T.C. Summary Opinion 2003-87
UNITED STATES TAX COURT
CHARLES WENDELL HARKEY, SR. AND BARBARA ANNE HARKEY, Petitioners
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 18187-02S. Filed July 1, 2003.
Charles Wendell Harkey, Sr., pro se.
Nancy E. Hooten, for respondent.
ARMEN, Special Trial Judge: This case was heard pursuant to
the provisions of sections 6330(d) and 7463 of the Internal
Revenue Code in effect at the time that the petition was filed.1
The decision to be entered is not reviewable by any other court,
and this opinion should not be cited as authority.
1
Unless otherwise indicated, subsequent references to
sections other than sections 6330 and 6320 are to the Internal
Revenue Code of 1986 as amended or in effect for 1992 and 1993.
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Respondent issued to petitioners a Notice Of Determination
Concerning Collections Action(s) Under Section 6320 and/or 6330
for unpaid Federal income taxes and related liabilities for the
taxable years 1992 and 1993 in the amounts (per collection
notices dated March 4, 2002) of $9,214.97 and $4,042.66,
respectively.
The issues for decision are:
(1) Whether petitioners are liable for the unpaid Federal
income taxes reported on their 1992 and 1993 delinquent income
tax returns. We hold that they are.
(2) Whether petitioners are liable for (a) additions to tax
under section 6651(a)(1) for failure to timely file their 1992
and 1993 income tax returns; (b) additions to tax under section
6651(a)(2) for failure to timely pay the unpaid tax reported on
their 1992 and 1993 income tax returns; (c) an addition to tax
under section 6654(a) for failure to pay estimated tax in 1993;
and (d) interest in respect of their unpaid income tax and
related liabilities for the taxable years 1992 and 1993. We hold
that they are.
(3) Whether respondent abused his discretion in determining
that the levy action against petitioners may proceed. We hold
that he did not.
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Background
Some of the facts have been stipulated, and they are so
found. Petitioners resided in Atlanta, Georgia, at the time that
their petition was filed with the Court.
A. Petitioners’ Liability for 1992
On or before April 15, 1993, petitioners filed Form 4868,
Extension of Time To File U.S. Individual Income Tax Return, and
were granted an automatic 4-month extension of time to file their
Federal income tax return for 1992. However, petitioners did not
file their 1992 Form 1040, U.S. Individual Income Tax Return,
until June 17, 1994, some 10 months after the due date as
extended. See secs. 6072(a); 6081(a).
On their 1992 income tax return, petitioners reported total
tax of $3,458, total payments of $0, and amount owed of $3,458.
Petitioners did not enclose payment with their return of any part
of the liability reported thereon.
On July 25, 1994, respondent assessed against petitioners
income tax in the amount of $3,458, an addition to tax under
section 6651(a)(1) for failure to timely file in the amount of
$778.05, an addition to tax under section 6651(a)(2) for failure
to timely pay in the amount of $276.64, and interest in the
amount of $379.45. On that same day, respondent sent petitioners
a notice of balance due, informing them that they had a liability
for 1992 and requesting that they pay it. Petitioners failed to
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do so, other than as mentioned in the following paragraph.
On June 3, 1997, and July 7, 1997, respondent applied
overpayment credits from petitioners’ account for the taxable
year 1990 in the amounts of $63.25 and $200, respectively, to
petitioners’ outstanding liability for 1992. Subsequently, on
August 12, 1997, respondent posted another $200 payment to
petitioners’ account for 1992. Other than the foregoing, no
credits or payments have been made to petitioners’ account for
1992.
B. Petitioners’ Liability for 1993
On June 17, 1994, petitioners filed Form 1040 for 1993, some
2 months after its due date. See sec. 6072(a).
On their 1993 income tax return, petitioners reported total
tax of $1,586, total payments of $0, and amount owed of $1,652.2
Petitioners did not enclose payment with their return of any part
of the liability reported thereon.
On July 25, 1994, respondent assessed against petitioners
income tax in the amount of $1,586, an addition to tax under
section 6654(a) for failure to pay estimated tax in the amount of
$66, an addition to tax under section 6651(a)(1) for failure to
timely file in the amount of $214.11, an addition to tax under
section 6651(a)(2) for failure to timely pay in the amount of
$31.72, and interest in the amount of $36.46. Also on July 25,
2
The amount owed included $66 for “estimated tax penalty”.
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1994, respondent sent petitioners a notice of balance due,
informing them that they had a liability for 1993 and requesting
that they pay it. Petitioners have made no payments to their
account for 1993.
C. Collection-related Matters at the Administrative Level
On December 17, 2001, respondent sent petitioners a Final
Notice/Notice Of Intent To Levy And Notice Of Your Right To A
Hearing in respect of their outstanding tax liabilities for 1992
and 1993.
