Shannon v. Comm'r

T.C. Summary Opinion 2006-176

UNITED STATES TAX COURT

PATRICK M. SHANNON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 9574-05S. Filed October 25, 2006.

Patrick M. Shannon, pro se.

Lisa K. Hunter, for respondent.

CHIECHI, Judge: This case is before the Court on respon-

dent’s motion for summary judgment (respondent’s motion)1 and was

heard pursuant to the provisions of section 7463 of the Internal

Revenue Code in effect at the time that the petition was filed.2

1
Although the Court ordered petitioner to file a response to
respondent’s motion, petitioner failed to do so.
2
All section references are to the Internal Revenue Code in
(continued...)
 - 2 -

The decision to be entered is not reviewable by any other court,

and this opinion should not be cited as authority. We shall

grant respondent’s motion.

Background

The record establishes and/or the parties do not dispute the

following.

Petitioner resided in Bellevue, Nebraska, at the time he

filed the petition in this case.

Petitioner did not timely file a Federal income tax (tax)

return (return) for his taxable year 1999. On or about April 25,

2002, respondent prepared a substitute for return for that year.

On September 5, 2002, respondent issued to petitioner a

notice of deficiency with respect to his taxable year 1999 (1999

notice of deficiency), which he received. In that notice,

respondent determined a deficiency in, and additions under

sections 6651(a)(1), 6651(a)(2), and 6654 to, petitioner’s tax

for that year in the respective amounts of $7,691, $1,036.57,

$598.91,3 and $204.74.

2
(...continued)
effect at all relevant times. All Rule references are to the Tax
Court Rules of Practice and Procedure.
3
With respect to the addition to tax under sec. 6651(a)(2),
respondent determined in the 1999 notice of deficiency that if
petitioner “did not pay the balance of the tax owed within the
time prescribed by law, a penalty of 0.5% of the tax due is added
for each month the tax remains unpaid (not to exceed a total of
25% of the unpaid amount”.
 - 3 -

Petitioner did not file a petition in the Court with respect

to the 1999 notice of deficiency.

On February 24, 2003, respondent (1) assessed with respect

to petitioner’s taxable year 1999 the tax of $7,691 and additions

to tax under sections 6651(a)(1), 6651(a)(2), and 6654 of

$1,036.57, $806.22,4 and $204.74, respectively, that respondent

determined in the 1999 notice of deficiency, as well as interest

as provided by law on such assessed amounts, and (2) abated

certain of such assessed amounts. (We shall refer to any such

unpaid assessed amounts, as well as interest as provided by law

accrued after February 24, 2003, as petitioner’s unpaid 1999

notice of deficiency liability.)

On February 24, 2003, respondent issued to petitioner a

notice of balance due with respect to petitioner’s unpaid 1999

notice of deficiency liability.

Around March 18, 2003, petitioner’s return preparer sent

respondent Form 1040, U.S. Individual Income Tax Return, for

petitioner and his spouse Lauri Shannon (Ms. Shannon) for their

taxable year 1999 (1999 return) that petitioner and Ms. Shannon

had signed. Respondent filed that return sometime shortly after

respondent received it. In their 1999 return, petitioner and Ms.

Shannon reported total tax of $29,069 and tax due of $24,014.

When petitioner’s return preparer sent respondent the 1999 return

4
See supra note 3.
 - 4 -

around March 18, 2003, petitioner and Ms. Shannon did not pay the

tax shown due in that return.

On May 5, 2003, respondent assessed with respect to the

taxable year 1999 of petitioner and Ms. Shannon (1) tax of

$21,378 ($21,378 increase in 1999 tax), which was the difference

between the total tax (i.e., $29,069) that petitioner and Ms.

Shannon reported in their 1999 return and the amount of tax

(i.e., $7,691) that respondent determined in the 1999 notice of

deficiency and assessed on February 24, 2003, with respect to

petitioner’s taxable year 1999 and (2) additions to tax under

section 6651(a)(1) and (2) of $4,351.06 and $3,743.33, respec-

tively, attributable to the $21,378 increase in 1999 tax (in-

creases in the 1999 additions to tax), as well as interest as

provided by law on such assessed amounts. (We shall refer to any

such unpaid assessed amounts, as well as interest as provided by

law accrued after May 5, 2003, as petitioner’s5 unpaid 1999

return liability. We shall refer collectively to petitioner’s

unpaid 1999 notice of deficiency liability and petitioner’s

unpaid 1999 return liability, as well as interest as provided by

law accrued after February 24, 2003, and May 5, 2003, respec-

tively, as petitioner’s unpaid total 1999 liability.)

