Tuesday, November 6, 2007
Offer in Compromise - IRS tax lien filed during OIC
Kenneth Holten Black and Marie K. Morilus Black v. Commissioner.
Docket No. 8251-06S . Filed November 5, 2007.
Tax Court: Summary opinion: Collection: Installment agreement: Offer in compromise: Discretion of hearing officer: Notice of federal tax lien. --
An IRS Appeals officer did not abuse his discretion by sustaining a notice of federal tax lien (NFTL) that was filed against a married couple while they were attempting to negotiate an installment agreement. The Appeals officer considered the taxpayers' collection alternative; however, the taxpayers did not qualify for an offer in compromise because they had the ability to pay the liability in full through an installment agreement. In addition, the Appeals officer balanced the need to collect the taxes with the taxpayers' concern over the NFTL's intrusiveness. --
Tax Court: Summary opinion: Collection: Discretion of hearing officer: Notice of federal tax lien: Withdrawal of tax lien. --
An IRS Appeals officer did not abuse his discretion by refusing to withdraw a notice of federal tax lien (NFTL). The NFTL was not filed prematurely; the taxpayers' tax liability was assessed, notice and demand for payment was sent and the taxpayers were provided with a Collection Due Process (CDP) hearing notice. Moreover, an installment agreement does not preclude the filing of a NFTL nor require withdrawal of the lien after the agreement becomes effective. Finally, the taxpayers failed to submit any evidence that withdrawal of the NFTL would facilitate collection or would be in both their best interests and that of the United States.
DEAN, Special Trial Judge: This case was heard pursuant to the provisions of section 7463(b), the decision to be entered is not reviewable by any other court, and this opinion shall not be treated as precedent for any other case. Unless otherwise indicated, subsequent section references are to the Internal Revenue Code in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Some of the facts have been stipulated and are so found. The stipulation of facts and the exhibits received into evidence are incorporated herein by reference. At the time the petition was filed, petitioners resided in Williamsville, New York.
Petitioners filed a joint Form 1040, U.S. Individual Income Tax Return, for 2004. The Internal Revenue Service (IRS) assessed the $24,143 tax shown on the return. The IRS assessed the following additional amounts: (1) A $143 addition to tax for failure to pay estimated tax; (2) a $115.96 addition to tax for failure to pay timely; and (3) $86.09 in accrued interest. After the application of a $12,547 credit for withholding taxes, the additional assessments resulted in an $11,941.05 unpaid balance.
The IRS sent petitioners a notice and demand for payment within 60 days of the assessment. In response, petitioners submitted an offer-in-compromise (OIC) on September 13, 2005, which the IRS rejected, and petitioners appealed. While petitioners' appeal was pending, the IRS filed a Notice of Federal Tax Lien (NFTL) at the Erie County Clerk, Buffalo, New York, on October 20, 2005. The IRS issued to petitioners a Letter 3172(DO), Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320, on October 21, 2005. In response, petitioners submitted a timely Form 12153, Request for a Collection Due Process Hearing, on November 9, 2005.
Petitioners' hearing was held on January 18, 2006. Pursuant to the parties' discussions, petitioners signed a Form 433-D, Installment Agreement, on February 10, 2006. Petitioners, via a letter dated February 9, 2006, requested that the NFTL be withdrawn because the lien's filing would adversely affect their credit rating and could cause them financial hardship. Additionally, petitioners expressed their concern that a lien could affect their ability to secure college loans on their son's behalf. In response, the IRS sent petitioners a Letter 3193, Notice of Determination Concerning Collection Action(s) Under The issues for decision are whether the Appeals officer abused his discretion in: (1) Sustaining the NFTL; and (2) determining that the NFTL should not be withdrawn.
Sec. 6322. In order for the Federal tax lien to have priority over other liens or security interests, the IRS must file an NFTL. section 6320(a) states that the IRS must give the person against whom a Federal tax lien is filed written notice of the lien's filing within 5 days after the date of its filing. section 6330. 6330(d)(1). In reviewing the IRS's determination, the Court applies an abuse of discretion standard when the underlying tax liability is not at issue. Sego v. Commissioner, 114 T.C. 604, 610 (2000). Pursuant to this standard, petitioners must prove that the filing of the NFTL and the rejection of their withdrawal request was arbitrary, capricious, or without sound basis in fact or law. See Woodral v. Commissioner, 112 T.C. 19, 23 (1999).1. Filing of the NFTL
Petitioners contend that respondent's Appeals officer abused his discretion by sustaining the NFTL.
The applicable laws and administrative procedures were satisfied. The parties agree that petitioners received the required notice and demand for payment within the 60-day timeframe mandated by Finally, Form 656, Offer in Compromise, which petitioners signed, specifically states that an NFTL "may be filed at any time while your offer is being considered".
Therefore, the Court concludes that respondent's Appeals officer did not abuse his discretion in upholding the NFTL. Accordingly, respondent's determination is sustained.2. Withdrawal of the NFTL
In pertinent part, Petitioners contend that respondent's Appeals officer abused his discretion when he refused to withdraw the NFTL because: (1) The NFTL's filing was premature; (2) an installment agreement was subsequently agreed to; and (3) it would be in petitioners' and the United States' best interests to remove the NFTL due to the damage it would cause to petitioners' credit rating.
The NFTL was not filed prematurely. Petitioners' tax liability was assessed, and notice and demand for payment was mailed to petitioners within 60 days of the assessment. The IRS issued a Notice 504, Balance Due-Urgent; a Letter 1058, Final Notice of Intent to Levy; as well as A Notice of Federal Tax Lien and Your Right to a Hearing under IRC 6320. The lien's filing occurred after assessment and notice and demand; at each step, petitioners were properly notified.
Entering into an installment agreement does not preclude the filing of an NFTL, nor is the IRS required to withdraw an NFTL after an installment agreement has become effective. Section 6323(j)(1) is permissive: the IRS "may" withdraw an NFTL, but failure to do so is not an abuse of discretion. The Court concludes that respondent's Appeals officer did not abuse his discretion in refusing to withdraw the NFTL. Accordingly, respondent's determination is sustained.
To reflect the foregoing,
An appropriate decision will be entered.