Joseph Paul Freije v. Commissioner

125 T.C. No. 3UNITED STATES TAX COURT
JOSEPH PAUL FREIJE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 932-02L. Filed July 14, 2005.
P timely petitioned for review under sec. 6330(d),
I.R.C., of R's determination to proceed with levies to
collect unpaid Federal income taxes for 1997, 1998, and
1999.
P claimed in his Appeals hearing and herein that
the proposed levy for 1997 should not be sustained
because a remittance he made in 1997 with respect to
his Federal income tax liability for that year was
instead applied improperly by R against a tax liability
alleged by R to exist for 1995. Consequently, P
contends, R is attempting to collect a tax that has
been paid. R contends that this Court lacks
jurisdiction to consider 1995, a year that was not the
subject of a notice of determination, to ascertain
whether a liability existed for that year, to which the
1997 remittance was applied.
Held: P's claim concerning the disposition of his
1997 remittance is a relevant issue relating to the
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unpaid tax for 1997, and we have jurisdiction to
consider facts and issues arising in 1995, a year not
the subject of the notice of determination, insofar as
they are relevant to computing the unpaid tax for 1997.
Held, further, since P's Federal income tax return
and payment for 1995 were untimely, resulting in the
assessment of additions to tax for late filing and
payment, R's application of P's 1997 remittance against
the 1995 liability was proper.
In July 1998, P mailed a check to R for $1,776. R
posted the check to P's 1997 account for the erroneous
amount of $11,776. As $11,776 exceeded all unpaid
assessments for 1997, R issued P a refund for 1997 of
$5,513 in August 1998. After subsequently discovering
his error, R applied four of P's 1999 remittances,
totaling $6,500, to P's 1997 account. P claimed in his
hearing request and herein that he had not received
proper credit for all payments made with respect to
1999.
Held: R's application of P's 1999 remittances to
P's 1997 account to recoup the erroneous nonrebate
refund for 1997 contravenes O'Bryant v. United States,
49 F.3d 340 (7th Cir. 1995). These 1999 remittances
should have been applied against unpaid taxes that are
the subject of the instant levies. Consequently, the
levies must be reconsidered by R on remand.
P claimed in his Appeals hearing and herein that
the proposed levy for 1999 should not be sustained
because R improperly changed the amounts shown as due
on P's Federal income tax return for 1999. R concedes
that he disallowed, pursuant to sec. 6213(b)(1),
I.R.C., certain miscellaneous itemized deductions
claimed on that return and made an assessment based
thereon without issuing a notice of deficiency to P as
required by sec. 6213(a), I.R.C. As a consequence, R
contends, P is entitled in the instant proceeding to de
novo review under sec. 6330(c)(2)(B), I.R.C., of his
entitlement to these deductions, with any modifications
resulting from the Court's review to be reflected in
the amount of the assessment and levy.
Held: the 1999 levy, insofar as it is based on the
disallowance of P's miscellaneous itemized deductions,
may not proceed, as the assessment upon which it is
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based is invalid; de novo review pursuant to sec.
6330(c)(2)(B), I.R.C., may not cure an assessment that
is invalid for failure to comply with sec. 6213(a),
I.R.C. Consequently, the 1999 levy must be
reconsidered by R on remand.
Held, further, other issues raised by respondent's
determination to proceed with the levies for 1997,
1998, and 1999 determined.
Joseph Paul Freije, pro se.
Diane L. Worland, for respondent.
GALE, Judge: Pursuant to section 6330(d),1 petitioner seeks
review of respondent's determination to proceed with collection
by levy of income tax liabilities with respect to petitioner's
1997, 1998, and 1999 taxable years. The issue for decision is
whether respondent may proceed with proposed levies for
liabilities not conceded by him for 1998 and 1999.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The parties' stipulations and attached exhibits are incorporated
herein by this reference.
Petitioner resided in Franklin, Indiana, when the petition
in this case was filed.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as amended.
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Petitioner and his spouse (Mrs. Freije; collectively, the
Freijes) obtained an automatic 4-month extension (until August
15, 1996) to file their joint Federal income tax return for the
1995 taxable year (1995 return).2 The 1995 return, untimely
filed on November 18, 1996, reported tax due of $8,281.61 and was
accompanied by a payment of $3,005.47 which, when added to the
withholding credits listed of $5,276.14, satisfied the tax
reported as due. Nonetheless, the untimely filing and payment
triggered additions to tax for late filing and late payment, as
well as interest, totaling $838.27, which was assessed on
December 23, 1996.
On June 3, 1997, respondent received a $2,800 remittance
from the Freijes. The record does not disclose whether this
remittance was designated for any purpose. Respondent applied
$869.46 of this remittance to the foregoing assessment for 1995
(plus an additional assessment of interest) and refunded the
2
Our findings with respect to the Freijes' 1995 taxable
year are based in part on Ex. 21-R, a certified copy of a Form
4340, Certificate of Assessments, Payments, and Other Specified
Matters, covering the Freijes' individual income taxes for that
year. At trial, we reserved ruling on the admissibility of the
exhibit, because of uncertainty concerning whether respondent's
counsel had identified and provided a copy of it to petitioner at
least 14 days before trial, as required by the Court's standing
pretrial order. We allowed petitioner to make a submission after
trial with respect to the admissibility of Ex. 21-R. On the
basis of petitioner's submission and the entire record in this
case, we conclude that petitioner has failed to show prejudice
from any failure to receive a copy of Ex. 21-R at least 14 days
before trial. We accordingly hereby admit Ex. 21-R.
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balance to the Freijes. The Freijes also made remittances to
respondent of $2,300 on June 10, 1997, and $1,500 on October 6,
1997, that respondent treated as payments of estimated tax for
1997.
The Freijes timely filed a joint Federal income tax return
for the 1997 taxable year (1997 return) reporting a tax due of
$21,510, listing withholding credits of $4,134, and claiming
estimated tax payments of $6,600.3 A payment of $4,000 was sent
with the 1997 return. The $21,510 in tax reported as due on the
1997 return, as well as additions to tax for late payment and
failure to pay estimated tax, plus interest, were assessed on
June 8, 1998. Subsequent remittances of $2,000 each were
credited against the Freijes' 1997 liability on May 3 and June 1,
1998. On or about July 6, 1998, petitioner mailed a check for
$1,776 to respondent.4 This check was erroneously posted to the
3
The figure of $6,600 in claimed estimated tax payments for
1997 apparently reflected the Freijes' understanding that the
three remittances they submitted to respondent during 1997 (i.e.,
$2,800, $2,300, and $1,500, for a total of $6,600) constituted
estimated tax payments for that year. However, as noted,
respondent applied a portion of the initial $2,800 remittance to
the Freijes' 1995 liability and refunded the balance.
