T.C. Memo. 2005-156
UNITED STATES TAX COURT
BRIAN AND TINA NICKLAUS, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8587-04L. Filed June 27, 2005.
Brian Nicklaus and Tina Nicklaus, pro se.
Aimee R. Lobo-Berg, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COLVIN, Judge: Respondent sent petitioners a Notice of
Determination Concerning Collection Action(s) Under Sections 6320
and/or 6330 (the levy determination) on April 15, 2004, in which
respondent determined to proceed with collection by levy from
both petitioners of income tax liabilities for 1993 and 1994 and
from Brian Nicklaus for 1995-2000.
- 2 -
The sole issue for decision is whether respondent's
determination was an abuse of discretion. We hold that it was
not.
Unless otherwise stated, section references are to the
Internal Revenue Code. Rule references are to the Tax Court
Rules of Practice and Procedure. References to petitioner are to
Brian Nicklaus.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioners are married and had a mailing address in Stevenson,
Washington, when the petition was filed.
A. Petitioners’ Prior Tax Court Case Relating to Respondent’s
Lien for Petitioners’ Tax Years 1993-96
Petitioners had a prior case in this Court, Nicklaus v.
Commissioner, 117 T.C. 117 (2001), in which we sustained
respondent’s determination that notices of Federal tax lien for
petitioners’ 1993-96 income tax liabilities had been properly
recorded.
Petitioners filed Federal income tax returns for 1993 and
1994 in September 1995. Id. at 117. Respondent prepared
substitutes for petitioners’ 1995 and 1996 returns and issued a
notice of deficiency to petitioners for their 1993-96 tax years.
Id. Petitioners did not file a petition with this Court for
1993-96. Id.
- 3 -
Respondent assessed tax, penalties, and interest for
petitioners’ 1993-96 tax years and sent them a notice of balance
due for those years. Id. at 117-118. Prior to November 25,
1998, petitioners received a notice from respondent that
respondent intended to collect tax owed by petitioners for those
years by levy. Id. at 118. On November 25, 1998, respondent
issued a notice of levy to two banks with respect to petitioners’
tax liabilities for 1993-95. Id.
Respondent filed notices of Federal tax lien with respect to
petitioners’ 1993-96 tax years on July 16, 1999. Id. at 118.
Petitioners timely requested a hearing. Id. Respondent’s
Appeals Office conducted the hearing and gave petitioners copies
of Forms 4340, Certificate of Assessments and Payments, for 1993-
96. Id. at 119. After the hearing, respondent issued a notice
of determination sustaining the notice of Federal tax lien. Id.
at 119-120.
Petitioners timely filed a petition with this Court to
obtain judicial review of respondent’s notice of determination
relating to the lien. A trial was held. On brief, petitioners
said that the sole issue was whether the requirements for issuing
a Form 4340 had been met. Id. at 120. In our opinion in that
case, we held that the requirements for sustaining the notice of
Federal tax lien had been met because Form 4340 establishes a
presumption that tax was validly assessed, and petitioners had
- 4 -
not shown any irregularity in respondent’s assessment procedures.
Id. at 120-122.
B. Respondent’s Notice of Levy for Petitioner’s Tax Years 1993-
2000 and Tina Nicklaus’s Tax Years 1993-94
Respondent prepared substitutes for petitioner’s returns for
tax years 1997-99 on February 1, 2001, and for 2000 on July 11,
2002. Respondent issued notices of deficiency to petitioner for
1997-2000 on dates not stated in the record. Petitioner did not
file a petition in this Court for those years. Respondent
assessed tax, additions to tax, and interest for petitioner’s tax
years 1997-99 on July 14, 2003, and for his tax year 2000 on
September 8, 2003.
On September 9, 2004, respondent sent a Final Notice -
Notice of Intent to Levy and Notice of Your Right to a Hearing to
Tina Nicklaus for income taxes for 1993 and 1994 and to
petitioner for 1993-2000. Petitioners filed separate requests
for a hearing under section 6330(b).
Appeals Officer Jean Duncan (Duncan) was assigned to
petitioners’ case. Duncan gave petitioners Forms 4340 for 1993-
2000 before the hearing under section 6330(b). As part of their
section 6330(b) hearing, petitioners gave Duncan seven documents
including petitioner’s description of respondent’s actions with
respect to petitioners’ 1993-2000 tax years and copies of various
transcripts.
