T.C. Memo. 2006-21
UNITED STATES TAX COURT
WILLIAM REESE, Petitioner v. COMMISSIONER OF
INTERNAL REVENUE, Respondent
Docket No. 1174-05L. Filed February 9, 2006.
William Reese, pro se.
Jeffrey E. Gold, for respondent.
MEMORANDUM OPINION
NIMS, Judge: The petition in this case was filed in
response to a Notice of Determination Concerning Collection
Action(s) Under Section 6320 and/or 6330 (notice of
determination), in which respondent determined to proceed with
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collection by levy of petitioner’s Federal income tax liability
for 1988 to 1992, inclusive, plus accrued interest and failure to
pay penalty under section 6651(a)(3). Unless otherwise
indicated, all section references are to sections of the Internal
Revenue Code in effect for the years in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
Petitioner resided in Reston, Virginia, at the time the petition
was filed.
Background
Under “Brief Background,” the notice of determination
states, among other things, that
The outstanding tax liabilities are the result of TC
300 additional tax assessments because Mr. Reese was a
non-filer.[1] When the required Notices of Deficiencies
[for 1988 to 1992, inclusive,] were issued, * * * [Mr.
Reese] petitioned Tax Court. The TC 300 assessments
and all applicable penalties and interest are in
accordance with the Tax Court Decision documents for
each year.
Under Relevant Issues Presented by the Taxpayer, the Notice
states that
IRC 6330(c) allows the taxpayer to raise any relevant
issue relating to the unpaid tax. Form 12153 as
prepared by Mr. Reese claims that the amounts
outstanding are in error: that the Philadelphia
Service Center transposed numbers from the Tax Court
Decision Documents, and have [sic] refused to abate the
incorrect amounts.
1
TC 300, 1 Audit, Internal Revenue Manual (CCH), exhibit
4.4.1-1, at 7425, is a so-called transaction code number used
internally by the Internal Revenue Service. It has no
significance for purposes of this case.
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Appeals received and reviewed all TC 300 assessments
documents in addition to the Tax Court Decision documents for tax
years 1988-1992, inclusive. All TAX as stipulated by the Tax
Court was correctly assessed for the years in question. However,
Appeals did conclude that Mr. Reese was not given proper credit
for his federal income tax withholding for the years 1989, 1990
or 1992.
Appeals prepared three adjustment documents (Form 3870)
to give Mr. Reese the following credit: $2,840 for
1989, $3,517 for 1990 and $295 for 1992. (No
adjustments were warranted on tax years 1988 or 1991 as
the correct amount of tax was assessed with the correct
amount of withholding credits given per year). Mr.
Reese was advised of the Appeals adjustments.
Mr. Reese was requested to provide a repayment proposal
(such as an Installment Agreement or an Offer in
Compromise) to Appeals by October 1, 2004 in lieu of
the proposed collection actions as the minimal
adjustments requested by Appeals would NOT satisfy his
tax indebtedness to the IRS. There was no further
response nor information received from Mr. Reese.
Accordingly, there was no agreement reached on this
account.
The taxpayer raised no other issues. [Emphasis added.]
Petitioner filed his petition on T.C. Form 2 (Rev. 5/03).
Petitioner’s request for relief and statement of error, as stated
in the petition, is as follows:
4. Set forth the relief requested and the reasons
why you believe you are entitled to such relief. 1.)
Abatement of all excessive and wrongful IRS
assessments. 2.) Proper accounting of my liability.
The fact situation underlying this case is the
egregious pattern and practice by the IRS of issuing
excessive and wrongful assessments and ignoring
requests to abate those wrongful assessments. The IRS
Appeals Officer acted in bad faith by imposing an
illusory conclusion to this problem that failed to
mitigate harm caused by IRS misfeasance and excessive
interest caused by IRS delays. The Appeals Officer
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acted in bad faith by being unresponsive to telephone
calls and information requests, and deliberately
supplying false contact information that frustrated
efficient communication.
