Thursday, October 4, 2007

Back Taxes: IRS abused its discretion - installment agreement

Lofgren Trucking Service, Inc. v. United States of America, U.S. District Court, Dist. Minn.; 06-CV-3100(JMR/FLN), September 10, 2007.

Once the IRS issues a Notice of Intent to Levy, a taxpayer is entitled to a fair hearing before an impartial officer. 26 U.S.C. § 6330(b). At the hearing, the taxpayer can challenge the propriety of the levy and offer alternative means of collection, including an installment agreement. Id. § 6330(c)(2). The hearing officer must determine "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary." Id. § 6330(c)(3)(C).

The officer may, among other things, consider the following factors: (1) the taxpayer's ability to pay in accordance with its proposal; (2) the size of the taxpayer's liability; (3) the taxpayer's record of fulfilling its obligations under any previous collection alternative agreements; and (4) its compliance with current obligations. Fifty Below Sales & Marketing, Inc. v. United States, 2007 WL 2301924 *2-3 (8th Cir. August 14, 2007).

In deciding whether to permit a proposed collection alternative, the officer is obligated to follow all applicable statutes and regulations. Id. at *2.A district court reviews the appeals officer's decision for abuse of discretion. Robinette v. Commisioner, 439 F.3d 455, 458-59 (8th Cir. 2006). The Eighth Circuit has observed that "Congress likely contemplated review for a clear abuse of discretion in the sense of clear taxpayer abuse and unfairness by the IRS." Id. at 459 (quotations omitted). No clear taxpayer abuse occurs "where the IRS followed the statutes and regulations governing grants of relief, and the appeals officer took into account the taxpayer's proposed alternative and the statutory balancing test, followed the prescribed procedures, gave a reasoned decision, and did not rely on any improper criteria or facts that are contrary to the evidence." Fifty Below Sales, 2007 WL 2301924 *1 (citations omitted).III. AnalysisIt is undisputed that, at least in part, the Appeals Officer based his rejection of the plan on plaintiff having incurred a new tax debt due the first quarter of 2006. His summary notes from the June 5, 2006, CDP hearing reflect his belief that plaintiff's failure to make employment tax deposits during the first quarter of 2006 precluded the IRS from accepting its payment plan, unless plaintiff tendered those funds immediately.The parties dispute whether plaintiff was meeting its "current" tax obligations when the Appeals Officer rejected the proposal. Plaintiff acknowledges it made no deposits during 2006's first quarter, but claims the relevant time to measure its ability to meet its current obligations should have been the second quarter of 2006, rather than the first. Plaintiff makes this claim based on the fact that its payment plan was submitted on April 3, 2006; it requested a CDP hearing to review the Notices of Intent to Levy on April 17, 2006, and June 1, 2006; and the Appeals Officer did not conduct the hearing or make his final determination until June, 2006. Plaintiff accurately notes that each date falls in the second quarter of 2006.In reply, the government simply elides plaintiff's concerns regarding its "current" tax obligation date. In doing so, it merely repeats the Appeals Officer's opinion that plaintiff incurred a "new" tax debt while the proposal was pending. The government goes so far as to identify this "fact" as "important."A simple repetition of the government's contention that it should win, cannot - ipsa dixit - carry the day. There is no dispute that, while the payment plan was pending, plaintiff made timely deposits for the second quarter of 2006, and at the same time paid almost $6,000 on its back liability. The Court finds this persuasive evidence of plaintiff's ability to remain in good standing on its "current" obligations, while paying past due amounts. But this does not conclude the issue.The controlling question in this matter is whether the Appeals Officer abused his discretion in finding plaintiff's collection alternative unsuitable to meet the IRS's interest in collecting its taxes. That question hinges on whether the Appeals Officer gave actual and fair consideration to plaintiff's proposal. Cf. Fifty Below Sales, 2007 WL 2301924 *3. The Court finds he did not, and that he therefore abused his discretion.The Court's review of the Appeals Officer's notes and his Notice of Determination leads the Court to the inescapable conclusion that he summarily denied plaintiff's requested payment plan under the mistaken belief that the IRS Code forbade him from accepting it. The record clearly demonstrates the Appeals Officer's belief that the code and regulations made it impossible to approve plaintiff's proposed payment plan, because of the debt incurred relative to the first quarter of 2006. The Appeals Officer's Notice of Determination stated that administrative guidelines "required" plaintiff to pay current employment tax deposits in order to show it had the financial ability to meet current obligations while paying past due tax. Plaintiff's Exhibit 14.Using this erroneous standard, the Appeals Officer found plaintiff's failure to pay deposits for the first quarter of 2006 meant he was "not able" to approve plaintiff's plan. Id. The government's pleadings compound this error, when it avers that, given the circumstances of plaintiff's case, "[t]he guidelines do not permit the acceptance of an installment agreement." Memorandum in Support of United States' Motion for Summary Judgment, filed March 2, 2007, p. 7 [Docket No. 13] (emphasis in original) (citing I.R.M. Court finds the government's cited regulation is inapposite and fails to support its position. By its very terms, the regulation states only that a business classified as a "repeater" is not immediately entitled to acceptance of a proposed payment plan; the plan should be classified as pending. I.R.M. "Repeaters" is a defined term: it applies to business taxpayers which are currently pyramiding trust fund taxes, and have three or more trust fund balances due assigned to the collection field function. Id. The government has not shown - nor can it - that plaintiff met this definition when the Appeals Officer made his determination.The regulation goes further: "[i]f, however, after contact, taxpayers originally classified as repeaters do not continue to accrue liabilities and begin making FTDs and file all appropriate returns ... then, they are no longer considered repeaters and may qualify for installment agreements." I.R.M. Even if plaintiff were a "repeater," which it was not, its status would have been ameliorated because it falls into this category. Plaintiff was not accruing liabilities when the Appeals Officer made his determination and it made deposits (FTDs) throughout the second quarter, rendering it current in its filing requirements.While plaintiff's first quarter 2006 liabilities may be a factor to consider in assessing the proposed installment agreement, the Court finds they were not an absolute bar to the Appeals Office accepting plaintiff's proposal. The Internal Revenue Manual provides that, when reviewing a proposed installment agreement, "if the taxpayer cannot pay operating expenses and current taxes, then deferring action on delinquent and accrued taxes may serve no useful purpose." I.R.M. (emphasis added). The Manual directs the reviewing officer to consider the taxpayer's interests and review its financial statements to see "if there is a way to reduce expenses in order to make payment on the taxes and avoid enforced collection action." Id. This regulation makes it clear: even if the taxpayer is unable to pay current taxes, the officer is not prohibited from accepting an installment agreement. In fact, the regulation encourages the officer to work with the taxpayer to figure out a way to make such an option work. Id. The Court finds plaintiff was eligible to be considered for an installment agreement.The Manual also provides that "[a]mounts due on unassessed returns may be included in installment agreements." I.R.M. This provision further supports the Court's conclusion that plaintiff was eligible for an installment agreement, even in the absence of deposits during the first quarter of 2006. In June, 2006, the IRS had not yet assessed plaintiff for any first quarter 2006 delinquency. The Manual clearly contemplates the grant of an installment agreement, despite an unassessed delinquency, and directs permitting those unassessed amounts to be incorporated into the payment plan.The Court finds the Appeals Officer clearly erred when interpreting these regulations. As such, it is highly implausible that the Appeals Officer could have engaged in the requisite balancing test to determine whether plaintiff's payment plan satisfied the government's interest in the efficient collection of taxes. The government may wish the Court to find that the Appeals Officer fulfilled his duty to carefully balance the taxpayer's and the IRS's interests, as he was required to do. But wishing does not make it so.The evidence overwhelmingly shows the Appeals Officer summarily rejected plaintiff's plan based on his erroneous belief that plaintiff's delinquencies for first quarter 2006 made it ineligible for an installment agreement. His view was very likely fostered by Revenue Officer Brellenthin's declaration to that effect. The Appeals Officer cites no "balancing" factors, and gives no other basis for his rejection. As a result, the Court concludes plaintiff was deprived of its right to a fair hearing under 26 U.S.C. § 6330(b).