5
This case involves only petitioner, and not Ms. Shannon.
For convenience, we shall sometimes refer only to petitioner, and
not to petitioner and Ms. Shannon.
 - 5 -

On May 5, 2003, respondent issued to petitioner a notice of

balance due with respect to petitioner’s unpaid 1999 return

liability.

On various dates from May 26 through December 22, 2003,

respondent abated certain assessed amounts of petitioner’s tax,

additions to tax, and interest as provided by law with respect to

petitioner’s taxable year 1999. On various dates after respon-

dent made the respective assessments on February 24, 2003, and

May 5, 2003, with respect to petitioner’s taxable year 1999,

respondent applied as credits to the unpaid total 1999 liability

certain overpayments with respect to certain other taxable years

of petitioner after petitioner’s taxable year 1999.

On February 21, 2004, respondent issued to petitioner a

final notice of intent to levy and notice of your right to a

hearing with respect to petitioner’s unpaid total 1999 liability.

On or about March 8, 2004, petitioner sent a letter (peti-

tioner’s March 8, 2004 letter) to respondent that respondent

received on March 12, 2004. That letter stated in pertinent

part:

Letter of Protest

* * * * * * *

2. I state that I want to APPEAL the IRS find-
ing to the Appeal Office.
 - 6 -

3. See copy of your letter attached.[6]
4. Tax years involved are 1999, 2000, 2001,
2002 and 2003.
5. I do not agree with your conclusion that we
owe any money to you. We did not owe when
we filed our 1999 return. You owe us a
refund for 2000, 2001, 2002, and 2003. Not
to mention the $600.00 refund that we never
received. Amount owed us is approximately
$20,000.00!!!!! Plus interest for four
(4) years * * * [Reproduced literally.]

On or about September 15, 2004, an Appeals officer with

respondent’s Appeals Office (Appeals officer) sent petitioner a

letter. That letter stated in pertinent part:

In review of your protest and/or request for a hearing,
I find that the outstanding liabilities are from your
own late filing of the 1999 return. The first liabil-
ity was established by the Service with some limited
information after you defaulted your right to petition
the Tax Court. Thereafter, you submitted a return for
1999 with a higher liability.

Since the due date of the return was April 15, 2000,
you were assessed the failure to file penalty, the
failure to pay penalty and interest. As the Service
took funds from other returns, adjustments were made to
the penalties and interest since some of the payments
from other returns were not known until after the
penalties and interest were assessed, but the effective
date of the refunds took effect earlier.

* * * The total assessed balance is currently
$18,309.15 since the Service took $2,236.51 levy funds
on May 17, 2004.

* * * * * * *

6
Petitioner attached to his March 8, 2004 letter Form CP
504, “Urgent!! We intend to levy on certain assets. Please
respond NOW.” (Form CP 504). The Internal Revenue Service (IRS)
had issued Form CP 504 to him with respect to petitioner’s unpaid
total 1999 liability.
 - 7 -

I ask that you respond within the next 30 days to
discuss the case, or set a time and date to discuss the
case * * *. [Reproduced literally.]

On November 16, 2004, the Appeals officer held a telephonic

hearing with petitioner’s authorized representative. By letter

dated November 16, 2004, the Appeals officer sent petitioner’s

authorized representative a copy of a transcript of the IRS’s

account with respect to petitioner’s taxable year 1999.

On or about December 30, 2004, petitioner’s authorized

representative sent the Appeals officer a letter (petitioner’s

December 30, 2004 letter). That letter stated in pertinent part:

We are asking for abatement of penalties for this case
due to reasonable cause, based upon consideration of
the following facts.

The main penalty that has been applied is the failure
to file penalty under Section 6651(a)(1). The original
return was filed by the October 15, 2000 extended due
date. However, the return was not signed by the tax-
payer. It is our understanding that the IRS has had a
longstanding policy of waiving this penalty if the
error is corrected. In this case the error was indeed
corrected when the taxpayer was notified of this over-
sight. Thus, we request that this penalty be abated,
as the taxpayer moved to correct this error as quick as
possible once it was discovered.

Further, please note that the taxpayer suffered a
relapse of his hydrocephalus during 1999 and spent most
of the last four months of 1999 hospitalized during
which time he underwent multiple brain surgeries and
had a shunt placed in his brain to reduce fluid pres-
sure. This condition rendered the taxpayer very much
like an Alzheimer’s patient, unable to remember or care
for himself and very much at the mercy of the former
CPA’s direction in this matter.

The other penalty charged in this case is the failure
to pay penalty under Section 6651(a)(2). As a first
 - 8 -

consideration for abatement of the penalty, the tax-
payer, prior to the tax year in question, had a good
record of timely filing and paying his tax liabilities,
and the underpayment in this case was not due to bad
faith. In addition, the taxpayer exercised prudence by
engaging a CPA to advise him on his personal and busi-
ness tax matters. The taxpayer relied on the advice of
his former CPA, who gave assurance that application of
subsequent taxable years’ tax overpayments to the
taxpayer’s 1999 underpayment would result in elimina-
tion of his tax liability for 1999. While this advice
was clearly erroneous, the taxpayer had no way of
knowing this fact and was in no condition to challenge
this advice. Had the taxpayer been correctly advised
by his CPA, he would have taken the correct action, and
request that this be considered in your review of the
application of the failure to pay penalty.

We are also asking for reduction of interest and/or
abatement in this case based upon consideration of the
following facts.

The majority of the payments made in this case were by
way of payroll deductions from the taxpayer and were
not applied to the tax in some cases until some sixteen
months after the government received the money. For
example, monies deducted from the taxpayers’ January
2000 paychecks were not applied to the taxes due until
Apr 15, 2001 when the taxes for 2000 were due. Apply-
ing 1/12 of the refund due for tax year 2000 evenly
throughout 2000 as payments against the taxes due would
significantly reduce the interest charge in this case
and more fairly represent the actual amount that should
be owed.

In addition interest in this case is eligible for
abatement because the delayed payments were not due
solely to the actions of the taxpayer, but were caused
by erroneous advice from a former CPA. [Reproduced
literally.]

On March 8, 2005, the Appeals officer held another tele-

phonic hearing with petitioner’s authorized representative with

respect to the issues that that representative had raised in

petitioner’s December 30, 2004 letter.
 - 9 -

On or about March 21, 2005, petitioner’s authorized repre-

sentative sent the Appeals officer another letter (petitioner’s

March 21, 2005 letter). That letter stated in pertinent part:

We are writing on behalf of * * * [petitioner] regard-
ing the outstanding 1999 balance * * *.

We previously corresponded with you on this issue in a
letter dated December 30, 2004 in which we laid out
specific points for abatement of the penalties. We
also submitted additional information on the medical
problems suffered by the taxpayer on January 29, 2005
as requested. We are requesting a written response to
each of these points, since they have summarily been
rejected.

We are also asking for written response to our calcula-
tion of the amounts due, based on the calculations we
submitted along with the aforementioned correspondence
of December 30, 2004.

Further, we would like a written determination of the
amount due for 1999.

The taxpayer is not proposing an offer in compromise at
this time, and therefore is not submitting Form 433-A.

On or about March 25, 2005, in response to petitioner’s

March 21, 2005 letter, the Appeals officer sent petitioner’s

authorized representative a letter. That letter stated in

pertinent part:

In response to your latest correspondence and fax, I am
writing this letter.

You did submit arguments about the penalties for 1999
and submitted evidence of the taxpayer’s medical condi-
tion since 1999. There have been other arguments about
the computations of the balance due. I reviewed the
file and find insufficient evidence overcomes the
penalties. The computations of the balances due have
been found to be correct. I found one exception in
that a levy was taken during the period of collection
 - 10 -

due process and have ordered that refunded. The cur-
rent transcript shows this has been done recently.

There is no evidence that the taxpayer timely filed a
return for 1999, with or with a signature. The first
return or copy of a return is the one signed May 31,
2001. The recorded extension date expired on August
15, 2000. The Service set up a substitute for a return
in May of 2002. The Service started sending reports of
the 1999 liability in May of 2002. Where there was no
agreement, a Statutory Notice of deficiency was issued
September 5, 2002. The tax, penalty and interest were
assessed on February 24, 2002 when the taxpayer didn’t
petition the Tax Court. The taxpayer had his opportu-
nity to argue the tax, failure to file penalty, failure
to pay penalty and failure to pay estimated tax penalty
in Tax Court.