- 5 -
Duncan reviewed respondent’s administrative records for
petitioners and all documents submitted by petitioners. Duncan
considered petitioners’ arguments and concluded that petitioners
had not shown that there were any irregularities in assessment
procedures for the years in issue.
Respondent sent petitioners a Notice of Determination with
respect to the levy concerning their income tax liability for
1993 and 1994 on April 15, 2004. Respondent sent a Notice of
Determination to petitioner with respect to the levy concerning
income tax he owed for 1995-2000 on April 15, 2004. Petitioners
timely filed a petition in this Court.
On Forms 4340 for 1995 and 1996, Tina Nicklaus’s Social
Security number is partially incorrect and petitioner’s first
name is misspelled.
OPINION
A. Contentions of the Parties and Background
Petitioners contend that respondent’s transcripts show that
respondent did not follow proper assessment procedures and that
this Court lacked jurisdiction in their prior case before this
Court and in this case. Petitioners ask that we vacate the
decision in their prior case and that we remand this case to
respondent.1
1
Petitioners do not contend that sec. 7491(a) applies in
this case and have not established that they met the requirements
of sec. 7491(a)(2).
- 6 -
Respondent contends that petitioners are collaterally
estopped from alleging irregularities in the assessment of their
tax liabilities for 1993-96. Respondent also contends that all
requirements have been met for respondent to collect taxes that
petitioners owe for 1993-2000.
Section 6330 (pertaining to levies) provides for
administrative and judicial review of certain collection actions.
The Commissioner is required to give a taxpayer written notice
that a Federal tax lien has been filed and/or that the
Commissioner intends to levy and to explain to the taxpayer that
such collection actions may be challenged on various grounds at
an administrative hearing. See Davis v. Commissioner, 115 T.C.
35, 37 (2000); Goza v. Commissioner, 114 T.C. 176, 179 (2000).
Section 6330(c)(1) requires the Appeals Office to obtain
verification that “the requirements of any applicable law or
administrative procedure have been met.” Section 6330(c)(2)
prescribes the matters that a person may raise at an
administrative hearing. Section 6330(c)(2)(A) provides that a
person may raise issues such as spousal defenses, the
appropriateness of the Commissioner's intended collection action,
and possible alternative means of collection. See Sego v.
Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner,
supra.
- 7 -
B. Whether This Court Has Jurisdiction in This Case
Petitioners contend that this Court lacks jurisdiction in
this case because (1) the underlying tax liability at issue is
for employment or excise tax, and (2) respondent may not file a
substitute for return for individual income tax.
1. Whether the Underlying Liability Is for Employment or
Excise Tax
Petitioner contends that records that he obtained from
respondent under the Freedom of Information Act, 5 U.S.C. sec.
552 (2000), show that employment or excise taxes, but not income
taxes, are at issue in this case, and that respondent’s records
show that petitioners were employers. We disagree.
On each of the Forms 4340 for the years in issue, respondent
certified that respondent assessed individual income tax. On the
Final Notice - Notice of Intent to Levy & Your Notice Of a Right
To A Hearing, respondent identified Form 1040, U.S. Individual
Income Tax Return, as the form for the underlying tax which
respondent seeks to collect. Petitioners wrote “1040” in the
space for “Tax Form Number(s)” on their requests for a hearing
under section 6330. The notice of determination states that it
relates to income tax and the form number is Form 1040. We
conclude that respondent seeks to collect Federal individual
income tax from petitioners for 1993-94 and from petitioner for
1995-2000.
- 8 -
2. Whether Respondent May Prepare Substitutes for
Individual Income Tax Returns
Petitioners contend that respondent may not prepare
substitutes for returns for them because part 5.1.11.6.10 of the
Internal Revenue Manual (IRM) (May 27, 1999) lists seven returns2
that may be prepared under the authority of section 6020(b) and
does not mention Form 1040.
We disagree. The Internal Revenue Service may prepare
substitute returns for taxpayers who fail to do so themselves.
Sec. 6020(b)(1);3 Cabirac v. Commissioner, 120 T.C. 163, 171-172
2
The seven returns are: Form 940, Employer’s Annual
Federal Unemployment Tax Return; Form 941, Employer’s Quarterly
Federal Tax Return; Form 943, Employer’s Annual Tax Return for
Agricultural Employees; Form 720, Quarterly Federal Excise Tax
Return; Form 2290, Heavy Vehicle Use Tax Return; Form CT-1,
Employer’s Annual Railroad Retirement Tax Return; and Form 1065,
U.S. Partnership Return of Income.
