Craig Douglas Hoglund & Christine Joan Hoglund v. Commissioner , 2018 T.C. Memo. 185 ( 2018 )

T.C. Memo. 2018-185UNITED STATES TAX COURT
CRAIG DOUGLAS HOGLUND AND CHRISTINE JOAN HOGLUND,
Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 17639-17L. Filed November 5, 2018.
Craig Douglas Hoglund and Christine Joan Hoglund, pro sese.
Michael T. Garrett, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
KERRIGAN, Judge: This collection due process (CDP) case was
commenced in response to three Notices of Determination Concerning Collection
Action(s) Under Section 6320 and/or 6330 (notices of determination) upholding
proposed levy collection actions regarding petitioners’ unpaid tax liabilities for tax
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[*2] years 2013 and 2014 (years at issue). The issue for our consideration is
whether respondent’s determination to proceed with the collection actions
regarding petitioners’ unpaid tax liabilities for the years at issue was proper.
Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect at all relevant times, and all Rule references are to the Tax
Court Rules of Practice and Procedure. We round all monetary amounts to the
nearest dollar.
FINDINGS OF FACT
Mr. Hoglund and Dr. Hoglund (together, petitioners) resided in North
Dakota when the petition was timely filed. Mr. Hoglund worked in oil field
services, and Dr. Hoglund was a physician.
Petitioners timely filed their initial 2013 Form 1040, U.S. Individual Income
Tax Return, which reflected no income tax due. Respondent determined that
petitioners’ 2013 return contained errors and selected the return for examination.
Respondent thereafter expanded the examination to include the 2014 tax year.
Respondent filed a substitute 2014 return for petitioners on February 29,
2016. On July 18, 2016, petitioners filed an amended Form 1040 for 2013 and an
original Form 1040 for 2014. Respondent accepted petitioners’ 2013 Form 1040
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[*3] as an amended return and accepted the 2014 Form 1040 as an original,
delinquent return.
On their 2013 amended income tax return petitioners reported a tax liability
of $114,340, Federal tax withholdings of $72,384, and a balance due of $41,956.
Respondent accepted and assessed petitioners’ reported tax liability of $114,340
and applied a Federal tax withholding credit of $74,257 against that tax liability.
During the examination of petitioners’ 2013 return respondent determined
that petitioners were liable for a section 6662 accuracy-related penalty of $3,983
and a section 6654 addition to tax of $533. The section 6662 accuracy-related
penalty was approved by the examination officer’s immediate supervisor. On July
5, 2017, petitioners consented to both the section 6662 accuracy-related penalty
and the section 6654 addition to tax.
On their 2014 Form 1040 petitioners reported a tax liability of $121,452,
Federal tax withholdings of $72,812, and a balance due of $49,366. Respondent
accepted and assessed petitioners’ reported tax liability of $121,452 and applied a
Federal tax withholding credit of $74,679 against that tax liability. On October
31, 2016, respondent assessed an addition to tax under section 6651(a)(1) of
$10,044, an addition to tax under section 6651(a)(2) of $4,443, an addition to tax
under section 6654 of $653, and accrued interest of $2,888.
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[*4] On March 13, 2017, respondent issued petitioners separate notices of intent
to levy for years 2006, 2007, and 2013.1 Only Mr. Hoglund was issued a notice of
intent to levy for 2014. Petitioners submitted a Form 12153, Request for a
Collection Due Process or Equivalent Hearing, and a related administrative claim
letter, both dated March 17, 2017. Their Form 12153 indicated that they were
requesting a hearing for 2006, 2007, 2013, and 2014. Petitioners did not propose
any collection alternatives.
Petitioners’ administrative claim letter contended that they were entitled to
civil damages under section 7433, which offset their total outstanding tax liability.
Respondent rejected petitioners’ section 7433 claim and advised them of their
need to file such claim in the appropriate Federal District Court.
The Appeals officer sent petitioners a letter scheduling a telephone CDP
hearing for June 21, 2017. This letter asked for a completed Form 433-A,
1
Tax years 2006 and 2007 were addressed in a prior Tax Court case
(Hoglund v. Commissioner, T.C. Dkt. No. 18823-16L (final disposition May 14,
2018)). A taxpayer is entitled to only one CDP hearing regarding the first
issuance of a levy notice for a given period or periods with respect to the unpaid
tax shown on the levy notice if the taxpayer timely requests such a hearing. Secs.
301.6320-1(b)(1), 301.6330-1(b)(1) and (2), Proced. & Admin. Regs.; see also
Orum v. Commissioner, 123 T.C. 1, 10 (2004), aff’d, 412 F.3d 819 (7th Cir.
2005).
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[*5] Collection Information Statement for Wage Earners and Self-Employed
Individuals, and completed income tax returns for 2015 and 2016.