On January 10, 2002, petitioners filed with respondent Form
12153, Request for a Collection Due Process Hearing. The request
stated only that “I have never recieved [sic] notice of this
tax”.
On July 10, 2002, an administrative hearing was conducted by
respondent’s Appeals Office in Atlanta, Georgia. At the
administrative hearing, petitioners repeated their assertion that
they had not received any notice that there was tax due for
either 1992 or 1993. Petitioners also stated that they did not
have any income tax liability for either of those years.
Also discussed at the administrative hearing was an
installment agreement. Such collection alternative did not prove
to be feasible, however, because (as explained by the Appeals
officer in his Case Memo) petitioners “[reserved] the right to
dispute the tax for the 1992 and 1993 tax year[s].”
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On October 24, 2002, respondent sent petitioners a Notice Of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330 (notice of determination) with regard to their tax
liabilities for 1992 and 1993. In the notice of determination,
the Appeals Office stated that respondent’s determination to
proceed with collection by way of levy should be sustained.
D. Petitioners’ Petition
On November 22, 2002, petitioners filed a Petition for Lien
or Levy Action Under Code Section 6320(c) or 6330(d) (the
petition). In the petition, petitioners allege as follows:
We claim we do not owe these taxes. Upon several
requests to the Internal Revenue Service they were
unable to support their claim to Notice of Deficiency
with any documentation (other than a transcript). My
accountant has disposed of these records as well as
Barbara and myself, the Petitioners.
E. Pretrial Developments
After this case had been calendared for trial, respondent
filed a Motion For Summary Judgment (the motion). In the motion,
respondent alleged that “The sole issue presented in this case is
whether petitioners are precluded from challenging the liability
they asserted on their originally filed returns in a Collection
Due Process hearing.” Relying on section 6330(c)(2)(B),
respondent took the position that petitioners were precluded, as
a matter of law, from challenging the liabilities reported by
them on their 1992 and 1993 returns.
Respondent attached to his motion, inter alia, copies of
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petitioners’ Federal income tax returns for 1992 and 1993 and a
Form 4340, Certificate of Assessments, Payments, And Other
Specified Matters, for each of the years in issue.
Shortly before trial, petitioners filed a response to
respondent’s motion. In their response, petitioner Charles
Wendell Harkey alleged, in part, as follows:
I do not owe these taxes but have no supporting
documents. The IRS has not presented me with any
documents from the last ten years showing me that they
have tried to collect which translates into I don’t owe
these taxes and that this is harassment. I have
appealed this collection on that basis and will present
this as my case on my court date of May 12, 2003.
When this case was called from the calendar at the trial
session, the Court advised the parties that, under the
circumstances then extant, the Court was not inclined to rule on
respondent’s motion and that the case would therefore proceed to
trial. The following day, when this case was called for trial,
the parties tendered, and the Court filed, a stipulation of
facts, attached to which were the same exhibits that accompanied
respondent’s motion.
Discussion
At trial, petitioners raised issues that arguably went
beyond the scope of the issues defined in the petition. Cf. Rule
331(b)(4).3 However, respondent did not object. Accordingly, we
3
All Rule references are to the Tax Court Rules of
Practice and Procedure.
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regard such issues as having been tried by consent, and they
shall be treated as if they had been raised in the petition. See
Rule 41(b).
A. Petitioners’ Liability for Unpaid Taxes
For the sake of convenience, we shall assume without
prejudice that petitioners may challenge the existence or amount
of their underlying tax liability for each of the years in issue.
Petitioners’ challenge, however, is to no avail because, at
trial, petitioners failed to introduce any evidence whatsoever
that their tax liabilities were other than what they themselves
reported on their 1992 and 1993 Federal income tax returns.
In addition, the fact that petitioners or their accountant
may have disposed of all of their records for 1992 and 1993 does
not in any way absolve petitioners from liability for the income
taxes that they themselves reported on their 1992 and 1993
Federal income tax returns. If petitioners disposed of all of
their records before their liabilities were satisfied, then
petitioners have no one to blame but themselves; if it was their
accountant who did so, then petitioners should look to him.
It is also no excuse to profess that “I have never recieved
[sic] notice of this tax”. After all, the liabilities at issue
are nothing other than the liabilities reported by petitioners
themselves on their 1992 and 1993 delinquent income tax returns.
Finally, we observe that the period of limitations on
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collection of petitioners’ outstanding liabilities for 1992 and
1993 has not expired. Sec. 6502(a). Accordingly, the fact that
respondent may not have taken collection action against
petitioners immediately after assessment of the liabilities in
issue is of no moment.
B. Petitioners’ Liability for Additions to Tax and Interest
We turn now to what we understand to be petitioners’
contention that the Court should review respondent’s failure to
abate additions to tax (“penalties”) and interest with respect to
1992 and 1993.
