Friday, June 22, 2007

Back Taxes: Taxpayer’s need to have all tax returns filed if they want the IRS to approve either an Installment Agreement or an Offer in Compromise. The IRS Office of Appeals did not abuse its discretion in sustaining a levy, rather than granting the taxpayer an installment agreement, when the underlying deficiency arose out of five years of unfiled tax returns and the taxpayer still had an outstanding unfiled return on the date of the Appeals Office hearing. In balancing the need for efficient collection of tax against the taxpayer's concern that collection action not be more intrusive than necessary, the IRS was entitled to consider the taxpayer's history of noncompliance.


Roger Pavlica v. Commissioner, Dkt. No. 5861-06L , TC Memo. 2007-163, June 21, 2007.





Discussion



Generally, under section 6331(a) respondent may lawfully collect by levy upon property belonging to a taxpayer outstanding taxes which remain unpaid 10 days after respondent's notice and demand therefor.



Prior to making a levy upon a taxpayer's property, respondent must give to the taxpayer written notice of both the proposed levy and of the taxpayer's right to an Appeals Office hearing relating to the proposed levy. Secs. 6330(a), 6331(d)(1), (4).



In such a hearing, respondent is to verify whether the requirements of applicable law and administrative procedure have been met and consider other appropriate issues such as collection alternatives raised by the taxpayer. Sec. 6330(c).



Under section 6330(c)(3)(C), respondent also is to consider whether respondent's proposed levy balances the need for efficient collection of taxes with the taxpayer's concern that respondent's collection action be no more intrusive than necessary.



Under section 6330(d)(1), we have jurisdiction to review respondent's notice of determination relating to a section 6330 hearing. Where the underlying Federal income tax liability is not at issue, we review for abuse of discretion respondent's determination adverse to a taxpayer sustaining respondent's collection activity. Sego v. Commissioner, 114 T.C. 604, 610 (2000).



Petitioner argues that respondent's Appeals Office should have granted petitioner an installment agreement. Because, however, petitioner had a history of noncompliance with his Federal income tax obligations and was not compliant with his current tax obligations as of the date of the Appeals Office hearing, respondent's Appeals Office did not abuse its discretion in declining to grant petitioner an installment agreement. See Orum v. Commissioner, 412 F.3d 819, 821 (7th Cir. 2005), affg. 123 T.C. 1 (2004) (no abuse of discretion when rejecting an installment agreement from a taxpayer who had a history of not fulfilling Federal income tax obligations); Rodriguez v. Commissioner, T.C. Memo. 2003-153 (no abuse of discretion when rejecting an offer-in-compromise from a taxpayer who had not filed current and previous returns); Londono v. Commissioner, T.C. Memo. 2003-99 (no abuse of discretion when rejecting an offer-in-compromise from a taxpayer who had a history of not fulfilling Federal income tax obligations); McCorkle v. Commissioner, T.C. Memo. 2003-34 (no abuse of discretion when rejecting an installment agreement from a taxpayer who had not filed a current return).



We sustain respondent's levy.



To reflect the foregoing,



Decision will be entered for respondent.

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