After the assessment from the statutory notice, the
taxpayer submitted his return with a larger liability.
The account was adjusted to larger amounts on May 5,
2003. It appears the Service received the return
earlier, approximately February of 2003, but the return
didn’t have an original signature. Later this was
rectified and the return was posted so the account
could be posted.

There is no long standing policy for the Service to
waive the failure to file penalty when the taxpayer
doesn’t submit a timely return. There is no evidence
it was ever timely filed, signed or unsigned.

Regarding the failure to pay penalty, it is the tax-
payer’s responsibility to ensure the tax liability it
paid on time. He cannot delegate that responsibility
to a CPA or others. The return submitted in 2003
showed a larger liability than the Service set up
earlier. While you and the taxpayer contend the return
was filed in 2000 and the return has a copy of a signa-
ture in May of 2001, there were no payments towards the
liability except for some withholding that is question-
able.

I saw no evidence of reasonable cause to abate the
penalty. The taxpayer cannot rely on the CPA or others
to pay his liability and we saw no evidence that his
medical condition prevented him from making payments.
He was able to operate one or more corporations and
 - 11 -

earn an income from 1999 to the present.

We also find that the joint liability is also the
responsibility of the spouse, who was involved in the
home and business with him. The failure to pay is also
her responsibility.

You also requested a written response to your calcula-
tion of the amounts due based on your submitted compu-
tations in a December 30, 2004 letter. I recall send-
ing you transcripts and explanation of the transcripts
on November 16, 2004 and wonder what else there can be
to submit. The computations per the transcripts were
found to be correct and I didn’t think there was a need
for further explanations.

After I found there were no likely abatements of penal-
ties, I asked that you submit any alternatives to the
levy action to me with financial statements. I cannot
consider any alternatives to the levy action without
financial statements. Without viable alternatives, I
have to sustain the levy action. [Reproduced liter-
ally.]

On April 26, 2005, respondent’s Appeals Office issued to

petitioner a notice of determination concerning collection

action(s) under section 6320 and/or 6330 (notice of determina-

tion). That notice stated in pertinent part:

Summary of Determination

You sent the Service a Letter of Protest subsequent to
a CP504 letter, Urgent letter, and subsequent to a
notice of intent to levy, LT 11. The Service Center
considered this a request for a hearing regarding the
notice of intent to levy and considered it timely.

You disagreed with the underlying liability and stated
that the Service owed you money.

We tried to hold a hearing with you and held a tele-
phone and correspondence hearing with your new repre-
sentatives. We wrote to you and explained the reasons
for the balances due for 1999.
 - 12 -

You didn’t raise any issues or alternatives regarding
the levy action. You didn’t submit financial informa-
tion to determine your ability to pay.

Without further information from you, we are sustaining
the levy action. [Reproduced literally.]

An attachment to the notice of determination stated in pertinent

part:

SUMMARY OF THE ISSUES

The taxpayer sent the Service Center a letter of pro-
test on 03-08-2004, arguing that the balances were in
error. This was shortly after an Urgent notice and a
notice of intent to levy, so the Service Center deter-
mined this was a timely request for a collection due
process hearing.

The taxpayer argued that the balances were in error.
The taxpayer stated that refunds and changes were
misapplied.

A hearing was offered to the taxpayer and two represen-
tatives. A telephone and correspondence hearings were
held with the representatives. The balance of the
account was explained to them. I found nothing unusual
in the postings of the 1999 liability and the payments
by refunds from later years. The taxpayer and repre-
sentatives raised no discussions regarding alternatives
the levy action.

The underlying liability is correct as posted to the
account.

RECOMMENDATION

The levy action is sustained without other information
to determine a lesser intrusive method of collection.

BRIEF BACKGROUND

The 1999 liability was first set up by Substitute for
return and a statutory notice of deficiency. After the
notice was defaulted, the taxpayer submitted a return
with an increased liability. The self-corrected in-
creases to the account were assessed. Later, there was
 - 13 -

a carry back from later years to further correct the
liability to a lower amount. Refunds were taken from
later years to make additional payments.

Since the return was filed later and insufficient
withholding was set up, the account includes the fail-
ure to pay penalty, the failure to file penalty, an
estimated tax penalty and interest. As amendments and
payments were applied, corrections were made to the
account.

In review of a current transcript, Appeals finds the
Service levied and took $2,236.512 on 05-17-2004, after
the taxpayer had timely requested an appeal. This
amount shouldn’t have been levied. The late posting of
the request for appeals allowed the Service to enforce
a levy action without a suspension during the CDP
suspension period. The CDP unit in Covington, KY was
advised to return the levied funds and it was refunded
during the hearing period.

