follows:

If a taxpayer is incarcerated at the time the notice of deficiency is mailed, duplicate original notices are sent to:

The address on the Letter 531-T, Notice of Deficiency, should be where the taxpayer is incarcerated and should reference the prisoner locator number, if available.

For federal prison inmates, the prisoner locator number and address can be obtained from the Bureau of Prisons web site.

For state prison inmates, the prisoner locator number and address can be obtained from the individual state web sites, using the search term "inmate locator" or "department of corrections" . Additionally, the following site provides search capabilities for all 50 states: http://www.vinelink.com/vinelink/initMap.do.

Both notices should be sent certified/registered mail.

Deficiency notices sent to Army Post Office (APO)/Fleet Post Office (FPO) addresses must be mailed to such addresses by registered mail.

The Military Postal Service (MPS) is a segment of the U.S. Postal Service (USPS) and provides postal service to members of the armed forces stationed outside the United States. The MPS consists of military post offices operated by each branch of the armed services and staffed by military personnel. Mail addressed to APO/FPO addresses are routed to gateway locations within the United States where APO/FPO mail is sorted and directed to the appropriate Military Post Office (MPO). An APO/FPO address consists of a numerical code that identifies the location of an overseas MPO and the location of the United States gateway concentration point.

In Brown v. Commissioner, 78 T.C. 215, 221, acq. 1982–2 C.B. 1, the Tax Court held that a notice of deficiency mailed to a New York APO address was mailed to an address outside the United States. Therefore, the taxpayer was entitled to 150 days after the notice of deficiency was mailed to file a petition with the Tax Court. Further, in Rogers v. Commissioner, 57 T.C. 711, 713 (1972), the Tax Court stated that, because postal regulations restrict the use of certified mail to domestic address, notices of deficiency sent to addresses outside the United States must be sent by registered mail.

EXCEPTION: The Tax Court's specific holding in the Brown case is that "a notice of deficiency that bears an APO (or FPO) address is addressed outside the United States_if the military post office designated by the APO number is located outside the United States." See 78 T.C. 225. As the court indicated, a few MPO's are located in Alaska and Hawaii, which would be considered inside the United States for purposes of the deficiency notice requirements. In 1991, the military overseas ZIP codes were aligned to reflect the location of the recipient post office and now have a standardized address format. Questions regarding APO/FPO ZIP codes should be addressed to the Military Postal Service Agency.

As noted earlier, there are instances when it becomes necessary to issue a notice of deficiency to more than one address. In all instances, the address on the notice letter, the waiver and the mailing envelope should be the same.

The waiver is required to use the name and address of the taxpayer exactly as they appear on the notice letter.

To the extent possible, reviewers are required to use RGS to generate notices of deficiency.

When the notice of deficiency includes Form 4549-A, Income Tax Discrepancy Adjustments, (also known as the "unagreed" report) or Form 5278, Statement - Income Tax Changes, as the computation statement, the reviewer must also prepare Form 4089 (or RGS Form 4089-B). When printing Form 4089-B, RGS will allow the reviewer to select "all addresses" and will print multiple Forms 4089-B, each with different addresses as entered in the Case Information.

However, Form 4089, Income Tax Examination Changes, (also known as the "agreed" report) may be used as both the computation statement and the waiver.

For MFJ cases, RGS will allow a current address for "primary" , "joint" , and "secondary" taxpayers, thus allowing three reports to be printed with different addresses. However, RGS does not allow for printing reports using Form 4549 or Form 4549-A with multiple addresses for "one person" returns (i.e., MFS, Single, Head of Household). The reviewer must change the current address designation in the Case Information screen before printing each copy of the report. Depending on how many addresses are used, this procedure can be very time consuming.

Form 5278 does not reflect the taxpayer's address. Instead, as noted earlier, Form 4089, Notice of Deficiency Waiver, (or RGS Form 4089-B, Notice of Deficiency - Waiver) is included as the waiver, which includes the address information. For this reason, reviewers are encouraged to use Form 5278 and Form 4089 (RGS Form 4089-B) for those notices of deficiency that require multiple addresses.

Use the present tense in wording paragraphs rather than the past tense. This presents the Service's position as of the issue date rather than a prior decision.

Use positive phrasing whenever possible. State that the "allowable amount is" rather than the "disallowance is." However, the position of the Service should be clearly stated.

Do not use general qualifying phrases such as "based on the information in our files" since it implies the Service is using information unknown to and withheld from the taxpayer. Instead, use the phrase "it is determined" where appropriate.

Do not describe an item as a "deduction" and then disallow it because it does not qualify as an allowable deduction.

Avoid so-called "net adjustments" since they tend to be difficult to follow and may present a question as to the actual amount at issue.

The following phrases are often used at the end of a paragraph to clarify how the adjustment affects the tax return:

The length of the paragraphs should be sufficient to clearly state the conclusions. Additional information may be needed to show the detail of certain determinations.

State the taxable year(s) involved in each explanatory paragraph, particularly when the statutory notice covers more than one taxable year.

Cite code sections only to the extent necessary to inform the taxpayer of the real nature of the adjustment. Use of code sections can unnecessarily limit or narrow the Commissioner's position. If Code sections are cited, make sure all applicable code sections are cited.

As a general rule, it is preferable to use exact Code language rather than attempt to paraphrase Code language. For example, the statement, "Since it has not been established that your farm was operated with the intention of making a profit, the amounts deducted are not ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business." should be used rather than "You have not shown that such claimed deductions were connected with a business activity during your taxable year."

Include explanatory paragraphs for the additions to tax or penalties.

Show the paragraphs on the waiver or on a continuation sheet attached to the waiver. The paragraphs may also be placed behind the paragraphs explaining the various adjustments to income, credits, etc.

RGS penalty schedules: