Terrence C. Wright v. Commissioner, TC Memo 2012-24 , Code
Sec(s) 6323; 6330.
TERRANCE CLEM WRIGHT, Petitioner v. COMMISSIONER OF INTERNAL
REVENUE, Respondent .
Case Information:
Code Sec(s):
6323; 6330
Docket: Docket
No. 5031-11L.
Date Issued:
01/24/2012
HEADNOTE
XX.
Reference(s): Code Sec. 6323; Code Sec. 6330
Syllabus
Official Tax Court Syllabus
Counsel
Terrance Clem Wright, pro se.
Carol-Lynn E. Moran, for respondent.
MEMORANDUM OPINION
RUWE, Judge: This matter is before the Court on respondent's
motion for summary judgment (motion) pursuant to Rule 121. 1 Respondent
contends that no genuine issue exists as to any material fact and that the
determination to maintain a notice of Federal tax lien filed under section 6323
should be sustained. In his response to respondent's motion, petitioner does
not contest any of respondent's allegations and seems to indicate that
respondent's motion should be granted.
Background
At the time the petition was filed, petitioner resided in Pennsylvania.
Petitioner filed income tax returns for the taxable years 1999, 2000, 2001,
2003, 2004, 2005, 2006, 2007, and 2008 (years at issue) but failed to pay all
of the liabilities reported on the returns. As a result, respondent assessed
the taxes shown on the returns. Respondent sent petitioner a Letter 3172,
Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320,
dated March 18, 2010, advising petitioner that a notice of Federal tax lien
(NFTL) had been filed with respect to his unpaid liabilities for the years at
issue and that petitioner could request a hearing with respondent's Office of
Appeals. On April 25, 2010, petitioner submitted a Form 12153, Request for a
Collection Due Process or Equivalent Hearing, in which he did not contest the
underlying tax liabilities but instead requested an installment agreement. On
November 19, 2010, respondent's settlement officer sent petitioner a letter
scheduling a telephone conference for January 18, 2011. In the letter, the
settlement officer requested that petitioner provide financial information and
a monthly payment proposal so that she could make a decision regarding
petitioner's request for an installment agreement.
On January 18, 2011, a telephone conference was held between
respondent's settlement officer and petitioner. Petitioner advised the
settlement officer that he was not currently able to afford to make any
installment agreement payments. The settlement officer advised petitioner that
while he had provided respondent with some of the financial documents that were
requested, he did not provide bank statements, and, as a result, there was
insufficient information available for the settlement officer to determine
whether petitioner should be placed in currently not collectible (CNC) status.
The settlement officer further advised petitioner that he could pursue CNC
status when he obtained all of the necessary financial documents.
On February 2, 2011, respondent issued petitioner a Notice
of Determination Concerning Collection Action(s) Under Section 6320 and/or
6330, determining that petitioner would not be granted relief from the NFTL and
that petitioner did not qualify for withdrawal of the notice as allowed for by section 6323(j). On March 1, 2011, petitioner
filed a petition with this Court. In the petition, petitioner does not contest
the underlying liabilities or the denial of an installment agreement. Instead,
petitioner's only contention is that he does not have sufficient funds to pay
his admitted liabilities, and he requests suspension of collection action on
the basis of economic hardship.
Discussion
Summary judgment is designed to expedite litigation and to
avoid unnecessary and expensive trials. Shiosaki v. Commissioner, 61 T.C. 861, 862 (1974). A motion for summary
judgment is granted where the pleadings and other materials show that there is
no genuine issue as to any material fact and that a decision may be rendered as
a matter of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518,
520 (1992), aff'd, 17 F.3d 965 [73 AFTR 2d 94-1198] (7th Cir. 1994). The burden
is on the moving party to demonstrate that no genuine issue as to any material
fact remains and that he is entitled to judgment as a matter of law. FPL Grp.,
Inc. v. Commissioner, 116 T.C. 73, 74-75 (2001). In all cases, the evidence is
viewed in the light most favorable to the nonmoving party.Bond v. Commissioner,
100 T.C. 32, 36 (1993). However, the nonmoving party is required “to go beyond
the pleadings and by *** [his] own affidavits, or by the `depositions, answers
to interrogatories, and admissions on file,' designate `specific facts showing
that there is a genuine issue for trial.” Celotex Corp. v. Catrett, 477 U.S.
317, 324 (1986) (quoting Fed. R. Civ. P. 56); see also Rauenhorst v.
Commissioner, 119 T.C. 157, 175 (2002); FPL Grp., Inc. & Subs. v.
Commissioner , 115 T.C. 554, 560 (2000).
Petitioner's response to respondent's motion fails to indicate that there is a
genuine issue for trial. Consequently, we conclude that there is no issue as to
any material fact and that a decision may be rendered as a matter of law.
If a taxpayer's underlying liability is properly at issue,
the Court reviews any determination regarding the underlying liability de
novo.Goza v. Commissioner, 114 T.C. 176,
181 (2000). Petitioner has the burden of proof regarding his underlying
liabilities. See Rule 142(a); Smith v. Commissioner T.C. Memo. 2008- , 229. Petitioner
made no specific arguments and presented no evidence to bring into doubt the
correctness of the underlying tax liabilities as calculated by respondent.
The Court reviews administrative determinations by
respondent's Office of Appeals regarding nonliability issues for abuse of
discretion. Hoyle v. Commissioner, 131 T.C. 197, 200 (2008); Goza v.
Commissioner, 114 T.C. at 181- 182. The determination of an Appeals officer
must take into consideration: (1) the verification that the requirements of
applicable law and administrative procedure have been met; (2) issues raised by
the taxpayer; and (3) 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. Secs.
6320(c), 6330(c)(3); see also Lunsford
v. Commissioner 117 T.C. , 183, 184 (2001).
The notice of determination sets forth the Internal Revenue
Service's verification of compliance with applicable law and administrative
procedure, and petitioner did not challenge that verification. Consequently, no
verification issues under section 6330(c) are at issue. Furthermore, the issues
raised in the petition pertain only to collection alternatives based upon his
financial hardship, and these issues were considered by the Appeals officer.
The Appeals officer determined that the proposed collection action balanced the
need for the efficient collection of taxes with the legitimate concern of
petitioner that any collection be no more intrusive than necessary.
The Appeals officer determined not to grant petitioner's
request that the collection activity against him be suspended on the ground of
financial hardship. Suspension of collection activity is a “collection
alternative” that the taxpayer may propose and that the Office of Appeals must
take into consideration. See , sec. 6330(c)(2)(A)(iii), (3)(B). The Internal
Revenue Manual (IRM) makes provision for a taxpayer's account to be declared
“currently not collectible” in cases of “hardship”. See IRM pts. 1.2.14.1. 14
(Nov. 19, 1980) (Policy Statement 5-71), 5.16.1.2.9 (May 5, 2009). To justify
suspension of collection on the ground that the account should be deemed CNC,
petitioner must show that he cannot afford to pay the liabilities; and to do so
he must show his financial circumstances, including the money that is available
to him and the expenses that he bears. See Pitts v. Commissioner, T.C. Memo.
2010-101 [TC Memo 2010-101]; sec. 301.6320-1(e)(1), Proced. & Admin. Regs.
An Appeals officer does not abuse his or her discretion in denying CNC status
where the taxpayer has not submitted the necessary financial information.
Mahlum v. Commissioner , T.C. Memo. 2010-212 [TC Memo 2010-212]; Swanton v.
Commissioner, T.C. Memo. 2010-140 [TC Memo 2010-140]. The Appeals officer
requested that petitioner submit bank statements and other financial
information so that collection alternatives could be considered. Petitioner
submitted some of the requested information but failed to submit bank
statements. Because petitioner failed to submit the requested bank statement
information, the Appeals officer was unable to accurately ascertain
petitioner's financial circumstances and, consequently, determined that she
could not calculate the appropriate installment agreement terms or grant
petitioner CNC status. In the absence of the requested information,
respondent's Appeals officer did not abuse her discretion in denying
petitioner's request for collection alternatives. See Mahlum v. Commissioner
T.C. Memo. 2010-212 [TC Memo 2010-212]; Swanton v. , Commissioner, T.C. Memo.
2010-140 [TC Memo 2010-140]; Pitts v. Commissioner, T.C. Memo. 2010- 101 [TC
Memo 2010-101]. As a result, respondent's determination is sustained.
To reflect the foregoing,
An appropriate order and decision will be entered.
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Part 5. Collecting
Process
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Chapter 16. Currently
Not Collectible
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Section 1. Currently
Not Collectible
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1. Policy Statement P-5-71
provides the authority for reporting accounts currently not collectible (CNC).
See IRM 1.2.14.1.14, Policy Statements for Collecting Process. Accounts can be removed
from active inventory after taking the necessary steps in the collection
process.
2. Accounts may be reported
CNC for a variety of reasons using transaction code (TC) 530. It is a
requirement that TC 530 be defined by the appropriate closing code (cc). The
most commonly used closing codes are displayed in the table below.
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Currently Not
Collectible Closing Codes
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Closing Code
|
Definition
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03
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inability to locate the taxpayer or assets
|
|
04
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partial expiration of the assessment prior to issuance
|
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05
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complete expiration of the statutory period for collection or
suit initiated to reduce tax claim to judgment
|
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06
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for use by revenue officers on international casework, where a
taxpayer can pay but the service is unable to collect a liability because the
taxpayer resides in a foreign country
|
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07
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a corporation, exempt organization, or Limited Liability Company
(LLC), where the LLC is identified as the liable taxpayer, liquidated in
bankruptcy
|
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08
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death of an individual with no collection potential from the
decedent/decedent estate
|
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09
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accounts below tolerance; see IRM 5.16.1.2.5(1) and (2) Tolerance, for additional information
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10
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corporations, certain limited liability partnerships, exempt
organizations, or LLCs, where the LLC is identified as the liable taxpayer,
which are inactive and defunct with no assets
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12
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inability to contact a taxpayer although the address is known
and there is no means to enforce collection
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13
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a corporation, exempt organization, limited partnership, or LLC,
where the LLC is identified as the liable taxpayer, remains in business and
is current but is unable to pay back taxes
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14
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when suspending collection of BMF balance due accounts when the key
individual is deployed to a combat zone; see IRM 5.1.7.9.1, Business
Masterfile (BMF) Accounts of Taxpayers Deployed to a Combat Zone, for additional information
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15
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obsolete - this was formerly used for corporate income tax
liabilities owed by a financial institution certified as insolvent by the
Office of the Controller of the Currency or the Office of Thrift Supervision
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17
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inability to locate the Single Member Owner (SMO) or assets of
the SMO who is liable for taxes assessed under an LLC Employer Identification
Number (EIN)
|
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18
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inability to contact a Single Member Owner (SMO) who is liable
for taxes assessed under an LLC EIN when the SMO address is known, and there
are no means to enforce collection
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19
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accounts below tolerance that are assessed under an LLC EIN, but
owed by SMO; see 5.16.1.2.5, Tolerance, for additional information
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24 - 32
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collection of the liability would create a hardship for
taxpayers by leaving them unable to meet necessary living expenses
Reminder:
Hardship closing codes
can only be used for individual or joint IMF
assessments, sole proprietorships, general partnerships, and LLCs, where an
individual owner is identified as the liable taxpayer.
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3. Note:
4. See IRM 5.16.1.1(17) for a
list of the Integrated Collection System (ICS) literals used to close CNC
cases.
5. Note:
6. A single member LLC that is
classified as a disregarded entity will, nevertheless, be treated as an entity
separate from its owner for employment tax purposes (effective for wages paid
on or after January 1, 2009) and for certain excise tax purposes (effective for
liabilities imposed and actions first required or permitted in periods
beginning on or after January 1, 2008). The regulations are not retroactive.
7. The investigation required
to establish a CNC condition varies with the dollar amount and type of case.
Generally, a Collection Information Statement (CIS) will be secured prior to
reporting an account CNC. The CIS supporting a CNC determination is considered
current if it is less than twelve months old.
Note:
Appropriate procedures must
be followed when making third party contacts. (See IRM 5.1.17, Third
Party Contacts)
.
8. In general, a Notice of
Federal Tax Lien (NFTL) should be filed on accounts being reported CNC when the
aggregate unpaid balance of assessments equals or exceeds ≡ ≡ ≡ ≡ ≡ . See IRM
5.12.2, Lien Filing Requirements. If a taxpayer
subsequently requests a Collection Due Process (CDP) hearing based upon the
NFTL filing, the Revenue Officer (RO) must follow the procedures in IRM
5.1.9.3, Collection Due Process, to forward the case to
Appeals.
9. Conduct a compliance check
and document the results in the case history in circumstances when the taxpayer
is contacted. See IRM 5.1.11.2.3, Full Compliance
Check.
Compliance checks are not required when the taxpayer cannot be contacted.
10. All open filing
requirements or Delinquent Return (Del Ret) modules must generally be resolved
and closed appropriately when reporting an account CNC. For further
instructions see also 5.16.1.2.9(9) .
11. Document all actions to
support the CNC determination. The last history entry will be a summarizing
statement supporting the CNC decision. Address any assets owned by the taxpayer
in the summarizing statement. If a mandatory follow-up is requested, include
the reason in the summarizing statement. See IRM 5.16.1.6 for information on
mandatory follow-up.
12. Only certain CNC cases can
be reactivated systemically. Systemic follow-up is limited to hardship, unable
to locate and unable to contact cases. Unable to locate and unable to contact
cases will reactivate if a new levy source posts to Integrated Data Retrieval
System (IDRS). Unable to locate cases will also reactivate if a new address
posts to IDRS. Hardship cases can be reactivated if it appears there is a
change in the taxpayer's ability to pay indicating collectibility. See IRM
5.16.1.2.9(11).
13. Revenue Officers (RO),
Appeals Officers (AO), and Settlement Officers (SO) may report accounts as CNC.
14. Tax examiners in Collection
Field function (CFf) and Centralized Case Processing (CCP) may report as CNC
those accounts that meet existing criteria subject to the limitations:
·
IMF, Non-Masterfile (NMF), or out of business BMF sole
proprietors or partners, with less than ≡ ≡ ≡ ≡ ≡ aggregate unpaid balance of
assessments.
·
BMF taxpayers (other than accounts for trust fund taxes
owed by corporations, LLCs, or limited partnerships) with less than ≡ ≡ ≡ ≡ ≡
aggregate unpaid balance of assessments.
15. Bankruptcy specialists may
report as CNC corporate liabilities where the aggregate unpaid balance of
assessments is less than ≡ ≡ ≡ ≡ ≡ ≡ ≡ when a corporation has been through a
liquidating bankruptcy.
16. Advisory employees may
report accounts CNC when a local probate office indicates that a proof of claim
will not generate funds. Transferee issues should be considered. See IRM
5.16.1.2.4(9) and (10) for additional information.
17. The Inventory Delivery
System (IDS), may shelve IMF accounts where the aggregate unpaid balance,
including accruals, is less than ≡ ≡ ≡ ≡ ≡ ≡ ≡ and BMF accounts where the
aggregate unpaid balance including accruals is less than ≡ ≡ ≡ ≡ ≡ .
