Does refusing an IRS certified letter cancel it?

Unfortunately, the tactic you propose will not work.  In state court, I must serve a defendant either in person or through certified mail restricted delivery.  If by mail, the defendant must sign the receipt or the service is not valid.  However, the general rule for the IRS is that service is valid as of the date the letter is mailed, not delivered.  Thus the IRS only need prove that the letter was mailed for valid service, not that it was actually received by the taxpayer.  A recent case reaffirmed that policy.  The District Court stated that the taxpayer could not defeat actual notice by refusing to accept delivery of the Deficiency Notice.  If he had accepted delivery, he could have contested the validity of the assessment through normal appeals channels, so he was denied the opportunity to contest the validity in the District Court. This same rule applies when the IRS sends the letter to an old address from which the taxpayer has moved.  The Court says this is still good service because the taxpayer should have notified the IRS of his new address.  Therefore, you should accept delivery of the IRS letter.  You stand a much better chance of making a good deal with the IRS in this manner.