DocketNumber: Docket No. 8552-13S
Citation Numbers: 2014 T.C. Summary Opinion 63, 2014 Tax Ct. Summary LEXIS 65
Judges: DEAN
Filed Date: 7/7/2014
Status: Non-Precedential
Modified Date: 4/17/2021
PURSUANT TO
Decision will be entered for respondent.
DEAN,
This case arises from petitioner's request for relief from joint and several liability under section 6015 with respect to an underpayment of Federal income tax for 2009. Respondent denied petitioner relief from joint and several liability under section 6015(f). The issue for decision is whether petitioner is entitled to relief under section 6015(f) for 2009.
Some of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by reference. Petitioner resided in Maryland when she filed her petition.
Petitioner married intervenor in 2001.*66 Petitioner is employed by the Social Security Administration as a paralegal specialist and has worked there for 31 years. She has a bachelor of science degree in healthcare management. As part of her coursework, she completed a course entitled "Introductory Accounting for Healthcare Management".
Intervenor worked for an architectural firm until he lost his job during the financial crisis in 2008 or 2009. As a result, intervenor was unemployed for six months at the beginning of 2009. While he was unemployed, he withdrew money from his retirement accounts to help support the household. Intervenor accepted a position as project manager at SHW Group LLP (SHW Group) and began working again on June 22, 2009, at an annual salary of $85,000.
In 2009 both petitioner and intervenor took distributions from their respective retirement accounts. Petitioner took a distribution of $38,000 from her thrift savings plan account, and Federal tax of $3,800 was withheld on the distribution. Intervenor took a distribution of $44,204 from an individual retirement account at SECU Credit Union and a distribution of $10,163.50 from his account with Fascore Institutional Services. No tax was withheld on either*67 of the distributions to intervenor. Petitioner and intervenor were not sure that intervenor's new job was going to be permanent, so they wanted to pay down some of their debts. Intervenor used a portion of his distributions to pay off his automobile loan. Petitioner used her distribution to pay off a timeshare purchase, to pay tuition for petitioner and intervenor's minor child, and for other expenses.
Petitioner and intervenor also earned income in 2009. Petitioner received $98,651.64 in wage income from the Social Security Administration and elected to have $6,929.07 in Federal income tax withheld from her wages. Intervenor received wage income totaling $50,622.42 in 2009 and elected to have $4,811.85 in Federal income tax withheld. While intervenor was unemployed, he applied for and received unemployment compensation of $7,605 from the District of Columbia and did not elect to have Federal income tax withheld from this compensation.
During 2009 petitioner and intervenor were in arrears with their mortgage by about $25,000. Petitioner's parents gave her money to help pay household expenses while intervenor was still living in the home.
Since their marriage in 2001 petitioner and intervenor*68 have prepared their tax returns using TurboTax. On or about April 15, 2010, petitioner and intervenor timely filed a joint Form 1040, U.S. Individual Income Tax Return, for tax year 2009. Petitioner prepared the return using TurboTax, and intervenor did not participate in the preparation of the return. The return reported a balance due of $23,246. Petitioner and intervenor included with the return a Form 9465, Installment Agreement Request, requesting an installment agreement with a payment of $350 per month to pay the liability. The first $350 payment was included with the return.
Intervenor's job with SHW Group was terminated on May 25, 2010. Petitioner and intervenor filed a joint Form 1040X, Amended U.S. Individual Income Tax Return, for 2009 dated May 26, 2010. The amended return claimed a dependent not listed on the original return and reclassified various retirement distributions made during the 2009 tax year. The amended return reported a balance due of $22,200, and respondent accepted the amended return as filed.
Petitioner filed her 2010, 2011, and 2012 Federal income tax returns as married filing separately. For 2010 petitioner received a small refund. For 2011 and 2012 petitioner*69 filed tax returns but did not pay in full the amounts reported as due on the returns. Petitioner claimed 10 exemptions for withholding purposes for 2011. At the time of trial petitioner owed a balance for the 2011 tax year. Petitioner asserted at trial that the balance for the 2012 tax year had been paid in full. Respondent, however, provided an account transcript showing a balance due for the 2012 tax year. Petitioner entered into an installment agreement with the Internal Revenue Service (IRS) to pay $300 per month on her 2011 and 2012 tax liabilities. The installment agreement was confirmed by letter dated October 29, 2013.
On April 11, 2011, petitioner filed Form 8857, Request for Innocent Spouse Relief. On January 23, 2013, the IRS issued a final determination denying petitioner's request for innocent spouse relief. On April 17, 2013, petitioner timely filed a petition with this Court seeking review of respondent's determination. At the time she filed her request for relief, as well as at the time she filed her petition, petitioner resided with intervenor. Intervenor moved out of the marital home in October 2013, and petitioner and intervenor are currently involved in divorce proceedings.*70 Pursuant to section 6015(e)(4) and Rule 325, Intervenor filed a timely notice of intervention in this case to oppose petitioner's request for relief.
In general, a spouse who files a joint Federal income tax return is jointly and severally liable for the entire tax liability. Sec. 6013(d)(3). However, a spouse may be relieved from joint and several liability under section 6015(f) if: (1) taking into account all the facts and circumstances, it would be inequitable to hold the taxpayer liable for any unpaid tax; and (2) relief is not available to the spouse under section 6015(b) or (c). Sec. 6015(f)(1) and (2).