18. CNC recommendations
generally require the review and approval of the immediate manager to ensure
the investigation meets established standards of thoroughness and integrity.
See IRM 5.16.1.5. Managerial review
criteria can be located in IRM 1.4.50,Collection Group Manager,
Territory Manager, and Area Director Operational Aid, exhibit 1.4.50-2.
19. Quality control is
accomplished through mandatory and sample reviews through Embedded Quality
(EQ).
20. Attach the following
supporting documents, whenever applicable, to the case file:
·
Collection Information Statements (CIS)
·
Approved Form 4183, Recommendation re:
Trust Fund Recovery Penalty Assessment
·
Copies of transferee assessment recommendations
·
Copies of suit recommendations to reduce the tax claim to
judgment
·
Replies to Courtesy Investigations
·
Copies of tax returns
·
Other documentation to support the CNC determination
Reminder:
If the account is being
reported CNC based on a suit recommendation to reduce the tax claim to
judgment, forward the entire case file to Advisory for association with the
suit file after the group manager approves the CNC.
Note:
Parts 2 and 3 of the paper
Form 53 that are generated by ICS, which show "For processing as Form
3177" at the bottom, should not be included in the closed case file. Parts
2 and 3 should be sent by secure E-mail or mailed separately from the closed
case to CCP for input.
21. Select the following
literals when closing cases as CNC using ICS. The related closing codes (cc)
are in parentheses:
·
A. Defunct Corp., Exempt Org., Ltd. Ptr., or LLC (10)
·
B. Unable to Pay/Hardship (24-32)
·
C. Bankrupt Corp., Exempt Org., or LLC (07)
·
D. Unable to Locate (03)
·
E. UTL for LLC-SMO Liable (17)
·
F. Unable to Contact (12)
·
G. UTC for LLC-SMO Liable (18)
·
H. In-Business Corp., Exempt Org., Ltd.Ptr., or LLC (13)
·
I. Tolerance (09)
·
J. Tolerance for LLC-SMO Liable (19)
·
K. Decedent/Decedent Estate (08)
·
L. Statute Expired Prior to Issuance (04 )
·
M. Statute Expired After Issuance or Suit Initiated (05)
·
N.. Resolution Trust Corp. Related (15)
·
O. Surveyed (39)
·
P. International - No Field Visit (06)
·
Q. Combat Zone (14)
1. When the LLC is the liable
taxpayer for some tax module(s) and the owner of the LLC is the liable taxpayer
for other tax module(s), separate collection determinations must be made for
each liable taxpayer. Select the appropriate tax module(s) for each closing
code when utilizing TC 530 for both liable taxpayers. If only one liable
taxpayer meets conditions for reporting CNC, and a different collection action
is required for the other taxpayer, report the appropriate tax module(s) CNC
before proceeding with collection action on the remaining tax module(s). See
IRM 5.16.1.3.4.(7) LLC tables for additional information. See IRM 5.1.21, Collecting
From Limited Liability Companies.
1. If neither the taxpayer nor
assets can be located, use cc 03 to report the account uncollectible. For
Single Member Owners (SMO), where the SMO is liable for taxes assessed under an
LLC EIN, and the SMO, and assets of the SMO are unable to locate, use cc 17 to
report the SMO modules uncollectible.
2. When the taxpayer's ability
to pay cannot be determined because they cannot be contacted and income and
assets cannot be identified, use cc 12, Unable to Contact. For SMOs, where the
SMO is liable for taxes assessed under an LLC EIN, use cc 18 if the SMO is
unable to contact, although the SMO address is known, and there is no means to
enforce collection.
3. For domestic accounts where
the aggregate unpaid balance of assessments is less than ≡ ≡ ≡ ≡ ≡ ≡ research
of the following resources is required:
·
Telephone directories
·
Information Return Program (IRP) data, using Corporate
Files On-Line (CFOL) command codes SUPOL or IRPTR
·
Postal tracers, when a field call to the master file
address confirms the taxpayer is unable to locate or contact See IRM 5.1.18.12,United
States Postal Service, for additional guidance on postal tracers.
For international accounts, the same sources will be checked whenever available for the country in question.
4. For domestic accounts where
the aggregate unpaid balance of assessments is over ≡ ≡ ≡ ≡ ≡ ≡ , attempt to
develop leads by researching the following additional sources:
·
Motor vehicle records
·
Employment commissions
·
On-line courthouse records for real and personal property
·
Local licensing authorities when a taxpayer has a
business that requires a license
·
On-line services that help in locating taxpayers, such as
Accurint, follow security guidelines when using public internet search engines
·
CC RTVUE/BRTVU/TRDBV if the due date of the last filed
return was within the past two years. Use RTVUE/BRTVU to determine if a copy of
the return should be secured to further develop leads to locate the taxpayer,
assets or levy sources
For international accounts, besides using these sources when and where practical, a Tax Attache could be consulted for further potential sources of value for the country in question.
5. The above list is not all
inclusive. Local management may require that additional information sources be
checked, for example U.S. Coast Guard and local licensing agencies where boat
ownership is common.
6. For accounts with an
aggregate unpaid balance of assessments over ≡ ≡ ≡ ≡ ≡ ≡ , a field call to the
taxpayer's last known address is required. In addition, a field call must be
made to the courthouse to check real and personal property records if not
available on line. See IRM 5.1.18.4, Real Property
Records.
Note:
For taxpayers residing
outside the United States, and territories other than Puerto Rico and the U.S.
Virgin Islands, a field call may not be practical. Any taxpayer contact
(including a field call) that requires foreign travel must be coordinated with
the U. S. Competent Authority (delegated to the Deputy Commissioner
(International), Large Business and International), who may authorize such
travel based on treaties or other international arrangements.
Reminder:
W&I ACS call sites,
SB/SE ACS large dollar sites, and tax examiners in the Collection Field
function are exempt from the requirement to
make field calls.
7. For Individual Master File
(IMF) taxpayers, sole proprietor taxpayers, and for LLCs where an individual
owner is identified as the liable taxpayer, secure and analyze a full credit
report if the aggregate unpaid balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ .
This includes cases where recently filed returns will result in liabilities in
excess of ≡ ≡ ≡ ≡ ≡ . For additional information on credit reports see IRM
5.1.18.17.2, Credit Reports.
8. When the aggregate unpaid
balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ , research the following additional
sources:
·
Check CC AMDIS to determine if there is a current open
examination. If there is an open examination, contact the revenue agent to see
if he/she has a new address for the taxpayer or has identified any additional
assets.
·
Request a passport check when the taxpayer travels
overseas frequently or there is reason to believe the taxpayer travels overseas
frequently in accordance with IRM 5.1.18.13, United
States Passport Office.
9. Consider requesting that a
taxpayer be placed on the Department of Homeland Security lookout list if you
have been unable to locate or contact the taxpayer and if they live outside the
U.S. or travel outside the U.S. See IRM IRM 5.1.12.26, Treasury
Enforcement Communications System.
10. Consider a mandatory
follow-up if there is a definite indication that contact should be made in the
future.
11. Federal Employee/Retiree
Delinquent Investigation (FERDI) cases cannot be reported as UTL or UTC. Follow
procedures in IRM 5.1.7.7, Federal
Employee/Retiree Initiative (FERDI).
1. Ensuring that the proper
action is taken on an account before the collection statute expires is a
priority. The actions required to resolve short statute issues will depend on
the circumstances. See IRM 5.1.19, Collection Statute
Expiration and/or IRM 25.6.1.9, Statute
of Limitations - Assessments.
1. An imminent Collection
Statute Expiration Date (CSED) module is any module with twelve months or less
remaining on the collection statute. See IRM 5.1.19.5, Imminent
CSEDs,
for specific procedures used to verify, monitor, work, and document these types
of cases.
2. Imminent CSED modules
should be worked to an appropriate conclusion prior to the statute expiration
whenever circumstances permit. For further guidance, see IRM 5.1.19.5.2, Working
Imminent CSEDs.
3. The RO must discuss
imminent CSED modules with their group manager and document an appropriate plan
of action to resolve the module(s) prior to the expiration of the statute. For
further guidance, see IRM 5.1.19.5.3, Documenting
Imminent CSEDs.
4. If payments are applied to
a module with multiple CSEDs they should be applied in order of the date in
which the CSED will expire, starting with the one that will expire first. This
includes proceeds from seizures, levies, installment agreements and other
undesignated voluntary payments. For proceeds from a levy or installment
agreement, the CSED module where the payment will be applied must be included
on the levy or installment agreement.
5. Do not solicit voluntary
payments on accounts barred by statute. If a taxpayer makes a payment on an
account barred by statute, inform them that payment is not required and ask if
he/she still wishes to make the payment or have it returned. The taxpayer must
be advised that the payment is purely voluntary and will be treated as a gift
to the United States Treasury. If the taxpayer's intentions cannot be
ascertained, return the payment.
6. Proceeds from the sale of
assets seized prior to the expiration of the statute can be applied after the
date of expiration. The affected modules require that TC 520 cc 80 be input.
Any outstanding balance will be closed using TC 530 cc 05 after the application
of sale proceeds and after the statute expires. See IRM 5.12.2.20, Refiling
the NFTL,
to determine if the NFTL needs to be refiled. The RO should request input of TC
520 cc 80 to allow for application of the proceeds from the seizure. Once the
proceeds are posted, the RO must request input of TC 521, no closing code
required.
7. Proceeds that are received
as the result of a levy which was served prior to the CSED may be applied to
the expired module(s). See IRM 5.11.2.2.1, Legal
Basis for Releasing Levies.
Note:
Unlike interest which may
be assessed and collected as long as the underlying tax can be collected (see
IRC 6601(g)), penalties may have a different CSED apart from any other
assessment on the module(s). See IRM 5.1.19.2.1, Transaction
Codes That Carry Their Own CSED. The Service, however, is not required to
make a separate assessment of the accruals on Failure to Pay (FTP) penalties
(i.e., the IRC 6651(a)(2) and IRC 6651(a)(3) additions to tax) in order to
collect the accruals.
1. For non-master file
accounts, if only a portion of the liability expired prior to issuance, report
the expired portion on Form 53, using TC 530 cc 04 and annotate 'Statutory
Period for Collection Expired'.
2. If the statute expired on a
portion of the liability prior to issuance and the balance expires after
issuance, use TC 530 cc 05 for the entire amount. It is not necessary to use cc
04 for a portion of the liability and cc 05 for the balance when the entire
balance can be closed using cc 05.
3. Complete all actions such
as payment tracers and adjustments prior to input of either cc 04 or 05.
1. The majority of master file
accounts on which the collection statute has expired, either on part of the
liability or on the entire liability prior to issuance, will be identified by
Taxpayer Delinquent Account (TDA) issuance code 534.
2. If only a portion of the
module has expired, adjust the balance by reporting the expired portion on Form
3870, Request for Adjustment, using TC 534.
Caution:
Do not use
cc 04 for master file accounts as this will cause the entire account to go to
status 53.
3. If the remaining balance is
determined to be uncollectible, use the appropriate closing code such as
hardship, unable to contact, etc.
1. Use closing code 05 when
the entire module balance expires after issuance.
2. Closing code 05 is also
used in circumstances where a suit has been filed to reduce a tax claim to
judgment. The filing extends the collection statute so that if a judgment is
obtained, the tax may be collected by levy until the tax is paid. If the
collection statute expires prior to the filing of the suit, report the account
CNC using cc 05. A report of the circumstances of the statute expiration is not
required under these circumstances.
Note:
Closing code 05 can only be
input after the statute has expired.
3. If a suit is being
recommended based on anticipated improvement in the taxpayer's financial
condition - such as discharge of a debt, inheritance or other significant
property acquisition - report the account CNC based on the taxpayer's current
circumstances (e.g. hardship, unable to locate, etc.).
4. The suit must be filed
prior to the statute's expiration. The recommendation should be initiated in
sufficient time so that it can be forwarded to Area Counsel at least nine
months before the expiration of the statute. A copy of the recommendation will
be kept with the case file. For further information on suits, see IRM 5.17.4, Legal
Reference Guide for Revenue Officers - Suits by the United States.
5. Guidelines for determining
the feasibility of recommending a suit are found in IRM 25.3.2, Suits
by the United States.
1. The employee assigned the
case at the time of the statute expiration will be required to report the
expiration in accordance with the procedures in IRM 5.1.19.5, Imminent
CSEDs .
This requirement applies to situations where a statute expires on any party to
a joint assessment where the balance is collectible from the other party(s).
These procedures apply to cases where a module has been reported CNC with
closing codes 04 and 05 or in cases where it is permissible to let the
collection statute expire in inventory with group manager's prior concurrence.
2. To report an expired
collection statute on a case where the RO has taken all appropriate actions
without resolving the module(s) prior to the expiration of the statute, use the
procedure in IRM 5.1.19.5.4, Expiration of a
Collection Statute.
3. To report an expired
collection statute on a case where the RO has not taken all appropriate
actions to resolve the module(s) prior to the expiration of the statute, use
the procedure in IRM 5.1.19.5.5, Collection
Statutes That Expire Without Prior Approval.
1. If a corporation has been
in bankruptcy and no further proceeds will be received from the bankruptcy and
anticipated collection from abandoned or after-acquired property is
insufficient to warrant further collection efforts, use cc 07.
Reminder:
Collection employees should
always contact Insolvency prior to using cc 07.
2. Closing code 07 may also be
used for exempt organizations that have been through liquidating bankruptcy and
LLC accounts, (where the LLC is identified as the liable taxpayer), that have
been through liquidating bankruptcy.
Note:
See IRM 5.1.21, Collecting
from Limited Liability Companies, for sources that may be used to identify
the liable taxpayer.
3. A NFTL should not be filed
regardless of the dollar amount, if the taxpayer is a corporation, exempt
organization or LLC (where the LLC is identified as the liable taxpayer), and
the entity has gone through a liquidating bankruptcy or receivership. Document
the proceeding number in the case history.
4. The trust fund recovery
penalty (TFRP) assessment must be considered and Form 4183, Recommendation
Re: Trust Fund Recovery Penalty Assessment, must be approved prior to
reporting the trust fund liabilities CNC using criteria in IRM 5.7.4.5, Trust
Fund Recovery Penalty (TFRP).
5. If the aggregate unpaid
balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ request information on the latest
filed income tax return (Form 1120 or 990) by using BRTVU/TRDBV to help
identify additional assets. If assets are indicated, secure a copy of the
return to pursue any leads. Requests for returns should be limited to returns
filed within the prior two years.
6. If the aggregate unpaid
balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ , any portion of the assessment
results from an examination and/or fraud penalty, request a copy of the revenue
or special agents file formerly known as RAR. Review the file for additional
assets, inconsistencies in the taxpayer's financial disclosure and potential
for transferee assessment.
7. If the aggregate unpaid
balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ ≡ , check cc AMDIS. If there is an
open examination, contact the agent to determine if there are additional assets
or to provide information which may limit the scope of the examination based on
lack of collectibility.
