T.C. Memo. 2002-205
UNITED STATES TAX COURT
BILLYE S. CANNON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13033-00. Filed August 15, 2002.
Billye S. Cannon, pro se.
Charles Pillitteri, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
DAWSON, Judge: This case was assigned to Special Trial
Judge Lewis R. Carluzzo pursuant to section 7443A(b)(5) and Rules
180, 181, and 183.1 The Court agrees with and adopts the opinion
1
Unless otherwise indicated, section references are to the
Internal Revenue Code of 1986, as amended and in effect at the
time that the petition was filed. Rule references are to the Tax
Court Rules of Practice and Procedure.
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of the Special Trial Judge, which is set forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
CARLUZZO, Special Trial Judge: In this case, filed pursuant
to section 6404(i),2 petitioner claims that respondent’s failure
to abate interest with respect to her 1990 Federal income tax
liability is an abuse of discretion.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. At
the time that the petition was filed, petitioner resided in
Biloxi, Mississippi, and her net worth did not exceed $2 million.
Petitioner filed a timely 1990 Federal income tax return.
Attached to that return are several Forms W-2, Wage and Tax
Statement, from the following employers in the following amounts:
Employer Amount
Solo Serve Corp. $ 530
Wolf Camera Inc. 1,020
PCA National, Inc. 1,409
Temporaries, Inc. 1,477
Total 4,436
Petitioner also worked as a paralegal for the law firm of
Smith, Currie & Hancock (the law firm) during 1990. At the time
she filed her return, she could not locate any yearend earnings
statements from the law firm, so she estimated those earnings to
2
After the petition was filed in this case, sec. 6404(i)
was redesignated sec. 6404(h) by the Victims of Terrorism Tax
Relief Act of 2001, Pub. L. 107-134, sec. 112(d)(1)(B), (f), 115
Stat. 2434-2435.
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be $11,767, as indicated by a calculator tape attached to her
return.
The $16,204 reported as “wages, salaries, tips, etc.” on
petitioner’s 1990 return is the sum of the wages reported on the
Forms W-2 listed above, plus petitioner’s estimate of her
earnings from the law firm. Taking into account unchallenged
deductions, her 1990 return lists her Federal income tax
liability as $1,639. Federal income tax withholdings of $449 are
applied against this liability resulting in a Federal income tax
of $1,190 to be paid with her return. No income tax payment,
however, was submitted with petitioner’s return. Statements
contained in a letter attached to petitioner’s 1990 return
suggest that petitioner might have been experiencing financial
difficulties at the time her 1990 return was filed.
On May 20, 1991, respondent assessed the income tax
liability of $1,639 reported on petitioner’s 1990 return, plus a
late payment penalty of $11.90, and interest of $11.47. The late
payment penalty and interest take into account the Federal income
tax withholdings reported on petitioner’s return.
As it turned out, petitioner underestimated and
underreported her 1990 earnings from the law firm. On November
27, 1992, respondent, reacting to information received from the
law firm, sent petitioner a notice of proposed changes to her
1990 return. In that notice, respondent proposed to increase
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petitioner’s income by $12,846, the amount reported on a Form
1099-Misc., Nonemployee Compensation, issued to petitioner by the
law firm. Respondent further proposed that the increased income
constituted net earnings from self-employment.
By letter dated December 22, 1992, petitioner disagreed with
the adjustments proposed by respondent. In that letter
petitioner indicated that the income from the law firm was “still
in dispute” and challenged respondent’s claim that she was self-
employed during 1990. Attached to her letter is a copy of a Form
SS-8, Information for Use in Determining Whether a Worker is an
Employee for Federal Employment Taxes and Income Tax Withholding.
No deficiency has been determined with respect to
petitioner’s 1990 Federal income tax. Although the timing is not
entirely clear, at some point after receipt of petitioner’s
December 22, 1992, letter, respondent recognized that $11,767 of
the $12,846 reported on the above-mentioned Form 1099 had been
included in the wages reported on petitioner’s 1990 return.
After further examination, respondent also accepted petitioner’s
claim that she was an employee of the law firm during 1990 and
therefore not liable for any self-employment tax. Petitioner was
notified of respondent’s decision as to her employment status by
letter dated May 4, 1993.
