Ronald Powell & Cynthia Powell

United States Tax Court
T.C. Memo. 2023-48RONALD POWELL AND CYNTHIA POWELL,
Petitioners
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
—————
Docket No. 5848-22L. Filed April 17, 2023.
—————
Ronald Powell and Cynthia Powell, pro sese.
Rachel L. Rollins, for respondent.
MEMORANDUM OPINION
LAUBER, Judge: In this collection due process (CDP) case, peti-
tioners seek review pursuant to section 6330(d)(1) 1 of the determination
by the Internal Revenue Service (IRS or respondent) to uphold a notice
of intent to levy. Respondent has filed a Motion for Summary Judgment
contending that there are no disputed issues of material fact and that
the settlement officer (SO) did not abuse her discretion in sustaining the
collection action. We agree and accordingly will grant the Motion.
Background
The following facts are based upon the parties’ pleadings and the
Declarations and Exhibits attached to respondent’s Motion, which in-
clude the administrative record of the CDP hearing. See Rule
1 Unless otherwise indicated, all statutory references are to the Internal Reve-
nue Code, Title 26 U.S.C., 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.
Served 04/17/23
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[*2] 121(c). Petitioners resided in Maryland when the Petition was
timely filed.
Petitioners did not file a timely return for 2016, and the IRS pre-
pared a substitute for return as authorized by section 6020(b). On the
basis of third-party reporting, the IRS determined that petitioners dur-
ing that year had received gross income of $163,057 and taxable income
of $112,107. Petitioners later filed a delinquent return for 2016 but
failed to pay the tax shown as due on that return. The IRS assessed the
tax as shown on the delinquent return along with additions to tax under
section 6651(a) (failure to timely file and pay) and section 6654 (failure
to pay estimated tax), plus accrued interest. The IRS has also made
assessments on account of petitioners’ unpaid tax liabilities for
2017–2019.
In April 2020, in an effort to collect petitioners’ 2016 liability, the
IRS sent them a Notice of Intent to Seize Your Assets and Notice of Your
Right to a Hearing. Petitioners timely submitted Form 12153, Request
for a Collection Due Process or Equivalent Hearing. They expressed in-
terest in a collection alternative, checking the box “Installment Agree-
ment.” They did not indicate any intention to dispute their underlying
liability for 2016.
The case was assigned to an SO from the IRS Independent Office
of Appeals. The SO reviewed petitioners’ file and verified that all re-
quirements of applicable law and administrative procedure had been
satisfied. The SO calculated that, as of May 2021, petitioners’ liability
for all open years totaled $30,491, making them eligible for a “stream-
lined” installment agreement (IA). This procedure enables the IRS to
enter into an IA with a taxpayer “without securing in-depth financial
information for the sake of expediency.” Internal Revenue Manual
(IRM) 5.14.5.1.1 (Oct. 14, 2021). Such agreements are limited to taxpay-
ers with unpaid assessed balances not exceeding $50,000. See IRM
5.14.5.2(1) (Oct. 14, 2021).
The SO sent petitioners a letter acknowledging receipt of their
hearing request and scheduling a telephone conference for July 22, 2021.
The letter offered petitioners a streamlined IA whereby they would fully
discharge their unpaid liabilities for 2016–2019 over 92 months at a rate
of $424 per month. The SO explained that, if petitioners wished to move
forward with the streamlined IA, they should complete and return Form
433–D, Installment Agreement, by June 9, 2021. Alternatively, if peti-
tioners believed they could not afford $424 per month, the letter
3
[*3] requested that they complete and return Form 433–A, Collection
Information Statement for Wage Earners and Self-Employed Individu-
als, accompanied by the requisite financial information.
The SO received no response to her offer by the June 9 deadline
and no other communication from petitioners until the day before the
scheduled conference. On July 21, 2021, petitioner wife called the SO to
request that the conference be rescheduled; the SO agreed and resched-
uled it for October 5, 2021. The SO reiterated that she could not consider
a monthly payment lower than $424 unless petitioners submitted a com-
pleted Form 433–A with supporting financial information. During the
10 weeks before the rescheduled conference, petitioners did not com-
municate their intentions regarding the streamlined IA proposal and did
not submit a Form 433–A.
On October 5, 2021, the SO contacted petitioners’ newly desig-
nated representative for the telephone conference. The representative
raised no challenge to petitioners’ underlying tax liability during that
call or at any other time during the CDP proceeding. The SO gave peti-
tioners a deadline of October 19, 2021, to accept the streamlined IA or
(alternatively) submit a completed Form 433–A in support of a different
collection alternative.