8. Corporations and
liquidating LLCs, (where the LLC is the liable taxpayer), that have filed a
Chapter 7 bankruptcy petition and have been designated a "No Asset"
case, being closed as TC 530 cc 07 by the Centralized Insolvency Operation
(CIO) do not require managerial approval.
1. Use closing code 08 to
report an account CNC on a decedent or decedent estate .
2. Closing code 08 is
appropriate for IMF joint liabilities only when both taxpayers are deceased and
a determination has been made that there is no collection potential from assets
owned at death.
3. Closing code 08 may be used
when the primary taxpayer is deceased and a determination has been made that
there is no collection potential from the decedent's individual or business
assets or persons in possession of such assets. Collection may also be pursued
from the surviving spouse on joint liabilities using MFT 31 mirrored accounts.
See IRM 5.16.1.3.2.1 for additional information.
4. Do not use cc 08 when only
the secondary taxpayer is deceased. A TC 540 should be input on the secondary
taxpayer's SSN. Collection may be pursued from the decedent's individual or
business assets or persons in possession of such assets. Collection may also be
pursued from the primary taxpayer on joint liabilities. If the primary taxpayer
is determined to be uncollectible, the account should be closed using a
hardship closing code. A CIS must be secured from the primary taxpayer.
5. Closing code 08 also
applies to BMF sole proprietorships and partnerships only if all of the
partners are deceased and taxes were due at the time of death.
6. In situations where the
owner of an LLC is identified as the liable taxpayer and is deceased, cc 08 is
appropriate.
7. In all decedent and
decedent estate cases attempt to secure the following:
·
Date of death
·
County/city in which the taxpayer died
·
The taxpayer's place of residence at the time of death
·
The name, address and telephone number of the fiduciary
·
Probate records that list an inventory and appraisement
of decedent assets
Caution:
Closing code 08 does not
apply to corporations even though one or more of the officers may be deceased
or to LLCs (where the LLC is identified as the liable taxpayer) and one or more
of the members is deceased.
8. Additional sources may be
used to determine the date of death including:
·
On-line locator services (follow security guidelines when
using public internet search engines)
·
Obituaries
·
Family members
·
Death certificates
9. Field employees will
consult with Advisory for the purpose of filing a proof of claim when there is
an estate proceeding.
Note:
See IRM 5.5, Decedent
Estates and Estate Taxes , and IRM 5.17.13, Legal
Reference Guide for Revenue Officers, Insolvencies and Decedents' Estates, regarding proof of claim.
10. Consider a transferee
assessment if circumstances warrant and document the ICS history.
Note:
See IRM 5.17.14, Legal
Reference Guide for Revenue Officers regarding Fraudulent Transfers and
Transferee and Other Third Party Liability.
11. When reporting accounts CNC
using cc 08, do not request separate input of TC 540 to delete the master file
filing requirements. TC 530 cc 08 generates a TC 540.
1. The following accounts may
be closed as CNC, tolerance without further action, where the aggregate unpaid
balance, including accruals, is less than ≡ ≡ ≡ ≡ ≡ :
·
IMF (other than MFT 55)
·
BMF (other than MFT 13)
·
NMF
·
IRAF
Use closing code 09. These
accounts do not require managerial approval. This does not apply to cases with
TDA issuance codes of N (False Refund Claim Case), 914 (active CI case), or
TRSF (transferred from another area office). This does not apply to bankrupt
corporations, which should be closed using cc 07.
2. The following accounts may
be closed as CNC, tolerance, where the aggregate unpaid balance, including
accruals, is less than ≡ ≡ ≡ ≡ ≡ ≡ :
·
IMF MFT 55
·
BMF MFT 13
Use closing code 09. These
accounts do not require managerial approval.
3. When there are multiple
periods where any one period exceeds the tolerance level, do not use cc 09.
Close all periods using the appropriate CNC closing code such as unable to
locate, hardship, etc.
Exception:
A new LLC closing code 19
has been established for LLCs where the SMO is liable. If the SMO liable
periods meet the tolerance criteria, they can be closed using cc 19, and the
LLC liable periods can be closed using a different closing code or different
type of closure. See IRM 5.16.1.3.4.(7) LLC tables. Modules closed using cc 19
do not require managerial approval.
5.16.1.2.6
(04-29-2011)
Defunct Corporations, Exempt Organizations, Limited Partnerships, and Limited Liability Companies
Defunct Corporations, Exempt Organizations, Limited Partnerships, and Limited Liability Companies
1. Closing code 10 applies to
any corporation or exempt organization that is no longer operating and from
which all assets have been dispersed. Closing code 10 may be used to close Form
1041, U.S. Income Tax Return for Estates
and Trusts,
assessments on trusts or estates, if there are no assets to collect from and
transferee issues have been considered for all transfers of assets or
distributions to beneficiaries or grantors.
2. Closing code 10 may also be
used for limited partnership cases when the partnership agreement limits the
liability of the partners under local law, when the business is no longer
operating and from which all assets have been dispersed.
3. Closing code 10 may also be
used for LLC cases (where the LLC is identified as the liable taxpayer), when
the business is no longer operating and from which all assets have been
dispersed.
4. When there is limited
collection potential from a corporation with corporate income tax liability,
investigate and consider the following collection actions against shareholders,
successor entities or others receiving corporate property:
A. Foreclosure of any Federal
Tax Liens against property in the hands of other entities if they were in place
before distribution
B. Assertion of transferee
liability against recipients of corporate property
C. Enforcement of liens
attaching to corporate property before the distribution (levy, suit)
D. Assertion of fiduciary
liability against any parties acting in a fiduciary capacity
E. Suit to set aside the
fraudulent transfer of specific property
F. Establishing the recipient
as a nominee, alter ego, or successor in interest of the taxpayer and
proceeding appropriately
The above options,
particularly assertion of transferee liability, should be considered when
collecting unpaid deficiency income tax assessments against insolvent
corporations that utilized an Intermediary Transaction or other type of tax
shelter to shelter income.
5. When a corporation has been
dissolved under state receivership proceedings or other state dissolution
actions, use closing code 10. See IRM 5.5.4, Working
Non-Bankruptcy Insolvency Cases.
Note:
Seek Counsel's input in
cases of state receivership. Revenue Officers should consider consulting with
Insolvency prior to contacting Counsel. See IRM 5.17.13.1, Legal
Reference Guide for Revenue Officers, Insolvencies and Decedents' Estates, for further information
in circumstances involving assignments for the benefit of creditors, corporate
dissolutions, etc.
Reminder:
In situations where
transferee liability exists, action may be needed to protect the statute of
limitations of the transferee as well as the transferor. See IRM 25.6.22.6.2.4, Extension
of Assessment Statute of Limitations by Consent, Dissolved Corporations.
6. Form 4183, Recommendation
re: Trust Fund Recovery Penalty Assessment, must be approved before
reporting the employment and/or excise taxes CNC when the liability meets the
criteria in IRM 5.7.4, Investigation and Recommendation of
TFRP.
Form 4183 will also include the additional TFRP liabilities from any unfiled
returns. See IRM 5.7.4.3, Calculating the
TFRP.
Note:
If the corporate Bal Due
modules are being reported CNC prior to assessment of the TFRP, an Other
Investigation (OI) will be created on ICS to control completion of the TFRP
assessment.
7. If the aggregate unpaid
balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ , request information on the latest
filed income tax return (Form 1120, 1065 or 990) by using BRTVU/TRDBV to verify
the CIS and identify additional assets. If assets are indicated, secure a copy
of the return to pursue any leads. Requests for returns should be limited to
returns filed within the prior two years.
8. If the aggregate unpaid
balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ ≡ check cc AMDIS. If there is an
open examination, contact the agent for evidence of assets.
9. If the aggregate unpaid
balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ and any portion of the assessment
results from an examination and/or fraud penalty, request a copy of the revenue
agents file, (formerly known as RAR), by requesting the Document Locator Number
(DLN) of the TC 29X/30X. Review the file for additional assets, inconsistencies
in the taxpayer's financial disclosure and potential for transferee assessment.
10. If the corporation or LLC
is chartered in a state that permits corporate or LLC reactivation or
reinstatement, and it appears likely that the same entity will resume business,
consider a mandatory follow-up.
5.16.1.2.7
(04-29-2011)
In-Business Corporations, Exempt Organizations, Limited Partnerships, or Limited Liability Companies
In-Business Corporations, Exempt Organizations, Limited Partnerships, or Limited Liability Companies
1. Accounts may be reported
CNC using cc 13 when an operating corporation, exempt organization, or limited
partnership cannot pay its back taxes and enforcement cannot be taken because
the business has no distrainable accounts receivable or other receipts or equity
in assets.
2. Closing code 13 may also be
used for LLC cases (where the LLC is identified as the liable taxpayer), when
an operating business cannot pay its back taxes and enforcement cannot be taken
because the LLC has no distrainable income or equity in assets.
3. Secure a complete CIS. The
CIS must support the CNC recommendation. If the taxpayer has equity in assets,
the reason collection is not being pursued must be documented in the history.
The income and expense analysis must show that the taxpayer can make current tax
deposits, but cannot make payments on the back taxes. The income and expenses
should be verified against tax returns, bank statements or other financial
statements provided by the taxpayer. See IRM 5.15.1, Financial
Analysis,
for detailed information on financial analysis of business entities.
4. The taxpayer must be
current with all filing and paying requirements and must demonstrate an ability
to remain current prior to closing as cc 13. The case will be monitored for
filing and paying compliance and if the taxpayer does not remain current, the
case will be reactivated.
5. A TFRP investigation must
be completed and a recommendation on Form 4183 must be approved prior to
disposition of the account. See IRM 5.7.4, Investigation
and Recommendation of TFRP, for further information.
6. Consider issuance of Letter
903(DO) to prevent accrual of additional liabilities and document the decision.
For additional information, see IRM 5.7.2.1, Letter
903 (DO).
7. There is no systemic
follow-up on cc 13. Initiate a mandatory follow-up 18 to 24 months after the
date of the Form 53. Requests that exceed 24 months must include an explanation
in the history or CCP will limit the time to 24 months. The mandatory follow-up
will include securing a new CIS, conducting a full compliance check, and
reviewing the corporation's or LLC's latest income tax return. This review will
determine whether the account will be reactivated or scheduled for additional
mandatory follow-up.
8. If the taxpayer has
incurred subsequent liabilities while collection on a prior liability was
suspended, the taxpayer must be investigated to verify the taxpayer's financial
condition, a NFTL determination made, and a TFRP recommendation made on
applicable taxes. See IRM 5.7.4, Investigation and
Recommendation of TFRP .
1. Income tax liabilities of
certain institutions formerly under control of the Resolution Trust Corporation
(RTC) are subject to the InterAgency Agreement (Dec. 10, 1992) between the IRS
and the RTC. The Federal Deposit Insurance Corporation (FDIC), as the successor
to the RTC, is subject to this agreement but only for the RTC's remaining
inventory. Upon receipt of a copy of the FDIC Certification of Treasury Funds
Usage in connection with a Thrift subject to this Agreement, annotate the case
history, request TC 530 cc 15, and submit for managerial approval. Consult with
SB/SE Area Counsel thru Technical Services Advisory on statute expiration
issues to determine whether or not a collection suit should be initiated and/or
is required and document the case history. See IRM 5.1.12.13, Insolvent
Financial Institutions - Provisions of the IRS-RTC/FDIC Agreement, for additional
information.
2. This procedure applies only
to corporate income tax liabilities worked in Insolvency.
1. Follow the procedures in
IRM 5.15.1, Financial Analysis Handbook, to determine the correct
resolution of the case based on the taxpayer's assets and equity, income and
expenses:
·
A hardship exists if a taxpayer is unable to pay
reasonable basic living expenses.
·
The basis for a hardship determination is from
information about the taxpayer's financial condition provided on Form 433–A,Collection
Information Statement for Wage Earners and Self-Employed Individuals or Form 433–B, Collection
Information Statement for Businesses.
·
Generally, these cases involve no income or assets, no
equity in assets or insufficient income to make any payment without causing
hardship.
·
An account should not be reported as CNC if the taxpayer
has income or equity in assets, and enforced collection of the income or assets
would not cause hardship.
·
Hardship accounts are closed using cc 24 through 32. See
Exhibit 5.16.1-2.
Reminder:
Hardship closing codes can only be used for individual or
joint IMF assessments, sole proprietorships, general partnerships, and LLCs,
where an individual owner is identified as the liable taxpayer. See IRM
5.16.1.2.4 for decedent cases.
2. Verification of a CIS is
not required if the aggregate unpaid balance of assessments is less than ≡ ≡ ≡
≡ ≡ and the information on the CIS appears reasonable.
3. Under certain conditions, a
CIS is not required before reporting an account CNC. The aggregate unpaid
balance of assessments, including any prior CNC's, must be less than ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ and at least one of the following conditions must exist:
·
The taxpayer has a terminal illness or excessive medical
bills.
·
The taxpayer is incarcerated.
·
The taxpayer's only source of income is social security,
welfare, or unemployment.
·
The taxpayer is unemployed with no source of income.
Consider a mandatory follow-up or Manually Monitored Installment Agreement
(MMIA) for seasonal workers.
Note:
Employees are required to
secure documentation from the taxpayer prior to declaring the account
uncollectible if internal documents such as IRPTR and RTVUE do not confirm the
taxpayers' circumstance.
4. The following verification
is required for accounts when the aggregate unpaid balance of assessments is
between ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :
·
IRPTR or SUPOL
·
RTVUE/TRDBV
Note:
RTVUE/TRDBV is required
only if the last filed return was for one of the immediate two preceding years.
If RTVUE reveals new income or asset information secure a copy of the return(s)
for the purpose of identifying income or assets.
5. For accounts where the aggregate
unpaid balance of assessments is above ≡ ≡ ≡ ≡ ≡ the following additional
verification is required:
·
Full credit report on IMF and sole proprietor
taxpayers and LLCs (where an individual owner is identified as the liable
taxpayer)
·
Motor vehicle records
·
Real and personal property courthouse records, see IRM
5.1.18.4, Real Property Records
·
On-line locator services, such as Accurint, follow
security guidelines when using public internet search engines
·
CC AMDIS. If there is open Examination activity, contact
the revenue agent to determine any additional sources of collection or the need
to limit the scope of the examination based upon collectibility.
·
Audit File or Special Agents Report if the assessment
originated in Examination or Criminal Investigation (CI). The file can be
secured by requesting the DLN of the TC 29X/30X.
Note:
If unable to obtain any
information from the special agent, consider consulting with Advisory. If there
is a TC 910 on the module, the taxpayer may have filed a financial statement
with the probation office.
Note:
Credit reports are optional
for accounts with an aggregate balance below ≡ ≡ ≡ ≡ ≡ ≡ .
6. IMF accounts and BMF
accounts of sole proprietorships, partnership and LLCs, (where an individual
owner is identified as the liable taxpayer) that cannot be collected due to
bankruptcy, will be closed using hardship closing codes.