The Court finds that the Appeals Officer failed to meet his obligation to adequately consider whether plaintiff's proposed installment agreement "balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary." 26 U.S.C. § 6330(c)(3)(C). In doing so, he clearly abused his discretion, rendering his decision improper. Accordingly, the Court remands the matter to the Office of Appeals for consideration of plaintiff's proposal.

Alvin S. Brown, Esq.
Tax Attorney
703 425-1400

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Notice of Levy and Right to Hearing: Judicial Review of Appeals Determinations: Judicial review

The lack of any meaningful record of a corporation's CDP hearing eroded its statutory right to judicial review of the hearing determination. While a full stenographic record was not required, there had to be enough information contained in the documentation created by the IRS for the court to draw conclusions about statutory compliance and whether the appeals officer's discretion was abused.

Mesa Oil, Inc., DC Colo., 2001-1 USTC ¶50,130 (Nonacq.).

A de novo standard of review was not the proper standard to be applied to Appeals determinations made at the taxpayer's collection due process hearing. Although Code Sec. 6330 is silent as to the proper standard of review, the legislative history clearly indicated that Congress intended review to be based on an abuse of discretion standard when the amount of tax liability was not in issue.

AJP Management, DC Calif., 2001-1 USTC ¶50,184.


TTK Management, DC Calif., 2001-1 USTC ¶50,185.

An individual who failed to respond to a deficiency notice, and who submitted requests for collection due process hearings only after receiving an IRS final notice of intent to levy, was not entitled to review of the Appeals Office's determination to proceed to collection. He failed to prove that the IRS improperly deprived of him the right to examine documents, present his case, or cross-examine witnesses, and his contention that his Appeals Officer was not independent and impartial was deemed to be abandoned. He acknowledged to the court that he had been afforded the opportunity for a hearing, and the evidence established that he had received the IRS's deficiency notice. Thus, he was barred from challenging the underlying tax liability.

R. Watson, 82 TCM 412, Dec. 54,448(M), TC Memo. 2001-213.

An individual's petition for review of an IRS administrative determination to proceed with a levy action following an Appeals Office hearing was dismissed because he failed to state a claim upon which relief could be granted. The taxpayer's petition included nothing but patently frivolous and groundless allegations that he was not liable for taxes under the Uniform Commercial Code and an affidavit denying the existence of various entities including the United States, the Tax Court, and the IRS. Moreover, he failed to raise a spousal defense or challenge the Service's proposed levy by offering a less intrusive means for collecting the taxes at either the Appeals Office hearing or in his petition for review.

T.V. Tipp, 82 TCM 759, Dec. 54,515(M), TC Memo. 2001-272.

The government was entitled to summary judgment with respect to married taxpayers' claim that their civil rights were violated in a Collection Due Process (CDP) hearing in which they attempted to challenge assessment of frivolous return penalties. The CDP hearing allows taxpayers to request judicial review of process, rather than to appeal the underlying merits of the case. Although appeal of underlying claims may have been appropriate at the CDP hearing if the taxpayers had no previous opportunity to contest the validity of the penalties, they had such an opportunity during the 30-day period in which they could have amended their returns. Consequently, their claim was properly construed as a request for judicial review under Code Sec. 6330.

R. Kintzler, DC Nev., 2001-2 USTC ¶50,696.

A federal district court upheld the IRS's decision to file a federal tax lien for unpaid gasoline excise taxes against an individual who pleaded guilty to a conspiracy scheme to evade payment of those taxes. The taxpayer's challenge to the validity of his tax debt was not subject to review at the collection proceeding because the taxpayer had opportunities to dispute the underlying tax liability and he had been provided with ample notice of his tax liability and with demands for payment before the IRS filed the tax lien.

