Gonzales v. Comm'r ( 2010 )

T.C. Memo. 2010-35
UNITED STATES TAX COURT
JOE REY AND LINDA GONZALES, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13438-07L. Filed February 23, 2010.
Joe Rey Gonzales and Linda Gonzales, pro sese.
Jeffrey D. Heiderscheit, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COHEN, Judge: This case was commenced in response to a
notice of determination concerning collection action that
sustained a lien filing with respect to petitioners’ unpaid
Federal income taxes. The issue for decision is whether the
determination was an abuse of discretion. All section references
are to the Internal Revenue Code (IRC).
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FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioners resided in Texas at the time their petition was
filed.
On August 9, 2004, petitioners agreed in writing to income
tax examination changes by which deficiencies were determined for
2001 and 2002, primarily because of the disallowance of business
expenses claimed on their returns for those years. Petitioners
entered into an installment agreement to pay the 2001 and 2002
liabilities, but the last installment payment that they made was
on September 6, 2006. Refunds due petitioners for 2005 and 2007
were applied toward the liability for 2001.
On April 13, 2006, the Internal Revenue Service (IRS) sent
to petitioners a Notice of Federal Tax Lien Filing and Your Right
to a Hearing Under IRC 6320. The notice indicated that
petitioners had unpaid liabilities of $26,374.65 for 2001 and
$3,241 for 2002. Petitioners requested a hearing under section
6320, asserting that “the tax liability will be reduced below the
limitation amount designated as the amount for automatic lien
levied [sic]. Furthermore, payments to reduce tax liability have
been timely, as required.”
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Petitioner Joe Rey Gonzales (petitioner) participated in a
hearing on November 7, 2006. Petitioners did not contest the
amounts of their tax liabilities and presented no collection
alternatives. Their position was that they had made required
payments and that the balances had been reduced to an amount
that, according to petitioner, was “near or below the $25,000
threshold amount which would automatically trigger tax liens
securing the government’s interest.” He argued that the lien
“has and will reduce our credit rating adversely and financial
hardship has already developed”.
On May 18, 2007, a Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330 was sent to
each petitioner. The assessed balances were then shown as
$17,878.65 for 2001 and $4,143.97 for 2002, for a total of
$22,022.62. The notices concluded:
After review, the proposed collection action, lien
is appropriate based on the following: 1) review of the
subsequent tax assessments per the taxpayers’ consent
are correct and remain owing 2) the taxpayers
previously agreed to a long term installment
arrangement of which all payments have not been made;
3)the taxpayers subsequently have not provided
collection alternatives. As a result, the Notice of
Federal Tax Lien filing by Compliance is being
sustained. This account will be returned to Automated
Collection for review and applicable collection action.
After the petition was filed, petitioners requested a second
hearing and the opportunity to submit an offer-in-compromise.
Respondent agreed to allow petitioners to present their case to a
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second Appeals officer. The second Appeals officer contacted
petitioners and requested financial information and completion of
a Form 656, Offer in Compromise. Petitioners did not submit an
offer-in-compromise and did not offer any other collection
alternatives. They did not contest the underlying liabilities.
On June 16, 2009, supplemental notices of determination were
sent to each petitioner. The notice explained that the lien was
filed in accordance with all applicable laws, policies, and
procedures. After petitioners’ ability to pay the outstanding
liabilities was determined, again the lien was sustained.
OPINION
Section 6321 imposes a lien in favor of the United States on
all property and property rights of a taxpayer liable for taxes
after a demand for the payment of the taxes has been made and the
taxpayer fails to pay. The lien arises when the assessment is
made. See sec. 6322. The IRS files a notice of Federal tax lien
to preserve priority and put other creditors on notice. See sec.
6323. Section 6320(a) requires the Secretary to send written
notice to the taxpayer of the filing of a notice of lien and of
the taxpayer’s right to an administrative hearing on the matter.
The hearing generally shall be conducted consistent with
procedures set forth in section 6330(c), (d), (e), and (g). See
sec. 6320(c). At the hearing a taxpayer may raise any relevant
issue, including challenges to the appropriateness of the
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collection action and possible collection alternatives. See sec.
6330(c)(2)(A). A taxpayer may contest the validity of the
underlying tax liability, see sec. 6330(c)(2)(B), but petitioners
have not done so here. They must, therefore, establish that the
issuance of a notice of determination sustaining the lien filing
was an abuse of discretion. See Sego v. Commissioner, 114 T.C.
604, 609-610 (2000). An abuse of discretion is shown only if the
action of the Appeals officer was arbitrary, capricious, or
without sound basis in fact or law.
See Giamelli v. Commissioner, 129 T.C. 107, 111 (2007).
Respondent moved for summary judgment, but petitioners
raised material issues of fact and suggested that the
administrative record was incomplete; the motion for summary
judgment was denied.
Petitioner testified at trial. Petitioner contends that
there was an abuse of discretion in that the collection officer
who set up his payment plan and the two officers who conducted
the hearings he requested did not properly weigh the facts and
consider the financial hardship that the lien would bring about.
In other words, he argues that the lien is more intrusive than
necessary.
Petitioner admits that he cannot cite any specific financial
hardship but claims that he is concerned about his job security
and other potential adverse effects on his credit ratings. He
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argues, but has not shown, that the conclusion that petitioners
have the ability to pay the outstanding liabilities is erroneous,
which is a less rigorous standard than arbitrary and capricious.
He argues that the determination that petitioners have the
ability to pay the balances owed is inconsistent with the need
for a lien to secure the Government’s interest, but that argument
has no merit. Petitioners’ failure to make voluntary payments
since September 2006 supports the need for a lien.
Petitioners have not cited, and we have not found, any
authority that would support their positions. We cannot conclude
that sustaining the lien was an abuse of discretion. By reason
of the foregoing,
Decision will be entered
for respondent.