7. IRC 6343(e) requires the
immediate release of a levy on salary or wages due a taxpayer upon agreement
with the taxpayer that the tax is not collectible. See IRM 5.11.2, Serving
Levies, Releasing Levies and Returning Property. Case histories must be
reviewed to ensure that wage levies are released prior to declaring an account
uncollectible under hardship closing codes. The case history must be
documented.
Reminder:
If TC 670 with designated
payment code (DPC) 05 (levy) is present on any module or a regular series of
payments is noted, ensure that the disposition of the levy is known.
8. A compliance check will be
made and the results documented in the case history for all hardship
determinations per IRM 5.16.1.1(5). All open filing requirements or Del Ret
modules must generally be resolved and closed appropriately when reporting an
account CNC.
9. Open Del Ret modules may be
resolved by closing as little or no tax due, or income below filing requirement
(P-5-133), if warranted by the facts of the case. See IRM 5.1.11, Delinquent
Return Accounts, for options to resolve delinquent return accounts. If
the taxpayer is required to file and refuses a referral or summons may be
appropriate. See IRC IRM 25.5, Summons Handbook for summons procedures.
Caution:
If a hardship determination
is verified, a levy cannot be issued or left in place to persuade a taxpayer to
file.
Note:
Accounts may be reported
CNC hardship if a CIS can be verified, even if there are unfiled returns. If
the unfiled return is needed to confirm the hardship determination (i.e.,
income, expenses and/or assets reported on the CIS), the Bal Dues should be
held until the return is secured and the CIS can be verified, but levies cannot
be issued to collect the Bal Dues if all other income/asset checks appear to
confirm hardship.
10. Use the hardship closing
code that most closely corresponds to the taxpayer's total living expenses
allowed. See Form 433A, Collection Information Statement for
Wage Earners and Self-Employed Individuals; Section 4, Monthly Income
and Expense Analysis; Line 45, Total Living Expenses. If the closing code
chosen does not correspond to the taxpayer's allowed expenses, document the
reason for the deviation in the summarizing statement for the CNC decision.
Generally, do not select a code below the taxpayer's total living
expenses allowed. Do not use a higher code simply to prevent re-issuance of the
account.
Example:
Monthly living expenses
allowed x 12 (months) = Annual living expense amount. Select the hardship
closing code with the closest dollar amount above the annual living expense
amount.
Note:
If the closest closing code
amount is only $300.00 more than the annual living expense amount, the next
higher closing code would be selected. The history would be documented that an
increase in Total Positive Income (TPI) of only $300.00 above total living
expenses allowed annually would not enable the taxpayer to make monthly
payments.
11. The systemic process for
reactivating hardship CNC accounts relies on an increase in TPI above a
predetermined amount based on the hardship closing code when the case is closed
as CNC:
·
The TPI is reviewed annually when a taxpayer files an
income tax return.
·
For BMF accounts on sole proprietorships, partnerships
and LLCs (where the owner is identified as the liable taxpayer), TPI is
determined by the annual income of the individual, general partner or member of
the LLC.
·
The Social Security Number (SSN) of the individual,
general partner or member of an LLC (where the owner is identified as the liable
taxpayer) must be cross-referenced on IDRS.
·
Evaluate BMF entities to determine if a TC 130 should be
input on the SSN of an individual, general partner or member of an LLC ( where
the owner is identified as the liable taxpayer). Forward Part 3 of Form 53 to
CCP for input.
12. Taxpayers must be advised that
interest and penalties will continue to accrue on the account even though the
collection action is suspended. In addition, before reporting an account CNC,
other collection options such as Offer in Compromise should be discussed with
the taxpayer.
13. Case Closing Letter 4223, Case
Closed - Currently Not Collectible, will be issued to the taxpayer and/or Power
of Attorney (POA) when a case is closed as CNC - hardship. The case closing
letter will only be used when the collection investigation on the taxpayer
entity is concluded. Letter 4223 is available on the publishing web site
located at http://publish.no.irs.gov/.
1. Collection investigation
and distraint actions by the Service in cases involving taxpayers residing in
foreign countries are not treated the same as those involving taxpayers
residing in the United States. The Service is only able to collect from
taxpayers residing in foreign countries to the extent provided for in tax
treaties. Revenue Officers working taxpayers who reside in foreign countries
use TC 530 cc 06 for cases where it is known that the taxpayer has assets and
ability to pay in part or in full but has not done so and where we have no
further ability to collect as assets are outside the U.S. Currently, there are
only five countries with which the United States has treaties that provide for
mutual collection assistance. These countries are Canada, Denmark, France, the
Netherlands, and Sweden. See IRM 5.1.12.25, Outgoing
Mutual Collection Assistance Requests. International revenue officers also use TC
530 cc 06 in instances where they have initiated an Outgoing Mutual Collection
Assistance Request (MCAR) request and have no other collection avenues to
pursue. The TC 530 cc 06 closure can occur prior to the resolution of the
Outgoing MCAR request by the foreign country. Taxpayers residing in U.S.
possessions and territories (a.k.a. insular areas) are treated the same as
those residing in the United States and are not appropriate for closing as TC
530 cc 06.
2. When the taxpayer travels
overseas frequently or there is reason to believe the taxpayer travels overseas
frequently in accordance with IRM 5.1.18.13, United
States Passport Office, request a passport check if the aggregate
unpaid balance of assessments is:
·
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or more for international taxpayers.
·
≡ ≡ ≡ ≡ ≡ ≡ ≡ or more for domestic taxpayers.
1. In certain circumstances
employees will be required to take additional actions to ensure that CNC
accounts are properly closed.
2. When recommending an
account be reported CNC with MFT 74 or MFT 76 Bal Due modules showing on IDRS
SUMRY or BMFOLI, follow the procedures below:
A. Determine the correct type
of CNC based on IRM 5.16.1 criteria, excluding the MFT 74 or 76 modules.
Exception:
If the total balance due
including the MFT 74 and 76 modules exceeds the tolerance amount, you will not
be able to close the case as tolerance.
B. Input the CNC request on
ICS excluding the MFT 74 and 76 modules.
C. Follow the same processing
procedures for a CNC case.
D. Document the closing ICS
history that the MFT 74 and 76 modules should be excluded from the CNC.
E. The MFT 74 and 76 modules
can be ignored for purposes of reporting an account CNC.
Note:
If an ICS Bal Due was
created for an MFT 74/76 module, and all other Bal Due modules on the case are
being closed as CNC, the ICS created Bal Due modules for the MFT 74/76 modules
must be closed as "Erroneously Created " . Since these modules are
not on IDRS, they will not systemically close on ICS.
1. If a transferee assessment
has been recommended and the liability is not collectible from other sources,
report the transferor account CNC under the appropriate closing code. See IRM
5.1.14.2, Transferee Liability and Fraudulent
Conveyances,
for further guidance.
2. Document the consideration
of transferee liability prior to case disposition.
1. Assessments against more
than one taxpayer can only be reflected as CNC on IDRS and ICS if all of the
liable taxpayers are determined to be uncollectible. In order to request a CNC
hardship closing code on a joint IMF liability, where the taxpayers are now
divorced or legally separated, both taxpayers would need to be uncollectible.
2. If one taxpayer qualifies
for CNC hardship on a joint liability, or one taxpayer on the joint assessment
requests separate treatment from their spouse, proceed with the CNC mirroring
process. See IRM 5.16.1.3.2.1 for additional information.
Reminder:
Employees should review
joint accounts of divorced taxpayers to ensure that collection is not being
pursued on a taxpayer that has already been determined to be uncollectible.
3. An accepted offer in
compromise will release the taxpayer who made the offer from the entire
liability if the taxpayer complies with all the terms of the offer. Offer
credits are applied to the original liability reducing the overall debt. If the
liability against the remaining taxpayer is determined to be uncollectible, the
amount to be reported as CNC is the balance of assessments after credits.
Note:
For specific procedures
concerning partnership liabilities see IRM 5.8.4.20.2, Partnership
Liabilities and IRM 5.15.1.36.1, Entity
Types.
1. When a taxpayer files a
joint income tax return with a balance due, both taxpayers are equally
responsible for payment of the tax liability. One or both taxpayers on the
jointly filed return may request and qualify for separate treatment and meet
CNC criteria. Revenue Officers are to follow procedures in IRM 5.15.1, Financial
Analysis Handbook, to determine the correct resolution based on the
taxpayers' assets and equity, income and expenses.
2. If it is determined that
one of the taxpayers on the joint return may not be collectible then the MFT 30
joint account must be mirrored into two separate MFT 31 accounts to allow the
RO to report one of the liable taxpayers CNC and to pursue collection on the
other liable taxpayer.
3. A mirrored assessment is
identical to the MFT 30 assessment. The MFT 30 joint assessment will be
replaced with two separate accounts using the MFT 31 account code. The purpose
in creating the MFT 31 accounts is to pursue collection or withhold collection
on each spouse separately, when needed. A mirrored account is identified on
IDRS by MFT 31. The CNC mirroring process will be identified by TC 971 AC 109
on each account.
4. The MFT 30 account must be
"mirrored" into two separate MFT 31 accounts when one taxpayer on a
jointly filed return needs to be treated separately from the other taxpayer
based upon the following triggering event(s):
·
Joint MFT 30 liability
·
Either taxpayer is determined to be CNC
·
Taxpayer requests separate treatment from their spouse or
former spouse
5. The RO will conduct the
following analysis:
·
Verify joint liability
·
Analyze taxpayer's ability to pay (using financial
information)
·
Determine if one of the taxpayers meets CNC criteria
·
Conduct full compliance check
·
Consider appropriate enforcement actions such as levy or
NFTL
·
Document the taxpayer's request for separate treatment
from their spouse or former spouse
6. A separate CNC on a joint
liability cannot be referred for mirroring
if any of the following conditions exist:
·
Invalid SSN or TIN
·
Name control is not the same as on CC INOLE
·
A credit balance exists on the module to be mirrored
·
If either TIN begins with a "9"
·
Bankruptcy
·
International Entities
Note:
A compliance check should
be made and documented when considering a CNC hardship case. Folow procedures
in IRM 5.16.1.2.9(9) if there unfiled returns.
1. If a NFTL is already filed
on the MFT 30 tax period(s), (check for TC 582 and/or TC 360), then no
additional lien filing is necessary when the account is mirrored. The NFTL
transaction codes will transfer over to the mirrored accounts.
2. If there is no indication
that a NFTL is already filed on the MFT 30 tax period(s) involved and a lien
filing is necessary and the lien should be filed to protect the government's
interest against both taxpayers, the RO will request filing of the NFTL prior
to sending the account forward for mirroring. The MFT 30 case must be held
until the NFTL filing requirements are met, the NFTL is requested and the TC
582 lien indicator is pending. See IRM 5.12.2.2, Lien
Filing Requirements - Creation and Duration; IRM 5.12.2.3, Lien
Filing Requirements - Taxpayer Contact; and IRM 5.12.6.3, Creating
the Notice of Federal Tax Lien Form 668(Y)(c), using ALS.
3. If a NFTL is only required
on the mirrored tax period(s) against one spouse, the case may be packaged with
a completed NFTL request via Form 12636, Request for Filing
or Refiling Notice of Federal Tax Lien, and forwarded with Form
3210, Document Transmittal, to SB/SE CSCO PSC for
processing.
4. If a determination is made
that no lien is to be filed on the mirrored account, a statement must be
documented on Form 3210.
1. Perform and document
complete research prior to making a referral for the mirroring process. A
manual Form 53 can be selected from the ICS template listing in preparing a
referral for mirroring.
2. Document the following
information on Form 3210:
A. "MFT 31 Mirror"
in the remarks section
B. Taxpayer name line and MFT
30 TIN
C. Name and TIN of taxpayer
account to be mirrored
D. Current address of the
taxpayer to be mirrored
E. All telephone numbers of
taxpayer
F. Tax years to be included
G. Indicate appropriate TC 530
cc (24 - 32)
H. RO name, T-sign and phone
number
Note:
If a NFTL is not required,
annotate on Form 3210 that lien determination was made and no lien is to be
filed.
3. If a NFTL is required on
the mirrored assessment, attach Form 12636 to Form 3210. Annotate "MFT 31
Mirror" , on Form 12636. Complete Form 12636 with date, RO name, T-sign,
and phone number.
4. Attach Form 53 package to
Form 3210 for routing to SB/SE CSCO PSC for input of TC 530 on the mirrored tax
periods. Form 53 must be annotated with "MFT 31 Mirror Assessment" in
red or bold. Group assessed and mirrored tax periods together in Item 16 of
Form 53, beginning with assessed liabilities; write "mirrored" at the
beginning of the mirrored periods header.
5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡
6. SB/SE CSCO PSC will create the
MFT 31 modules identified by TC 971 AC 109, process the NFTL request and input
the appropriate CNC closing action(s).
7. Send case closing Letter
4223, Case Closed Currently Not
Collectible,
on the MFT 31 mirrored assessment when the account is reported as CNC hardship.
1. If another delinquent
module becomes due and owing after the initial CNC, the new account may be
reported CNC without further investigation if the prior CNC determination is no
more than twelve months old. A NFTL determination is required per IRM 5.12.2.4,Notice
of Federal Tax Lien Determination.
2. Exceptions are:
·
Trust fund taxes which require a TFRP determination or
which accrued after the date of the prior CNC determination
·
Prior bankruptcy (07) dispositions; contact Insolvency to
determine other collection sources
·
The taxpayer has a new address and the case was reported
as CNC unable to locate or unable to contact
·
When a case was closed TC 530 cc 39, shelved
3. Combined Annual Wage
Reporting (CAWR) assessments may be reported CNC without investigation if they
meet the criteria in IRM 5.7.4, Investigation and
Recommendation of TFRP, and if the prior CNC closing code is 10. If
the prior cc is 07, contact Insolvency to determine collection potential.
4. Federal Unemployment Tax
Act (FUTA) state matching assessments may be reported as CNC without further
investigation if the prior CNC closing code is 10. If the prior CNC closing
code is 07, contact Insolvency to determine collection potential.
1. Limited Liability Companies
(LLC's) are business entities that are organized and established under state
law which specifically limits the liability of the owners for debts of the LLC.
The identity of the party liable for taxes is either the LLC or the owner of
the LLC.
Note:
See IRM 5.1.21, Collecting
from Limited Liability Companies, for guidance in identifying the liable
taxpayer. This includes information on the classification for federal tax
purposes of a single member LLC (as a disregarded entity or an association
taxable as a corporation) and a multi-member LLC (as a partnership or an
association).
Note:
A single member LLC that is
classified as a disregarded entity will, nevertheless, be treated as an entity
separate from its owner for employment tax purposes (effective for wages paid
on or after January 1, 2009) and for certain excise tax purposes (effective for
liabilities imposed and actions first required or permitted in periods
beginning on or after January 1, 2008). The regulations are not retroactive.
2. Prior to reporting any
modules as CNC, ensure the appropriate TC 971 Action Codes 364/365/366 have
been input to identify the liable taxpayer for each tax module.
3. Where the LLC is identified
as the liable taxpayer, consider the following:
·
Collectibility is based on the income and assets of the
LLC.