Consequently, the total 1997 estimated tax payments recorded in
the Freijes' account when their 1997 return was filed equaled
$3,800 (i.e., the total of the latter two 1997 remittances), not
the $6,600 reported on the 1997 return.
4
If respondent had not applied a portion of the Freijes'
1997 remittance of $2,800 to their 1995 liability, the $1,776
remittance of July 6, 1998, would have resulted in total
remittances for 1997 of $20,510, or $1,000 less than the tax
(continued...)
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Freijes' 1997 account in the amount of $11,776 on July 8, 1998,
which amount exceeded all assessments for 1997. As a
consequence, respondent issued the Freijes a refund of $5,513 on
August 3, 1998. At a time not disclosed in the record,
respondent corrected the $10,000 error by reversing $10,000 of
the $11,776 previously credited.5 Subsequent remittances made by
the Freijes in 1999 without designation for any year, totaling
$6,500, were posted to their 1997 account as follows: $1,800 on
May 26, 1999; $2,400 on June 16, 1999; $1,200 on July 9, 1999;
and $1,100 on July 26, 1999.
The Freijes timely filed a joint Federal income tax return
for the 1998 taxable year (1998 return) reporting a tax due of
$11,686 and no withholding credits or estimated tax payments.
(The Freijes' actual withholding credits for 1998 were $4,094.)
A payment of $3,000 was sent with the 1998 return. Subsequent
remittances of $1,000 and $1,587 were credited against their 1998
liability on April 19 and October 27, 1999, respectively.
4
(...continued)
reported as due on the 1997 return.
5
While this reversing entry is dated July 8, 1998, on the
Freijes' Form 4340, Certificate of Assessments, Payments, and
Other Specified Matters, for 1997, we conclude that it did not
occur on that date, as the refund triggered by the erroneous
posting of this amount was issued almost 1 month later. We are
persuaded that respondent did not become aware of the error until
sometime after this refund was issued to the Freijes.
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The Freijes timely filed a joint Federal income tax return
for the 1999 taxable year (1999 return) reporting a tax due of
$12,507.05, listing withholding credits of $4,318.96, and
claiming estimated tax payments of $15,616.6 On or about May 29,
2000, respondent issued a notice to the Freijes, at the address
they entered on the 1999 return, concerning the 1999 return and
entitled “We Changed Your Estimated Tax Total--You Have An Amount
Due". The notice indicated that the 1999 return had been changed
as follows: (i) Taxable income had been increased from the
$43,531 reported to $53,399, resulting in an increase in the tax
shown as due on the return from $12,507.05 to $15,265; and (ii)
estimated tax payments had been reduced from the $15,616 reported
to $6,000. On the same date as the notice, respondent assessed
the increased tax of $15,265, without issuing a statutory notice
of deficiency to the Freijes.
On December 27, 2000, respondent sent a letter to the
Freijes with attached workpapers that explained in greater detail
the foregoing changes made to the 1999 return. With respect to
the reduction in the claimed estimated tax payments, the letter
advised that the Freijes' 1999 account showed 1999 estimated tax
payments of only $6,000, consisting of two payments of $3,000 on
6
According to the Forms 4340 in the record, the total
remittances made by the Freijes during 1999, exclusive of the
$3,000 payment submitted with the 1998 return, were $15,087.
Insofar as the record discloses, these remittances were not
designated by the Freijes for any taxable year.
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November 10 and December 17, 1999.7 With respect to the increase
in taxable income, the letter advised that the $9,868 increase in
taxable income (from the reported $43,531 to $53,399) consisted
of the following items:
(i) a $1,000 increase in income as a result of a
discrepancy in that amount between the figure entered
for adjusted gross income at the bottom of the first
page of the 1999 return ($73,273) and the figure
entered for adjusted gross income at the top of the
second page ($72,273);
(ii) a $320 increase in income resulting from the
disallowance of a casualty or theft loss in that amount
claimed on the 1999 return, on the grounds that the
claimed loss did not consider the limitation of such
losses to amounts in excess of 10 percent of adjusted
gross income;
(iii) a $20 increase in income resulting from the
disallowance of a miscellaneous deduction for "P.O.
Box" claimed on the 1999 return, explained in the
letter as follows: "Misc Deductions: A post office box
is not a deductible expense";
(iv) a $8,528 increase in income resulting from the
disallowance of a miscellaneous deduction for "Lawyers"
claimed on the 1999 return, explained in the letter as
follows: "Other Misc Deductions: Lawyers are not a
deductible expense. They are deductible if the fees
are paid to produce or collect taxable income or are in
connection with the determination, collection, or
refund of a tax."
On February 7, 2001, respondent issued to the Freijes a
Final Notice of Intent to Levy and Notice of Your Right to a
Hearing for income tax, interest, and penalties for taxable years
7
As noted, the Forms 4340 in the record state that the
Freijes made remittances during 1999 that totaled $15,087;
however, respondent applied $6,500 and $2,587 against the
Freijes' 1997 and 1998 liabilities, respectively.
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1997, 1998, and 1999. On February 18, 2001, respondent received
a Form 12153, Request for a Collection Due Process Hearing, from
petitioner (but not Mrs. Freije) regarding respondent's proposed
collection action for the foregoing years. As grounds for
disagreeing with the proposed collection action, petitioner wrote
as follows, "I am scheduled for audit in Greenwood IN. You
people have falsely accused me of writing a bad check for
$10,000.00. You deny receiving over $13,000.00 in estimated
taxes. * * * I have amended 1997, 1998, 1999. You owe me over
$24,000.00."
On February 27, 2001, the Freijes filed an amended Federal
income tax return for 1997, claiming an increase in itemized
deductions of $14,9408 and a resulting refund of $6,395. On
March 27, 2001, the Freijes filed amended Federal income tax
returns for 1998 and 1999, claiming a $14,9409 reduction in
previously reported adjusted gross income for each of those years
and resulting refunds of $8,996.50 and $8,752.73, respectively.10
8
This figure equaled the portion of an increase in the
Freijes' income for 1999 that had been proposed in an examination
of the 1999 return, with which petitioner disagreed.
9
These figures were likewise designed to offset the same
proposed examination increase in the Freijes' income for 1999
with which petitioner disagreed. See supra note 8.