On August 5, 2005, respondent filed his Motion for Summary
Judgment (Motion) in response to which petitioner filed
Petitioner’s Opposition to Respondent’s Motion for Summary
Judgment. Pursuant to an Order of the Court dated October 28,
2005, respondent filed his Supplement to Respondent’s Motion for
Summary Judgment (Respondent’s Supplement, discussed infra), in
response to which petitioner filed Petitioner’s Opposition to
Respondent’s Supplement to Respondent’s Motion for Summary
Judgment (Petitioner’s Opposition).
Under Rule 121, a summary adjudication may be made “if the
pleadings, answers to interrogatories, depositions, admissions,
and any other acceptable materials, together with the affidavits,
if any, show that there is no genuine issue as to any material
fact and that a decision may be rendered as a matter of law.”
Rule 121(b). While petitioner throughout this case has made a
number of conclusory and unsupported allegations of Internal
Revenue Service (IRS) misconduct, no material facts are in
dispute; thus, whether respondent has authority to proceed with
levy may be decided as a matter of law.
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On March 22, 2004, respondent sent to petitioner a Final
Notice, Notice of Intent to Levy and Notice of Your Right to a
Hearing (Levy Notice). On April 26, 2004, the IRS Service Center
in Kansas City, Missouri, received petitioner’s Request for a
Collection Due Process Hearing (Request) in response to the Levy
Notice on IRS Form 12153, in which petitioner claimed that the
amounts which the IRS asserted were outstanding are in error,
that the Philadelphia Service Center transposed numbers from the
Tax Court decision documents, and has refused to abate the
incorrect amounts.
As stated in the notice of determination, respondent had
previously sent deficiency notices to petitioner for the tax
years 1988 to 1992, inclusive, to which petitioner responded by
filing petitions in this Court. The 1992 case resulted in a
trial and related to an issue not relevant to this case. The
trial also resulted in a holding that the income tax deficiency
and penalties due from petitioner were as detailed below. See
Reese v. Commissioner, T.C. Memo. 1997-346.
The cases for the remaining years, 1988 to 1991, inclusive,
were settled. The decision documents for all 5 years reflect,
among other things, the following:
Income tax IRC Sec. 6651(a) IRC Sec.
Year deficiency addition to tax 6654
1988 $5,101 $445 None
It is stipulated:
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* * * * * * *
4. petitioner has withholding credits in the
amount of $3,321.00 for calendar year 1988 which will
be credited toward the deficiency due for calendar year
1988.
Income tax IRC Sec. 6651(a) IRC Sec.
Year deficiency addition to tax 6654
1989 $4,729 $472.25 $121.27
It is stipulated:
* * * * * * *
4. petitioner has withholding credits in the
amount of $2,840.00 for calendar year 1989 which will
be credited toward the deficiency due for calendar year
1989.
Income tax IRC Sec. 6651(a) IRC Sec.
Year deficiency addition to tax 6654
1990 $5,976 $614.75 $151.97
It is stipulated:
* * * * * * *
4. petitioner has withholding credits in the
amount of $3,517.00 for calendar year 1990 which will
be credited toward the deficiency due for calendar year
1990.
Income tax IRC Sec. 6651(a) IRC Sec.
Year deficiency addition to tax 6654
1991 $8,269 $1,047.75 $188.18
It is stipulated:
* * * * * * *
4. petitioner has withholding credits in the
amount of $4,078.00 for calendar year l991 which will
be credited toward the deficiency due for calendar year
1991.
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Income tax IRC Sec. 6651(a) IRC Sec.
Year deficiency addition to tax 6654
1992 $20,106 $4,953 $613
Petitioner had a withholding credit in the amount of $295 to
be credited toward the deficiency due for calendar year 1992.