·
The NFTL is filed in the name of the LLC.
·
The assets of the members of the LLC are not subject to
collection action.
·
The TFRP must be considered with respect to the members
or employees of the LLC who meet the definition of responsibility under IRC
6672.
4. Where the SMO is identified
as the liable taxpayer, consider the following:
·
Collectibility is determined based on the income and
assets of the owner.
·
The NFTL is filed in the name of the SMO.
Note:
See IRM 5.12.2.6.3, Preparing
the NFTL - Limited Liability Company (LLC), for further instructions
concerning NFTLs against single member disregarded LLCs.
5. Because state law specifies
that the owner of an LLC has no direct ownership in LLC assets, the property of
the LLC is not available for collection action when the owner is identified as
the liable taxpayer. Consider the following:
·
In situations where an individual owner of an LLC is
identified as the liable taxpayer, that individual is directly responsible for
the entire liability and the TFRP is not required as to the owner.
·
When the owner of an LLC is a partnership, the liable
taxpayer is the partnership and the partnership is responsible for the
liability. Counsel should be consulted to determine if individual partners are
directly responsible for the liability or if a TFRP should be considered with
respect to anyone who meets the definition of responsibility and willfulness
under IRC 6672. Revenue officers should consider consulting with Advisory prior
to contacting Counsel.
·
When the owner of an LLC is a corporation, the liable
taxpayer is the corporation and the corporation is responsible for the
liability. Consider the TFRP with respect to employees of the LLC or of the
corporation who meet the definition of responsibility and willfulness under IRC
6672.
6. If assessments in the name
and EIN of an LLC include some tax periods where the LLC is identified as the
liable taxpayer and other tax periods where the owner of the LLC is identified
as the liable taxpayer, separate collection determinations must be made for
each identified taxpayer.
Caution:
Administrative collection
action should never include both the name of the LLC and the name of the SMO.
Only the name of the liable taxpayer should be included.
7. There will be situations
where one case resolution is appropriate for the single member owner and a
separate case resolution is appropriate for the LLC, and special case processing
is required. When modules, where the single member owner is liable, will be
closed as UTL, UTC or tolerance, use cc 17, 18 or 19. Case resolution actions
must be taken in a specific order as shown in the table below:
|
If CNC is the
appropriate case resolution for . . .
|
And. . .
|
Then request CNC. . .
|
|
all modules for both liable taxpayers
|
the same closing code is appropriate for both liable taxpayers
|
for all modules using appropriate closing code and submit for
approval on ICS.
|
|
all modules for both liable taxpayers
|
different closing codes are appropriate for each liable taxpayer
|
for one liable taxpayer using appropriate closing code and
submit for approval on ICS. Following approval of the CNC on the first liable
taxpayer, request CNC for remaining modules for the other liable taxpayer
using appropriate closing code and submit for approval on ICS to close case.
Caution:
If closing one
taxpayer as unable to locate (CC 03), unable to contact (CC 12) or tolerance
(CC 09), you must close modules using the other closing code first.
|
|
one liable taxpayer
|
modules for the other liable taxpayer will remain open orrequire a separate case resolution
|
for that liable taxpayer, using appropriate closing code and
submit for approval on ICS. Then take necessary action on remaining modules
for other liable taxpayer.
Note:
Requests for closing
specific modules as unable to locate (CC 03), unable to contact (CC 12) or
tolerance (CC 09), require manual input of TC 530 by sending Form 53 by
secure E-mail to CCP.
|
8. Counsel should be consulted
whenever legal issues are encountered. Consider consulting Advisory prior to
contacting Counsel.
1. The IRC 6700 civil penalty
is assessed against the promoters of abusive tax shelters. The IRC 6701 civil
penalty is assessed against any person who aids and abets the understatement of
a tax liability. See IRM 20.1.6.12, Penalty for
Promoting Abusive Tax Shelters IRC 6700, and IRM 20.1.6.13, Penalties
for Aiding and Abetting IRC 6701, for detailed descriptions of the IRC 6700
and IRC 6701 civil penalties. Persons against whom these penalties have been
assessed often conceal assets and distort their financial picture through a
wide variety of sophisticated means, making it difficult to immediately
determine the true collection potential of promoter penalty assessment accounts
with a high degree of confidence. Assets currently concealed or placed beyond
the government's reach may be discovered or become available during subsequent
investigations.
2. IRC 6700 and IRC 6701
balance due accounts should be assigned to an Abusive Tax Avoidance Transaction
(ATAT) trained RO. Contact the Area ATAT Coordinator for reassignment of a
promoter penalty assessment account. See IRM 5.20.8.3, Coordination
with the Exam Function, for a web link to the Small
Business/Self-Employed (SB/SE) abusive tax web site for a list of Area ATAT
coordinators for collection. In addition to the requirements of IRM 5.16, the
procedures in IRM 5.20.8, Abusive Tax
Avoidance Transactions - Promoter/Preparer Investigations, should be followed prior
to closing a promoter penalty assessment account as CNC.
5.16.1.4
(04-29-2011)
Requesting Currently Not Collectible Input for Assessed and Pre-assessed Tax Periods
Requesting Currently Not Collectible Input for Assessed and Pre-assessed Tax Periods
1. Input of a TC 530 may be
requested on Form 53, Report of Currently Not Collectible
Taxes,
Form 3177, Notice of Action for Entry on Master
File,
and Form 4844, Request for Terminal Action. The information required
includes the SSN/EIN, name control, tax period(s), MFT and the closing code.
Note:
Parts 2 and 3 of a paper
Form 53 generated by ICS, which show "For processing as Form 3177" ,
at the bottom, should be sent by secure E-mail or mailed separately from the
closed case to CCP for input.
2. For ICS cases, the group
manager’s approval of the CNC allows the TC 530 and closing code to upload to
IDRS. At least one of the tax periods must be in status 26 on IDRS for the
upload to be successful.
3. ICS will not send a TC 530
to IDRS on pre-assessed/unassessed tax periods. Consider the following:
·
If a NFTL will be required on the pre-assessed tax
periods, the ICS case with a combination of assessed and unassessed tax periods
must be held until all tax periods for CNC have been assessed. Once assessed on
IDRS, create the "ICS Only Bal Due Notice" tax periods on ICS. Wait
ten days after assessment to request the NFTL on ICS in accordance with IRM
5.12.2.2, Lien Filing Requirements - Creation
and Duration,
and IRM 5.12.2.3, Lien Filing Requirements Taxpayer
Contact.
After the NFTL indicator (TC 582) is pending, the case can be closed as CNC on
ICS. It is not necessary to wait until all tax periods are in Status 26, as
long as at least one tax period is in Status 26.
·
If a NFTL will not be required on the
pre-assessed tax periods, create the pre-assessed tax periods on ICS as
"ICS Only Bal Due Pre-assessed Modules" . This will generate
"pre-assessed" to print on the Form 53 for each pre-assessed tax
period. Complete the CNC process on ICS. If there are both assessed and pre-assessed
tax periods, the assessed tax periods will upload the TC 530 to IDRS. The
pre-assessed tax periods will not upload and therefore must be processed to CCP
for input of TC 530 after assessment. Attach a copy of the signed tax return
for each pre-assessed tax period to the CNC file. For additional information
see the Who/Where tab on SERP or click on this link
http://sbse.web.irs.gov/CCP/Contacts/CCP_Addresses.htm.
4. For cases not processed on
ICS, prepare Form 53 and complete the following actions:
·
If a NFTL is required on the pre-assessed tax periods,
the case must be held until the assessments are made. After NFTL filing
requirements are met in accordance with IRM 5.12.2.2, Lien
Filing Requirements - Creation and Duration, and IRM 5.12.2.3, Lien
Filing Requirements Taxpayer Contact, complete Form 12636, Request
for Filing or Refiling Notice of Federal Tax Lien, available through the
template process. Complete all applicable fields and forward Form 12636 to the
Centralized Lien Unit (CLU) for processing. For additional information, please
click on the Who/Where tab on SERP, scroll down to Lien Payoff/Release Numbers
to visit the Centralized Lien Unit Site, or click on this link
http://serp.enterprise.irs.gov/databases/who-where.dr/als.dr/case-processing-lien-units.htm.
Forward the CNC file to CCP for input of TC 530 on the assessed tax periods
after the NFTL indicator (TC 582) is pending. Click on this link for the CCP
addresses. http://sbse.web.irs.gov/CCP/Contacts/CCP_Addresses.htm.
·
If a NFTL is not required annotate Form 53
"Assessed/Unassessed" in red or bold. Group assessed and unassessed
tax periods together in Item 16 of Form 53, beginning with assessed
liabilities; write "Unassessed" at the beginning of the unassessed
periods header. Attach a copy of the signed tax return for each pre-assessed
tax period to the file. Forward the file to CCP for input of TC 530 on the
assessed tax periods and monitoring of the unassessed tax periods. Click on
this link for the CCP addresses http://sbse.web.irs.gov/CCP/Contacts/CCP_Addresses.htm.
5. Completion of item 15 on
Form 53 will depend on the nature of the closure and the procedures needed to
close the account. Only certain records need to be checked depending on the
dollar level and type of account, SeeIRM 5.16.1.2 for further guidance.
6. Form 53 requires managerial
approval prior to input of a CNC request. See IRM
5.16.1.5 for
additional information. Unapproved requests will be returned to the initiator.
1. The decision to place an
account in CNC status requires the approval of a manager. The approval should
normally be that of the recommending employee's immediate manager. Acting
managers may be given authority to approve CNC's.
Exception:
As noted in IRM
5.16.1.2.3(8), corporations and liquidating LLCs (where the LLC is the liable
taxpayer), that have filed a Chapter 7 bankruptcy petition and have been
designated a "No Asset" case that are being closed as TC 530 cc 07 by
the Centralized Insolvency Operation do not require managerial
approval. IRM 5.16.1.2.5., for tolerance accounts
being closed with TC 530 cc 09 and cc 19 that do not require managerial
approval.
2. The manager's review must
address the thoroughness of the investigation to ensure that a hardship
condition exists before approving a recommendation to declare an account
uncollectible. If a mandatory follow-up is required, the manager must verify it
meets the criteria in IRM 5.16.1.6. See IRM 1.4.50 Exhibit 1.4.50 - 2,Criteria
for Review of Completed Work, for additional information.
3. If additional actions are
needed to CNC an account, the manager should indicate what additional steps
need to be taken before the CNC can be approved such as partial collection from
available assets, consideration of an installment agreement or an offer in
compromise.
1. Systemic follow-up is
limited to hardship, unable to locate, and unable to contact cases. The
systemic process for reactivating hardship CNC cases relies on an increase in
Total Positive Income (TPI) above a predetermined amount based on the hardship
closing code when the case is closed as CNC. The TPI is reviewed annually when
a taxpayer files an income tax return. For BMF cases on sole proprietorships,
partnerships and LLCs, (where the owner is identified as the liable taxpayer),
the TPI is determined by the annual income of the individual, general partner
or member. The Social Security Number (SSN) of the individual, general partner
or member of an LLC, (where the owner is identified as the liable taxpayer),
must be cross-referenced on IDRS. These cases do not require a mandatory
follow-up.
2. In some circumstances a
mandatory follow-up action is requested to ensure protection of the revenue
potential on a CNC case including specific assets such as vestment in funds or
full payment of an encumbrance of real property.
3. Request mandatory follow-up
only when required or when there is a likelihood that revenue will be collected
by taking the requested action.
4. Do
not request a mandatory follow-up in the following instances:
A. To update and review a CIS
on the chance that a taxpayer's financial condition will change.
B. If follow-up will occur in
less than 90 days; these cases should be held in the RO inventory.
C. To check on future
compliance with filing requirements.
D. To verify that payments are
being made on an installment agreement.
E. To verify that estimated
tax payments are being made.
F. To determine offset of a
potential refund.
G. To attempt to locate a
taxpayer whose accounts were reported CNC with closing code 03, 06 or 19.
H. If the aggregate account
balance, including accruals, is less than the following Bal Due deferral
levels:
IMF - ≡ ≡ ≡ ≡ ≡ ≡ , (except MFT 55 - ≡ ≡ ≡ ≡ ≡ )
BMF - ≡ ≡ ≡ ≡ ≡ ≡ ≡ , (except MFT 13 - ≡ ≡ ≡ ≡ ≡ ≡ )
NMF - ≡ ≡ ≡ , (except ≡ ≡ ≡ ≡ ≡ for NMF accounts on telephone excise tax when the SSN is determined)
IRAF - ≡ ≡ ≡ ≡
IMF - ≡ ≡ ≡ ≡ ≡ ≡ , (except MFT 55 - ≡ ≡ ≡ ≡ ≡ )
BMF - ≡ ≡ ≡ ≡ ≡ ≡ ≡ , (except MFT 13 - ≡ ≡ ≡ ≡ ≡ ≡ )
NMF - ≡ ≡ ≡ , (except ≡ ≡ ≡ ≡ ≡ for NMF accounts on telephone excise tax when the SSN is determined)
IRAF - ≡ ≡ ≡ ≡
Example:
Financial information shows
the taxpayer's allowable expenses exceed income and there is no
equity in
assets. The taxpayer has fallen on hard times but expects to be back to work in
a year and able to pay the tax debt. Allowable expenses are $22,000. Report the
account CNC using cc 25. Do not request a mandatory follow-up. The account will
be reissued systemically when the taxpayer files a return with income of
$28,000 or more.
Example:
Financial information shows
the taxpayer's allowable expenses exceed income. The taxpayer has equity in
their home sufficient to pay the tax debt and requests an extension of eight
months to allow them time to refinance their residence. Do not report this
account as CNC. Continue to pursue equity in asset using appropriate IRM
procedures.
Example:
Financial information shows
the taxpayer's allowable expenses exceed income and no equity in assets. The
taxpayer is incarcerated and his/her release date is two years from today's
date. Report the account CNC using cc 24.
5. Request mandatory follow-up
when there is evidence that the taxpayer's ability to pay will improve and
either computer generated reactivation is not available or the improvement will
happen significantly sooner than systemic reactivation can occur. Generally,
the expectation is that revenue will be collected as a result of the follow-up
request. Circumstances include:
A. IMF accounts where the
taxpayer will pay off a debt which creates positive cash flow for payment of
the tax.
Example:
Financial information shows
the taxpayer's allowable expenses equal income. The taxpayers have equity in their home but already
have a second mortgage and cannot qualify at this time for a third.
The second mortgage will be paid in ten months. Allowable expenses are $42,000.
Report the account CNC using cc 27 with a mandatory follow-up in twelve months
to see whether, based on the current equity in assets, the IRS may be able to
secure payment from the taxpayer through either a new second mortgage and/or an
installment agreement.
B. In business corporation
cases and other employment tax cases (proprietorship, partnership, or LLC)
where the taxpayer is still in business in accordance with IRM 5.16.1.2.7(7).
C. BMF accounts for which the
principals file as the secondary SSN on a joint income tax return.
