Charles J. Schuman v. Commissioner

T.C. Memo. 2019-137 UNITED STATES TAX COURT

CHARLES J. SCHUMAN, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 26921-16L. Filed October 15, 2019. Charles J. Schuman, pro se.

Frederic J. Fernandez and Samuel T. Kuzniewski (student), for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION NEGA, Judge: This case was commenced in response to a Notice of Determination Concerning Collection Action(s) Under Section(s) 6320 and/or 6330 (notice of determination) that sustained a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (notice of intent to levy) with respect to petitioner’s unpaid Federal income tax liabilities for years 2011 and 2012 (years at [*2] issue).1 Pursuant to section 6330(d)(1) petitioner timely filed a petition seeking review of respondent’s determination to sustain the proposed levy. The issue for decision is whether respondent’s Office of Appeals (Appeals Office) properly sustained the notice of intent to levy.

FINDINGS OF FACT

Some facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference. Petitioner resided in Wisconsin when the petition was filed.

Petitioner untimely filed Federal income tax returns for the years at issue and failed to pay the balances owed. On May 30, 2016, respondent mailed petitioner a notice of intent to levy with respect to petitioner’s tax liabilities for the years at issue. The notice of intent to levy listed deficiencies, penalties, and interest owed for the years at issue totaling $8,927.

On June 12, 2016, petitioner timely submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing (CDP).2 Petitioner stated as a [*3] reason for the request that respondent’s “billing summary” is incorrect. In support of this assertion petitioner directed the Appeals Office’s attention to “over 50 documents” he allegedly filed with respondent.3 Petitioner failed to explain how he determined that respondent’s billing summary was inaccurate or how the 50 documents he claimed to file demonstrated inaccuracies in respondent’s billing summary. Petitioner also stated that a refund notice concerning tax year 2009 is incorrect. He failed to explain the relevance of the 2009 refund notice to his tax liabilities for the years at issue. Additionally, petitioner requested collection alternatives and specifically checked the box marked “Offer in Compromise”. Petitioner also requested innocent spouse relief but failed to submit Form 8857, Request for Innocent Spouse Relief, with the CDP request as instructed. [*4] Petitioner’s CDP request was assigned to an SO with no prior involvement with the liabilities at issue. On August 24, 2016, the SO sent petitioner a letter scheduling a telephone CDP hearing for September 27, 2016. The letter also proposed a streamlined installment agreement under which petitioner would pay $142 per month until the tax owed is paid. For purposes of discussing collection alternatives the SO requested that petitioner submit Form 656, Offer in Compromise, or Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or both, with required attachments before the hearing. The SO also instructed petitioner that, if he wished to dispute the underlying liabilities to the extent reported on his tax returns, he must submit for consideration Forms 1040X, Amended U.S. Individual Income Tax Return (amended returns). Since petitioner requested innocent spouse relief, the SO requested that petitioner submit Form 8857 before the hearing. Petitioner never submitted Form 656, Form 433-A, amended returns, or a request for innocent spouse relief as directed by the SO.

In response to the SO’s letter dated August 24, 2016, petitioner sent a letter dated September 8, 2016, which confirmed his intention to participate in the telephone CDP hearing scheduled for September 27, 2016. Petitioner attached documentation to the letter that attempted to substantiate the issues addressed in [*5] his CDP request. One such attachment was a spreadsheet he had created, outlining payments he allegedly made toward tax years ended December 31, 2009 through 2016.4 Petitioner failed to explain how the figures in the spreadsheet challenged the balances owed for the years at issue. Before the CDP hearing the SO reviewed the documentation submitted with petitioner’s letter and determined that none of it pertained to the balances owed for the years at issue.

On September 27, 2016, during the telephone CDP hearing petitioner reasserted that respondent failed to properly apply payments that he claimed he had made toward the balances for the years at issue. Petitioner did not designate how he wanted respondent to apply the alleged misapplied payments.

During the CDP hearing the SO reviewed with petitioner his account transcripts for tax years 2007 through 2012, which confirmed that there were no missing or misapplied payments affecting the years at issue. The SO verified that petitioner’s underpayments of tax resulted from insufficient Federal withholding or from his failure to make necessary estimated tax payments on his earned income reported on his tax returns or both. The SO also partially abated a failure to pay [*6] penalty of $223 for 2009 because petitioner qualified for “First Time Penalty” abatement. Petitioner orally agreed to the streamlined installment agreement proposed by the SO in letter sent August 24, 2016.

The SO also noted that no statutory notice of deficiency was issued for the years at issue and instructed petitioner to submit amended returns if he wished to challenge the amounts of tax owed. The SO further instructed petitioner, if he wanted innocent spouse relief, to submit Form 8857. Petitioner failed to submit either the amended returns or Form 8857.