10
The 1998 and 1999 amended returns both claimed amounts
for estimated tax payments that were different from the amounts
claimed in the original returns for those years.
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On or about April 30, 2001, an Appeals officer of respondent
sent petitioner a letter advising him that a conference would be
scheduled in the future. In May 2001, petitioner advised the
Appeals officer that he did not wish to appear in person in
respondent's office to attend a face-to-face meeting in
connection with a hearing.
On June 4, 2001, petitioner and the Appeals officer
discussed petitioner's request by telephone. During that
conversation, petitioner advised the Appeals officer that he
would be willing to "pay 25 cents per year for 1997, 1998, and
1999, call it even, and then start afresh with the year 2001."
The Appeals officer advised petitioner that this proposed
collection alternative to the levy was not acceptable. Later
that day, petitioner left voice-mail messages for the Appeals
officer seeking information concerning changes respondent made to
his 1995, 1996, 1997, and 1998 returns that resulted in
additional tax, additions to tax, and interest for those years as
well as information concerning why payments intended for one year
had been applied to other years. Petitioner further advised the
Appeals officer that his problems began with his 1995 taxes. In
addition, petitioner advised the Appeals officer of petitioner's
claim that respondent had altered petitioner's check for $1,776
(intended as payment of his 1997 taxes) so that it was posted for
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$11,776, which, according to petitioner, resulted in his being
falsely accused by respondent of writing a bad check for $10,000.
On November 26, 2001, a Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330 was sent to
petitioner. In the notice, the Appeals officer determined that
all applicable laws and administrative procedures had been
satisfied. With respect to petitioner's expressed concerns about
his 1995 taxes, the Appeals officer explained that a remittance
submitted by petitioner in 1997 and intended by him to be applied
to that year's taxes was instead applied to 1995 taxes because
the return and payment for 1995 had been received late,
triggering an assessment of additions to tax and interest for
that year to which the 1997 payment had been applied. With
respect to 1997, the Appeals officer determined that, because
respondent's incorrect posting of petitioner's $1,776 check as
$11,776 had resulted in an erroneous refund with respect to 1997,
the assessed failure to pay addition to tax would be abated. As
for the remaining liabilities that were the subject of the levy,
the Appeals officer determined: "The tax owed is from the
original return for 1997, 1998 and 1999. Therefore, I recommend
the government sustain the tax liability for * * * [those tax
periods]." Concluding that the proposed levy represented an
appropriate balancing of the need for efficient collection with
the concern that the collection action be no more intrusive than
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necessary, the Appeals officer determined that the proposed levy
could proceed.
On January 14, 2002, petitioner filed a timely petition with
this Court for review of the determination. The petition assigns
a litany of errors to the determination, including (i) that
respondent changed petitioner's 1995 through 1999 returns without
notifying him; (ii) that respondent altered a check petitioner
submitted in connection with the erroneous posting of his $1,776
payment as $11,776 for 1997; and (iii) that respondent denied
receipt of certain payments petitioner made. Petitioner seeks as
a remedy a refund of all Federal income taxes he paid for taxable
years 1995 through 2001.
After the petition was filed, on March 11, 2002, respondent
issued a notice of deficiency to the Freijes with respect to
their 1999 taxable year. In the notice of deficiency, respondent
determined, inter alia, that the Freijes were not entitled to the
$320 casualty loss claimed in the 1999 return but were entitled
to miscellaneous deductions of $8,935 (subject to the 2-percent
limitation of section 67(a)). On the same day that the notice of
deficiency was issued, respondent issued a claim disallowance
letter to the Freijes, denying their claims for refund in their
amended returns filed for 1997, 1998, and 1999. No petition was
filed in this Court with respect to the notice of deficiency for
1999.
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At trial and in his posttrial brief, respondent conceded
that collection of petitioner's outstanding liability for 1997,
representing that portion of the erroneous refund for 1997 that
had not been collected, was prohibited by section 6532(b).
OPINION
Section 6331(a) authorizes the Secretary to levy upon
property and property rights of a taxpayer liable for taxes who
fails to pay those taxes within 10 days after notice and demand
for payment is made. Section 6331(d) provides that the levy
authorized in section 6331(a) may be made with respect to any
"unpaid tax" only if the Secretary has given written notice to
the taxpayer 30 days before the levy. Section 6330(a) requires
the Secretary to send a written notice to the taxpayer of the
"amount of the unpaid tax" and of the taxpayer's right to a
section 6330 hearing at least 30 days before any levy is begun.
This notice need only be given once for "the taxable period to
which the unpaid tax specified in * * * [the levy notice]
relates." Sec. 6330(a)(1).
If a section 6330 hearing is requested, the hearing is to be
conducted by Appeals, and, at the hearing, the Appeals officer
conducting it must verify that the requirements of any applicable
law or administrative procedure have been met. Sec. 6330(b)(1),
(c)(2). The taxpayer is entitled to one hearing with respect to
"the taxable period to which the unpaid tax specified in * * *
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[the levy notice] relates." Sec. 6330(b)(2). The taxpayer may
raise at the hearing "any relevant issue relating to the unpaid
tax or the proposed levy". Sec. 6330(c)(2)(A). The taxpayer may
also raise challenges to the existence or amount of the
underlying tax liability at a hearing if the taxpayer did not
receive a statutory notice of deficiency with respect to the
underlying tax liability or did not otherwise have an opportunity
to dispute that liability. Sec. 6330(c)(2)(B). The underlying
tax liability that may be challenged includes amounts reported as
due on a return. Montgomery v. Commissioner, 122 T.C. 1 (2004).
At the conclusion of the hearing, the Appeals officer must
determine whether and how to proceed with collection and shall
take into account (i) the verification that the requirements of
any applicable law or administrative procedure have been met,
(ii) the relevant issues raised by the taxpayer, (iii) challenges
to the underlying tax liability by the taxpayer, where permitted,
and (iv) whether any proposed collection action balances the need
for the efficient collection of taxes with the legitimate concern
of the taxpayer that the collection action be no more intrusive
than necessary. Sec. 6330(c)(3).
We have jurisdiction to review the Appeals officer's
determination where we have jurisdiction over the type of tax
involved in the case. Sec. 6330(d)(1)(A); see Iannone v.
Commissioner, 122 T.C. 287, 290 (2004). Generally, we may
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consider only those issues that the taxpayer raised during the
section 6330 hearing. See sec. 301.6330-1(f)(2), Q&A-F5, Proced.