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Thereafter, in a Form 1040X, Amended U.S. Individual Income
Tax Return, dated April 11, 1994, petitioner reported an increase
in taxable income of $1,088 (which includes the difference
between her actual and estimated earnings from the law firm) and
a resultant additional income tax liability of $157. No payment
was submitted with the amended return.
On June 30, 1999, petitioner filed a Form 843, Claim for
Refund and Request for Abatement, requesting abatement of
interest on her 1990 Federal income tax liability. Respondent
concluded that the delay in payment of petitioner’s 1990 Federal
income tax liability was not attributable to a ministerial error
on respondent’s part and therefore denied petitioner’s claim in a
notice of final determination dated July 25, 2000.
OPINION
Subject to exceptions not relevant here, interest on an
underpayment of income tax begins to accrue on the due date of
the return for such tax and continues to accrue, compounding
daily, until payment is made. Secs. 6601(a), 6622(a).
The Commissioner may abate the assessment of interest with
respect to a taxpayer’s Federal income tax liability if: (1) The
delay in a payment of such tax is attributable to an official or
employee of the Internal Revenue Service being erroneous or
dilatory in performing a ministerial act after the Internal
Revenue Service has contacted the taxpayer in writing with
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respect to the tax; and (2) no significant aspect of such delay
can be attributed to the taxpayer involved. Sec. 6404(e)(1).3
In accordance with the provisions of section 6404(i), a taxpayer
whose claim for abatement under section 6404(e) has been denied
may petition this Court for a determination whether the
Commissioner’s failure to abate interest was an abuse of
discretion.
In this case petitioner seeks abatement of interest with
respect to a Federal income tax liability assessed pursuant to
amounts reported on her 1990 original and amended returns.
Generally, the relief provided by section 6404 is not available
under those circumstances. As noted in the legislative history
of that section, “if a taxpayer files a return but does not pay
the taxes due, * * * [section 6404] would not permit abatement of
this interest regardless of how long the IRS took to contact the
taxpayer and request payment.” S. Rept. 99-313 (1985), 1986-3
C.B. (Vol. 3) 1, 208; see also Smith v. Commissioner, T.C. Memo.
2002-1.
Moreover, petitioner has failed to demonstrate that the
3
In 1996, sec. 6404(e) was amended by sec. 301 of the
Taxpayer Bill of Rights 2, Pub. L. 104-168, 110 Stat. 1457
(1996), to permit the Secretary to abate interest with respect to
“unreasonable” error or delay resulting from “managerial” and
ministerial acts. This amendment, however, applies to interest
accruing with respect to deficiencies or payments for tax years
beginning after July 30, 1996. This case involves petitioner’s
1990 tax year; therefore, the amendment is inapplicable here.
Woodral v. Commissioner, 112 T.C. 19, 25 n.8 (1999).
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delay in payment of her 1990 Federal income tax liability is
attributable to anything other than her own conduct. She
certainly has not demonstrated that the delay is attributable to
an official or employee of respondent being erroneous or dilatory
in performing a ministerial act. To the extent that petitioner
suggests that the relevant “delay” is measured by the time it
took for respondent to resolve the dispute involving her
employment status, we note that the determination of employee
status involves the exercise of judgment and the proper
application of Federal tax and common law. Sec. 3121(d); Ewens
and Miller, Inc. v. Commissioner, 117 T.C. 263 (2001). As such,
it is not a ministerial act and cannot provide the requisite
basis for abating interest under section 6404(e). Sec. 301.6404-
2T(b)(1), Temporary Proced. & Admin. Regs., 52 Fed. Reg. 30163
(Aug. 13, 1987).
As we view the matter, the interest that accrued on
petitioner’s 1990 Federal income tax as a result of any delay in
the payment of that tax is, simply put, attributable to her
failure, for financial or other undisclosed reasons, to pay such
tax when due. Consequently, petitioner is not entitled to an
abatement of interest under section 6404 with respect to her 1990
Federal income tax. It follows that respondent’s failure to
abate such interest is not an abuse of discretion.
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To reflect the foregoing,
Decision will be
entered for respondent.