Example:
If a couple files jointly
under the wife's SSN, and the husband owes on a sole proprietorship that is
reported uncollectible, the BMF case would have the husband's SSN as the cross
reference. Since reactivation is determined by an annual review of TPI on the
cross reference SSN and the husband is filing under the wife's SSN, this case would
not reactivate.
D. The account is reported CNC
using cc 12 or cc 18 and there is a definite indication contact should be made
in the future.
Example:
The taxpayer is out of the
country or temporarily cannot be reached.
E. The taxpayer is reported
CNC as a defunct business (other than a sole proprietorship) but requires a
follow-up because there is an indication that the business will be due funds in
the future.
F. The taxpayer is a seasonal
worker, and the tax would be collectible if the taxpayer is contacted when
working.
G. Non-master file accounts.
H. Cases in which the 65 cycle
suppression of reactivation built into the systemic follow-up program would
prevent timely action.
I. Cases where a notice of
levy was issued to attach retirement income and assets or income from a law
suit which the taxpayer is not yet eligible to receive.
J. Cases that require a NFTL
refile and/or waiver.
6. For cases not processed on
ICS, document the specific follow up actions and the date required in the
Mandatory Follow-up Action section of Form 53, (or equivalent) in sufficient
detail to ensure appropriate follow-up. Also document the case history to
permit review of the follow-up action after part 4 of Form 53 is detached. As
each follow-up action is completed, update part 4 to show the date of the next
follow-up.
7. When a CNC case is closed
through ICS with a mandatory follow-up request, after managerial approval, ICS
systemically creates a Non-Field OI and assigns it to CCP. The RO then sends
the paper file to CCP to monitor the follow-up action. Form 3210, Document
Transmittal,
and the CNC case file should be annotated in bold or red "Mandatory
Follow-up 53" . See the Who/Where tab on SERP for the CCP addresses or
click on this link. http://sbse.web.irs.gov/CCP/Contacts/CCP_Addresses.htm
8. CCP will maintain a file
for mandatory follow-up requests. These files will not be retired to the federal
records center. CCP will:
·
File the cases by month and year of the requested action
as determined by the originator.
·
File the cases alphabetically if a systemic monitoring
program is used.
·
Generate and control subsequent actions with an ICS OI.
Note:
CCP will monitor
in-business CNC cases for compliance. If the taxpayer incurs additional
liabilities, an OI will be issued to resolve the liabilities. If the additional
liabilities are not resolved, the CNC accounts will be reactivated for
collection action.
9. If the account remains in
CNC after a follow-up, update the closing code to reflect current conditions.
If a new closing code is needed request input of TC 530 with the new closing
code on the CNC modules. Indicate on the request document, Form 4844, that the
modules are not on IDRS. Forward Form 4844 to CCP after securing the required
managerial approval.
Example:
If a case was closed as
Unable to Contact using cc 12, and the taxpayer is subsequently contacted and
determined to be a hardship, the closing code for the CNC periods should be
updated to a hardship closing code.
Example:
If the case was closed as
an in-business corporation using cc 13, and the follow-up determines the
taxpayer is now defunct, the closing code for the CNC periods should be updated
to cc 10 for a defunct corporation.
1. Quality review of CNC
accounts is conducted through Embedded Quality (EQ).
2. CNC cases with closing
codes other than 39 are included in a weekly random sample of closed Balance
Due taxpayer cases. See IRM 5.13.1.10, NQRS Sampling.
3. EQ quality review
attributes pertaining to CNC and other closures are found in IRM 5.13.2, Embedded
Quality Attribute Definitions.
|
(1) Enter the name of the taxpayer as it appears on the Bal Due
account or notice and the last known address of the taxpayer. Underline the
name control.
|
|
(1a) Self explanatory.
|
|
(2) Available for local use.
|
|
(3) Check the appropriate box. The date of NFTL filing is not
required.
|
|
(4) Complete whenever a Form 53 is assigned to an employee for
reinvestigation.
|
|
(5) An entry is required if the criteria for TC 130 contained in
IRM 5.1.12.21, Refund Offset, are met.
|
|
(6) Check the appropriate box. Complete this item to cross
reference an individual SSN to a related EIN when the individual's TPI on
subsequently filed returns is used to reactivate the account. See IRM
5.16.1.2.9(11). Forward Part 3 of Form 53 to CCP for TC 130 input.
|
|
(7) Complete this item when mandatory follow-up action is
required. See IRM 5.16.1.6.
|
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(8) Enter the date of the full compliance check. If not
applicable, as in unable to locate or unable to contact cases, write
"N/A" .
|
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(9) If the taxpayer is deceased, enter the date of death.
|
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(10) Check "Yes" to only close the BMF filing
requirements. Check "No" if the BMF entity remains liable for any
returns. Leave blank for IMF or NMF accounts. Forward Part 2 of Form 53 to
CCP for input.
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(11) Enter "1" for Advisory or CCP, "2" for
Collection Field function (CFf), "3" for CSCO, or "4" for
ACS.
|
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(12) Enter the employee identification number.
|
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(13) No entry required.
|
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(14) Enter the closing code that fits the situation of the
accounts being reported CNC. A listing of the closing codes is contained on
the reverse of Part 1 or see Exhibit 5.16.1-2.
|
|
(15) Only certain records need to be checked depending on the
dollar level and type of account. See IRM 5.16.1.2.
|
|
(16) Item 16 a — enter the TIN. If different master file
accounts on the same taxpayer are reported, the appropriate TIN may be
entered once for each group of accounts. Ditto marks may be used for
successive TIN entries.
Items 16 b – d are self explanatory. Include notice modules. Item 16 e is used when the account balance consists only of accruals. Write "Unassessed Periods" in this column. See IRM 5.16.1.4(4). |
|
(17) Self explanatory.
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(18) Self explanatory.
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(19) Self explanatory.
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(20) Self explanatory.
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(21) Proposed Action - Item
a. Check N/A if TFRP is not required. Date Submitted - will be the date the manager signs Form 4183 on ATFR. b. Date Submitted - will be date transferee recommendation is sent to Advisory. c. Date Submitted - will be date suit recommendation is sent to Advisory. d. Self explanatory. e. Check appropriate box if OIC was discussed with taxpayer as possible case resolution. f. If an OIC was filed and rejected, enter the amount of the offer. g. If Installment Agreement was discussed with taxpayer as possible case resolution, check appropriate box. |
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(22) Mandatory Follow up Action(s). Document specific follow-up
action and date required in sufficient detail to ensure appropriate
follow-up. An entry is required whenever Item 7 is checked "Yes" .
|
|
(1) The most common MFT codes and type of Tax are listed for
quick reference. See Document 6209 Section 11 Collection (5) TDA Closing
Codes for additional information regarding closing codes and type of tax.
|
||
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(2) The handbook text explains the use of the closing codes.
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||
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(3) Values for the hardship closing codes are as follows:
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24
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$20,000
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25
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$28,000
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26
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$36,000
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27
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$44,000
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28
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$52,000
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29
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$60,000
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30
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$68,000
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31
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$76,000
|
|
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32
|
$84,000
|
More Internal Revenue Manual
Charles Pitts v. Commissioner, TC Memo 2010-101 , Code
Sec(s) 6330; 6320.
CHARLES PITTS, Petitioner v. COMMISSIONER OF INTERNAL
REVENUE, Respondent.
Case Information:
Code Sec(s):
6330; 6320
Docket: Dkt
No. 6463-09L.
Date Issued:
05/6/2010.
Judge: Opinion by
Gustafson, J.
Tax Year(s): Years
1991, 1992, 1993.
Disposition: Decision
for Commissioner.
HEADNOTE
[pg. 590]
1. Collection due process—review of administrative
determination—financial hardship—hearings—Americans with Disabilities and
Paperwork Reduction Acts. IRS's administrative determination to proceed with
lien filing for disabled taxpayer's more than decade-old liabilities, and to
deny his financial hardship request for “currently not collectible” (CNC) status,
was upheld on summary judgment: taxpayer didn't submit Form 433-A or otherwise
provide financial information necessary to establish CNC eligibility/status;
and any belief on part of taxpayer or his representative that recent IRS news
release immunized taxpayer from obligation to provide stated financial
information was off base. Also, claims that IRS violated ADA by not giving
taxpayer in-person hearing at his home was belied by fact that taxpayer agreed
to hearing by correspondence. ADA claim was also otherwise misguided because
there was no statutory right to in-person CDP hearing, because ADA wasn't
applicable, and/or because IRS did accommodate taxpayer in respect to hearing.
And alternative argument, that PRA invalidated Form 433-A's use in CDP hearing,
was meritless since PRA provisions regarding “collection of information” didn't
even apply in CDP context.
Reference(s): ¶ 63,305.01(5) ; ¶ 63,205.01(5) Code Sec.
6330; Code Sec. 6320
Syllabus
Official Tax Court Syllabus
P's duly assessed
income taxes for 1991, 1992, and 1993 were still unpaid in 2008. The IRS filed
a notice of Federal tax lien and gave P notice of the filing and of his right
to a collection due process (CDP) hearing before R's Office of Appeals
(Appeals) under I.R.C. sec. 6320(b). P requested a hearing. Appeals scheduled a
hearing and asked P to submit financial information on Form 433-A, “Collection
Information Statement for Wage Earners and Self-Employed Individuals”. P's
representative requested that P's liability be classified as “currently not
collectible” because of financial hardship, that the hearing take place in P's
home because P is disabled, and that P be excused from submitting Form 433-A
because of his hardship. Appeals offered to conduct the hearing by telephone or
correspondence and repeated the request for Form 433-A. P did not provide the
requested information, and Appeals issued a notice of determination sustaining
the filing of the notice of lien. P appealed to this Court pursuant to I.R.C.
sec. 6330(d)(1) and filed a motion for summary judgment. R filed a
cross-motion.
Held: Appeals did not abuse its discretion in declining to
conduct a face-to-face hearing in P's home.
Held, further, the Paperwork Reduction Act of 1995, 44
U.S.C. ch. 35 (2006), does not apply to CDP hearings; and Appeals did not abuse
its discretion in requiring P's financial information on Form 433-A.
Counsel
Anthony M. Bentley, for petitioner.
Mimi M. Wong, for respondent.
GUSTAFSON, Judge
MEMORANDUM OPINION
This case is an appeal by petitioner Charles Pitts, pursuant
to section 6330(d)(1), 1 asking this Court to review the notice of
determination issued by the Internal Revenue Service (IRS) sustaining the
filing of a notice of Federal tax lien to collect Mr. Pitts's unpaid Federal
income tax for tax years 1991, 1992, and 1993. The case is currently before the
Court on the parties' cross-motions for summary judgment. For the reasons
explained below, we will deny petitioner's motion and grant respondent's motion.
Background
The following facts are based on Forms 4340, “Certificate of
Assessments, Payments, and Other Specified Matters”, for Mr. Pitts's taxable
years at issue; on the undisputed documents submitted in support of the
parties' cross-motions; and on court records of which we take judicial notice.
Mr. Pitts did not raise any genuine issue as to these facts. [pg. 591]
Mr. Pitts's non-payment of his taxes
Mr. Pitts filed no tax returns for the years 1991, 1992, and
1993. He has still not paid his income tax liabilities for those years, the
collection of which is now the subject of this litigation. In September 1999
the IRS prepared substitutes for return and thereafter sent Mr. Pitts a
statutory notice of deficiency pursuant to section 6212(a), determining
deficiencies and additions to tax for those years. Mr. Pitts challenged that
determination by filing a petition in the Tax Court in March 2000, commencing
Pitts v. Commissioner, docket No. 3187-00. That case was concluded when Mr.
Pitts agreed to the entry of a stipulated decision on February 9, 2001; and on
August 6, 2001, the IRS assessed against Mr. Pitts the following amounts of tax
and additions to tax pursuant to that decision, as well as interest thereon,
totaling about $68,000: 2
Additions to Tax
----------------------------
Year Tax Sec. 6651(a)(1) Sec. 6654 Interest
==== === =============== ========= =========
1991 $ 9,463 $2,365.75 $
540.80 $12,878.82
1992 9,782 2,445.50 426.66 11,480.56
1993 8,098 2,024.50 339.30 8,177.41
------- --------- --------- ----------
Total 27,343
6,835.75 1,306.76 32,536.79
In February 2003 Mr. Pitts filed a petition in the U.S.
Bankruptcy Court for the Southern District of New York, commencing In re Pitts,
No. 03-11021. That filing had the effect of staying IRS collection of his
liabilities, pursuant to 11 U.S.C. sec. 362(a) (2000). The IRS filed a proof of
claim in that proceeding that asserted Mr. Pitts's liability for his 1991 to
1993 taxes; Mr. Pitts objected to the proof of claim; and the bankruptcy court
overruled the objection. We take judicial notice of the records of the
bankruptcy court, which show that Mr. Pitts's bankruptcy case was closed in
August 2008.
The IRS's notice of lien
On October 21, 2008, the IRS sent to Mr. Pitts a Letter
3172, “Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC
6320.” The letter stated that the IRS had filed a notice of lien against Mr.
Pitts with respect to his unpaid tax liabilities for 1991, 1992, and 1993, and
that he had a right to request a so-called collection due process (CDP) hearing
before the IRS Office of Appeals.
Initial attempt to schedule the CDP hearing
Through his counsel, Anthony M. Bentley, Mr. Pitts timely
submitted to the IRS a Form 12153, “Request for a Collection Due Process or
Equivalent Hearing”. Mr. Pitts's Form 12153 did not indicate what relief or
collection alternative he desired, but the phrase “Bankruptcy Discharge” was
written on the form.
In response to Mr. Pitts's request, a Settlement Officer 3
in the IRS Office of Appeals sent him and Mr. Bentley a letter dated December
30, 2008, which stated that Mr. Pitts's CDP hearing had been scheduled to be
conducted as a telephone conference call on January 29, 2009. The letter
stated, “For me to consider alternative collection methods *** , you must
provide any items listed below”, which included a “completed Collection
Information Statement (Form 433-A *** )”. A blank Form 433-A, “Collection Information
Statement for Wage Earners and Self-Employed Individuals”, for Mr. Pitts to
fill out was attached to the letter.
Mr. Bentley replied by a letter that the IRS received on
January 14, 2009, which stated: [pg. 592]
I am instructed by my client that the conference would be
preferred to be held face-to-face at his home/business address, (the address to
which you direct his correspondence) with me in attendance as well as the
taxpayer, on 2/24/09 at 1530 hours, or at such later date that may be mutually convenient.
The taxpayer requests that the Treasury Department extend
reasonable accommodation to him under the ADA in meeting as indicated above,
due to his disability which makes him essentially homebound. He suffers from,
inter alia, acute COPD [chronic obstructive pulmonary disease], his only income
is Social Security (due to his recent layoff[)], and his medical bills already
amount to more than he can afford, to the extent they are over and above his
Medicare benefits.
His principal issue he wishes to discuss with you concerns
the suspension of collection due to hardship because of the above factors.