M. Pikover, DC Calif., 2001-2 USTC ¶50,702.

The IRS was granted summary judgment against a married couple who signed a Form 4549, Income Tax Examination Changes, prior to the enactment of the Collection Due Process hearing provisions of Code Sec. 6320 and Code Sec. 6330. By signing the form, they explicitly waived their right to challenge their underlying tax liabilities in the Tax Court. That Code Sec. 6330 currently allows taxpayers who did not receive a notice of deficiency to contest tax liabilities did not apply. The taxpayers deliberately chose not to accept such notice. Moreover, summary judgment was proper because the taxpayers failed to appear and contest the IRS's motion.

F. Aguirre, 117 TC 324, Dec. 54,577.

An individual who declined to participate in his Collection Due Process (CDP) hearing, but who petitioned the Tax Court for relief under Code Sec. 6330(d), was not entitled to a reduction in his tax assessments to take into account additional items that he alleged to be deductible. Assuming that the taxpayer was entitled to challenge his underlying tax liability, the court found that he failed to establish his entitlement to any additional deductions. Furthermore, he did not allege an abuse of discretion on the part of the IRS, claim that the proposed method of collection was inappropriate, offer any alternative means of collection, or raise spousal defenses.

G.C. Smith, 83 TCM 1314, Dec. 54,669(M), TC Memo. 2002-59.

A married couple's suit filed under Code Sec. 6330 was dismissed. Because the wife never requested a CDP hearing, no notice of determination concerning collection actions was issued; thus, there was nothing for the court to review under Code Sec. 6330. The husband's case against the government was also terminated because, after requesting a CDP hearing, he attacked only the amount of the unpaid liability rather than attacking the merits of the assessment. Because he had an opportunity to dispute the assessment in the IRS appeal process but failed to avail himself of that opportunity, the merits of the liability were not properly the subject of a CDP hearing and were not subject to review by the court. Furthermore, documents submitted to the court that were not furnished to the IRS appeals officer during the CDP hearing could not properly be considered by the court.

D. Remole, DC Ill., 2002-1 USTC ¶50,224.

A former corporate president's claim for review and redetermination of his liability for the trust fund recovery penalty resulting from his corporation's underpayment of employment taxes was denied. The taxpayer did not raise any spousal defenses or collection alternatives. Rather, by questioning whether his appeals officer possessed sufficient evidence and failed to consider a field officer's determination that a tax payment had been made, the taxpayer raised the issue of his underlying tax liability, which he could not challenge because he had received notices of deficiency. As to his claim that evidence was incompetent or that he lacked access to relevant evidence, judicial review was precluded because he did not raise the issues before the appeals officer.

E.S. Wald, DC Fla., 2002-1 USTC ¶50,278.

An individual's suit against the government challenging a levy in response to his nonpayment of a frivolous return penalty was dismissed. Imposition of the penalty was proper as his Form 1040 lacked information such that its correctness could not be judged. Moreover, a document attached to the Form 1040 indicated that the omissions from the Form 1040 were attributable to a frivolous position. He received proper notice and opportunity to appeal the penalty prior to his Collection Due Process (CDP) hearing in which he failed to raise any relevant issues, focusing instead on the validity of the underlying taxes. All other assertions were dismissed as meritless.

D.D. Hoffman, DC Wash., 2002-2 USTC ¶50,499.

Married taxpayers who petitioned the Tax Court to review a notice of tax lien placed upon their property were entitled to the dismissal of their case without prejudice with respect to their right to seek a federal district court determination that they incurred a net operating loss that could be carried back to the earlier of the two tax years at issue. The court distinguished W.R. Ming, Jr. Est. (Dec. 32,686), which barred taxpayers from withdrawing petitions under Code Sec. 6213 to redetermine a deficiency. Moreover, the IRS was not prejudiced in maintaining a collection action against the taxpayers as if the Tax Court proceeding had never been commenced.

R.T. Wagner, 118 TC 330, Dec. 54,717.

Married taxpayers who received notices of deficiency, failed to file a petition for redetermination in the Tax Court, and advanced meritless tax protest arguments at their collection review proceeding failed to demonstrate that tax assessments against them were invalid. Under Code Sec. 6330, they were barred from challenging the existence or the amount of their underlying tax liabilities in the Tax Court.

G. Newman, 83 TCM 1757, Dec. 54,764(M), TC Memo. 2002-135.

A taxpayer's contention that his notices of determination were improperly issued without an administrative hearing was rejected. The court was not required to look behind a notice to consider whether an administrative hearing has been held. Thus, the taxpayer's notices were valid.

T. Tilley, 83 TCM 1912, Dec. 54,797(M), TC Memo. 2002-161.

The IRS could proceed with collection of an individual's tax liabilities because she failed to provide any factual basis to support a conclusion that the IRS's determination to proceed with a levy was an abuse of discretion.

J. Lister, 85 TCM 774, 55,020(M), TC Memo. 2003-17.


Living Care Alternatives of Utica, Inc., DC Mass., 2004-1 USTC ¶50,225, 312 FSupp2d 929, aff'd, CA-6, 2005-1 USTC ¶50,395, 411 F3d 621.

K.P. Burke, 124 TC 189, Dec. 55,994.

Munguia Printers, Inc., DC Tex., 2005-2 USTC ¶50,632.

J.E. Eby, DC Ohio, 2006-1 USTC ¶50,244.

S.D. Royal, 91 TCM 1002 , Dec. 56,477(M), TC Memo. 2006-71.

D.J. Ford, 91 TCM 1174 ,Dec. 56,517(M), TC Memo. 2006-102.

J.F. Weber, 91 TCM 1279, Dec. 56,545(M), TC Memo. 2006-126.

C. A. Schneller, 91 TCM 1169 ,Dec. 56,514(M), TC Memo. 2006-99.

J.N. Sweeney, 92 TCM 320, Dec. 56,640(M), TC Memo. 2006-213.

R.C. Bird, 93 TCM 709, Dec. 56,819(M), TC Memo. 2007-18.