DISCUSSION AND ANALYSIS
APPLICABLE LAW AND ADMINISTRATIVE PROCEDURES

* * * * * * *

In review of the file and transcripts, it appears that
all manual and legal procedures have been properly
followed. This Appeals Officer has not dealt with this
taxpayer in the past regarding this liability. I did
have involvement in the taxpayer’s corporation in the
past, but not regarding the current type of individual
taxes or years. The taxpayer signed a waiver of my
involvement.

I found one error on May 17, 2004, when the Service
took levy funds during the CDP hearing period of col-
lection suspension. The CDP unit was advised to return
the funds. The cause for the premature levy action was
the late input of the suspension code on the account.
The request for a hearing was timely received on March
12, 2004 but the suspension code TC 520 cc 77 was not
input until cycle 200429, approximately August. Ap-
peals believes the CDP unit didn’t recognize the CDP
request until June of 2004 because the taxpayer didn’t
use form 12253. When they allowed the CDP hearing, the
CDP unit should ensure premature levy was returned to
the taxpayer.
 - 14 -

Under section 6330, the taxpayer can question the
underlying unless he has been previously given the
right to appeal or petition the Tax Court regarding the
matter. In this situation, the taxpayer defaulted the
statutory notice of deficiency and later amended his
own return to report more income and liability. He
doesn’t appear to argue those actions of his own,
although indicating he disagrees with his own pre-
parer’s computations of an additional liability. The
remains of the account are postings of payments from a
carry back or from later year refunds. There appear to
be no errors in the postings of those changes and
payments.

RELEVANT ISSUES PRESENTED BY THE TAXPAYER

I believe I have addressed all relevant issues pre-
sented by the taxpayer. The taxpayer and representa-
tive haven’t presented further arguments that are on
point to the case. They didn’t present an alternative
or lesser intrusive method of payment to the levy
action

The representative submitted numerous copies of medical
receipts showing the taxpayer/husband encountered
various medical problems in 1999 through 2003. I
didn’t find the information would show a reasonable
cause to reduce any penalties assessed on the 1999
liability. In addition, the taxpayer had prior oppor-
tunities to either petition the Tax Court or file an
appeal regarding the penalties and interest in prior
years. They should not be allowed to argue those
underlying liabilities in this CDP hearing.

BALANCING EFFICIENT COLLECTION AND INTRUSIVENESS

Under the circumstances of the case, the levy action
balances an efficient method of collection when consid-
ering the legitimate concerns of the taxpayer that it
be no more intrusive than necessary.

The levy action is sustained. [Reproduced literally.]

Discussion

The Court may grant summary judgment where there is no

genuine issue of material fact and a decision may be rendered as
 - 15 -

a matter of law. Rule 121(b); Sundstrand Corp. v. Commissioner,

98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994). We

conclude that there are no genuine issues of material fact

regarding the questions raised in respondent’s motion.7

A taxpayer may raise challenges to the existence or the

amount of the taxpayer’s underlying tax liability if the taxpayer

did not receive a notice of deficiency or did not otherwise have

an opportunity to dispute the tax liability, sec. 6330(c)(2)(B),

including the tax liability reported in the return that such

taxpayer filed, Montgomery v. Commissioner, 122 T.C. 1 (2004).

Where the validity of the underlying tax liability is properly

placed at issue, the Court will review the matter on a de novo

basis. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v.

Commissioner, 114 T.C. 176, 181-182 (2000).

We turn first to the tax that respondent assessed with

respect to petitioner’s taxable year 1999. With respect to the

tax of $7,691 determined in the 1999 notice of deficiency that

respondent assessed on February 24, 2003, petitioner received

that notice, but he did not file a petition with respect to it.

7
The party opposing summary judgment must set forth specific
facts that show a genuine issue of material fact exists and may
not rely merely on allegations or denials in the pleadings.
Grant Creek Water Works, Ltd. v. Commissioner, 91 T.C. 322, 325
(1988); Casanova Co. v. Commissioner, 87 T.C. 214, 217 (1986).
As indicated supra note 1, petitioner did not file a response to
respondent’s motion. Petitioner relies merely on allegations in
the petition.
 - 16 -

On the instant record, we find that petitioner may not challenge

the existence or the amount of the tax of $7,691 determined in

the 1999 notice of deficiency that respondent assessed on Febru-

ary 24, 2003.