& Admin. Regs.; see also Magana v. Commissioner, 118 T.C. 488,
493 (2002). Where the underlying tax liability is properly at
issue, we review the determination de novo. E.g., Goza v.
Commissioner, 114 T.C. 176, 181-182 (2000). Where the underlying
tax liability is not at issue, we review the determination for
abuse of discretion. Id. at 182. Whether an abuse of discretion
has occurred depends upon whether the exercise of discretion is
without sound basis in fact or law. See Ansley-Sheppard-Burgess
Co. v. Commissioner, 104 T.C. 367, 371 (1995).
Petitioner, proceeding pro se, seeks a refund of all income
taxes paid for taxable years 1995 through 2001. Our jurisdiction
in this case is confined, however, to a review of the Appeals
officer's determination approving a levy to collect unpaid tax
liabilities for 1997, 1998, and 1999. We shall treat petitioner
as contesting the Appeals officer's determination for all years,
and consider his arguments to the extent they have any bearing
thereon. In particular, we find that petitioner's communications
with the Appeals officer may be fairly construed as proposing a
collection alternative, and as raising the issue that payments he
made with respect to the years in issue were not properly
accounted for by respondent and that the tax reported as due on
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his returns for some or all of the years in issue was changed
inappropriately by respondent.11
Proposed Collection Alternative
We can readily dispose of petitioner's proposed collection
alternative. His offer of 25 cents per year for 1997, 1998, and
1999 is frivolous, and the Appeals officer's rejection of it was
not an abuse of discretion.
1997
Although respondent now concedes he may not collect the
unpaid balance of petitioner's 1997 liability by levy, we
nonetheless find it necessary to consider that year because,
first, petitioner claims that payments that were intended to
satisfy his 1997 liability were instead applied to 1995. If
these payments were improperly applied to 1995, then respondent's
computation (and assessment) of the additions to tax for late
payment and failure to pay estimated tax for 1997 would be
11
We shall also assume, without deciding, that by
mentioning his amended returns for 1998 and 1999 in his request
for a hearing, petitioner thereby raised challenges at the
hearing to the underlying tax liabilities as originally reported
in the 1998 and 1999 returns. Regardless of whether these issues
are treated as having been raised, there is no effect on the
outcome because the challenges, as discussed infra, have no
merit.
While petitioner also mentioned his amended return for 1997
in his hearing request, we conclude that any issue thereby raised
is moot as a result of respondent's concession that the levy for
1997 should not proceed.
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incorrect.12 Second, respondent applied $6,500 of remittances
made by the Freijes in 1999 to their 1997 liability, even though
all assessments of the 1997 liability were extinguished by
respondent's crediting of petitioner's $1,776 check as $11,776 on
July 8, 1998. Although neither party has addressed the issue, as
discussed more fully below, respondent's application of the
Freijes' 1999 remittances to their 1997 account contravenes
O'Bryant v. United States, 49 F.3d 340 (7th Cir. 1995).
Claim of Payment
With respect to petitioner's contention that certain 1997
payments were improperly applied to 1995, respondent argues that
we lack jurisdiction to consider 1995, citing Lister v.
Commissioner, T.C. Memo. 2003-17. We disagree. We held in
Lister, a Memorandum Opinion, that our jurisdiction under section
6330(d)(1) was confined to the years that were the subject of the
notice of determination, where the taxpayer had attempted in the
12
Had the Freijes' June 3, 1997, remittance of $2,800
(which was undesignated insofar as the record discloses) not been
applied in part against their 1995 liability, we assume
respondent would have treated it as a payment of estimated tax
for 1997, as he did with respect to the Freijes' $2,300
remittance made 1 week later on June 10, 1997, and their $1,500
remittance made on Oct. 6, 1997. There is evidence that the
Freijes intended all of the foregoing remittances to be payments
of estimated tax for 1997, in that they reported in the 1997
return the total of these three remittances ($6,600) as the
amount of estimated tax paid.
On this record, given the Freijes’ myriad remittances, we
are unable to conclude that a change in the unpaid liability for
1997 would have had no impact on the computation of any additions
to tax for untimely payment in 1998 and 1999.
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petition to put in issue all years subsequent to the 2 years
covered by the notice. Here, petitioner's claim is that a
payment intended for 1997, a year that was a subject of the
notice of determination (determination year), was instead applied
to a liability for 1995, a year that was not a subject of the
notice of determination (nondetermination year).
We do not read Lister as precluding our consideration of
facts and issues arising in nondetermination years where those
facts and issues are relevant to a taxpayer's claim that the tax
which is the subject of a collection action has been paid. As
discussed below, we believe our jurisdiction extends in
appropriate circumstances to years other than those in which the
tax liability sought to be collected arises.
Our jurisdiction under section 6330 covers the
"determination" of the Appeals officer who conducted the hearing
requested under that section. See sec. 6330(d)(1)(A) ("the Tax
Court shall have jurisdiction with respect to [the determination
of an Appeals officer under section 6330]"). Section 6330(c)(3)
prescribes the matters that the Appeals officer's determination
"shall" take into consideration, which include "the issues raised
under paragraph (2) [of section 6330(c)]". Paragraph (2) of
section 6330(c) entitles the person upon whose property the
Commissioner seeks to levy (the taxpayer) to raise at the hearing
"any relevant issue relating to the unpaid tax or the proposed
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levy", par. (2)(A), and, if he did not receive any statutory
notice of deficiency for, or otherwise have an opportunity to
dispute, the underlying tax liability, he may also raise
"challenges to the existence or amount of the underlying tax
liability for any tax period", par. (2)(B).
Thus, our jurisdiction is defined by the scope of the
determination, which must take into consideration, if raised by
the taxpayer, "any relevant issue relating to the unpaid tax or
the proposed levy" and, in certain circumstances, "challenges to
the existence or amount of the underlying tax liability for any
tax period".
There is no question that petitioner raised the issue of a
remittance made in 1997 having been applied (improperly, in
petitioner's view) to satisfy a 1995 liability, as the
determination discusses his claim and traces the application of
the remittance.13 The question is whether the propriety of
applying the 1997 remittance to satisfy the 1995 liability is a
"relevant issue relating to the unpaid tax or the proposed levy".
If so, we have jurisdiction, as the statute required the
determination to take into consideration the issue and our
jurisdiction encompasses the determination. For the reasons
discussed below, we conclude our jurisdiction is not confined to
13
There is also no dispute that the Freijes made the
claimed remittance of $2,800 on or about June 3, 1997, as the
Form 4340 for 1995 records a payment in that amount on that date.