L.L. Pool, 93 TCM 718, Dec. 56,821(M), TC Memo. 2007-20.

E.K. Ozaki, 93 TCM 912, Dec. 56,838(M), TC Memo. 2007-36.

C.A. Wolf, 93 TCM 1273, Dec. 56,949(M), TC Memo. 2007-133.

Two Brothers Construction Corp., DC N.J. (unpublished opinion), 2007-1 USTC ¶50,362

D. Zisskind, 93 TCM 1037, Dec. 56,874(M), TC Memo. 2007-69.

T.G. Totten, DC Wash., 2007-1 USTC ¶50,502.

R. Tashjian, 93 TCM 998, Dec. 56,864(M), TC Memo. 2007-59.

A taxpayer's challenge to the validity of a Collection Due Process (CDP) determination holding him liable for frivolous return penalties was rejected, and his claim for compensatory and punitive damages against the government was dismissed. Because the taxpayer, who had not received a deficiency notice, challenged the validity of the underlying tax liability, the district court's standard of review was de novo. However, the taxpayer's failure to state a claim upon which relief could be granted resulted in the dismissal of the action.

J. Tornichio, DC Ohio, 2003-1 USTC ¶50,285, 263 FSupp2d 1090.

An IRS Appeals officer's decision to partially reduce past-due taxes, additions to tax and interest assessed to married taxpayers was not an abuse of discretion. The husband claimed unjustified exemptions on his employer's W-4 form, failed to timely file returns or pay tax, and argued that the IRS should accept less than his assessed tax liability because he could not afford it as the sole income earner supporting his wife and children. Since the underlying tax liability was not properly in issue and the appeal's officer abated the assessed taxes and gave due consideration to taxpayers' proposed collection alternatives, there was no abuse of discretion.

J.E. Brown, 85 TCM 1015, Dec. 55,081(M), TC Memo. 2003-73.

The existence of unresolved issues of material fact regarding a debtor's liability for taxes under his Chapter 11 bankruptcy plan barred the entry of summary judgment in a suit in which he challenged a Collection Due Process determination upholding the IRS's imposition of a tax lien against his property. The amount owed under the bankruptcy plan was in dispute because the taxpayer asserted that he had made payments to the IRS that were not credited against his tax debt.

R.E. Malke, DC Fla., 2003-2 USTC ¶50,617.

A corporation was not entitled to a jury trial in its appeal of a Collection Due Process hearing determination that a tax lien was properly imposed against it in connection with its unpaid payroll taxes. The statutes under which the suit was instituted, Code Sec. 6320(c) and Code Sec. 6330(d), do not provide, either expressly or "by fair implication," for trial by jury. The taxpayer's contention that Fed. R. Civ. P. 39(c) preserves the Seventh Amendment right to a jury trial in cases where the government is a defendant was misplaced. Although the federal procedural rule has been construed to permit advisory juries, it did not authorize a regular jury trial.

Brown Brothers Concrete, Inc., DC Fla., 2002-2 USTC ¶50,581.

A mechanical engineer was not entitled to appeal a frivolous return penalty determination made in conjunction with a Collection Due Process (CDP) hearing under procedures set forth in Code Sec. 6330(d)(1)(B). He received notice of the penalty and had an opportunity to dispute his tax liability at the administrative level; thus, he could not subsequently raise a judicial challenge to the underlying liability under Code Sec. 6330. In addition, the CDP hearing procedures did not entitle the taxpayer to a face-to-face meeting with the Appeals officer. Numerous written communications between the parties sufficed for the purposes of a CDP hearing.

T. Loofbourrow, DC Tex., 2002-1 USTC ¶50,465.

Because the tax was not previously assessed and she did not have a chance to contest the liability prior to the Collection Due Process Hearing, she could raise her objections in litigation. The IRS erroneously argued that the Appeals officer's refusal to consider the taxpayer's liability for the interest was not an abuse of discretion. Because the taxpayer could properly argue her liability for the interest, the proper standard of review was a de novo review. However, even if the abuse of discretion standard had applied, the Appeals officers summary dismissal of the taxpayer's contention was improper.

P.J. Hudson, DC N.Y., 2004-1 USTC ¶50,241.

The IRS did not abuse its discretion by proceeding with levy against a taxpayer who failed to timely schedule a collection due process hearing. Since no relevant issues were raised to protest the underlying deficiency, the Court determined that it was unnecessary to decide whether the taxpayer had received a hearing.

J.R. Henderson, 88 TCM 1, Dec. 55,682(M), TC Memo. 2004-157.

A taxpayer's company was dismissed from the appeal of the collection due process hearing. There was no determination related to the company; therefore, the company had no legal basis on which to seek review.

E.J. Gnifkowski, DC Minn., 2004-1 USTC ¶50,219.

Sanctions were imposed on an individual taxpayer who presented frivolous jurisdictional arguments challenging his collection due process determination.

D.K. Winterroth, DC Nev., 2004-1 USTC ¶50,216. Aff'd, CA-9 (unpublished opinion), 2006-1 USTC ¶50,251.

The Tax Court's review of a Collection Due Process (CDP) hearing determination was limited to the administrative record developed at the hearing; therefore, the Tax Court erred when it considered evidence that was not presented during the administrative proceedings. Nothing in the IRS Restructuring and Reform Act of 1998 (P.L. 105-206) permits the Tax Court to perform a de novo review of IRS Appeals officer's decisions under Code Sec. 6330. Moreover, it was incongruous to conclude that the Appeals officer committed an "abuse of discretion" by failing to weigh information that was not presented during the CDP hearing. Based on the Administrative record, the Appeals officer's determination to revoke the taxpayer's offer-in-compromise (OIC) was not an abuse of discretion. The terms of the offer explicitly required the taxpayer to file certain tax returns by their due dates, which he failed to do. Therefore, the taxpayer was in default. In addition, revoking the offer did not cause a disproportionate forfeiture, but was merely a reinstatement of the taxpayer's original outstanding tax liability. Finally, the Appeals officer properly considered collection alternatives, including reinstating the taxpayer's offer-in-compromise. Therefore, it was reasonable for the Appeals officer to sustain the IRS's proposed collection activity.