With respect to the $21,378 increase in 1999 tax that

respondent assessed on May 5, 2003, and that is attributable to

the 1999 return, petitioner did not receive a notice of defi-

ciency and did not otherwise have an opportunity to dispute that

tax. We shall review on a de novo basis respondent’s determina-

tions with respect to such increase in 1999 tax. Sego v. Commis-

sioner, supra; Goza v. Commissioner, supra. Petitioner made

general and vague allegations in the petition about whether the

total tax for his taxable year 1999 is the amount shown as total

tax in the 1999 return. However, petitioner failed to specify

the basis for any disagreement that he may have regarding the

total tax shown in that return.8 On the instant record, we find

that petitioner has failed to show that he is not liable for the

$21,378 increase in 1999 tax that respondent assessed on May 5,

2003, and that is attributable to the 1999 return.

We turn next to the respective additions to tax under

section 6651(a)(1) and (2) that respondent assessed with respect

8
Petitioner did not claim in the petition that any items of
income, deduction, or credit reported, or any computations made,
in the 1999 return were incorrect.
 - 17 -

to petitioner’s taxable year 1999.9 With respect to the addi-

tions to tax under section 6651(a)(1) and (2) of $1,036.57 and

$806.22, respectively, determined in the 1999 notice of defi-

ciency that respondent assessed on February 24, 2003, as dis-

cussed above, petitioner received the 1999 notice of deficiency

in which respondent, inter alia, determined such additions to

tax, but he did not file a petition with respect to that notice.

On the instant record, we find that petitioner may not challenge

the existence or the amount of the additions to tax under section

6651(a)(1) and (2) of $1,036.57 and $806.22, respectively,

determined in the 1999 notice of deficiency that respondent

assessed on February 24, 2003.

With respect to the increases in the 1999 additions to tax

under section 6651(a)(1) and (2) of $4,351.06 and $3,743.33,

respectively, that respondent assessed on May 5, 2003, and that

are attributable to the 1999 return, petitioner did not receive a

9
Petitioner does not dispute respondent’s determination that
respondent may proceed to collect any unpaid addition to tax
under sec. 6654 for his taxable year 1999 determined in the 1999
notice of deficiency that respondent assessed on Feb. 24, 2003.
With respect to the respective additions to tax under sec.
6651(a)(1) and (2) that respondent assessed for petitioner’s
taxable year 1999, petitioner alleges in the petition that he
seeks “abatement” of those additions to tax. We construe that
allegation as a request to review (1) whether petitioner is
liable for the respective additions to tax under sec. 6651(a)(1)
and (2) that respondent assessed for his taxable year 1999 and
(2) whether, if the Court were to find that he is so liable,
respondent may proceed to collect such additions to tax.
 - 18 -

notice of deficiency and did not otherwise have an opportunity to

dispute those additions to tax. We shall review on a de novo

basis respondent’s determinations with respect to such increases

in the 1999 additions to tax. Sego v. Commissioner, supra; Goza

v. Commissioner, supra. Section 6651(a)(1) imposes an addition

to tax for failure to file timely a return. Section 6651(a)(2)

imposes an addition to tax for failure to pay timely the amount

shown as tax in a return. The respective additions to tax under

section 6651(a)(1) and (2) do not apply if the failures to file

timely and to pay timely are due to reasonable cause and not to

willful neglect. Respondent has the burden of production with

respect to the increases in the 1999 additions to tax under

section 6651(a)(1) and (2). Sec. 7491(c); Higbee v. Commis-

sioner, 116 T.C. 438, 446 (2001). Although respondent bears the

burden of production with respect to such increases, respondent

“need not introduce evidence regarding reasonable cause * * * or

similar provisions. * * * the taxpayer bears the burden of proof

with regard to those issues.” Higbee v. Commissioner, supra.

With respect to the increase in the 1999 addition to tax

under section 6651(a)(1), petitioner claims, and respondent

disputes, that petitioner submitted timely an unsigned return for

his taxable year 1999. Assuming arguendo that petitioner had

timely submitted an unsigned return for his taxable year 1999,

such unsigned return does not constitute a valid tax return for
 - 19 -

that year. See Elliott v. Commissioner, 113 T.C. 125, 128

(1999). We conclude that respondent has satisfied respondent’s

burden of production under section 7491(c) with respect to the

increase in the 1999 addition to tax under section 6651(a)(1) of

$4,351.06 that respondent assessed on May 5, 2003, and that is

attributable to the 1999 return which petitioner and Ms. Shannon

signed and which respondent filed sometime shortly after it was

sent to respondent around March 18, 2003.

