Federal Tax Day - Current, J.4, IRS Assessment Was Proper Supplemental Assessment, Amended Liability Claim Allowed (In re Kossoff PLLC, DC N.Y.), (Jan 8, 2026)

An IRS assessment was a proper supplemental assessment of a tax firm’s (taxpayer) tax liabilities for tax years (TY) 2015 and 2016. The IRS determined the taxpayer had a valid tax liability from TY 2015 in the taxpayer’s bankruptcy proceedings.

The principal of the taxpayer (P1) during TY 2015 and 2016 misappropriated client funds. P1 later pleaded guilty to fraud and grand larceny charges. P1 was disbarred in TY 2022 after the taxpayer was placed in Chapter 7 bankruptcy proceedings. The IRS initially issued a tax lien to encumber the taxpayer’s property because part of its TY 2015 liability remained outstanding. Later, in TY 2019, the IRS performed a Combined Annual Wage Reporting (CAWR) audit of the taxpayer’s TY 2015 tax liability. It found discrepancies and assessed additional liabilities.

The first assessment involved taxes owed in taxpayer’s Form 941, Employer's Quarterly Federal Tax Return. The second assessment involved taxes from underreporting employees’ taxable wages. This was revealed through a CAWR review. Since it pertained to a different tax liability, both the first and second assessments were valid.

Next, the second assessment was properly assessed in the fourth quarter of TY 2015. P1 was not justifiably misled or deceived by the second assessment. The court noted that taxes were not imposed quarterly. Therefore, even if a discrepancy was identified between the quarterly period in which the IRS assessed the tax and the quarterly period in which the shortfall arose, the second assessment would be valid.

In re: Kossoff PLLC, DC N.Y.