3
Sec. 6020 provides:
SEC. 6020. RETURNS PREPARED FOR OR EXECUTED BY
SECRETARY.--
(a) Preparation of return by Secretary.--If any
person shall fail to make a return required by this
title or by regulations prescribed thereunder, but
shall consent to disclose all information necessary for
the preparation thereof, then, and in that case, the
Secretary may prepare such return, which, being signed
by such person, may be received by the Secretary as the
return of such person.
(b) Execution of Return by Secretary.--
(1) Authority of Secretary to execute return.--If
any person fails to make any return required by any
internal revenue law or regulation made thereunder at
the time prescribed therefor, or makes, willfully or
(continued...)
- 9 -
(2003); Millsap v. Commissioner, 91 T.C. 926, 936 (1988); see
also United States v. Updegrave, 80 AFTR 2d 97-5290, 97-1 USTC
par. 50,465 (E.D. Pa. 1997). IRM provisions not cited by
petitioners state that respondent may prepare substitutes for
Forms 1040 under section 6020(b). See, e.g., IRM, pt.
3.0.273.40.3(6) (Jan. 1, 2005), pt. 5.1.15.2 (July 30, 1999). We
conclude that respondent may prepare substitutes for petitioners’
individual income tax returns for the years in issue,4 and that
this Court has jurisdiction to review respondent’s determination
to proceed with collection.
C. Whether Petitioners Are Collaterally Estopped From
Contending That Irregularities Exist in Assessment of Their
Tax Liabilities for 1993-96
We held in Nicklaus v. Commissioner, 117 T.C. at 121, that
respondent had properly assessed petitioners’ tax liabilities for
1993-96 and that those liabilities remain unpaid. Respondent
contends that collateral estoppel precludes petitioners from
3
(...continued)
otherwise, a false or fraudulent return, the Secretary
shall make such return from his own knowledge and from
such information as he can obtain through testimony or
otherwise.
(2) Status of returns.--Any return so made and
subscribed by the Secretary shall be prima facie good
and sufficient for all legal purposes.
4
Respondent does not contend and we need not decide whether
the returns prepared by respondent in this case meet the
requirements of sec. 6020(b) in all respects.
- 10 -
alleging irregularities in the assessment of their Federal income
taxes for 1993-96.
If collateral estoppel applies, issues which were litigated
and decided in an earlier case cannot be relitigated by the
parties or their privies. Montana v. United States, 440 U.S.
147, 153 (1979); Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326
n.5 (1979); Commissioner v. Sunnen, 333 U.S. 591, 597 (1948).
Collateral estoppel protects adversaries from the expense and
vexation of multiple lawsuits, conserves judicial resources, and
fosters reliance on judicial action by minimizing the possibility
of inconsistent decisions. Montana v. United States, supra at
153-154; Meier v. Commissioner, 91 T.C. 273, 282-284 (1988).
Collateral estoppel applies if the following requirements
are met: (1) The issue in the second suit is identical to the
issue decided in the first suit, Commissioner v. Sunnen, supra at
599-600; (2) there is a final judgment rendered by a court of
competent jurisdiction, Peck v. Commissioner, 90 T.C. 162, 166
(1988), affd. 904 F.2d 525 (9th Cir. 1990); Gammill v.
Commissioner, 62 T.C. 607, 613 (1974); (3) the parties to the
second suit are the same as the parties to the first suit or in
privity with them, Peck v. Commissioner, supra at 166-167;
Gammill v. Commissioner, supra at 614-615; (4) the parties
actually and necessarily litigated the matters at issue, and the
resolution of those matters was essential to the prior decision,
Commissioner v. Sunnen, supra at 598, 601; (5) the controlling
- 11 -
facts and legal principles remain unchanged, id. at 599-600; and
(6) there are no special circumstances that would warrant making
an exception to the normal rules of issue preclusion, Montana v.
United States, supra at 162; Meier v. Commissioner, supra at
291-292.