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the year (or period) to which the unpaid tax relates, as
respondent contends, but extends to facts and issues in
nondetermination years where they are relevant to computing the
unpaid tax.
In interpreting the scope of section 6330(c)(2), we note
first that the legislative history indicates that Congress
intended a broad construction of the issues that a taxpayer was
entitled to raise under that section. "In general, any issue
that is relevant to the appropriateness of the proposed
collection against the taxpayer can be raised at the pre-levy
hearing." H. Conf. Rept. 105-599, at 265 (1998), 1998-3 C.B.
747, 1019.
Second, considering the terms of the statute in their
ordinary meaning, a "relevant issue relating to the unpaid tax or
the proposed levy" surely includes a claim, such as the one here,
that the "unpaid tax" has in fact been satisfied by a remittance
that the Commissioner improperly applied elsewhere. Both section
6331, which empowers the Commissioner to impose a levy, and
section 6330, which requires the Commissioner to afford a hearing
before proceeding with a levy and provides our jurisdiction to
review his determination to proceed with a levy, contemplate an
"unpaid tax". Secs. 6330(a)(1), (3)(A), (b)(2) and (3),
(c)(2)(A), 6331(d)(1) (emphasis added). Since an "unpaid tax" is
the sine qua non of the Commissioner's authority to levy, we
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believe a claim directed at the status of the tax as "unpaid" is
a "relevant issue relating to the unpaid tax or the proposed
levy". Sec. 6330(c)(2)(A). Meaningful review of a claim that a
tax sought to be collected by levy has been paid, by means of a
remittance or an available credit, will typically require
consideration of facts and issues in nondetermination years, as
those years may constitute the years to which a remittance was
applied or from which a credit originated.14
Finally, we note that, notwithstanding respondent's present
position, the Appeals officer interpreted the statute to require
her consideration of petitioner's claim that certain remittances
intended for 1997 had been applied improperly to 1995. The
determination specifically addresses this claim, and traces the
application of the Freijes' June 3, 1997, remittance to an
14
Indeed, we have routinely considered facts and issues in
nondetermination years in these circumstances. See, e.g., Landry
v. Commissioner, 116 T.C. 60 (2001) (untimely claim for
application of overpayments from nondetermination years);
Leineweber v. Commissioner, T.C. Memo. 2004-17 (claim that
overpayment in determination year was applied to nondetermination
year for which period of limitation on collection had expired);
Tedokon v. Commissioner, T.C. Memo. 2002-308 (same as Landry);
Lee v. Commissioner, T.C. Memo. 2002-233 (same as Landry), affd.
70 Fed. Appx. 471 (9th Cir. 2003); Kazunas v. Commissioner, T.C.
Memo. 2002-188 (existence of overpayment in nondetermination
year); Sponberg v. Commissioner, T.C. Memo. 2002-177 (claim that
Commissioner had not accounted for all payments in
nondetermination years, which if accounted for would result in
overpayments available for application to determination years).
Apparently no issue was raised in the foregoing cases concerning
our jurisdiction to consider facts and issues arising in
nondetermination years.
- 22 -
outstanding liability for 1995 representing an assessment for
failure to file and failure to pay additions to tax as well as
interest.
For the foregoing reasons, we hold that our jurisdiction
under section 6330(d)(1)(A) encompasses consideration of facts
and issues in nondetermination years where the facts and issues
are relevant in evaluating a claim that an unpaid tax has been
paid.
In reaching this conclusion, we are mindful that in the case
of our deficiency jurisdiction, section 6214(b) imposes
limitations on our jurisdiction with respect to years other than
the year for which a deficiency has been determined. Section
6214(b) provides that, in redetermining a deficiency of income
tax for any taxable year, this Court "shall consider such facts
with relation to the taxes for other years * * * as may be
necessary correctly to redetermine the amount of such deficiency,
but in so doing shall have no jurisdiction to determine whether
or not the tax for any other year * * * has been overpaid or
underpaid." In interpreting this provision--
We have distinguished our authority under section
6214(b) to compute a tax for a year not before the
Court from our lack of authority under that same
section to "determine" a tax for such year. In Lone
Manor Farms, Inc. v. Commissioner, 61 T.C. 436, 440
(1974), affd. without published opinion 510 F.2d 970(3d Cir. 1975), we stated that section 6214(b) "does
not prevent us from computing, as distinguished from
'determining', the correct tax liability for a year not
in issue when such a computation is necessary to a
- 23 -
determination of the correct tax liability for a year
that has been placed in issue." [Hill v. Commissioner,
95 T.C. 437, 439-440 (1990).]
Thus, section 6214(b) does not foreclose our authority (i) to
consider facts and issues in a nondeficiency year and on the
basis thereof compute the tax liability for that year (regardless
of the tax liability reported by the taxpayer or assessed by the
Commissioner), or (ii) to employ the recomputed tax liability in
redetermining the tax liability for the year for which a
deficiency was determined. The limiting conditions of section
6214(b) are that the computation of the other year's tax
liability be necessary to the redetermination of the tax
liability at issue and that our recomputation not constitute a
determination of the other year's liability for any other
purpose.
There is no statutory provision comparable to section
6214(b) that limits the jurisdiction granted by section
6330(d)(1)(A). Nonetheless, our holding conforms to the
principles of section 6214(b). We conclude that our jurisdiction
under section 6330(d)(1)(A) extends to the consideration of facts
and issues in a nondetermination year only insofar as the tax
liability for that year may affect the appropriateness of the
collection action for the determination year. In exercising that
jurisdiction, we do not determine whether any collection action
- 24 -
with respect to the nondetermination year may proceed, but only
whether collection action may proceed in the determination year.
Having decided our jurisdiction to consider facts and issues
in 1995, we turn to consideration of petitioner's claim that his
1997 liability had been paid. In an effort to demonstrate that
respondent had not properly credited him with payments he made to
satisfy his 1997 liabilities, petitioner testified that he had
timely filed his 1995 return. If the 1995 return had been timely
filed, then the $3,005.47 payment submitted with that return,
when added to withholding credits, would have fully satisfied the
tax reported as due on the 1995 return, and no additions to tax
for late filing or late payment would have been owed. As a
consequence, it would not have been proper for respondent to
apply (as he did) a portion of the $2,800 payment received from
the Freijes on June 3, 1997, against any 1995 liability, as there
would have been none.
