Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 78-20

1978-1 C.B. 441

Sec. 6211
Sec. 6213
Sec. 6659

IRS Headnote

Deficiency notice; addition to tax; waiver of restrictions. A statutory notice of deficiency must be issued to assess and collect the addition to the tax for late filing by a taxpayer who has signed a waiver of restrictions on assessment and collection with respect to a deficiency but has refused to sign a waiver of the addition to tax for late filing.

Full Text

Rev. Rul. 78-20

Advice has been requested whether the Internal Revenue Service must issue a statutory notice of deficiency before it can assess and collect the addition to the tax for late filing under section 6651(a)(1) of the Internal Revenue Code of 1954 under the circumstances described below.

The Service examined a Federal income tax return that was filed late. As a result of the examination certain adjustments were proposed that increased the tax liability, thereby increasing the amount of the addition to the tax for late filing. The taxpayer signed a waiver of the restrictions on assessment and collection in the amount of the increased tax liability. However, the taxpayer refused to sign a waiver of the restrictions on assessment and collection of the increase in the addition to the tax for late filing.

Section 6651(a)(1) of the Code provides that in case of failure to file any return required under subchapter A of chapter 61 on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not due to willful neglect, an additional amount equal to five percent of the tax required to be shown on the return for each month of such failure (up to an aggregate of twenty-five percent) will be added to the amount required to be shown on the return.

Section 6659(a) of the Code provides that the additions to the tax, additional amounts, and penalties provided by chapter 68 shall be paid upon notice and demand and shall be assessed, collected, and paid in the same manner as taxes and that any reference in the Code to the term "tax" shall be deemed to also refer to such additions to the tax, additional amounts, and penalties. Section 6659(b) provides that for purposes of subchapter B of chapter 63 (relating to deficiency procedures), section 6659(a) will not apply to the section 6651 addition to the tax except for that portion of such addition that is attributable to a deficiency in tax described in section 6211.

With respect to the income tax, section 6211(a) of the Code provides that the term "deficiency" means the amount by which the tax imposed by subtitle A (the income tax provisions) exceeds the excess of the sum of the amount shown as tax by the taxpayer upon the return plus the amounts previously assessed (or collected without assessment) as a deficiency over the amount of rebates made.

Section 6212(a) of the Code authorizes the sending, when an income tax deficiency is determined, of a notice of such deficiency.

Section 6213 of the Code restricts the assessment and collection of income tax until a statutory notice of deficiency has been issued. Section 6213(d) provides, however, that the taxpayer shall at any time (whether or not a notice of deficiency has been issued) have the right, by a signed notice in writing filed with the Service, to waive the restrictions on the assessment and collection of the whole or any part of the deficiency.

Under section 6659(b) of the Code any portion of the addition to the tax for late filing attributable to an income tax deficiency is subject to the restrictions on assessment and collection provided in section 6213.

The increase in the section 6651(a)(1) of the Code addition to the tax is attributable to the adjustments to the income tax liability. The increased income tax liability resulting from such adjustments is a "deficiency" within the meaning of section 6211(a). Therefore, the increase in the section 6651(a)(1) addition to the tax is attributable to a deficiency for purposes of section 6659(b). Since the taxpayer has not waived the section 6213 restrictions on assessment and collection with respect to the increase in the section 6651(a)(1) addition to the tax, such restrictions apply.

Accordingly, even though the taxpayer signed a waiver of the restrictions on assessment and collection of the income tax deficiency the Service must issue a statutory notice of deficiency before it can assess and collect the increase in the addition to the tax.