Late extension waiver was valid.

In CCA 200637001 (9/15/06), the IRS ruled that a waiver to extend the statutory period of assessment for unpaid employment taxes was valid and enforceable, despite the fact that it was executed outside of the original three-year assessment period.

Facts: A corporation had an assessed unpaid balance for employment tax for the third quarter of 1991. The IRS began a "trust fund recovery penalty" investigation in which it recommended that several officers of the corporation be assessed the penalty. The recommendation was made on the last day of the three-year statute of limitations (SOL) on assessment. On the same day, Letter 1153, Notice of Proposed Assessment, was issued and mailed by certified mail to all of the officers listed on Form 4183, Recommendation of Assertion of Trust Fund Penalty, as responsible for the penalty.

As a result of the issuance of Letter 1153, the assessment statute was automatically extended for 90 days, giving the corporation's officers additional time to appeal the proposed assessment. To meet the requirements, the officers had to appeal within 60 days of the issuance of Letter 1153. One of the officers responded with a protest letter that was found to be incomplete. He was notified of his right to cure the defective appeal within 45 days; however, the proper appeal was not received until after the deadline. At that time, an IRS revenue officer secured from him Form 2750, Waiver Extending Statutory Period for Assessment of the Trust Recovery Penalty.

Overview: Sec. 6501(a) generally provides that tax must be assessed within three years after a return is filed. Under Sec. 6501(c) (4), the Service and a taxpayer can agree in writing to extend the period for assessment, as long as the agreement is entered into before the expiration of the assessment period.

Sec. 6672 imposes a 100% penalty (trust fund recovery penalty) on "responsible persons" who willfully fail to pay over to the Service the amount of taxes otherwise due. The IRS must send a 60-day notice of proposed assessment (Letter 1153) before making notice and demand for payment of the trust fund recovery penalty.

Under Sec. 6672(b)(3), if a 60-day notice is issued before the expiration of the SOL, the SOL will not expire before 90 days after the 60-day notice was mailed. Form 2750 is a waiver form used to extend the SOL on assessment of the trust fund recovery penalty.

Waiver valid: The Service concluded that the Form 2750 waiver was valid and enforceable, despite the fact that it was executed outside of the Sec. 6501(a) SOL period. No legal authority barred the execution of a written agreement to extend the assessment period during the 90-day extension provided under Sec. 6672(b)(3).

Lesli S. Laffie J.D., LL.M.