J.M. Robinette, CA-8, 2006-1 USTC ¶50,213, rev'g 123 TC 85, Dec. 55,698.

The Tax Court refused to review the IRS's determination to proceed with collection of a taxpayer's unpaid tax liability. The taxpayer was given the opportunity to challenge the disallowance of claimed casualty losses by filing suit in district court, but she failed to do so. As a result, she conceded the correctness of the underlying tax liability.

P.A. Farley, 88 TCM 32, Dec. 55,696(M), TC Memo. 2004-168.

In a review of an IRS decision to proceed with collection activities, the doctrine of res judicata prevented the court from considering the taxpayer's challenge to his assessment because a prior judicial proceeding had ended with a stipulated decision that the tax liability reflected on his return was correct.

R. Newstat, 88 TCM 254, Dec. 55,747(M), TC Memo. 2004-208.

The IRS did not act arbitrarily when it determined to proceed with a levy to collect an outstanding tax liability arising out of a joint return filed by married taxpayers who later separated. Neither taxpayer attended the scheduled hearing or provided the requested financial information to the IRS Appeals officer.

K.A. Picchiottino, 88 TCM 348, Dec. 55,773(M), TC Memo. 2004-231.

Similarly, for another tax year:

S.P. Picchiottino, 88 TCM 351, Dec. 55,774(M), TC Memo. 2004-232.

A determination that the taxpayer's had not paid their outstanding income tax liability was upheld. The taxpayers claimed that the IRS erroneously applied three checks to their outstanding employment tax liability. However, the checks totalled the exact amount of the taxpayers' employment tax liability. Also, the taxpayers later sent two checks to be applied toward their income tax liability, which they likely would not have done if they had considered that liability paid with the previous checks.

P.L. Eckert, 88 TCM 362, Dec. 55,777(M), TC Memo. 2004-235.

The question of whether payment had been made of trust fund recovery penalties assessed against an individual was the only issue raised at the taxpayer's Collection Due Process (CDP) hearing. Thus, that was the only issue that could be addressed on appeal.

P.J. Moran, DC Ill., 2004-2 USTC ¶50,417.

An individual's action to set aside an IRS determination denying his offer in compromise (OIC) was dismissed for lack of subject matter jurisdiction. Because the OIC was not considered a collection alternative in a Collection Due Process hearing, the plaintiff was not entitled to a judicial review of the IRS's denial of his OIC. In addition, none of the alternative grounds for the district court's jurisdiction offered by the plaintiff under the Mandamus Act, the Administrative Procedure Act and the Federal Torts Claims Act provided an opportunity for a judicial review of the IRS's determination.

B.G. Asemani, DC Pa., 2005-1 USTC ¶50,129. Aff'd, per curiam, CA-3 (unpublished opinion),2006-1 USTC ¶50,150, 163 FedAppx 102.

The IRS correctly sustained a notice of lien issued to an individual who had pled guilty to tax evasion and wire fraud. The individual's claim that the penalty and interest for a particular year was supposed to have been paid from funds that were seized from him was not credible. A written plea agreement clearly stated that funds seized from the individual would be used to pay his tax deficiency, but that the funds would not be used to pay interest or penalties.

M. Norton, 89 TCM 834, Dec. 55,949(M), TC Memo. 2005-44.

Married taxpayers' pro se challenge to notices of determination that approved collection of their unpaid taxes was properly dismissed. The taxpayers failed to respond to the government's motion to dismiss the challenge, even after the court advised them of the consequences and gave them extra time to do so.

W.B. McDermott, CA-9 (unpublished opinion), 2005-1 USTC ¶50,377, 125 FedAppx 738, aff'g an unreported DC Ariz. decision.

Federal district courts, which reviewed Collection Due Process (CDP) determinations issued by IRS Appeals officers using an abuse of discretion standard, were not required to use a de novo standard because the taxpayer, a nursing home, did not challenge the underlying tax liabilities in the CDP hearings. The nursing home's argument that it was bad public policy to require it to pay taxes when it lacked the financial ability to meet federal regulatory standards governing the care of patients and its request to "remove" the tax liability were not challenges to the validity of the underlying liability. The reports issued by the Appeals officers in connection with their determinations had sufficient information to provide a basis for an abuse of discretion review.

38 Alternatives of Utica, Inc., CA-6, 2005-1 USTC ¶50,395, 411 F3d 621.

A taxpayer's wife lacked standing to appeal a lien under Code Sec. 6330(d)(1) because she was not liable for the taxes owed.

J. Forman, DC Ill., 2005-1 USTC ¶50,418.

In reviewing a levy to collect taxes for 1997, the court had jurisdiction to compute the taxpayer's 1995 liability to the extent that the existence and size of that liability might affect the appropriateness of the collection action for 1997. The proper treatment of items improperly disallowed as math errors is not considered in reviewing a Collection Due Process hearing. The taxpayer's right to dispute the underlying tax liability in a Code Sec. 6330 proceeding does not cure an assessment made in violation of the taxpayer's right to a deficiency proceeding.

J.P. Freije, 125 TC 14, Dec. 56,095.

An Appeals officer's decision contained sufficient information for judicial review and indicated that he performed the required balancing of the need for efficient collection of taxes against the legitimate concern that the action be no more intrusive than necessary.

Comfort Plus Health Care, Inc., DC Minn., 2005-2 USTC ¶50,494.