These requirements are met in this case. First, petitioners
disputed respondent’s assessment procedures for 1993-96 in the
prior case and in this case. Thus, identical matters are at
issue in the prior case and in the instant case. Second, our
decision in the prior case is final. Third, the parties in this
case are the parties in the prior case. Fourth, during the prior
trial, petitioners and respondent actually and necessarily
litigated respondent’s assessment procedures for 1993-96 and
whether respondent’s proposed collection action for those years
was appropriate. The resolution of those matters was essential
to the decision in the first suit. Fifth, the controlling facts
and legal principles have not changed. Meier v. Commissioner,
supra at 291. Sixth, petitioners do not contend, and we do not
find, that special circumstances are present that would warrant
not applying the normal rules of issue preclusion. See Montana
v. United States, supra; Meier v. Commissioner, supra at 291-292.
Thus, petitioners are collaterally estopped from alleging
irregularities in the assessment of their Federal income taxes
for 1993-96.
- 12 -
D. Whether Requirements for Collection of Petitioners’ Tax
Liabilities Have Been Met
1. Errors on Form 4340
An assessment is made by recording the tax liability in the
office of the Secretary in accordance with rules or regulations
prescribed by the Secretary. Sec. 6203. A Form 4340, absent
evidence to the contrary, is sufficient to establish that the
assessment was properly made. United States v. Zolla, 724 F.2d
808, 810 (9th Cir. 1984); Psaty v. United States, 442 F.2d 1154,
1159 (3d Cir. 1971); Nicklaus v. Commissioner, supra at 121.
Treasury regulations require that the summary record,
through supporting records, identify the taxpayer. Sec.
301.6203-1, Proced. & Admin. Regs. Petitioners point out that
respondent misspelled petitioner’s first name and used an
incorrect Social Security number for Tina Nicklaus on the Forms
4340 for 1995 and 1996. Petitioners contend that the errors show
that the Forms 4340 are unreliable, and thus the requirements for
collection of their tax liabilities for the years in issue have
not been met. We disagree.
The Forms 4340 for 1995 and 1996 pertain only to the tax
liability of petitioner. Respondent correctly stated
petitioner’s middle initial, last name, and Social Security
number on those Forms 4340. The erroneous Social Security number
for petitioner’s spouse on the Forms 4340 for 1995 and 1996 does
not affect this case because: (1) Respondent seeks to collect by
- 13 -
levy petitioner’s, and not his spouse’s, unpaid tax for those
years; and (2) an incorrect Social Security number on a Form 4340
does not invalidate the assessment shown on the form if the
taxpayer is sufficiently identified. See Frey v. United States,
87 AFTR 2d 2001-2309, 2001-1 USTC par. 50,417 (N.D. Tex. 2001),
affd. 34 Fed. Appx. 151 (5th Cir. 2002). The Forms 4340 for 1995
and 1996 sufficiently identify petitioner as the taxpayer whose
tax was assessed by respondent.
2. Determination by Respondent
Section 6330(c)(1) requires that, in order for the
Commissioner to proceed with proposed collection, the Appeals
officer must verify that the requirements of any applicable law
or administrative procedure have been met. The record shows that
Duncan properly verified that all applicable laws and
administrative procedures governing the assessment and collection
of petitioner’s unpaid tax liabilities were met.
3. Conclusion
We conclude that respondent’s determination to proceed with
collection from petitioners was not an abuse of discretion.
E. Underlying Tax Liability
Petitioners contend for the first time in their posttrial
brief that they may dispute their underlying tax liability. We
disagree. First, we need not consider this issue because
petitioners raised it untimely. See Glass v. Commissioner, 124
- 14 -
T.C. __, __ (2005); Leahy v. Commissioner, 87 T.C. 56, 64-65
(1986). In their petition, amended petition, and at trial,
petitioners disputed only the assessment procedures.
Second, a taxpayer may dispute his or her underlying tax
liability at the section 6330 hearing only if he or she did not
receive a notice of deficiency or did not otherwise have an
opportunity to dispute the tax liability. Sec. 6330(c)(2)(B).
Petitioners do not contend that they did not receive notices of
deficiency for the years in issue. Instead, petitioners contend
only that the notices of deficiency applied to employment or
excise tax, not income tax. We have rejected this contention at
paragraph B-1, above.
We conclude that petitioners may not dispute their
underlying tax liability.
F. Conclusion
We conclude that respondent’s determination to proceed with
levy action to collect petitioners’ tax liabilities for 1993-2000
was not an abuse of discretion.
To reflect the foregoing,
Decision will be entered
for respondent.