Discussion
In light of petitioner’s “request for relief and statement
of error” in his petition, referred to above, in which he
requested “abatement of all excessive and wrongful IRS
assessments,” and “Proper accounting of my liability,” the Court
issued an Order requiring respondent to supplement his Motion in
certain respects. The Order required the following:
ORDERED that on or before November 18, 2005,
respondent shall supplement his [summary judgment]
motion with a statement showing petitioner’s current
outstanding Federal income tax liabilities for the
years 1988, 1989, 1990, 1991, and 1992. It is further
ORDERED that the statement described in the
foregoing paragraph shall: (1) Explain how the
liability for each year has been computed; (2) explain
why amounts listed in the “Paying Late Penalty” column
(presumably the addition to tax imposed by I.R.C.
section 6651(a)(3))[2] in respondent’s final notice of
intent to levy, dated March 22, 2004, are not reflected
in the transcripts of account attached to respondent’s
motion; and (3) demonstrate the allowance of Federal
income tax withholdings for 1989, 1990, and 1992 which
are not taken into account in respondent’s final notice
of intent to levy, dated March 22, 2004. It is further
2
This is not expressly stated in the Levy Notice or the
Notice of Determination.
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ORDERED that in support of the statement described
above, respondent shall submit a certified copy of a
current certificate of assessments and payments for
each of the above-referenced years.
In response to the Order, respondent filed Respondent’s
Supplement, which contains detailed and comprehensive
explanations of the matters raised in the Order.
Respondent’s Supplement demonstrates the differences between
the assessed balances of tax and penalties, the late-paying
penalties under section 6651(a)(3) and accrued interest,
reflected in the Levy Notice for the tax years 1988 to 1992
inclusive, and the same categories of items currently assessed or
accrued. As of November 18, 2005, petitioner owed $111,407.46,
rather than $123,226.56, the total amount asserted in the Levy
Notice, a difference of $11,819.10 in petitioner’s favor. In
paragraph 96 of Respondent’s Supplement, respondent concedes that
he can collect only the current amount petitioner owes (i.e., the
net assessed amounts of tax, including section 6651(a)(1)
penalty, plus interest and section 6651(a)(3) nonpayment penalty
accrued to date of payment).
Interest and the section 6651(a)(3) penalty (up to the
limitation contained in that section) continue to accrue until
petitioner makes payments of the amounts assessed for the
aforementioned years. Petitioner did not analyze respondent’s
carefully detailed computations contained in Respondent’s
Supplement, but instead made bald allegations that respondent
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intentionally failed to credit his withholding, which is
manifestly untrue, as plainly demonstrated in the notice of
determination and Respondent’s Supplement.
With regard to the Levy Notice, the Order directed
respondent to “explain why amounts listed in the ‘Paying Late
Penalty’ column * * * are not reflected in the transcripts of
account attached to respondent’s motion.” The so-called “Paying
Late Penalty” and Interest are shown on the Notice under the
category “Statutory Additions” and not as assessed items.
Section 6651(a)(3) provides:
SEC. 6651(a). Addition to the Tax.
* * * * * * *
(3) to pay any amount in respect of any tax
required to be shown on a return specified in paragraph
(1) which is not so shown (including an assessment made
pursuant to section 6213(b)) within 21 calendar days
from the date of notice and demand therefor (10
business days if the amount for which such notice and
demand is made equals or exceeds $100,000), unless it
is shown that such failure is due to reasonable cause
and not due to willful neglect, there shall be added to
the amount of tax stated in such notice and demand 0.5
percent of the amount of such tax if the failure is for
not more than 1 month, with an additional 0.5 percent
for each additional month or fraction thereof during
which such failure continues, not exceeding 25 percent
in the aggregate.