On September 27, 2016, the SO sent petitioner a letter enclosing Form 433- D, Installment Agreement, and Form 12257, Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, Waiver of Suspension of Levy Action, and Waiver of Periods of Limitation in Section 6330(e)(1). The SO instructed petitioner to review, sign, and return these forms by October 18, 2016. Petitioner did not return either form despite having orally agreed to the proposed installment agreement during the CDP hearing.

On October 14, 2016, petitioner mailed a letter to the Appeals Office in which he stated his belief that there are inconsistencies regarding his tax liabilities and that he intended to request a hearing before this Court. On November 21, [*7] 2016, the Appeals Office issued the notice of determination sustaining the notice of intent to levy.

On December 16, 2016, petitioner timely filed a petition with this Court alleging that respondent determined incorrect amounts owed for tax years 2010, 2011, and 2012.5

On November 6, 2018, respondent filed a motion for summary judgment. On March 25, 2019, this case was called from the calendar at the Court’s Milwaukee, Wisconsin, trial session. The parties appeared and were heard. As a result of the trial respondent’s motion for summary judgment was denied. [*8] OPINION I. Standard of Review

Section 6330 requires the Commissioner to notify a taxpayer if he intends to levy on that taxpayer’s property. The notice must inform the taxpayer of his or her right to a CDP hearing regarding the proposed collection action. Sec. 6330(a). In a CDP hearing taxpayers may raise any relevant issue, such as a request for consideration of a collection alternative. Sec. 6330(c)(2)(A). A determination to sustain a proposed levy may be reviewed by this Court. Sec. 6330(d)(1); see Rules 330-334. In general, upon review of a notice of determination sustaining a proposed levy, the Court will limit its review to those issues properly raised during the administrative hearing. Giamelli v. Commissioner, 129 T.C. 107, 114-115 (2007); Magana v. Commissioner, 118 T.C. 488, 493 (2002).

Where the underlying tax liability is properly at issue in a CDP proceeding, we review that issue de novo. Sego v. Commissioner, 114 T.C. 604, 610 (2000). To the extent that the underlying tax liability is not at issue, this Court reviews the determination of the Appeals Office for abuse of discretion.6 Id. Abuse of [*9] discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. See Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006).

II. Analysis

Petitioner challenged the amount of tax owed during the CDP hearing on the grounds that he believed respondent had failed to account for and misapplied certain payments. Although petitioner provided a spreadsheet attempting to outline the alleged misapplied payments, the SO determined that this and other documentation provided by petitioner was not pertinent to the years at issue. The SO accounted for all payments and refunds for the years at issue. The SO also guided petitioner through his account transcripts for years 2007 through 2010 during the CDP hearing in order to explain that there were no misapplied payments. We find that petitioner has not adduced any evidence that these transcripts are incorrect. [*10] Although petitioner claims that there were missing and misapplied payments that would lower the balances for the years at issue, petitioner failed to designate how he wanted any of these alleged payments to be applied. Without such designation, the Internal Revenue Service may apply payments in the Government’s best interests and in this case would be free to apply payments to the earliest years with balances due. See United States v. Schroeder, 900 F.2d 1144, 1149 (7th Cir. 1990); see also Buffalow v. United States, 109 F.3d 570, 574 (9th Cir. 1997).

In deciding whether there was an abuse of discretion in the sustaining of a notice of intent to levy, we review the record to determine whether the SO (1) properly verified that the requirements of applicable law and administrative procedure have been met, (2) considered issues raised by the taxpayer, and (3) considered whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary. See sec. 6330(c)(1), (2), and (3). [*11] Our review of the record establishes that the SO verified that the requirements of applicable law and administrative procedure had been met.7 Further, we find that the SO balanced the need for efficient collection of taxes with the legitimate concern of petitioner that any collection action be no more intrusive than necessary.8

The SO took into consideration all issues petitioner raised. Petitioner raised innocent spouse relief in his request for a CDP hearing but failed to submit Form 8857 or provide the SO with any other information supporting a basis for innocent spouse relief. An issue is not properly raised if the taxpayer fails to present the Appeals Office with any evidence with respect to that issue after being [*12] given reasonable opportunity to present such evidence. See sec. 301.6330- 1(f)(2), Q&A-F3, Proced. & Admin. Regs. In addition, petitioner has not pursued innocent spouse relief in this proceeding. Thus, innocent spouse relief is not at issue in this case.

In the light of our findings above, we sustain the notice of determination. We have considered all the other arguments of the parties, and to the extent not discussed above, find those arguments to be irrelevant, moot, or without merit.

To reflect the foregoing,

Decision will be entered for respondent.