With respect to the increase in the 1999 addition to tax

under section 6651(a)(2), the record establishes, and petitioner

conceded in the petition, that he failed to pay timely the tax

shown in the 1999 return. We conclude that respondent has

satisfied respondent’s burden of production under section 7491(c)

with respect to the increase in the 1999 addition to tax under

section 6651(a)(2) that respondent assessed on May 5, 2003, and

that is attributable to the 1999 return which petitioner and Ms.

Shannon signed and which respondent filed shortly after it was

sent to respondent around March 18, 2003.

We address now whether petitioner has carried his burden of

establishing that he is not liable for the increase in the 1999

addition to tax under section 6651(a)(1) that respondent assessed

on May 5, 2003, and that is attributable to the 1999 return. As

we understand petitioner’s position, he contends that he timely

sent to respondent an unsigned return for his taxable year 1999.
 - 20 -

Consequently, according to petitioner, his failure to file timely

a return for his taxable year 1999 was due to reasonable cause

and not to willful neglect. Even if petitioner timely sent to

respondent an unsigned return for his taxable year 1999, which

respondent disputes, any such action by petitioner would not

establish that his failure to file timely a return for his

taxable year 1999 was due to reasonable cause and not to willful

neglect. See Elliott v. Commissioner, supra at 128-131. On the

instant record, we find that petitioner has failed to show that

he is not liable for the increase in the 1999 addition to tax

under section 6651(a)(1) that respondent assessed on May 5, 2003,

and that is attributable to the 1999 return.

We address next whether petitioner has carried his burden of

establishing that he is not liable for the increase in the 1999

addition to tax under section 6651(a)(2) that respondent assessed

on May 5, 2003, and that is attributable to the 1999 return. As

discussed above, petitioner conceded in the petition that he did

not pay timely the tax shown in the 1999 return. Nonetheless, as

we understand petitioner’s position, he contends that he relied

on the advice of a certified public accountant that he did not

have to pay the tax shown due in the 1999 return when that return

was sent to respondent around March 18, 2003. Consequently,

according to petitioner, his failure to pay timely the tax shown

in the 1999 return was due to reasonable cause and not to willful
 - 21 -

neglect. In this connection, petitioner alleged in the petition:

Petitioner demonstrated prudence by engaging a CPA to
advise him on his personal and business tax matters.
The Petitioner relied on the advice of his former CPA,
who gave assurance that application of subsequent
taxable years’ tax overpayments to the Petitioner’s
1999 underpayment would result in elimination of his
tax liability for 1999. While this advice was clearly
erroneous, the Petitioner had no way of knowing this
fact and was in no condition to challenge this advice.
Had petitioner been correctly advised by this former
CPA, Petitioner would have taken the correct action,
request that this be considered in determining the
appropriateness of the application of the failure to
pay penalty. [Reproduced literally.]

Assuming arguendo that a certified public accountant advised

petitioner that he did not have to pay the tax shown due in the

1999 return when that return was sent to respondent around March

18, 2003, we reject any argument by petitioner that any reliance

by him on such advice establishes that his failure to pay timely

the tax shown in that return was due to reasonable cause and not

to willful neglect. The last date prescribed for the timely

payment of tax for petitioner’s taxable year 1999 was April 15,

2000. Secs. 6072(a), 6151(a). The standard for reasonable cause

under section 6651(a)(2) is a one-time test to be passed or

failed as of the due date for the tax payment.10 In order to

establish that his failure to pay timely the tax shown in the

1999 return was due to reasonable cause and not to willful

neglect, petitioner must show that reasonable cause existed on

10
See Estate of Hartsell v. Commissioner, T.C. Memo. 2004-
211.
 - 22 -

April 15, 2000, the last date prescribed for the timely payment

of tax for petitioner’s taxable year 1999. See secs. 6072(a),

6151(a). Petitioner does not contend, and the record does not

establish, that on April 15, 2000, he had reasonable cause for

his failure to pay timely the tax shown in the 1999 return.

We address next petitioner’s position that he is not liable

for the increase in the 1999 addition to tax under section

6651(a)(2) that respondent assessed on May 5, 2003, and that is

attributable to the 1999 return because respondent incorrectly

calculated the amount of such increase in such addition to tax.