The trial court properly determined that the IRS did not abuse its discretion when it attempted to collect unpaid employment taxes and penalties owed by an individual through the levy process. Although the taxpayer filed a formal offer in compromise to settle his tax liability, he did not supply the financial information about himself and his spouse that the IRS had requested and believed necessary to evaluate the offer in compromise. Moreover, the trial court did not err in denying the taxpayer's motion to conduct discovery and by limiting its review to the administrative record, which was adequate. In addition, the absence of administrative review of the rejected offer in compromise, the failure to grant administrative appeal rights, and the IRS's failure to negotiate and make a counteroffer during consideration of the compromise offer did not violate the taxpayer's due process rights. Finally, the trial court's comparison of the amount that the taxpayer offered to compromise with the asserted tax liability was not improper because the taxpayer was not forthcoming with the requested financial information and the IRS was uncertain as to his financial position.

R.E. Olsen, CA-1, 2005-2 USTC ¶50,637, 414 F3d 144.

A pro se individual's suit against the IRS was dismissed for lack of prosecution, and a $20,000 penalty was imposed for pursuing frivolous, groundless and meritless arguments. The taxpayer petitioned for a redetermination of deficiencies of tax and review of lien and levy actions for three separate tax years. He ignored the Tax Court's warning in a previous matter that sanctions would be imposed if he continued to raise only frivolous arguments. Accordingly, the case was dismissed under Tax Court Rule 123(b) for failure to comply with the Court Rules.

L.J. Forbes, 91 TCM 672 ,Dec. 56,414(M), TC Memo. 2006-10.

An individual's challenge to the merits of his underlying trust fund recovery penalty was not properly before the federal district court because the issue could not be raised at a Collection Due Process (CDP) hearing. Correspondence showed that he had the opportunity to contest the merits of his underlying tax liability prior to the CDP hearing. Therefore, he was statutorily precluded from raising the issues at a hearing. Further, a determination by the IRS Appeals officer to proceed with a levy action based on written correspondence and the case file was not an abuse of discretion. The officer had made unsuccessful attempts to schedule a Collection Due Process hearing.

R. Plumb, DC Fla., 2006-1 USTC ¶50,271.

The determination to proceed with collection of a married couple's tax liabilities by levy was not an abuse of the IRS's discretion. The couple's proposed installment agreement did not reflect their ability to pay. Their tax liability, including projected accruals, would not be fully paid within five years under the agreement. The couple had sufficient equity in their real property and other assets to pay the liability.

J.F. Joseph, 91 TCM 725 , Dec. 56,426(M), TC Memo. 2006-20.

The IRS did not abuse its discretion when it determined, after a Collection Due Process (CDP) hearing, to proceed with a levy to collect an amount due shown on a joint income tax return. Although her ex-husband may have forged her signature on the joint return, a joint return can be valid, even if signed only by one spouse, as long as both spouses intended to file jointly. Moreover, the taxpayer knew or should have known about the unpaid tax liability as she had earned income for the year at issue, but failed to make estimated payments.

D.A. Magee, 90 TCM 489 , Dec. 56,193(M), TC Memo. 2005-263.

An IRS Appeals officer did not abuse her discretion in rejecting an taxpayer's offer-in-compromise. The Appeals officer's rejection of the offer-in-compromise was justified because the disclosure that the taxpayer had incurred additional tax liability without making payment. The Appeals officer had agreed to allow a collection alternative if the taxpayer met certain conditions, but the taxpayer did not agree to those conditions. Finally, collection of the full tax liability would not have caused the taxpayer and his family financial hardship. Delaying his retirement plans was not considered a hardship.

J.G. Dostal, 90 TCM 496 , Dec. 56,194(M), TC Memo. 2005-264.

An IRS Appeals officer did not abuse his discretion in rejecting both married taxpayers' offers-in-compromise. The officer based his finding on published guidelines as to collectibility and determined the taxpayers could pay the total tax liability. Since he used published guidelines and the the taxpayers failed to show any special circumstances, the determination to levy was appropriate.

A.A. Lemann III, 91 TCM 846 ,Dec. 56,443(M), TC Memo. 2006-37.

An IRS Appeals officer's decision to reject an individual's proposed installment payment plan and to uphold a levy on his property for unpaid federal employment taxes was not an abuse of discretion. The individual had not established his ability to make the proposed payments and had failed to stay current with his tax obligations. The Appeals officer considered all the issues properly raised by the individual and determined that his failure to substantiate his proposal and meet his current tax obligations, as well as his overall financial ability to pay his tax liability in full, outweighed his request for an alternative payment plan.

D.J. Sutton, DC N.Y., 2006-1 USTC ¶50,348.

A hearing officer's determination at a collection due process hearing to sustain the termination of an installment agreement and the issuance of a proposed levy was not an abuse of discretion. The taxpayer's failure to file his individual returns and pay taxes for years when the installment agreement was in effect violated the terms of the agreement.

J.P. Lynn, 91 TCM 1280, Dec. 56,546(M), TC Memo. 2006-127.

The IRS did not abuse its discretion in proceeding with a collection action against an individual taxpayer, who failed to prove that he was entitled to a $250,000 theft loss deduction, which he sought to carry back or carry forward to several tax years for which he owed income tax.

M. Rosen, 92 TCM 130, Dec. 56,591(M), TC Memo. 2006-170.

The IRS Office of Appeals did not abuse its discretion when it sustained a notice of intent to levy issued to an individual to collect outstanding payroll withholding taxes. A Collection Due Process hearing was conducted by an Appeals officer who had no prior involvement with the case. The individual was provided with multiple opportunities to comply with document and information requests. However, he did not submit the forms and documents required by the IRS Appeals officers until fifteen minutes prior to the CDP hearing. His failure to provide requested information prohibited the IRS from considering an alternative collection action.

Raymond A. Shelko, D.D.S., P.C., DC Ga., 2006-2 USTC ¶50,511.

The IRS did not abuse its discretion in determining that levies against affiliated business entities that were delinquent in paying payroll taxes for various tax periods were proper. The IRS issued three notices of determination which recited that all legal requirements were satisfied and all administrative procedures followed. With respect to the first notice, the IRS did not abuse its discretion by refusing to consider further collection alternatives because the entities had defaulted on the repayment plan that they had agreed to at their telephonic Collection Due Process (CDP) hearing. With regard to the other notices, the IRS's refusal to consider their request to discuss other collection alternatives was also not an abuse of discretion because they did not respond when notified of the date and time of a scheduled CDP hearing and did not attend the hearing.