However, we have found that the 1995 return was untimely
filed on November 18, 1996. We based that finding on an
evaluation of the parties' respective evidence. Respondent
offered from his records a certified copy of a completed Form
1040, U.S. Individual Income Tax Return, for 1995 bearing the
Freijes' signatures, with a "received" stamp of November 18,
1996, and with a date of "11-16-96" entered next to the
signatures. The Form 4340 for 1995 likewise indicates a filing
- 25 -
date for the return of November 18, 1996. Petitioner offered a
Form 1040 with a date of "1-16-96" entered next to the
signatures. In addition, petitioner offered a copy of his check
to the IRS, bearing a date of "1-16-96". This copy had no bank
markings indicating it had been negotiated, which petitioner
explained was due to the fact that it was a copy of the check
made before mailing it to the IRS. Petitioner also produced a
copy of the negotiated version of the same check, yet this copy
bore a date of "11-16-96", consistent with a November 1996
filing.15 Moreover, petitioner produced a copy of a request for
an automatic 4-month extension of time for filing the 1995
15
As to the discrepancy in the "1-16-96" and "11-16-96"
dates on the two copies of the same check he wrote as payment of
his 1995 taxes, petitioner testified that the check bore the "1-
16-96" date when he mailed it to respondent, which implies that
someone at the IRS altered the check by adding the numeral "1" to
the month indicator in the date.
This claim arouses greater suspicion when considered in
light of the fact that petitioner is also claiming that someone
at the IRS altered the numeral "1" on another of his checks;
namely, the check for $1,776 intended as payment towards his 1997
taxes that was erroneously posted by respondent as a payment of
$11,776. That check is also in evidence and contains
inconsistent entries designating its amount; namely, a numeric
entry of "$1,1776.00" [sic] and a written entry of "One thousand
seven hundred seventy six" dollars.
The recurrent manipulation of the numeral "1" on
petitioner's checks undermines the credibility of both his claims
that IRS personnel altered his checks. We need not resolve the
dispute concerning the $1,776 check, however, given respondent's
concession that his effort to recover the erroneous 1997 refund
resulting from the incorrect posting of this check is barred by
sec. 6532(b). Nonetheless, one is left with the singular
sensation that petitioner's recurrent problems with the numeral
"1" are too similar to be explained by malfeasance on the part of
IRS employees.
- 26 -
return, with the signatures thereon dated February 10, 1996. The
Form 4340 for 1995 indicates that a 4-month extension was
granted. Yet petitioner offers no convincing explanation why, if
he filed a return for 1995 in January 1996 as he claims, he
sought a filing extension in February 1996. Given the
significant contradictory evidence, petitioner's self-serving
claim that he filed a return for 1995 in January 199616 is not
credible.
Because petitioner's 1995 return and accompanying payment
were untimely, respondent assessed additions to tax for late
filing and late payment for that year. As a consequence,
respondent was entitled to apply the June 2, 1997, payment
submitted by the Freijes, which it has not been shown was
designated for any year, in satisfaction of his 1995 liability.
See Rev. Rul. 73-305, 1973-2 C.B. 43. Therefore, respondent's
assessment of the additions to tax for late payment and failure
to pay estimated tax for 1997 was correct.
Respondent's Application of 1999 Remittances to 1997
Liabilities
On or about July 6, 1998, petitioner mailed a check for
$1,776 to respondent. This check was erroneously posted to the
16
Petitioner also claims that he filed a return for 1995 in
July 1996 and offered into evidence a purported copy of that
return, which respondent has no record of receiving. In light of
the greater weight of the evidence, discussed above, that he
filed the 1995 return in November 1996, we are likewise
unpersuaded that petitioner filed in July 1996.
- 27 -
Freijes' 1997 account in the amount of $11,776 on July 8, 1998.
As this amount exceeded all unpaid assessments for 1997,
respondent issued the Freijes a refund of $5,513 for that year on
August 3, 1998. Sometime after August 3, 1998, respondent became
aware of the $10,000 error and made reversing entries on the
Freijes' 1997 account.17 However, no assessments were recorded
subsequent to the August 3, 1998, refund. Respondent thereafter
applied four remittances made by the Freijes in 1999, totaling
$6,500, to their 1997 account.
Respondent's application of these 1999 remittances to the
Freijes' 1997 account in an effort to recover the erroneous
refund contravenes O'Bryant v. United States, 49 F.3d 340 (7th
Cir. 1995). In O'Bryant, the Court of Appeals for the Seventh
Circuit, to which an appeal in this case would ordinarily lie,
held that the Commissioner may not use his postassessment
collection powers to recover an erroneous nonrebate refund. In
that case, the taxpayer made a payment that satisfied an
outstanding assessment. The Commissioner mistakenly credited the
payment to the taxpayer's account twice and consequently issued
the taxpayer a refund in the amount of the payment plus interest.
Upon discovering his mistake, the Commissioner recovered a
portion of the refund by levy and by applying overpayments and
17
The reversing entries were dated as of the original
erroneous posting (July 8, 1998). See supra note 5.
- 28 -
remittances from other years to the taxpayer's account for the
year of the refund, without having made another assessment. The
Court of Appeals concluded that, since the assessment had been
extinguished by the taxpayer's payment, the Commissioner could
not employ his summary collection powers in the absence of an
assessment, but instead had to recover the erroneous refund
through an erroneous refund action under section 7405.18
Respondent has applied $6,500 in 1999 remittances to the
Freijes' 1997 account in an effort to recover the erroneously
refunded $5,513 (plus interest, presumably). Under O'Bryant, he
may not do so. Instead, these 1999 undesignated remittances,
under respondent's then-applicable procedures, see Rev. Rul. 73-
305, supra, should have been applied to satisfy outstanding
assessments for 1998. Had the 1998 assessments been thereby
satisfied, presumably some portion of these 1999 remittances
would have been available for application to the Freijes' 1999
account. Consequently, we conclude that the levies for 1998 and
1999 should not be sustained in their present form, as the unpaid
tax for each year may be affected by the proper application of
the $6,500 in 1999 remittances by the Freijes.
18
The Court of Appeals declined to decide whether, as the
Commissioner contended, he had a further option of recovering the
refund through a suit begun within the limitations period of sec.
6501, without regard to sec. 7405.
- 29 -
1998
Respondent has conceded that the Appeals officer's
determination to proceed with the levy with respect to
petitioner's 1998 liability failed to take into account $4,094 of
withholding credits of Mrs. Freije that were not listed on the
1998 return.