On October 19, 2021, petitioners submitted Form 433–A without
any supporting documentation. Netting petitioners’ monthly expenses
against their monthly income, the Form 433–A showed a “net difference”
of $1,449 per month available to pay their outstanding tax liabilities—
significantly more than the $424 payment required under the SO’s
streamlined IA proposal. The SO determined that certain of petitioners’
reported expenses (e.g., for their home mortgage and two cars) signifi-
cantly exceeded the expenses allowable under the applicable local and
national standards. Making the adjustments required by those stand-
ards, the SO determined that petitioners could actually afford payments
of $7,590 per month.
On November 3, 2021, the SO received copies of petitioners’ car
loans, insurance policies, and mortgage statements, but she determined
that these documents were insufficient to support a deviation from local
and national expense standards. Two days later the SO called petition-
ers’ representative and presented three options from which petitioners
might choose: (1) pay their 2016 tax liability in full; (2) submit an offer-
in-compromise; or (3) accept a revised IA covering 2016–2019 that would
require 109 payments of $350 per month. Petitioners’ representative
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[*4] was instructed to inform the SO of their decision by November 12,
2021. Having received no response by that deadline or subsequently,
the SO on November 24, 2021, decided to close the case.
On February 1, 2022, the IRS sent petitioners a notice of deter-
mination sustaining the proposed levy. Petitioners timely petitioned
this Court on March 2, 2022, contending that the expenses the SO used
to determine the monthly payment were “not computed correctly.” On
October 19, 2022, respondent filed a Motion for Summary Judgment, to
which we directed petitioners to respond by November 21, 2022. Our
Order warned petitioners that “under Tax Court Rule 121(d), judgment
may be entered against a party who fails to respond” to a motion for
summary judgment. Petitioners did not respond to the Motion by the
deadline we set or subsequently.
Discussion
I. Summary Judgment Standard
The purpose of summary judgment is to expedite litigation and
avoid costly, time-consuming, and unnecessary trials. Fla. Peach Corp.
v. Commissioner, 90 T.C. 678, 681 (1988). The Court may grant sum-
mary judgment when there is no genuine dispute as to any material fact
and a decision may be rendered as a matter of law. Rule 121(a)(2);
Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17
F.3d 965 (7th Cir. 1994). Where the moving party properly makes and
supports a motion for summary judgment, the nonmoving party may not
rest upon mere allegations or denials of his pleadings but instead must
set forth specific facts showing a genuine dispute for trial. Rule 121(d);
see Sundstrand Corp., 98 T.C. at 520.
Because petitioners did not respond to the Motion for Summary
Judgment, we could enter a decision against them for that reason alone.
See Rule 121(d). We will nevertheless consider the Motion on its merits.
We conclude that no material facts are in genuine dispute and that this
case is appropriate for summary adjudication.
II. Standard of Review
Section 6330(d)(1) does not prescribe the standard of review that
this Court should apply in reviewing an IRS administrative determina-
tion in a CDP case. The general parameters for such review are marked
out by our precedents. Where the taxpayer’s underlying tax liability is
properly at issue, we review the IRS’s determination de novo. Sego v.
5
[*5] Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114
T.C. 176, 181–82 (2000). Where the taxpayer’s underlying liability is
not properly in dispute, we review the IRS decision for abuse of discre-
tion only. Jones v. Commissioner, 338 F.3d 463, 466 (5th Cir. 2003);
Goza, 114 T.C. at 182. Abuse of discretion exists when a determination
is arbitrary, capricious, or without sound basis in fact or law. See Mur-
phy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st
Cir. 2006).
Taxpayers may challenge their underlying tax liability at a CDP
hearing only if they did not receive a statutory notice of deficiency for
that liability or did not otherwise have an opportunity to dispute it.
§ 6330(c)(2)(B). And taxpayers are precluded from advancing an under-
lying liability challenge in this Court “if it was not properly raised in the
CDP hearing.” Thompson v. Commissioner, 140 T.C. 173, 178 (2013);
see Giamelli v. Commissioner, 129 T.C. 107, 114 (2007). Because peti-
tioners did not raise a challenge to their 2016 tax liability at the CDP
hearing, we review the SO’s actions for abuse of discretion only. See
§ 6330(c)(2)(B); Goza, 114 T.C. at 182.
III. Abuse of Discretion
In deciding whether the SO abused her discretion in sustaining
the proposed levy, we consider whether she (1) properly verified that the
requirements of applicable law or administrative procedure were met,
(2) considered relevant issues petitioners raised, and (3) considered
“whether any proposed collection action balances the need for the effi-
cient collection of taxes with the legitimate concern of [petitioners] that
any collection action be no more intrusive than necessary.” See
§ 6330(c)(3). Our review of the record establishes that the SO properly
discharged all of her responsibilities under these provisions.