Initially, it should be recalled that petitioners filed
their 1992 income tax return some 10 months late and did not
enclose payment with their return of any part of the liability
reported thereon; consequently, respondent assessed against
petitioners an addition to tax under section 6651(a)(1) for
failure to timely file and an addition to tax under section
6651(1)(2) for failure to timely pay. Similarly, petitioners
filed their 1993 income tax return some 2 months late, did not
enclose payment with their return of any part of the liability
reported thereon, and reported liability for an “estimated tax
penalty”; consequently, respondent assessed against petitioners
an addition to tax under section 6651(a)(1) for failure to timely
file, an addition to tax under section 6651(1)(2) for failure to
timely pay, and an addition to tax under section 6654(a) for
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failure to pay estimated tax.4
The record does not demonstrate that petitioners raised at
the administrative hearing an issue concerning respondent’s
failure to abate additions to tax. We do not, therefore,
consider any such issue. See Washington v. Commissioner, 120
T.C. 114, 124 (2003). Assuming without prejudice that
petitioners did raise such an issue, this Court lacks
jurisdiction to review petitioners’ request that we review any
such failure. Id. at 124 n.15.
Insofar as interest is concerned, the record does not
demonstrate that petitioners raised at the administrative hearing
an issue concerning respondent’s failure to abate interest. We
do not, therefore, consider any such issue. Id. at 123-124.
Assuming without prejudice that (1) petitioners did raise such an
issue and that (2) we have jurisdiction to consider it, see id.
at 123 n.12, we conclude that petitioners have failed to prove
that respondent abused his discretion in failing to abate
interest. Indeed, petitioners failed to establish any error or
delay attributable to one of respondent’s officers’ or employees’
being erroneous or dilatory in performing a ministerial act
4
At trial, petitioners made no effort to show that their
failure to timely file or that their failure to timely pay was
attributable to reasonable cause and not willful neglect, nor did
petitioners make any effort to show that their failure to pay
estimated tax was statutorily excused. Similarly, petitioners
raised no issue regarding the computation of any of the additions
to tax.
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requiring the abatement of interest with respect to the taxable
year 1992 or 1993. See sec. 6404(e). The fact that respondent
assigned another DLN (document locator number) to each of
petitioners’ returns a few months after those returns were filed
in 1994 (apparently because they were “balance-due returns”) does
not, by any stretch of the imagination, satisfy petitioners’
burden of proof.
C. Did Respondent Abuse His Discretion?
At the administrative hearing, there was discussion
concerning a possible installment payment agreement.
Petitioners, however, were not willing to enter into such an
agreement because they continued to dispute their underlying
liabilities for 1992 and 1993. For that same reason, respondent
was not willing to offer an installment payment agreement as a
collection alternative.
In Rodriguez v. Commissioner, T.C. Memo. 2003-153, we held
that it was not an abuse of discretion for the Commissioner to
decline to accept an offer in compromise as a collection
alternative if the taxpayer had not filed all required income tax
returns. Indeed, we stated:
The decision not to accept the offer in compromise submitted
by petitioner on account of her failure to file all required
returns was an entirely reasonable exercise of the
Commissioner’s discretion in administering the offer in
compromise program. [Id.]
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Although the present case involves a potential installment
payment agreement and not an offer in compromise, we think the
deference shown in Rodriguez v. Commissioner, supra, to the
Commissioner’s collection procedures applies equally to the
present case. Specifically, we do not think it is an abuse of
discretion for the Commissioner to decline to offer an
installment payment agreement to a taxpayer if the taxpayer
continues to dispute the underlying liability.5 After all, an
installment payment agreement contemplates payment of an amount
acknowledged as owed. See Internal Revenue Manual 5.19.1.5.4.1;
Form 433-D, Installment Agreement; see also sec. 6159; sec.
301.6159-1, Proced. & Admin. Regs.
In sum, petitioners have failed to demonstrate that the
proposed levy action is inappropriate, that another collection
alternative is more appropriate, or that some other relevant
issue adversely affects respondent’s proposed collection action.
Respondent’s determination to proceed by levy with the collection
of petitioners’ outstanding liabilities for 1992 and 1993 was not
an abuse of discretion.
5
Indeed, it is hard to imagine that a taxpayer would even
want to enter into an installment payment agreement if the
taxpayer not only disputed the underlying liability but wished to
take that dispute to court.
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D. Conclusion
For the reasons discussed above, respondent’s determination
to proceed by levy with the collection of petitioners’
outstanding liabilities for 1992 and 1993 should be sustained,
and we so hold.
Reviewed and adopted as the report of the Small Tax Case
Division.
To give effect to the foregoing,
Respondent’s Motion For
Summary Judgment will be denied as
moot, and decision will be entered
for respondent.