The only specific dispute of his 1998 liability that we can
identify as having been raised by petitioner arises by virtue of
the Freijes' amended return for 1998.19 In the amended return,
the Freijes claimed a reduction in 1998 adjusted gross income of
$14,940, which was calculated as reducing the tax due from the
$11,686 originally reported to $7,097.50.20 While petitioner may
dispute in this proceeding the amount reported as due on the 1998
return, see Montgomery v. Commissioner, 122 T.C. 1 (2004), there
is no merit to the grounds on which petitioner now disputes the
amount reported as due on the 1998 return. Petitioner testified
that he claimed a $14,940 reduction in adjusted gross income on
the amended return for 1998 because this was an amount by which
an agent of respondent, upon examination of the 1999 return,
19
See supra note 11.
20
Because the Freijes claimed, for the first time in the
amended return for 1998, that they were entitled to 1998 credits
for withholding and estimated taxes of $4,094 and $12,000,
respectively, the refund claimed in the 1998 amended return was
$8,996.50, an amount exceeding the difference between the tax
reported as due on the original versus the amended return.
- 30 -
proposed to increase the Freijes' adjusted gross income for 1999.
Without more, we see no merit in petitioner's challenge to the
underlying liability for 1998.
The Appeals officer's determination to proceed with the levy
has not taken into account, however, the $4,094 in withholding
credits of Mrs. Freije to which respondent concedes the Freijes
are entitled, or the $6,500 in 1999 remittances that were
improperly applied to the Freijes' 1997 account. Given these
infirmities, the determination that the levy for 1998 could
proceed without modification was an abuse of discretion.
1999
The unpaid tax for 1999 that is sought to be collected by
the levy at issue includes an assessment of tax of $15,265 (as
well as an estimated tax addition to tax and interest) that
respondent made on May 29, 2000. For the reasons outlined below,
we conclude that a portion of this assessment is invalid.
The Freijes reported a tax due of $12,507 on the 1999
return, timely filed on April 15, 2000. However, on May 29,
2000, pursuant to what respondent concedes was a so-called math
error notice under section 6213(b)(1), respondent adjusted
various items reported on the 1999 return, resulting in an
increase in the reported tax to $15,265, which was assessed on
the same date.
- 31 -
Section 6213(b)(1) in general allows the assessment of tax
in excess of that shown on a return (i.e., without resort to the
deficiency procedures of sections 6211-6216) in cases where the
additional amount of tax is attributable to "a mathematical or
clerical error appearing on the return". Section 6213(g)(2)
defines "mathematical or clerical error" for this purpose
generally as an error in addition, subtraction, multiplication,
or division shown on a return; an incorrect use of an IRS table
if apparent from the existence of other information on a return;
an item entry on a return which is inconsistent with another
entry of the same or another item on the return; an omission of
information which is required to be supplied on a return to
substantiate an entry; an entry on a return of a deduction in an
amount which exceeds a statutory limit if the items entering into
the computation of the limit appear on the return; and various
other instances not pertinent here. See sec. 6213(g)(2)(A)-(M).
As noted in our findings of fact, respondent's "math error"
adjustments to the 1999 return included a correction of
inconsistent entries for adjusted gross income and of a casualty
loss claimed without regard to the limitation of such losses to
amounts exceeding 10 percent of adjusted gross income. We have
no quarrel with these adjustments, as they fall squarely within
- 32 -
the provisions of section 6213(b)(1).21 See sec. 6213(g)(2)(C),
(E). However, respondent also purported to disallow, pursuant to
section 6213(b)(1), an "other miscellaneous" deduction (i.e., a
miscellaneous deduction not subject to the 2-percent limitation
of section 67(a)) of $8,528 claimed on Schedule A, Itemized
Deductions, of the return for "Lawyers" and a "miscellaneous"
deduction (i.e., one subject to the 2-percent limitation) of $20
claimed on the Schedule A for a "P.O. Box".
In the instant proceeding, respondent does not attempt to
defend the foregoing disallowances as a permissible application
of section 6213(b)(1).22 Instead, respondent takes the position
that, because the miscellaneous deductions were disallowed
pursuant to a "math error" notice under section 6213(b)(1)
without the issuance of a notice of deficiency, petitioner did
not have any previous "opportunity to dispute" the underlying tax
liability within the meaning of section 6330(c)(2)(B). Thus,
respondent reasons, petitioner is entitled to dispute the
underlying tax liability associated with the disallowed
21
The "math error" notice also indicated that the Freijes'
estimated tax payments for 1999 totaled $6,000 rather than the
$15,616 claimed on the 1999 return. As previously noted,
additional remittances totaling $6,500 and $2,587, made by the
Freijes in 1999 but undesignated, were applied to their 1997 and
1998 liabilities, respectively.
22
The record does not disclose whether petitioner sought an
abatement (under sec. 6213(b)(2)) of the assessment made by
respondent pursuant to sec. 6213(b)(1).
- 33 -
deductions in the present section 6330 proceeding, and we are
urged to undertake de novo review under section 6330 of
petitioner's entitlement to those deductions. In respondent's
view, such de novo review should result in petitioner's 1999
liability's being adjusted to reflect an allowance of $7,701.25
of the claimed miscellaneous deduction for legal fees (the amount
that respondent concedes petitioner has substantiated in this
proceeding), reduced pursuant to section 67(a) by an amount equal
to 2 percent of adjusted gross income.
Petitioner contends that he has substantiated the full
$8,528 deduction claimed on the 1999 return and that, in
connection with the examination of his 1999 return, respondent's
agent allowed his claimed deduction for legal fees. The notice
of deficiency for 1999, issued after the notice of intent to levy
for that year, provides some corroboration for petitioner's
claim, in that it allowed $8,935 in miscellaneous deductions
(subject to the 2-percent limitation) without further specifying
the basis for the allowance.23 As to any possible discrepancy in
respondent's treatment of the legal fees deduction in the instant
proceeding and his treatment in the notice of deficiency (and any
consequent inconsistency in the assessment that respondent became
entitled to make when the Freijes defaulted with respect to the
23
As noted, no petition was filed in response to the notice
of deficiency for 1999.
- 34 -
notice of deficiency24), respondent takes the position on brief
that we should undertake a de novo determination of petitioner's
entitlement to the claimed deduction for legal fees pursuant to
section 6330(c)(2)(B) and that any such determination will
generally be binding on the parties in any subsequent litigation
under the doctrine of collateral estoppel. Accordingly,
respondent represents, respondent will "make any necessary
adjustments" to the liability to conform to our decision.