Petitioners’ CDP hearing request indicated that they intended to
seek a collection alternative in the form of an IA. Section 6159(a) au-
thorizes the IRS to enter into a written agreement allowing a taxpayer
to pay a tax liability in installments if it concludes that the agreement
“will facilitate full or partial collection of such liability.” The decision to
accept or reject an IA lies within the Commissioner’s discretion. See
Thompson, 140 T.C. at 179. As a threshold matter, it is not an abuse of
discretion for an SO to decline to consider a collection alternative where
the taxpayer does not put an offer on the table. See McLaine v. Commis-
sioner, 138 T.C. 228, 243 (2012); Kendricks v. Commissioner, 124 T.C.
69, 79 (2005). In other words, it is the obligation of the taxpayer, not the
6
[*6] reviewing officer, to start negotiations by making a specific pro-
posal. Petitioners never made one.
Though not required to do so, the SO proposed two IAs to peti-
tioners. The streamlined IA, offered in May 2021, would have enabled
them to discharge their 2016–2019 tax liabilities by making 92 pay-
ments of $424 a month—an amount their own Form 433–A showed they
could easily afford. The revised IA, which the SO proposed in November
2021, would have enabled them to discharge those same liabilities by
making 109 payments of $350 a month. Petitioners did not respond to
either offer, did not make a counteroffer, and did not contend that either
monthly payment was unreasonable.
When an SO gives the taxpayer an adequate period to respond, it
is not an abuse of discretion for the SO to move forward with a determi-
nation after receiving no communication from the taxpayer. See Maselli
v. Commissioner, T.C. Memo. 2010-19, 99 T.C.M. (CCH) 1089, 1092 (cit-
ing Roman v. Commissioner, T.C. Memo. 2004-20); cf. Pough v. Commis-
sioner, 135 T.C. 344, 351 (2010) (citing Shanley v. Commissioner, T.C.
Memo. 2009-17). The SO gave petitioners a deadline of November 12,
2021, to accept the revised IA, propose an offer-in-compromise, or pay
their balance in full. The SO waited two weeks after that deadline be-
fore determining to sustain the proposed levy and another three months
before issuing the notice of determination. The SO did not abuse her
discretion by issuing that notice when she did. See Hartmann v. Com-
missioner, T.C. Memo. 2018-154, 116 T.C.M. (CCH) 301, 304 (“[A]n SO
is not required to negotiate indefinitely or wait any specific time before
issuing a determination.”), aff’d, 785 F. App’x 906 (3d Cir. 2019).
In their Petition, petitioners contended that their monthly ex-
penses were “not computed correctly” when the SO calculated their abil-
ity to pay. In reviewing for abuse of discretion, we do not recalculate a
taxpayer’s ability to pay or substitute our judgment for the SO’s. See
O’Donnell v. Commissioner, T.C. Memo. 2013-247, 106 T.C.M. (CCH)
477, 481. The SO determined petitioners’ monthly income and expenses
on the basis of their disclosures on the Form 433–A, adjusting certain
reported expenses downward to conform to applicable local and national
standards. Although petitioners appear to challenge those downward
adjustments, we have repeatedly held that an SO does not abuse her
discretion by adhering to such standards, even if doing so would force a
taxpayer to change his or her lifestyle. See Friedman v. Commissioner,
T.C. Memo. 2013-44, 105 T.C.M. (CCH) 1288, 1290; cf. Aldridge v. Com-
missioner, T.C. Memo. 2009-276, 98 T.C.M. (CCH) 523, 526–27.
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[*7] Petitioners assert that they sent the SO additional financial in-
formation, which allegedly would have supported a deviation from na-
tional and local standards, and they speculate that these documents
were lost in the mail. Petitioners do not claim that they sent the docu-
ments by certified or registered mail, and they have supplied no affidavit
or exhibit supporting their allegation. The taxpayer generally bears the
risk of nondelivery when a tax return or other document is not sent by
registered or certified mail. See Walden v. Commissioner, 90 T.C. 947,
951 (1988). Petitioners’ unsupported allegation that they mailed this
information is insufficient to create a genuine dispute of material fact.
See Rule 121(d); Powers v. Commissioner, T.C. Memo. 2015-210, 110
T.C.M. (CCH) 422, 424.
In any event, petitioners’ challenge to the SO’s expense adjust-
ments is beside the point. The unadjusted figures shown on their Form
433–A disclosed monthly income net of expenses of $1,449—three times
the monthly payment required under the streamlined IA and four times
the monthly payment required under the revised IA. The SO offered
petitioners two IAs that reasonably balanced the need for efficient col-
lection of taxes with their legitimate concern that the collection action
be no more intrusive than necessary. Petitioners failed to respond to
these offers, made no effort to show that the monthly payments proposed
were unreasonable, and never made a counteroffer. Finding no abuse of
discretion in any respect, we will grant summary judgment for respond-
ent.
To reflect the foregoing,
An appropriate order and decision will be entered.