Subsections (b) and (c) of section 6015 apply only in the case of "an understatement of tax" or "any deficiency" in tax and do not apply in the case of underpayments of tax reported on joint tax returns. Sec. 6015(b)(1)(B), (c)(1);
The Commissioner has published revenue procedures listing the factors that are normally considered in determining whether section*71 6015(f) relief should be granted.
In determining whether petitioner is entitled to section 6015(f) relief we apply a de novo standard of review as well as a de novo scope of review.
The revenue procedure guidelines begin by establishing threshold requirements that, respondent contends, must be satisfied before an equitable relief request may be considered.
When the threshold conditions have been met, the guidelines allow a requesting spouse to qualify for a streamlined determination of relief under section 6015(f) if all of the following conditions are met: (1) the requesting spouse is no longer married to, is legally separated*73 from, or has not been a member of the same household as the other person at any time during the 12-month period ending on the date the Service makes its determination; (2) the requesting spouse will suffer economic hardship if relief is not granted; and (3) in an underpayment case such as this, the requesting spouse had no knowledge or reason to know when the return was filed that the nonrequesting spouse would not or could not pay the tax liability reported on the joint tax return.
Where, as here, a requesting spouse meets the threshold conditions but fails to qualify for streamlined relief, a requesting spouse may still be eligible for equitable relief if, taking into account all the facts and circumstances,*74 it would be inequitable to hold the requesting spouse liable for the underpayment.
In making the determination under section 6015(f), the Court considers these factors as well as any other relevant factors. No single factor is determinative, and all factors shall be considered and weighed appropriately.
If the requesting spouse is still married to the nonrequesting spouse, this factor is neutral.
Generally, economic hardship exists when collection of the tax liability will render the requesting spouse unable to meet basic living expenses.
In the case of an income tax liability that was properly reported but not paid, consideration is given to whether as of the date the return was filed the requesting spouse knew or had reason to know that the nonrequesting spouse would not or could not pay the tax liability at that time or within a reasonable period of time after the filing of the return.
In making the determination whether the requesting spouse had reason to know, consideration is given to various factors, including: (1) the requesting spouse's level of education, (2) the requesting spouse's degree of involvement in the activity generating the income tax liability, (3) the requesting spouse's involvement in business and household financial matters, and (4) the requesting spouse's business or financial expertise.
Respondent argues that it was unreasonable for petitioner to believe when she signed the return at issue that intervenor would pay the tax liabilities. Petitioner's testimony, as well as the stipulated facts, shows that she was very involved in the family's finances and was well aware of intervenor's poor financial situation. Petitioner and intervenor each paid a portion of the family's expenses. Intervenor's periodic unemployment*78 and lower salary and the family's apparent financial problems indicate that petitioner had reason to know that intervenor would not be able to pay the liability. Moreover, petitioner prepared the joint return and the amended return for the year in issue. When she prepared the original return it showed a balance due of $23,246, and she remitted only $350 with the return. When she prepared the amended return, petitioner knew that intervenor had lost his position with SHW Group and she saw that there was a balance due of over $22,000. Although petitioner submitted with the original 2009 return a Form 9465 that listed SHW Group as intervenor's employer, petitioner prepared the return, and presumably the Form 9465 filed with the return, without intervenor's participation.
Petitioner has a college degree and has taken an accounting course. The Court finds petitioner's argument that the installment agreement gave her a basis to believe that intervenor would pay the 2009 tax liability unpersuasive.
This factor will be neutral if the spouses are not separated or divorced, or the divorce decree or agreement is silent as to any obligation to pay the outstanding income tax liability.
This factor considers whether the requesting spouse received a significant benefit, beyond normal support, from the unpaid income tax liability.
Intervenor used at least a portion*80 of the funds he withdrew from his various retirement accounts to pay the balance of his car loan, on which petitioner was a cosigner. Intervenor used the rest of funds he withdrew to support the household and pay bills. From the record, any benefit petitioner received from the unpaid tax liability was not in excess of normal support. This factor weighs in favor of relief.
This factor considers whether the requesting spouse has made a good-faith effort to comply with the income tax laws in tax years after the year for which relief is requested.
Petitioner filed separate tax returns for the taxable years 2010, 2011, and 2012, and at the time of trial she had balances due for tax years 2011 and 2012. Petitioner claimed*81 10 exemptions for withholding purposes for 2011 because, she testified, she had "high mortgage interest" and property taxes. Petitioner is not in compliance with the tax laws and has not shown that she was unable to comply despite a good-faith effort. This factor weighs against relief.
This factor will weigh in favor of relief if the requesting spouse was in poor mental or physical health at the time the return or returns for which the request for relief relates were filed (or at the time the requesting spouse reasonably believed the return or returns were filed) or at the time the requesting spouse requested relief.
Weighing all the facts and circumstances, we are not persuaded that it would be inequitable to deny petitioner spousal relief*82 under section 6015(f). As the preceding discussion shows, there is one factor that weighs in favor of relief, two factors that weigh against relief, and four factors that are neutral. Considering that petitioner knew or had reason to know that intervenor would not or could not pay the tax liability reported on the return, and in the absence of economic hardship, we conclude that it would not be inequitable to deny petitioner relief under section 6015(f).
1. The IRS will consider granting relief regardless of whether the understatement, deficiency, or underpayment is attributable (in full or in part) to the requesting spouse if any of the following exceptions apply: (1) attribution due solely to the operation of community property law, (2) nominal ownership, (3) misappropriation of funds, (4) abuse, and (5) fraud committed by the nonrequesting spouse.