We reject respondent's contention that we should undertake
de novo review of petitioner's entitlement to the miscellaneous
deductions claimed. The assessment of the 1999 liability made
pursuant to the math error notice, which the levy at issue in
this proceeding seeks to collect, is simply invalid insofar as it
results from the disallowance of petitioner's miscellaneous
deductions claimed on the 1999 return. That portion of the
assessment violated section 6213(a), which generally prohibits
the assessment of a deficiency without affording the taxpayer the
opportunity to petition for redetermination of the deficiency in
24
The record does not disclose whether an assessment was
made after the Freijes failed to file a petition with respect to
the notice of deficiency for 1999. The Form 4340 covering 1999
that is in the record was generated before the issuance of the
notice of deficiency. However, respondent's counsel represents
on brief that petitioner has a liability for 1999 that is based
on the notice of deficiency, as distinguished from the liability
based on the math error notice.
- 35 -
this Court.25 Cf. Israel v. Commissioner, T.C. Memo. 2003-198,
affd. 88 Fed. Appx. 941 (7th Cir. 2004). In our view,
respondent's failure to show that the disallowance of the
miscellaneous deductions fell within the "math error" exception,
or some other exception, to the proscription of section 6213(a)
on assessments without deficiency procedures is fatal to that
portion of the math error assessment that is based on the
disallowance of the miscellaneous deductions.
Respondent in effect seeks to cure the defect in the math
error assessment by conceding petitioner the opportunity to
dispute the disallowance in this proceeding. While it is true
that section 6330(c)(2)(B) provides that a taxpayer whose
property is the subject of a proposed levy may dispute the
"underlying tax liability" if he "did not receive any statutory
notice of deficiency for such tax liability or did not otherwise
have an opportunity to dispute such tax liability", that
provision should not be construed to allow respondent to employ
25
Sec. 6213(a) provides in part:
Except as otherwise provided in * * * [the case of
certain termination or jeopardy assessments] no
assessment of a deficiency in respect of any tax
imposed by subtitle A * * * and no levy or proceeding
in court for its collection shall be made, begun, or
prosecuted until * * * [a] notice [of deficiency] has
been mailed to the taxpayer, nor until the expiration
of such 90-day or 150-day period [in which the taxpayer
may petition the Tax Court for redetermination of the
deficiency] * * *.
- 36 -
it to perfect an assessment made in derogation of section
6213(a). We have previously construed the phrase "did not
receive any statutory notice of deficiency" as used in section
6330(c)(2)(B) as encompassing the situation where a notice of
deficiency, though mailed by the Commissioner, was not in fact
received by the taxpayer. See Calderone v. Commissioner, T.C.
Memo. 2004-240; Tatum v. Commissioner, T.C. Memo. 2003-115.
Respondent would have us extend the meaning of that phrase to
encompass the situation where a taxpayer did not receive any
notice of deficiency because the Commissioner failed to issue
one, in violation of section 6213(a).
We decline to do so. Such an interpretation would
contravene the intent underlying section 6330, a measure intended
to expand taxpayers' rights in collection actions. See S. Rept.
105-174, at 67 (1998), 1998-3 C.B. 537, 603. Under the
interpretation of section 6330(c)(2)(B) urged by respondent, de
novo review in a section 6330 proceeding could substitute for the
taxpayer's right to a deficiency proceeding under sections 6211-
6216. A taxpayer's rights in the former proceeding are more
circumscribed than in the latter.26 Moreover, such a construction
26
For example, a taxpayer must petition this Court for
review within 30 days of a determination under sec. 6330, see
sec. 6330(d)(1), whereas he has 90 days or, if outside the United
States, 150 days to petition with respect to a notice of
deficiency, see sec. 6213(a). See also Sarrell v. Commissioner,
117 T.C. 122 (2001) (no expanded filing period under sec. 6330
(continued...)
- 37 -
would conflict with other provisions of section 6330. Section
6330(c)(1) and (3) requires, in connection with the hearing
provided under section 6330, that the Appeals officer obtain
verification "that the requirements of any applicable law or
administrative procedure have been met" and that he take such
verification into account in determining whether the levy should
proceed. One requirement of applicable law is the mandate of
section 6213 that, except in certain cases, including those
involving termination or jeopardy assessments, an opportunity for
preassessment judicial review precede the assessment or
collection of any deficiency, generally defined to encompass
income tax in excess of the amount reported on a return. Thus,
the requirement of section 6330(c)(1) that the Appeals officer
verify compliance with applicable law cannot be reconciled with
an interpretation of section 6330(c)(2)(B) that allows the
Commissioner to avoid compliance with section 6213(a).
We accordingly hold that petitioner's opportunity in a
section 6330 proceeding to dispute the underlying tax liability
does not cure an assessment made in derogation of his right under
section 6213(a) to a deficiency proceeding.
As a consequence, the determination to proceed with
collection of that portion of the math error assessment based on
26
(...continued)
for notices of determination addressed to persons outside the
United States).
- 38 -
the disallowance of the Freijes' miscellaneous deductions was
error as a matter of law and accordingly an abuse of discretion.
The Appeals officer's verification that the requirements of
applicable law had been met was incorrect. The statement in the
notice of determination that the tax owed for 1999 "is from the
original return" is wrong; it overlooks the adjustments to the
return improperly claimed as math errors under section
6213(b)(1). Accordingly, the levy to collect the foregoing
portion of the 1999 assessment may not proceed.
Conclusion
Respondent has conceded that the determination to proceed
with the levy for 1997 should not be sustained, and that the
determination to proceed with the levy for 1998 failed to take
into account $4,094 in withholding credits. With respect to the
levies for 1998 and 1999, we have found that $6,500 in
remittances made by the Freijes in 1999 were unlawfully applied
to their 1997 account and should have been available to satisfy
liabilities for 1998 and/or 1999.27 Thus, the unpaid tax for
those years, upon which the levies are based, may not be correct.
Further, we have found that a portion of the 1999 assessment on
which the levy for 1999 is based is invalid.
27
If the $6,500 in 1999 remittances that was applied to the
1997 account is applied to the 1998 account, the result may be
that the $2,587 in 1999 remittances that was applied to 1998 may
be available to satisfy 1999 liabilities.
- 39 -
Given the various infirmities in the proposed levies for
1998 and 1999, which demonstrate that the determination to
proceed with the 1998 and 1999 levies in full was an abuse of
discretion, we shall remand the determination for those years to
the Office of Appeals for reconsideration.
To reflect the foregoing,
An appropriate order
will be issued.