Although Mr. Bentley never submitted to the IRS (or to the
Court) substantiation of Mr. Pitts's medical condition, we assume for purposes
of summary judgment that Mr. Pitts does suffer from COPD and that he is
“essentially homebound”. We also assume (as Mr. Bentley stated at the hearing
held January 11, 2010) that Mr. Pitts lives in a fifth-floor walk-up apartment
and that he is a “hoarder”—i.e., “[s]omeone who has tons and tons of paper and
a variety of other things around that represent all of his possessions”.
Second attempt to schedule the CDP hearing
When the Settlement Officer received Mr. Bentley's letter,
she attempted to phone him and left him a voice mail message asking him to
“compromise on a date and time” and offering to hold a face-to-face conference
at 290 Broadway, which was the Office of Appeals location nearest to Mr.
Pitts's home.
Mr. Bentley responded to the voice mail with a letter dated
January 16, 2009, which stated:
It would appear that my letter to you received in your
office on January 14, 2009 has lacked clarity; it requests the Department of
the Treasury to render reasonable accommodation to my client in having a
face-to face conference at his home due to his disability which makes him
substantially homebound.
My letter also requests a date specific for that meeting as
the date chosen by you, in the words of your letter, “is not convenient” either
to my client nor to me, due to scheduling conflicts previously arranged, and we
have offered you, in my letter, any date post 2/24/09 should that date be
inconvenient.
I have enclosed an edited version of my original letter with
emphasis on those terms which constitute requests under the Americans with
Disabilities Act for “reasonable accommodation” which your voice mail message
appears to be refusing, and would ask you to clarify your position.
The Settlement Officer again left a voice mail message for
Mr. Bentley, explaining that the Office of Appeals does not conduct CDP
hearings at taxpayers' homes and that the CDP hearing could be held by
correspondence or by telephone. She asked that Mr. Pitts choose the manner of
hearing he would prefer and propose a date and time.
Decision to conduct the CDP hearing by correspondence
Mr. Bentley replied by a letter dated January 18, 2009:
write responsive to your voice mail message of January 16,
2009, which I found to be polite, informative and helpful.
As a result of the information that you relayed in your
message, it seems that the only effective course of action remaining to my
client in view of his disability would be to seek “hardship” relief in the form
of, initially, a temporary suspension of collection activity.
Would you please be so kind as to inform me, or provide me
by mail, what steps need be taken by the taxpayer to invoke this process?
I must advise that as I will be involved in a series of
medical procedures over the next weeks as treatment for re-[pg. 593] cently
diagnosed stage three kidney disease, I will be unable to telephone you as
requested in your last voice mail message during normal business hours, but I
will be able to proceed by correspondence, which choice is also selected and
approved by my client for the balance of the Appeals process. [Emphasis added.]
Second request for Form 433-A
On January 21, 2009, the Settlement Officer left a voice
mail message for Mr. Bentley, explaining that in order to seek suspension of
collection due to hardship, Mr. Pitts would need to fill out the Form 433-A
that had been enclosed with the Settlement Officer's letter of December 30,
2008. She asked that the form be filled out and returned by January 29, 2009,
so that she could review the form and then discuss the case with Mr. Bentley.
Mr. Bentley replied by a letter dated January 22, 2009,
which stated:
I write responsive to your voice mail message of January 21,
2009, which suggests that you have not read the correspondence I have sent you
despite your having acknowledged its receipt.
For your convenience, therefore, I have enclosed copies of
my letters to you of January 13, 2009; January 16, 2009, and January 18, 2009
which state the position of my client.
As to your reference to your letter of December 30, 2008,
it, by its terms, excludes the necessity of the taxpayer providing a 433A form
if the collection alternative sought is a hardship suspension of collection.
To the extent the above was not your intended meaning in
your letter, I would call your attention to Internal Revenue Service Release
#IR-2009-2, Jan. 6, 2009 which states that “IRS assistors may be able to
suspend collection without documentation to minimize burden [sic] on the
taxpayer” and request that if you are not so empowered, kindly transfer this
case to an “assistor” who is so authorized.
We will otherwise respond to your December letter, as has
been detailed to you in the enclosed prior received correspondence, for the
reasons stated therein, not later than 2/24/09.
IRS News release IR-2009-02 (Jan. 6, 2009) attached to Mr.
Bentley's letter included the following paragraph to which he referred:
Postponement of Collection Actions: IRS employees will have
greater authority to suspend collection actions in certain hardship cases where
taxpayers are unable to pay. This includes instances when the taxpayer has
recently lost a job, is relying solely on Social Security or welfare income or
is facing devastating illness or significant medical bills. If an individual
has recently encountered this type of financial problem, IRS assistors may be
able to suspend collection without documentation to minimize burden on the
taxpayer.
Third request for Form 433-A
In response to Mr. Bentley's letter, the Settlement Officer
sent him a “last chance” letter on January 29, 2009 (the date on which the CDP
hearing had originally been scheduled). This letter is not in the record, but
the Settlement Officer described it in detail in her work notes:
SO composed last chance letter. Letter advised POA/TP [i.e.,
Mr. Bentley (the “power of attorney”) and Mr. Pitts (the taxpayer)] that
IR-2009-02 referring to postponement of collection actions, to suspend
collection actions in certain hardship cases, does refer to the IRS to suspend
collection without documentation. These guidelines would also depend upon the
taxpayers situation. IR-2009-2 directs taxpayers who are behind on tax payments
& needs assistan[ce] that when contacting IRS, there could be additional
help available for taxpayers facing unus[u]al hardship situations. That to
suspend collection actions if the individual has recently encountered financial
problems. IRS manual indicates only partial financial analysis is required
prior to reporting an account as Cu[r]rently Not Collectible (CNC) if the
aggregate assessed balance, including prior CNC accounts, is less [pg. 594]
than $5,000. Balances above that amount require[] a full financial analysis and
the Collection Information Statement with documentation is required. The
taxpayer balance is $67,772.30. Please keep in mind this does not stop
penalties and interest from accruing as long as the assessed balance is still
outstanding. As the taxpayer did not file a tax return for 2005 and 2006
additional documentation is required. Taxpayer's CDP request was signed
November 15, 2008. Appeals Contact Letter [was] dated December 30, 2008 and
allow[ed] the taxpayer sufficient time to prepare for the conference on January
29, 2009. Though the taxpayer is 'essentially homebound' a conference could not
be extended to date requested, February 24, 2009. Last chance composed and
sent. F/U [follow-up] = 14 days = 02-12-2009 [i.e., February 12, 2009].
This “last chance” letter thus gave Mr. Pitts until February
12, 2009, to submit the requested information. This date was between the date
that the Settlement Officer had initially scheduled for the CDP hearing
(January 29, 2009) and the alternative date that Mr. Bentley had proposed
(February 24, 2009).
Issuance of the notice of determination
Petitioner does not dispute the fact that the “last chance”
letter was sent or the content of the letter. However, Mr. Bentley made no response
to the letter on behalf of Mr. Pitts. Consequently, on February 25, 2009, the
Office of Appeals issued to Mr. Pitts a “Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330.” The notice of
determination sustained the filing of the notice of lien. An attachment to the
notice stated that “the liabilities were not discharged in the taxpayer's
bankruptcy” and that “no collection alternatives were available to the taxpayer
as documentation was not supplied.”
Tax Court proceedings
Mr. Bentley timely filed a petition in this Court on behalf
of Mr. Pitts, appealing the notice of determination. The petition asserts that
the Office of Appeals abused its discretion in declining to suspend collection
activity, and it asserts three specific errors:
(1) Respondent violated the ADA Amendments Act of 2008
[amending the Americans with Disabilities Act, 42 U.S.C. chapter 126]
(2) Respondent violated Title 5 CFR § 1320.6 [implementing
the Paperwork Reduction Act of 1995, 44 U.S.C. chapter 35]
(3) Respondent declined to recognize underlying liability
included components discharged in bankruptcy
Petitioner moved for summary judgment on November 9, 2009;
respondent cross-moved on December 7, 2009; and the motions were argued at a
hearing on January 11, 2010.
Discussion
I. Applicable legal principles
A. Summary judgment standards
Where the pertinent facts are not in dispute, a party may
move for summary judgment to expedite the litigation and avoid an unnecessary
trial. Summary judgment may be granted where there is no genuine issue as to
any material fact and a decision may be rendered as a matter of law. Rule
121(a) and (b). The party moving for summary judgment bears the burden of
showing that there is no genuine issue as to any material fact, and factual
inferences will be drawn in the manner most favorable to the party opposing
summary judgment. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992),
affd. 17 F.3d 965 [73 AFTR 2d 94-1198] (7th Cir. 1994).
In his opposition to respondent's motion, Mr. Pitts asserts
that “cross-examination of respondent is required to understand the reason for
the blatant date alteration in respondent's log introduced in support of his
motion for summary judgment.” He apparently refers to respondent's Exhibit L,
“Case Activity Record Print”, which reflects entries that the Settlement
Officer made to record her work on the case, including her contacts with Mr.
Pitts's representative, Mr. Bentley. To the extent that respondent's assertion
of a material fact in the case is based on an entry in that record, if
petitioner raises a genuine issue as [pg. 595] to that fact, then summary
judgment would be precluded. However, Rule 121(d) provides:
When a motion for summary judgment is made and supported as
provided in this Rule, an adverse party [such as Mr. Pitts] may not rest upon
the mere allegations or denials of such party's pleading, but such party's
response, by affidavits or as otherwise provided in this Rule, must set forth
specific facts showing that there is a genuine issue for trial. ***
In compliance with Rule 121(b), respondent made and
supported a showing of the authenticity of the Case Activity Record Print and
of the facts of the case; but Mr. Pitts's only response is his unelaborated
assertion about “blatant date alteration”. Most of the dates in the chronology
set out above are corroborated in petitioner's submissions, and he does not
specify which dates were altered, nor how the alterations would affect the
outcome of the case. We therefore hold that respondent's factual assertions are
not controverted.
In ruling on respondent's motion, we draw all inferences in
favor of Mr. Pitts, and we find that there is no genuine issue as to any
material fact and respondent is entitled to judgment as a matter of law.
B. Collection review procedure
1. In general
When a taxpayer fails to pay any Federal income tax liability
after demand, section 6321 imposes a lien in favor of the United States on all
the property of the delinquent taxpayer, and section 6323 authorizes the IRS to
file notice of that lien. However, within five business days after filing a
notice of tax lien, the IRS must provide written notice of that filing to the
taxpayer. Sec. 6320(a). After receiving
such a notice, the taxpayer may request an administrative hearing before the
Office of Appeals. Sec. 6320(a)(3)(B),
(b)(1). Administrative review is carried out by way of a hearing before the
Office of Appeals pursuant to section 6330(b) and (c); and, if the taxpayer is
dissatisfied with the outcome there, he can appeal that determination to the
Tax Court under section 6330(d), as Mr. Pitts has done.
2. Agency-level review in lien cases
In the case of a notice of lien, section 6320(c) provides
that the procedures for the agency-level CDP hearing before the Office of
Appeals are set forth in section 6330(c):
First, the appeals officer must “obtain verification from
the Secretary that the requirements of any applicable law or administrative
procedure have been met.” Sec. 6330(c)(1). 4 The notice of determination set
forth the IRS's compliance with these requirements, and Mr. Pitts made no
challenge as to verification in his petition (or in his motion), so no
verification issues under section 6330(c)(1) are at issue.
Second, the taxpayer may “raise at the hearing any relevant
issue relating to the unpaid tax or the proposed [lien or] levy, including” challenges
to the appropriateness of the collection action and offers of collection
alternatives. Sec. 6330(c)(2)(A). Mr.
Pitts's contentions pertain to collection alternatives, which we will discuss
below.
Additionally, the taxpayer may contest the existence and
amount of the underlying tax liability, but only if he did not receive a notice
of deficiency or otherwise have a prior opportunity to dispute the tax
liability. Sec. 6330(c)(2)(B). Mr. Pitts
did receive a notice of deficiency and did have prior opportunities to
challenge the underlying liabilities for 1991, 1992, and 1993 when he not only
litigated them in his prior case (docket No. 3187-00)—in which his liabilities
were determined by stipulated decision—but also attempted to challenge them in
his bankruptcy case. 5 He cannot now make a third challenge to that
determination in this CDP case. Mr. Pitts previously contended (in the CDP
hearing and in his petition in this case) that the liabilities were
subsequently discharged [pg. 596] in bankruptcy; but he did not assert this
contention in his motion, in his opposition to respondent's motion, 6 or at the
hearing; and we find that he has abandoned this bankruptcy discharge
contention.
Finally, the appeals 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.” Sec.
6330(c)(3)(C). The notice of determination found “that the filing of the NFTL
[notice of Federal tax lien] balances the need for efficient collection of
taxpayer's accounts with taxpayer's legitimate concerns that the collection
action be no more intrusive than necessary.” Mr. Pitts made no contention of
any defect in the balancing conducted by the Office of Appeals in this case.
3. Tax Court review
When the Office of Appeals issues its determination, the
taxpayer may “appeal such determination to the Tax Court”, pursuant to section
6330(d)(1), as Mr. Pitts has done. In such an appeal (where the underlying
liability is not at issue), we review the determination of the Office of
Appeals for abuse of discretion. That is, we decide whether the determination
was arbitrary, capricious, or without sound basis in fact or law. See Murphy v.
Commissioner, 125 T.C. 301, 320 (2005),
affd. 469 F.3d 27 [98 AFTR 2d 2006-7853] (1st Cir. 2006).
II. Respondent's entitlement to summary judgment
A. Mr. Pitts's failure to produce financial information
The Office of Appeals determined not to grant Mr. Pitts's
request to suspend collection activity against him on the ground of financial
hardship, and we review that determination for an abuse of discretion.
Suspension of collection activity is, in CDP parlance, a “collection
alternative” that the taxpayer may propose, see sec. 6330(c)(2)(A)(iii), and
that the Office of Appeals must “take into consideration”, sec. 6330(c)(3)(B). The Internal Revenue
Manual (IRM) makes provision for a taxpayer's account to be declared “currently
not collectible” (CNC) in cases of “hardship”. See IRM pts. 1.2.14.1.14 (Nov.
19, 1980) (Policy Statement 5-71), 5.16.1.2.9 (May 5, 2009).
However, the regulations state that “[t]axpayers will be
expected to provide all relevant information requested by Appeals, including
financial statements, for its consideration of the facts and issues involved in
the hearing.” 26 C.F.R. Sec. 301.6320-1(e)(1), Proced. & Admin. Regs. It
could hardly be otherwise. For a taxpayer to justify suspension of collection
on the ground that the account should be deemed “currently not
collectible”—i.e., that he cannot afford to pay the liability—he must of course
show that he cannot afford to pay the liability. To do so, he must show his
financial circumstances—i.e., the money that is available to him and the
expenses that he bears. 7 Form 433-A is the means by which the IRS obtains this
financial information from the taxpayer—but Mr. Pitts failed to submit this
information despite three requests for it (on December 30, 2008, January 21,
2009, and January 29, 2009). In the absence of that information, the Office of
Appeals did not abuse its discretion in declining to put Mr. Pitts's account
into CNC status.