SFG LP, DC N.M., 2006-2 USTC ¶50,509.

The IRS's Appeals Office did not abuse its discretion by issuing a notice of determination rejecting a married couple's offer-in-compromise and sustaining the IRS's levy notice. The Appeals office acted appropriately based on information it received during its consideration of the taxpayers' appeal; it was not required to consider documentation that had been requested by the Appeals officers but that was not timely provided by the taxpayers. Furthermore, certain expenses that the taxpayers submitted were not considered because they were new issues.

I. Steinberg, 92 TCM 340, Dec. 56,645(M), TC Memo. 2006-217.

The IRS's Office of Appeals did not abuse its discretion in rejecting taxpayers' offer-in-compromise. The liability arose from claimed losses and credits from their involvement in a Hoyt partnership. An IRS Appeals settlement officer's determination to reject the taxpayers' offer was not arbitrary, capricious, or without a sound basis in fact or law, and it was not abusive or unfair to the taxpayers. Her determination was based on a reasonable application of the guidelines for evaluating an offer-in-compromise to promote effective tax administration.

B. Blondheim,, 92 TCM 334, Dec. 56,643(M), TC Memo. 2006-216.

The IRS did not abuse its discretion when it concluded that it could proceed with collection efforts against a delinquent taxpayer. In reaching its decision, the Tax Court could consider the taxpayer's deficiency notices, even though they were not referenced in his notice of determination. Moreover, the declaration signed by the IRS settlement officer established that the deficiency notices had been properly issued. The taxpayer's account transcripts and Forms 4340, Certificate of Assessments and Payments, did not violate the Federal Rules of Evidence. The court could consider the Forms 4340 even though they were dated after the taxpayer's notice of determination was issued.

P.L. Bowman, 93 TCM 1204, Dec. 56,926(M), TC Memo. 2007-114.

The IRS Appeals Office did not abuse its discretion when it upheld a tax lien and denied abatement of penalties and interest on the unemployment tax liabilities of the owner of a child-care center. Further, the owner's request for an installment agreement was properly denied because she had defaulted on two earlier installment agreements and she did not establish that she was able to pay her current expenses and taxes due and take on the additional burden of paying past-due taxes. Therefore, the position of the Appeals Office was well reasoned and the collection action was no more intrusive than necessary in order to ensure the ability of the IRS to collect the taxes owed to it

C. Persley, DC Ohio, 2006-2 USTC ¶50,609, 478 F3d 450.

The IRS did not abuse its discretion by terminating an individual's Collection Due Process hearing. The individual had been provided with a meaningful opportunity to present arguments why the levy should not be allowed to proceed but had raised no substantive issues and did not provide required financial information. Furthermore, the proper assessments were made and requisite notices had been sent.

R.B. Keenan, 92 TCM 470, Dec. 56,693(M), TC Memo. 2006-260.

The IRS did not abuse its discretion in determining that an individual was in default on an offer in compromise (OIC) and proceeding with collection of his unpaid tax liability. The terms of the OIC required the taxpayer to timely pay all required taxes for five years following its acceptance. The taxpayer materially breached the terms of the OIC by incurring a delinquent tax liability for a subsequent tax year. Therefore, the IRS was authorized to declare the taxpayer in default of the OIC and to proceed with collection action against him.

W.K. Ng, 93 TCM 675, Dec. 56,809(M), TC Memo. 2007-8.

The IRS's determination to uphold a tax lien was not an abuse of discretion. The IRS satisfied the necessary legal and procedural requirements for proceeding with a lien and did not abuse its discretion in determining further consideration of collection alternatives was futile. The taxpayer repeatedly failed to cooperate and respond to requests for financial information.

C.G. Waters, 93 TCM 690, Dec. 56,814(M), TC Memo. 2007-13.

A taxpayer who had a hearing with the IRS Appeals Office was precluded under Reg. §301.6330-1(e)(3), Q&A-E2 from disputing the assessed additions to tax again in an action under Code Sec. 6330. Furthermore, that regulation is valid because it implemented a congressional mandate in a reasonable manner. The legislative history of P.L. 105-206 indicates that Congress intended to preclude taxpayers who were previously afforded a conference with the Appeals Office from raising the underlying liabilities again in a collection review hearing and before the Tax Court.

J.E. Lewis, 128 TC 48, Dec. 56,876.

The IRS did not abuse its discretion in pursuing a levy action against an estate with an outstanding estate tax liability. The IRS adequately considered the estate's administrative expenses, it had sufficient information to make the collection determination; and the notice of determination was issued after adequate consideration by the IRS agent.

M.B. Atkinson Est., 93 TCM 1108, Dec. 56,900(M), TC Memo. 2007-89.

The IRS did not abuse it discretion by sustaining its decision to file Notices of Federal Tax Lien against an attorney's property for unpaid 1991 taxes that had been fully litigated in a prior suit. The taxpayer had sufficient funds in retirement accounts to satisfy the outstanding balance, which prevented the consideration of an offer-in-compromise. His arguments that he was denied due process were vague and general and lacked any supporting citation to the tax code or the regulations.

S.E. Scott, 93 TCM 1114, Dec. 56,902(M), TC Memo. 2007-91.

The IRS did not abuse its discretion in its determination to sustain the filing of a Notice of Tax Lien and proceed with collection against an individual who asserted tax-protestor type arguments during his Collection Due Process hearing. The IRS Appeals officer was not required to meet with the taxpayer's representative, who was permanently barred from providing tax services and representing taxpayers before the IRS. The taxpayer was also not entitled to a face-to-face meeting with the Appeals officer because he raised only frivolous arguments. He did not address the merits of the underlying tax liability, the validity of the assessment or whether the proceeding was in compliance with the requirements. Also rejected as frivolous was the taxpayer's argument that the IRS's representatives did not show that they were authorized to represent the Secretary of the Treasury. The Appeals officer could also use Forms 4340 to verify the assessment and was not required to provide Form 4340 to the taxpayer or other documents maintained by the IRS with respect to his account.