In this connection, petitioner alleged in the petition:

the IRS should allow credit for taxes paid [by with-
holding] when the Petitioner makes a payment [by with-
holding] not some 15 months later. Petitioner will
demonstrate monies were in the hands of the government
and unavailable to Petitioner far before they are being
credited to the Petitioners account allowing the IRS to
assess penalties * * * upon funds that it holds.
[Reproduced literally.]

As we understand it, it is petitioner’s position that any

tax withheld from wages that he received during taxable years

after his taxable year 1999 should be applied to his unpaid total

1999 liability at the time such tax was withheld. We reject any

such position. Any tax withheld from an individual’s wages is

deemed paid by the individual on the 15th day of the fourth month

following the close of the taxable year with respect to which

such tax is allowable as a credit under section 31. See sec.

6513(b)(1).
 - 23 -

On the instant record, we find that petitioner has failed to

show that he is not liable for the increase in the 1999 addition

to tax under section 6651(a)(2) that respondent assessed on May

5, 2003, and that is attributable to the 1999 return.

We consider now petitioner’s claim in the petition for

abatement of interest with respect to his taxable year 1999. We

construe that claim as a request to review respondent’s failure

to abate interest under section 6404(e),11 which we shall review

for abuse of discretion. See sec. 6404(h); see also Lee v.

Commissioner, 113 T.C. 145, 149 (1999). Section 6404(e) permits

respondent to abate interest with respect to an unreasonable

error or delay resulting from managerial and ministerial acts.12

Petitioner alleged in the petition:

The majority of the payments made in this case were by
way of payroll deductions from the Petitioner and were
not applied to the tax in some cases until some sixteen
months after the government received the money. For

11
In petitioner’s December 30, 2004 letter, petitioner
requested that respondent abate interest with respect to his
taxable year 1999. Respondent’s Appeals Office did not abate
such interest. We have jurisdiction to review respondent’s
determination not to abate interest with respect to petitioner’s
taxable year 1999. Sec. 6404(h); Katz v. Commissioner, 115 T.C.
329, 340-341 (2000).
12
Sec. 6404(e) was amended by Taxpayer Bill of Rights 2,
Pub. L. 104-168, sec. 301, 110 Stat. 1452, 1457 (1996), to permit
the Secretary to abate interest with respect to an “unreasonable”
error or delay resulting from “managerial” as well as ministerial
acts. The foregoing amendment applies to interest accruing with
respect to deficiencies or payments for taxable years beginning
after July 30, 1996, and is applicable in the instant case.
 - 24 -

example, monies deducted from the Petitioner’s January
2000 paycheck were not applied to the taxes due until
Apr 15, 2001 when the taxes for 2000 were due. Apply-
ing 1/12 of the refund due for tax year 2000 evenly
throughout 2000 as payments against the taxes due would
significantly reduce the interest charge in this case
and more fairly represent the actual amount that should
be owed.

* * * In addition interest in this case is eligible for
abatement because the delayed payments were not due
solely to the actions of the Petitioner, but were
caused by bad advice from a former CPA. [Reproduced
literally.]

We turn first to petitioner’s contention that respondent

abused respondent’s discretion in failing to abate interest on

petitioner’s unpaid total 1999 liability because respondent did

not apply tax withheld from wages that petitioner received during

taxable years after his taxable year 1999 to his unpaid total

1999 liability at the time such tax was withheld. We reject that

contention. As discussed above, any tax withheld from an indi-

vidual’s wages is deemed paid by the individual on the 15th day

of the fourth month following the close of the taxable year with

respect to which such tax is allowable as a credit under section

31. See sec. 6513(b)(1).

We turn next to petitioner’s contention that respondent

abused respondent’s discretion in failing to abate interest on

petitioner’s unpaid total 1999 liability because he received “bad

advice” from a certified public accountant. We reject that

contention. Any advice that petitioner received from a certified

public accountant is not a basis under section 6404(e) on which
 - 25 -

respondent may abate interest with respect to petitioner’s

taxable year 1999.

Based upon our examination of the entire record before us,

we sustain respondent’s determination in the notice of determina-

tion to proceed with the collection action with respect to

petitioner’s taxable year 1999.

We have considered all of the contentions and arguments of

the parties that are not discussed herein, and we find them to be

without merit, irrelevant, and/or moot.

On the record before us, we shall grant respondent’s motion.

To reflect the foregoing,

An order granting respondent’s

motion and decision for respondent

will be entered.