Wolfson v. Comm’r, T.C. Memo. 2022-46 | May 5, 2022 | Lauber, Judge | Docket No. 21343-21L

Memo. Opinion

Summary: A taxpayer sought review pro se under IRC sections 6320(c) and 6330(d)(1) of an IRS determination to uphold a collection action following a Collections Due Process (CDP) hearing with a Settlement Officer (SO). Upon motion of the IRS, the Court granted summary judgment. The court presumed the taxpayer wanted to challenge underlying penalties as he sought waiver of trust fund recovery penalties (TRFPs) because the phrase “underlying tax liability” includes TFRPs. However, the taxpayer had not challenged the underlying liability at the CDP hearing. Consequently, the underlying liability was not reviewable de novo and the Court applied an abuse of discretion standard to the CDP determination.

The taxpayer had failed to pay employment taxes (Form 941), in the first three quarters of 2012. In 2020, the IRS sent a notice of filing of Federal tax lien (NFTL) to collect assessed TFRP liabilities. In the CDP hearing request, taxpayer indicated he sought to discharge the lien and checked the boxes for “Filed NFTL,” “Installment Agreement,” “Offer in Compromise,” and “I Cannot Pay Balance.” IRS Appeals assigned an SO who verified the assessment complied with legal requirements and procedures. Thirty days before a conference, the SO notified the taxpayer he must file: (i) Form 433-A (financial information for collections); (ii) Form 656 (to make an offer in compromise); and an Application for Certificate of Discharge of Property form Federal Tax Lien (Form 12153), as a condition to any discharge. The taxpayer did not submit these documents. The petitioner requested to reschedule the hearing on the conference date. At the rescheduling conference approximately 3 weeks later, a representative of the taxpayer again requested a deferral of the conference. The SO declined, closed the case, and Appeals issued a notice of determination.

Key Holdings:

• The SO properly discharged his duties under Section 6330(c). The SO did not abuse his discretion in upholding the collection action without offering a settlement alternative because: The SO properly verified compliance with legal requirements and administrative procedures. Taxpayer never proposed a specific collection alternative. Taxpayer never submitted any of the documentation necessary to the SO’s consideration of a collection alternative. Taxpayer was not in compliance with his 2019 tax filing obligations.

Key Points of Law:

• The general parameters for reviewing an IRS administrative determination are as follows: where the validity of a taxpayer’s underlying liability is properly at issue, the Tax Court reviews the IRS determination de novo, Sego v. Comm’r, 114 T.C. 604, 610 (2000), and where the taxpayer’s underlying liability is not properly at issue, the Tax Court reviews the IRS decision for abuse of discretion only. Jones v. Comm’r, 338 F.3d 463, 466 (5th Cir. 2003). Abuse of discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. See Mpurphy v. Comm’r, 125 T.C. 301, 320 (2005), af’d, 469 F.3d 27 (1st Cir. 2006).
• An SO abuses his or her discretion in sustaining a collection action only if the SO fails to (1) properly verify that applicable legal and procedural requirements were met, (2) consider any relevant issues raised by a taxpayer, and (3) consider whether the collection action properly balances taxpayer’s legitimate privacy concerns with the IRS’s need to efficiently collect taxes. § 6330(c)(3).
• A settlement officer does not abuse discretion by declining to consider collection alternatives where the taxpayer does not propose any or where the taxpayer has failed to submit the required documentation. Nimmo v. Comm’r, T.C. Memo. 2020-72; Sullivan v. Comm’r, T.C. 2012-337. And, when a taxpayer is not in compliance with tax filing obligations, a settlement officer does not abuse his or her discretion when declining to consider a collection alternative. Boulware v. Comm’r, T.C. Memo. 2014-80, 107 T.C.M. (CCH) 1419, 1424, aff’d, 816 F.3d 133 (D.C. Cir. 2016); Treas. Reg. § 301.6230-1(d)(2), Q&A-D8.

Insights:  When seeking an offer in compromise or waive of penalties, the taxpayer must substantially follow all substantive and procedural requirements, or the IRS and the Tax Court will refuse any relief requested. In reviewing a CDP determination, the Tax Court will consider only the record before the officer that conducted the hearing, documents furnished to other IRS officials before or after the hearing are not relevant.

Have a question? Contact Jason Freeman, Freeman Law, Texas.