Before the scheduled CDP telephone conference petitioners contacted the
Appeals officer on May 23, 2017, to request a face-to-face hearing. Petitioners
were advised on June 1, 2017, that they did not qualify for a face-to-face hearing
because they had not submitted the financial documentation requested on Form
433-A and they were not in compliance with their Federal tax filings for 2015 and
2016. Petitioners did not contact the Appeals officer on the date of their
scheduled CDP telephone conference. The Appeals officer verified that the
requirements of applicable law and administrative procedure had been met.
Accordingly, the Appeals officer sustained the proposed levies against
petitioners. On July 18, 2017, respondent issued the following notices of
determination: a notice to Mr. Hoglund for 2013, a notice to Dr. Hoglund for
2013, and a notice to Mr. Hoglund for 2014. In their petition, petitioners raised
the issue that they were not allowed to have an in-person CDP hearing.
OPINION
Section 6330 requires the Secretary to furnish a person notice and
opportunity for a hearing before an impartial officer or employee of the Internal
Revenue Service (IRS) Appeals Office before levying on the person’s property.
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[*6] At the hearing the person may raise any relevant issue relating to the unpaid
tax or the proposed levy, including spousal defenses, challenges to the
appropriateness of the collection action, and offers of collection alternatives. Sec.
6330(c)(2). The person may challenge the existence or the amount of the
underlying tax liability for any period only if the person did not receive a notice of
deficiency or did not otherwise have an opportunity to dispute the liability. Sec.
6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000).
Following a hearing the Appeals officer must determine whether proceeding
with the proposed levy action is appropriate. In making that determination the
Appeals officer is required to take into consideration: (1) whether the
requirements of any applicable law or administrative procedure have been met,
(2) any issues appropriately raised by the taxpayer, and (3) whether the proposed
collection action balances the need for the efficient collection of taxes with the
legitimate concern of the taxpayer that any collection action be no more intrusive
than necessary. Sec. 6330(c)(3); see also Lunsford v. Commissioner, 117 T.C.
183, 184 (2001). We note that the Appeals officer properly based her
determination on the factors specified by section 6330(c)(3).
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[*7] I. Standard of Review
Once the Commissioner issues a notice of determination, the taxpayer may
seek review in this Court. Sec. 6330(d)(1). Where the validity of the underlying
tax liability is properly at issue, we review the determination de novo. Sego v.
Commissioner, 114 T.C. at 610; Goza v. Commissioner, 114 T.C. 176, 181-182
(2000). In a collection case where the validity of the underlying tax liability is
properly at issue, the burden of proof, including the burden of going forward with
evidence, is on the taxpayer to show that the Commissioner’s determination of
liability is incorrect. See Rule 142(a); Thompson v. Commissioner, 140 T.C. 173,
178 (2013). The term “underlying tax liability” in section 6330(c)(2)(B) includes
any amount owed by the taxpayer pursuant to the tax laws, including additions to
tax and interest. See Katz v. Commissioner, 115 T.C. 329, 339 (2000).
We review the Appeals officer’s administrative determinations regarding
nonliability issues for abuse of discretion. Sego v. Commissioner, 114 T.C. at
610. Abuse of discretion exists when a determination is arbitrary, capricious, or
without sound basis in fact or law. See Murphy v. Commissioner, 125 T.C. 301,
320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006). The Court does not conduct an
independent review and substitute its judgment for that of the Appeals officer. Id.If the Appeals officer follows all statutory and administrative guidelines and
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[*8] provides a reasoned, balanced decision, the Court will not reweigh the
equities. Link v. Commissioner, T.C. Memo. 2013-53, at *12.
II. Underlying Tax Liability
Respondent assessed petitioners’ tax liabilities on the basis of their Forms
1040 for the years at issue. Accordingly, petitioners did not have an opportunity
to dispute their tax liabilities until the CDP hearing. To dispute the underlying tax
liability, a taxpayer must have raised the merits of the underlying tax liability
during the CDP hearing. Giamelli v. Commissioner, 129 T.C. 107, 112-116
(2007); see also sec. 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs.
Other than their purported claim for damages under section 7433 articulated
in their administrative claim letter, petitioners did not participate in the CDP
hearing or challenge their underlying tax liabilities. Petitioners further failed to
make any specific contentions or to proffer any evidence before the Court showing
why respondent’s liability determinations were incorrect.
Petitioners contend they are entitled to damages under section 7433 and that
this claim offsets their tax liabilities for the years at issue. The issue of whether
petitioners are entitled to damages under section 7433 is not properly before this
Court. See Zapara v. Commissioner, 126 T.C. 215, 226 (2006), aff’d, 652 F.3d
1042 (9th Cir. 2011). The Tax Court is a court of limited jurisdiction, possessing
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[*9] only the adjudicatory powers that Congress has conferred upon it. Sec. 7442;
Naftel v. Commissioner, 85 T.C. 527, 529 (1985). Even if such a claim were
properly before this Court and were allowed or undisputed by respondent, it would
neither affect the validity of the underlying tax liabilities nor serve to offset them.
