Waring v. Comm'r

T.C. Memo. 2011-270
UNITED STATES TAX COURT
DAVID C. WARING, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1599-10L. Filed November 15, 2011.
David C. Waring, pro se.
James R. Bamberg, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
PARIS, Judge: On December 14, 2009, respondent mailed to
petitioner a Notice of Determination Concerning Collection
Action(s) under Section 6320 and/or 6330 (notice of
determination) which sustained the filing of a notice of intent
to levy for taxable years 2005 and 2006. In response to that
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notice and pursuant to section 6330(d),1 petitioner timely
petitioned this Court for review of respondent’s refusal to
consider the underlying tax liabilities and denial of
petitioner’s offer-in-compromise (OIC) in a collection due
process (CDP) hearing.
The issues for decision are (1) whether petitioner was
provided the opportunity to challenge the underlying tax
liabilities for taxable years 2005 and 2006, and (2) whether
respondent’s determination to sustain the collection by levy was
an abuse of discretion.
FINDINGS OF FACT
Some of the facts and exhibits have been stipulated and are
incorporated herein by reference. At the time the petition was
filed, petitioner resided in Florida.
Petitioner timely filed his taxable year 2005 and 2006
Federal income tax returns. On February 21, 2008, respondent
mailed to petitioner a notice of deficiency determining income
tax deficiencies for taxable years 2005 and 2006 and accuracy-
related penalties under section 6662. Petitioner received the
1
All section references are to the Internal Revenue Code as
amended, and all Rule references are to the Tax Court Rules of
Practice and Procedure, unless otherwise indicated.
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notice of deficiency but failed to contest or pay the outstanding
tax liabilities.2
On May 25, 2009, respondent sent to petitioner a Notice of
Intent to Levy and Notice of Your Right to a Hearing for the
unpaid income tax and penalties for taxable years 2005 and 2006.
On June 15, 2009, petitioner submitted a Form 12153, Request for
a Collection Due Process or Equivalent Hearing, with respect to
the proposed collection by levy. In his request, petitioner
requested an OIC and disagreed with the levy because of economic
hardship.
On October 13, 2009, Settlement Officer (SO) LaTorre sent to
petitioner a letter which scheduled a November 18, 2009, CDP
hearing. The letter further advised petitioner that in order for
an OIC to be considered, he had to provide SO LaTorre within 14
days of the letter with the following: (1) Signed Federal tax
returns for taxable periods ended December 31, 2007 and 2008, (2)
a completed Form 433-A, Collection Information Statement for Wage
Earners and Self-Employed Individuals, and (3) a proposal for
repayment.
2
Some time after the 90-day window to file a petition with
the Court, petitioner did prepare and submit a Form 1040X,
Amended U.S. Individual Income Tax Return, and contact
respondent’s audit reconsideration unit. Unfortunately,
petitioner did not simultaneously file a timely petition with the
Court, therefore documents and arguments related to this are not
relevant.
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On October 27, 2009, petitioner contacted SO LaTorre and
requested a face-to-face CDP hearing, which SO LaTorre denied as
petitioner was not in compliance with filing requirements. On
November 16, 2009, respondent agreed to petitioner’s request to
reschedule the CDP hearing until November 20, 2009, to allow
petitioner further time to collect documentation.
On November 20, 2009, SO LaTorre held a telephone CDP
hearing with petitioner. Petitioner challenged the underlying
tax liabilities for the periods at issue and challenged the levy
as inappropriate because of petitioner’s financial hardship.
On December 14, 2009, respondent mailed to petitioner a
notice of determination upholding the levy action, denying
petitioner’s OIC. As petitioner had had a previous opportunity
to contest the underlying liabilities, he was not able to contest
them at the CDP hearing.3 Further, while petitioner orally
mentioned an OIC, petitioner never filed documentation supporting
the offer. In response, petitioner timely filed a petition with
this Court.
OPINION
Where the validity of the underlying tax liability is
properly at issue, the Court will review the matter de novo.
3
The outstanding tax liabilities for both taxable years stem
from petitioner’s attempt to form a sec. 501(c)(3) charitable
organization. Unfortunately, petitioner did not file the
application for tax-free status until Apr. 13, 2007, after the
taxable years at issue.
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Davis v. Commissioner, 115 T.C. 35, 39 (2000). Where the
underlying tax liability is not properly at issue, the Court will
review the Commissioner’s administrative determination for abuse
of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000);
Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).
Petitioner may prove abuse of discretion by showing that
respondent exercised his discretion arbitrarily, capriciously, or
without sound basis in fact or law. See Giamelli v.
Commissioner, 129 T.C. 107, 111 (2007).
Underlying Liability
Generally, section 6330 provides protections for taxpayers
in tax collection matters. Under section 6330, a taxpayer is
given notice of the Government’s intent to levy and the right to
an administrative collection hearing and judicial review of that
proposed levy. Goza v. Commissioner, supra at 179. A taxpayer
may dispute the underlying tax liability at the administrative
hearing if two requirements have been satisfied: (1) The
taxpayer did not receive a notice of deficiency for that tax
liability and (2) the taxpayer did not otherwise have an
opportunity to dispute that tax. See Hoyle v. Commissioner, 131
T.C. 197, 199 (2008).
Petitioner was sent a notice of deficiency on February 21,
2008, which informed him that he had until May 21, 2008, to file
a petition with the Court. Petitioner failed to file a petition
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with the Court before the period to file expired. Therefore,
petitioner had an opportunity to dispute the tax, and the
standard of review for the denial of his OIC is abuse of
discretion.
Abuse of Discretion
Petitioner contends that respondent’s refusal to consider a
collection alternative because he had not filed a formal OIC was
an abuse of discretion. Taxpayers who wish to propose an OIC
must submit a Form 656, Offer in Compromise. See Goodwin v.
Commissioner, T.C. Memo. 2003-289, affd. 132 Fed. Appx. 785 (11th
Cir. 2005). The Court has held that there is no abuse of
discretion when Appeals fails to consider an OIC when a Form 656
was not filed with Appeals. See Pough v. Commissioner, 135 T.C.
344, 352 (2010); Kendricks v. Commissioner, 124 T.C. 69, 79
(2005); cf. Vinatieri v. Commissioner, 133 T.C. 392 (2009).
Petitioner did not submit a Form 656 or propose defined
settlement terms. The Court finds that SO LaTorre did not abuse
her discretion in rejecting petitioner’s proposed collection
alternative.
Balancing Test Under Section 6330(c)(3)(C)
An SO’s review of a taxpayer’s OIC must include: (1)
Verification that the requirements of any applicable law or
administrative procedure have been met; (2) consideration of any
allowance issues raised by the taxpayer; and (3) review of
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whether the proposed collection action balances the need for the
efficient collection of taxes with the legitimate concern that
any collection action be no more intrusive than necessary. Sec.
6330(c)(3).
SO LaTorre met all of these requirements. She reviewed the
Internal Revenue Service’s transcripts and computer records of
petitioner’s account to determine that the requirements of
applicable law and administrative procedure had been met. See
Hill v. Commissioner, T.C. Memo. 2002-272. SO LaTorre considered
the issues petitioner raised but determined that he could not
contest the validity or amount of his underlying tax liabilities
because he had had a prior opportunity to do so. SO LaTorre also
rejected petitioner’s OIC, as he failed to file a Form 656. SO
LaTorre performed the balancing test, finding that the levy
balanced the need for collection with the concerns of petitioner.
To reflect the foregoing,
Decision will be entered
for respondent.