Thus, section 6651(a)(3) imposes an addition to tax for
failure to pay any amount, in respect of any tax required to be
shown on a return which is not so shown, within 21 calendar days
from the date of notice and demand of payment. The addition to
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tax under section 6651(a)(3) is in an amount of 0.5 percent of
the amount of such tax if the failure to pay the tax is for not
more than one month, with an additional 0.5 percent for each
additional month or fraction thereof during which such failure to
pay continues, not to exceed 25 percent in the aggregate. The
failure to pay penalty thus may continue to accrue for up to 50
months, until payment. The addition to tax under section
6651(a)(3) is imposed unless the taxpayer establishes that the
failure was due to reasonable cause and not willful neglect.
Since petitioner has failed to pay any of the net assessed
balance of tax and section 6651(a)(1) penalties (after
withholding credits), the section 6651(a)(3) failure to pay
penalty in this case equals 25 percent of the net assessed
amounts after withholding credits. Respondent asserts that he is
not required to make a separate assessment of the accruals of the
section 6651(a)(3) additions to tax to collect the accruals. We
agree with respondent for the following reasons:
Section 6665(a) provides, in paragraph (1), that additions
to tax, additional amounts, and penalties are to be paid upon
notice and demand and are to be assessed, collected, and paid in
the same manner as taxes, and paragraph (2) provides that any
reference to “tax” is to be deemed also to refer to the foregoing
items.
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Section 6665(b), entitled “Procedure for Assessing Certain
Additions to Tax,” provides certain exceptions to subsection (a),
including, in effect, an exception that section 6651 additions
must be attributable to a deficiency for section 6665(a) to
apply. Thus, since section 6651(a)(3) additions are not
attributable to a deficiency, they are not required to be
assessed in the same manner as taxes. Instead section 6651(a)(3)
additions are attributable to amounts that have already been
assessed but remain unpaid, and therefore may be collected by
respondent by notice and demand, as in this case, without
assessment, and without recourse to the deficiency procedures.
See Greenhouse v. United States, 780 F. Supp. 136, 141 n.14
(S.D.N.Y. 1991).
A taxpayer may raise at a section 6330 hearing challenges to
the existence or amount of an underlying tax liability for any
tax period if the taxpayer did not receive any statutory notice
of deficiency for such tax liability or did not otherwise have an
opportunity to dispute such tax liability. Sec. 6330(c)(2)(B).
We need not, however, decide whether the section 6651(a)(3)
addition, although not deemed a tax under section 6651(a) and
section 6665, nevertheless falls within the ambit of section
6330(c)(2)(B). Petitioner did not challenge the section
6651(a)(3) addition at the Appeals Office hearing or in this
Court.
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As already noted, the only issue raised by petitioner at the
Appeals hearing was that the Philadelphia Service Center had
transposed numbers from the Tax Court decision documents and
refused to abate the incorrect amounts. The Appeals officer
determined that the tax, including penalties, reflected in the
Tax Court decision documents had been correctly assessed, but
that petitioner had not been credited with withholding tax for
1989, 1990, and 1992. Accordingly, the Appeals officer made
three adjustment documents for crediting petitioner with the
withholding taxes.
Because petitioner in his petition persisted in maintaining
that the IRS had made excessive and wrongful assessments, the
Court, as already discussed, directed respondent, among other
things, to explain how the liability for each year was computed,
and to demonstrate the allowance of the 1989, 1990, and 1992
withholdings, which were not taken into account in respondent’s
Levy Notice, dated March 22, 2004. Respondent’s notice of
determination, issued after the Levy Notice, properly reflects
the allowance of the withholding credits.
In petitioner’s “Opposition” to Respondent’s Supplement, he
makes no attempt whatsoever to demonstrate why he believes
respondent transposed decision document numbers, or why
respondent’s assessments are incorrect. Instead he persists in
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making frivolous allegations such as that the IRS engaged in an
“egregious” pattern and practice of issuing excessive and
wrongful assessments.
For the foregoing reasons, we shall grant respondent’s
motion for summary judgment. We hold that respondent may proceed
with a levy with respect to petitioner’s 1988, 1989, 1990, 1991,
and 1992 tax years.
An appropriate order and
decision will be entered.