See Morrow v. United States, 723 F. Supp. 2d 71, 80 (D.D.C. 2010); Sande v.
United States, 323 F. App’x 812, 814 (11th Cir. 2009). We conclude that there are
no changes to the underlying tax liabilities.
III. Abuse of Discretion
Petitioners contend that respondent’s determination constitutes an abuse of
discretion. In deciding whether the Appeals officer abused her discretion in
sustaining the notice of levy filing, we consider whether she: (1) properly verified
that the requirements of any applicable law or administrative procedure have been
met, (2) considered any relevant issues petitioners raised, and (3) determined
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); Lunsford v.
Commissioner, 117 T.C. at 184.
During the CDP hearing the Appeals officer verified that respondent
properly assessed petitioners’ Federal tax liabilities for the years at issue.
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[*10] Respondent’s examination officer obtained written approval in assessing the
section 6662 accuracy-related penalty for 2013. Additionally, petitioners
consented to the section 6662 accuracy-related penalty and the section 6654
addition to tax for the 2013 tax year before the CDP hearing.
As a part of the CDP hearing the Appeals officer considered all relevant
issues petitioners raised. Other than the administrative claim letter, petitioners did
not submit any information to the Appeals officer. Petitioners did not submit any
evidence that the liabilities reflected on their returns for the years at issue were
incorrect or evidence of any previous year’s overpayment available to offset the
tax liabilities for the years at issue.
Petitioners did not provide the Appeals officer with any collection
alternatives. Additionally, petitioners failed to file their Forms 1040 for the
subsequent tax years. It is not an abuse of discretion for an Appeals officer to
reject a collection alternative where a taxpayer fails to meet current filing
obligations. See Reed v. Commissioner, 141 T.C. 248, 256-257 (2013). Similarly,
it is not an abuse of discretion for an Appeals officer to decline to consider a
collection alternative where the taxpayer does not place a specific proposal on the
table. See McLaine v. Commissioner, 138 T.C. 228, 243 (2012); Kendricks v.
Commissioner, 124 T.C. 69, 79 (2005).
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[*11] Petitioners further contend that the Appeals officer abused her discretion
because she did not provide them with a face-to-face CDP hearing. CDP hearings
are informal and there is no requirement to conduct as a face-to-face hearing. Sec.
301.6330-1(d)(2), Q&A-D6, Proced. & Admin. Regs.; see also Katz v.
Commissioner, 115 T.C. at 337-338.
Although the Appeals officer requested financial documentation, petitioners
did not provide the requested information because of their purported belief that the
Appeals officer had access to other documents they had previously submitted to
respondent. Petitioners assert that they had previously submitted all of the
requested documentation to another employee of the IRS and that they should not
have to continually provide documentation to other employees in different offices.
A taxpayer is “expected to provide all relevant information requested by Appeals,
including financial statements, for its consideration of the facts and issues
involved in the hearing.” See sec. 301.6330-1(e)(1), Proced. & Admin. Regs. The
Appeals officer did not abuse her discretion by rejecting petitioners’ request for a
face-to-face CDP hearing in favor of a combined telephone- and
correspondence-based CDP hearing.
If no face-to-face, telephone, or other oral communication takes place,
review of the documents in the case file will constitute the CDP hearing for
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[*12] purposes of section 6330(b). Sec. 301.6330-1(d)(2), Q&A-D7, Proced. &
Admin. Regs. The record confirms that petitioners and the Appeals officer
exchanged letters and telephone calls concerning petitioners’ tax matters. After
petitioners failed to submit any of the requested documents or to call the Appeals
officer for their scheduled telephone CDP hearing on the appointed date, the
Appeals officer reviewed petitioners’ file and determined that the proposed levies
should be sustained. We find that petitioners were afforded a CDP hearing which
complied with all applicable requirements and the Appeals officer did not abuse
her discretion in sustaining the proposed levies.
Our review of the record concludes that the Appeals officer conducted a
thorough review of petitioners’ account, determined the additions to tax and
penalties had been properly assessed, and verified that other requirements of
applicable law and administrative procedure were followed. Respondent properly
determined that the proposed collection actions appropriately balanced the need
for the efficient collection of taxes with the legitimate concern that the collection
be no more intrusive than necessary. We conclude that respondent’s
determination to proceed with the proposed collection actions was not an abuse of
discretion.
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[*13] Any contention we have not addressed is irrelevant, moot, or meritless. To
reflect the foregoing,
An appropriate decision will be
entered.