C.E. Davis, 93 TCM 1396, Dec. 56,977(M), TC Memo. 2007-160.

A taxpayer's claim that notice and demand for payment was not sent to his last known address was barred by the doctrine of res judicata. He would have relied on the same facts and evidence, as in an earlier suit, to establish that the IRS failed to give him timely notice and demand.

W.R. Follum, 93 TCM 1407, Dec. 56,981(M), TC Memo. 2007-164.

A challenge to the validity of a deficiency notice on the basis of its reference to the incorrect tax year was not a dispute over the taxpayer's underlying tax liability. The court, therefore, applied an abuse of discretion standard in reviewing the Appeals officer's determination that the deficiency notice was valid.

J.A. Upchurch, 94 TCM 40, Dec. 56,998(M), TC Memo. 2007-181.

The IRS's determination to proceed with collection of an individual's outstanding tax liabilities was upheld because the individual failed to raise a spousal defense, make a valid challenge to the appropriateness of the collection action, or offer an alternative means of collection. The taxpayer failed to introduce any evidence to support her claim that she transferred the funds from her IRA into a qualified pension plan. In addition, the IRS correctly determined that the federal tax liens at issue continued to be valid against her interest in the IRA after her Chapter 7 bankruptcy discharge. A discharge from personal liability in a Chapter 7 bankruptcy case does not extinguish a prepetition federal tax lien. Finally, the lien on the IRA was not extinguished when the taxpayer transferred the funds into an Employee Retirement Income Security Act (ERISA)-qualified plan. The antialienation provisions of ERISA did not prevent an IRS levy against her alleged interest in an ERISA qualified plan.

C. Miles, 94 TCM 118, Dec. 57,026(M), TC Memo. 2007-208.

The IRS's determination to proceed with collection of an individual's outstanding tax liabilities was upheld because the individual failed to raise a spousal defense, make a valid challenge to the appropriateness of the collection action, or offer an alternative means of collection. The taxpayer failed to introduce any evidence regarding an alleged installment agreement or its terms. In addition, the taxpayer failed to make a timely claim for credit or refund with regard to alleged overpayments.

D. Mahoney, 94 TCM 181, Dec. 57,055(M), TC Memo. 2007-233.

An IRS Appeals officer's decision to reject a corporation's request to substitute IRS levies on its property for unpaid federal employment taxes with a proposed installment agreement was not an abuse of discretion. The administrative record showed that the officer had considered the corporation's current ability to make payments under the proposed installment agreement, its failure to fulfill two installment agreements in the past, and noncompliance with its current tax obligations in rejecting the request.

Fifty Below Sales & Marketing, Inc., CA-8, 2007-2 USTC ¶50,611.

The IRS did not abuse its discretion in rejecting an individual's offer in compromise. He had previously made an offer in compromise for one of the years at issue that had been accepted, but he promptly defaulted. His latest offer in compromise was rejected because it did not reflect his ability to pay. Although the individual argued that the IRS erroneously took into account various assets, the existence of other sources of funds supported the findings of the IRS settlement officer.

N.D. Newton, Dec. 57,086(M), TC Memo. 2007-264.

The IRS's determination to sustain a federal tax lien against a corporate taxpayer was not an abuse of discretion. Although the taxpayer argued that the IRS's assessments were in error, it failed to provide any evidence to rebut their presumption of correctness. Moreover, the IRS did not abuse its discretion when it rejected the taxpayer's proposed installment plan. The IRS properly considered the taxpayer's history of non-compliance, which continued even after the embezzlement was discovered. The company also failed to challenge the notices issued or any of the statutory and administrative procedures that were followed by the IRS prior to filing the lien.

Vollmer Electric Company, Inc., DC Texas, 2007-2 USTC ¶50,623.

Married taxpayers were not entitled to have their Collection Due Process (CDP) appeal heard under the Tax Court's small case procedures because their unpaid tax on the date of the determination notice exceeded $50,000. Although the couple disputed less than $50,000, the amount of the unpaid tax on the date of the determination notice, rather than the amount in dispute, governed their eligibility for small case designation.

M.P. Leahy,129 TC --, No. 8, Dec. 57,105.

Married taxpayers who agreed to immediate assessment and collection of their tax deficiency by signing a waiver of restrictions on assessment and collection could not later contest that deficiency in the Tax Court. Once the taxpayers signed the waiver, they could not carry back net operating losses (NOLs) from a later tax year to reduce the tax liability and avoid collection. The taxpayers could not challenge the IRS's collection efforts by claiming that they did not receive a deficiency notice, since they waived their right to one when they signed the waiver. Further, the taxpayers were barred from contesting their tax liability because they failed to request a hearing after receiving a Collection Due Process (CDP) notice that the IRS intended to collect via a levy. Finally, despite the taxpayers' later request for a hearing after receiving a CDP notice of the filing of a tax lien, the IRS could still deny the taxpayers the opportunity to contest the tax liability before the Tax Court because the taxpayers had already given up that right.

R.. Nichols, 93 TCM 657, Dec. 56,806(M), TC Memo. 2007-5.

Summary judgment granted in a levy appeal when the taxpayer raised no specific allegations of error or delay by the IRS in her petition, and was barred from challenging the correctness of the underlying deficiency. Although at her Collection Due Process (CDP) hearing the taxpayer mentioned her entitlement to an interest abatement and credit for payments made by her former husband, she abandoned these issues by failing to raise them in her petition. Moreover, the taxpayer could not challenge the correctness of the underlying tax deficiency in the levy appeal because she had litigated this issue in a prior Tax Court proceeding.

R.A. Westby, 94 TCM 71, Dec. 57,011(M), TC Memo. 2007-194.