In his correspondence with Appeals, Mr. Bentley resisted the
IRS's request that Mr. Pitts complete Form 433-A by citing the recent IRS News
release IR-2009-02, supra. Although he did not cite that release or make the
same contention in his petition or his motion papers, we note that the
contention was not well grounded. Mr. Bentley seemed to read the news release
as creating an immunity from the obligation to produce financial information.
In fact, the release stated that “IRS assistors may be able to suspend
collection without documentation”. (Emphasis added.) And as the Settlement
Officer explained to Mr. Bentley, the IRM makes provision for suspen-[pg. 597]
sion of collection after “only partial financial analysis” where the liability
is less than $5,000. 8 Mr. Pitts's unpaid liability was more than ten times
that amount.
Before his accounts could be treated as CNC, Mr. Pitts was
obliged to show his financial situation, and he failed to submit Form 433-A to
make that showing. 9 The Office of Appeals did not abuse its discretion by
requiring the submission of Form 433-A or by denying CNC status in its absence.
B. Mr. Pitts's contentions
Mr. Pitts asserts two errors 10 by the Office of Appeals
that, he argues, constituted abuses of its discretion, and we address them
separately here. 1. Denial of a face-to-face hearing at Mr. Pitts's home
Mr. Pitts argues that because he is disabled as a result of
COPD, the Americans with Disabilities Act (ADA), 42 U.S.C. chapter 126 (2006),
required the Settlement Officer to make reasonable accommodation for his disability
by conducting a face-to-face CDP hearing in his home. This contention fails for
multiple reasons.
First, Mr. Pitts chose to have his CDP hearing by
correspondence. After the Settlement Officer explained to Mr. Bentley that the
CDP hearing could be held by correspondence or by telephone, Mr. Bentley stated
in his letter of January 18, 2009, “I will be able to proceed by
correspondence, which choice is also selected and, approved by my client for
the balance of the Appeals process.” Having not objected to a non-face-to-face
hearing, and having rather chosen to have the hearing by correspondence, Mr.
Pitts cannot contend that the Office of Appeals abused its discretion by
proceeding on that basis.
Second, the statute does not require a face-to-face hearing. Section 6320(b)(1) provides that a “hearing
shall be held” by the Office of Appeals. The statute does not describe the
nature of that hearing. As we have previously observed,
Hearings at the Appeals level have historically been
conducted in an informal setting. ***
When Congress enacted section 6330 *** , Congress was fully
aware of the existing nature and function of Appeals. Nothing in section 6330
or the legislative history suggests that Congress intended to alter the nature
of an Appeals hearing *** .
Davis v. Commissioner, 115 T.C. 35, 41 (2000). Thus, the
regulations implementing the CDP process provide that a “CDP hearing may, but
is not required to, consist of a face-to-face meeting, one or more written or
oral communications between an Appeals officer or employee and the taxpayer or
the taxpayer's representative, or some combination thereof.” 26 C.F.R. sec.
301.6320-1(d)(2), A-D6, Proced. & Admin. Regs.
Third, a face-to-face hearing could not have been held in
Mr. Pitts's home. If a face-to-face CDP hearing was to be held, the applicable
regulations direct that such hearing take place “at the Appeals office closest
to the taxpayer's residence.”26 C.F.R. sec. 301.6320-1(d)(2), A-D7, Proced.
& Admin. Regs. Considerations of efficiency, taxpayer relations, and the
safety of IRS personnel surely entered into the formulation of that policy. If
there is a circumstance in which we would second-guess the Office of Appeals in
its adherence to that policy, it is not present in this case. [pg. 598]
Fourth, the ADA does not apply to the Federal Government.
The relevant portion of the act would be subtitle II, “Public Services”, but
the definition therein of a “public entity” to which the statute applies does
not include the Federal Government. See 42 U.S.C. secs. 12131(1), 12132; Agee
v. United States, 72 Fed. Cl. 284, 289 (2006); Smith v. U.S. Court of Appeals,
No. C-08-1860 EMC, WL 2079189, *4 (N.D. Cal., May 15, 2008) (order dismissing
complaint and granting application to proceed in forma pauperis); Wilks v. FAA,
No. C06-940P, WL 1687765, *6 (W.D. Wash., June 8, 2007) (order of dismissal).
But if a taxpayer's disability did impede his participation in a CDP hearing,
we assume arguendo that, notwithstanding the inapplicability of the ADA, the
Office of Appeals would abuse its discretion if it refused to make reasonable
accommodations to facilitate his participation. In this case, however, Appeals
did accommodate Mr. Pitts by its practice of allowing a hearing to be held by
telephone or by correspondence. 11 Particularly in the case of a taxpayer who
has counsel, as Mr. Pitts has, the conducting of the hearing by telephone or
correspondence yields no apparent prejudice to the taxpayer. The IRS has
developed routines for obtaining information in a manner that is susceptible of
being recorded, evaluated, and reviewed. The Settlement Officer was not obliged
instead to make a field trip to Mr. Pitts's apartment to learn his financial
situation; she was entitled rather to require Form 433-A, and Mr. Pitts has
made no showing that this method for evaluating his financial situation imposed
any particular hardship on him. 2. Paperwork Reduction Act
Mr. Pitts's principal contention in this case is based on
the Paperwork Reduction Act (PRA), 44 U.S.C. chapter 35 (2006). Section 3512(a) of Title 44 of the United
States Code provides:
Notwithstanding any other provision of law, no person shall
be subject to any penalty for failing to comply with a collection of
information that is subject to this subchapter if—
(1) the collection of information does not display a valid
control number assigned by the Director in accordance with this subchapter; or
(2) the agency fails to inform the person who is to respond
to the collection of information that such person is not required to respond to
the collection of information unless it displays a valid control number.
[Emphasis added.]
In the income tax context, this provision of the PRA is most
often cited against the income tax return itself—an argument that is thoroughly
discredited—so that most of the caselaw addressing the argument (and finding it
frivolous) affirms that the taxpayer's obligation to file a return is not
abrogated by supposed violations of the PRA. 12 Mr. Pitts addresses not the tax
return but Form 433-A, and he argues that the PRA applies to (and invalidates)
its use during the CDP hearing to obtain the financial statement of the
taxpayer. He argues that since the request for a financial statement on Form
433-A is “a collection of information”, the PRA applies; but that since Form
433-A displays no “control number”, the form is invalid and taxpayers need not
comply with requests to fill it out and submit it. [pg. 599]
Mr. Pitts's argument fails to note the effect of 44 U.S.C.
section 3518(c)(1)(B)(ii): 13
(c)(1) Except as provided in paragraph (2), this subchapter
shall not apply to the collection of information— ***
(B) during the conduct of— ***
(ii) an administrative action or investigation involving an
agency against specific individuals or entities *** . [Emphasis added.]
Section 3518(c)(1) thus excludes administrative
hearings—such as CDP hearings that evaluate the propriety of a specific
collection action against a specific taxpayer—from the reach of the PRA.
Consistent with that exclusion, 44 U.S.C. section 3518(c)(2) describes the
“general investigations” that are included within the reach of the PRA, and CDP
hearings are not in that description:
(2) This subchapter applies to the collection of information
during the conduct of general investigations (other than information collected
in an antitrust investigation to the extent provided in subparagraph (C) of
paragraph (1)) undertaken with reference to a category of individuals or entities
such as a class of licensees or an entire industry. [Emphasis added.]
Petitioner argues, however, that the PRA does reach CDP
hearings because the set of taxpayers who request CDP hearings constitute (in
the words of section 3518(c)(2)) a “category of individuals” (emphasis added)
who generally are asked to submit Form 433-A. This interpretation is
unwarranted.
The question under 44 U.S.C. section 3518(c)(2) is not
whether many individual taxpayers have CDP hearings (they do), nor whether Form
433-A is used widely (it is), but whether a given CDP hearing is a “general
investigation”—and it is not. Rather, a CDP hearing is “an administrative
action, investigation, or audit involving an agency [the IRS] against [a]
specific individual[]”—in this case, Mr. Pitts. Just as an IRS audit of a
specific individual taxpayer is not a general investigation, 14 so a CDP
hearing is an administrative action involving a specific individual and is not
a general investigation. For that reason, the collection of information during
a CDP hearing is not subject to the PRA. The lack of a control number on Form
433-A did not relieve Mr. Pitts from the obligation to submit the form and does
not relieve him of the consequences of his failure to do so. When the Office of
Appeals did not receive financial information from Mr. Pitts, it was entitled
to deny his request to suspend collection of his long-unpaid income tax
liabilities for 1991, 1992, and 1993.
Conclusion
On the undisputed facts of this case, it is clear that the
Office of Appeals did not abuse its discretion when it denied “currently not
collectible” status to Mr. Pitts's liabilities and upheld the filing of a
notice of lien. We hold that, as a matter of law, respondent is entitled to the
entry of a decision sustaining the determination.
To reflect the foregoing,
An appropriate order and decision will be entered.
1
Except as otherwise
noted, all section references are to the Internal Revenue Code (26 U.S.C.), and
all Rule references are to the Tax Court Rules of Practice and Procedure.
2
As of September 3,
2009—the latest date for which the record gives Mr. Pitts's balance due—he
still owed $67,772.30 for the three years. This balance appears not to include
the eight years' worth of additional interest that had accrued since August
2001 but had not yet been assessed.
3
Section 6330(b)(3)
provides that the CDP hearing shall be held before “an officer or employee” of
the Office of Appeals. Thereafter, the statute refers to this officer or
employee as the “appeals officer”. See sec. 6330(c)(1), (3). In the IRS Office of Appeals, hearings
are held before persons with the title Appeals Officer and Settlement Officer.
See Reynolds v. Commissioner, T.C. Memo. 2006-192 [TC Memo 2006-192]. In this
instance, the “officer or employee” who conducted the hearing had the title
Settlement Officer.
4
In the case of the
lien filed against Mr. Pitts, the basic requirements, see sec. 6320, for which
the appeals officer was to obtain verification are: assessment of the liabilty,
secs. 6201(a)(1), 6501(a); notice and demand for payment of the liability, sec. 6303; and notice of the filing of the
lien and of the taxpayer's right to a CDP hearing, secs. 6320(a) and (b).
5
See Kendricks v.
Commissioner, 124 T.C. 69, 77 (2005) (the taxpayer had the opportunity to
dispute the liability within the meaning of section 6330(c)(2)(B) when the IRS
submitted a proof of claim for an unpaid tax liability in taxpayer's bankruptcy
action).
6
Respondent's motion
asserted that the Office of Appeals “determined that Petitioner's bankruptcy
filing did not discharge his tax liabilities for the years at issue because
Petitioner's objection to the IRS's proof of claim was overruled and the IRS's
proof of claim was allowed in full by the Bankruptcy Court” and that the Office
of Appeals did not abuse its discretion “in determining that Petitioner's
bankruptcy did not discharge the unpaid tax liabilities”.
7
See Vinatieri v.
Commissioner, 133 T.C. ___, ___ n.7 (2009) (slip op. at 15) (“In Estate of
Atkinson v. Commissioner, T.C. Memo. 2007-89 [TC Memo 2007-89], we found
reasonable [the] requirement[] that an entity seeking collection alternatives
to full payment, including reporting an account as currently not collectible,
*** submit[] a full financial statement”).
8
See IRM pt.
5.16.1.2.9(3) (“Under certain conditions, a CIS [Collection Information
Statement] is not required before reporting an account CNC. The aggregate
unpaid balance of assessments, including any prior CNC's, must be less than the
amount in LEM 5.16.1.2.9(3)”). The LEM (law enforcement manual) is a portion of
the IRM that is not made available to the public. See Roberts v. IRS, 584 F. Supp. 1241 [54 AFTR 2d 84-5114] (E.D. Mich.
1984).
9
The Form 433-A seeks
not only information about a taxpayer's current income and expenses but also
details of his assets. Although Mr. Pitts represented that his only source of
income was Social Security benefits and alleged that he had substantial medical
expenses, he substantiated neither claim; and, on the record before us, he made
no representations whatever about the presence or value of any assets—the other
information required by Form 433-A, which is necessary for evaluating his ability
to pay.
10
In his motion for
summary judgment, Mr. Pitts asserts the Paperwork Reduction Act (PRA) argument
addressed here in part II.B.2, and in his opposition to respondent's
cross-motion he asserted the PRA argument and the Americans with Disabilities
Act argument addressed here in part II.B.1. As we noted above in part I.B.2,
Mr. Pitts abandoned his contention that the liabilities were discharged in
bankruptcy.
11
Cf. In re Winston,
No. 07-20593-D-13L, 2007 WL 1394161 (Bankr. E.D. Cal., May 11, 2007)
(memorandum decision indicating that allowing a disabled debtor to participate
by telephone in bankruptcy proceedings constitutes a reasonable accommodation).
12
See, e.g., Wheeler
v. Commissioner, 127 T.C. 200 (2006), affd.
521 F.3d 1289 [101 AFTR 2d 2008-1696] (10th Cir. 2008). Some of the
opinions holding the PRA inapplicable to tax returns are cited in Revenue
Ruling 2006-21, 2006-1 C.B. 745. With regard to tax returns we have rebuffed
the argument as recently as in Turner v. Commissioner, T.C. Memo. 2010-44 [TC
Memo 2010-44]. In Moore v. Commissioner,
T.C. Memo. 2007-200 [TC Memo 2007-200], affd. 296 Fed. Appx. 821 [102 AFTR 2d 2008-6696]
(11th Cir. 2008), when the taxpayer requested during the CDP hearing “that
Settlement Officer Feist 'provide evidence verifying the U.S. Individual Income
Tax/Forms 1040 and Form 433-A in question are in compliance with the
specifications of the PAPERWORK REDUCTION ACT (PRA) and have been issued
current and valid control numbers from the Office of Management and Budget”
(emphasis added), we characterized the issue as “frivolous”.
13
The regulations
promulgated under this statute are to the same effect. 5 C.F.R. section 1320.4
(2010) provides (with emphasis added):
(a) The requirements of this Part apply to all agencies as
defined in § 1320.3(a) and to all collections of information conducted or
sponsored by those agencies, as defined in § 1320.3 (c) and (d), wherever conducted
or sponsored, but, except as provided in paragraph (b) of this section, shall
not apply to collections of information:
***
(2) during the conduct of a civil action to which the United
States or any official or agency thereof is a party, or during the conduct of
an administrative action, investigation, or audit involving an agency against
specific individuals or entities;
***
(c) The exception in paragraph (a)(2) of this section
applies during the entire course of the investigation, audit, or action, whether
before or after formal charges or complaints are filed or formal administrative
action is initiated, but only after a case file or equivalent is opened with
respect to a particular party. ***
14
See Lonsdale v.
United States, 919 F.2d 1440, 1445 [67 AFTR 2d 91-1049] (10th Cir. 1990) (and
cases cited thereat) (the PRA is “inapplicable to 'information collection
request' forms issued during an investigation against an individual to
determine his or her tax liability” (citing 44 U.S.C. sec. 3518(c)(1)(B)(ii)).
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