T.C. Memo. 2007-155
UNITED STATES TAX COURT
THEODORE C. AND DENISE M. SCHWARTZ, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2914-06L. Filed June 18, 2007.
Theodore C. and Denise M. Schwartz, pro sese.
Michele E. Craythorn, for respondent.
MEMORANDUM OPINION
RUWE, Judge: Petitioners filed a petition in response to a
notice of determination concerning collection action(s) under
section 6320 and/or 6330, in which respondent determined that a
proposed levy should proceed to collect petitioners’ unpaid tax
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liabilities for 1997 through 2003 (years at issue).1 Pursuant to
section 6330(d), petitioners seek review of respondent’s
determination.2 The issue for decision is whether the Appeals
officer abused her discretion in determining not to consider
petitioners’ collection alternative.
Background
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. When the petition was
filed, petitioners resided in San Rafael, California.
Petitioner Theodore C. Schwartz is a self-employed dentist.
Petitioners received two Final Notices of Intent to Levy and
Notice of Your Right to a Hearing (Final Notices), each issued on
June 7, 2005, regarding petitioners’ unpaid Federal income taxes,
including penalties and interest, as follows:
Year Unpaid tax
1997 $2,052.96
1998 12,861.03
1999 27,040.65
1
Unless otherwise indicated, all section references are to
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.
2
Petitioners originally sought to have this case conducted
under the small tax case procedures of sec. 7463(f)(2). However,
because petitioners’ total unpaid tax exceeds $50,000, this Court
removed the small tax case designation and discontinued
proceeding under the small tax case procedures of sec. 7463. See
Schwartz v. Commissioner, 128 T.C. 6 (2007).
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2000 20,154.68
2001 37,315.70
2002 30,729.60
2003 23,566.81
Total 153,721.43
On July 5, 2005, petitioners, through their authorized
representative, executed and submitted a Form 12153, Request for
a Collection Due Process Hearing. Attached was a letter, which
stated in relevant part:
Levies placed on bank accounts would cause undue
hardship. The taxpayer has made Estimated Tax Deposits
for 2005. The taxpayer is completing Financial Form
433-A. This will assist in determining repayment
ability. It would also result in the inability to
pursue all avenues to resolve this liability and
prevent the repayment of the outstanding liability owed
to the Internal Revenue Service.
In light of the taxpayer’s current situation, it is
requested that no enforcement action take place against
Theodore and Denise Schwartz. The taxpayer is
interested in resolving this liability as quickly and
efficiently as possible.
On September 15, 2005, respondent sent petitioners a letter
acknowledging receipt of petitioners’ case in respondent’s San
Jose Appeals Office. On September 23, 2005, Appeals Officer
Colleen Cahill (Ms. Cahill) sent petitioners a letter inviting
them to contact her to schedule a section 6330 hearing and to
request that petitioners provide a completed Form 433-A,
Collection Information Statement for Wage Earners and Self-
Employed Individuals, a signed 2004 tax return, and proof of
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estimated tax payments for 2004 and 2005.3 On October 19, 2005,
Ms. Cahill sent petitioners a second letter providing petitioners
with a second opportunity to contact her to schedule a section
6330 hearing and to submit the requested documentation.4
Petitioners’ authorized representative, Dwayne Riggs, II
(Mr. Riggs), held a section 6330 hearing by telephone on December
2, 2005, for the years at issue with Ms. Cahill, who had no prior
involvement with respect to the unpaid tax. On the same day, Mr.
Riggs faxed to Ms. Cahill a letter offering a collection
alternative in the form of an installment agreement.5
Petitioners were not current with their 2005 estimated tax
payments at the time of their section 6330 hearing, and Mr. Riggs
did not raise any issues regarding the validity or the amount of
the liability or any other issues during the section 6330
3
Also on Sept. 23, 2005, Ms. Cahill made a real property
ownership search to verify petitioners’ residence address and to
determine that petitioners have sufficient equity in their home
to satisfy their tax liabilities.
4
On or about May 23, 2005, petitioners submitted to
respondent via fax Forms 433-A, Collection Information Statement
for Wage Earners and Self-Employed Individuals, and 433-B,
Collection Information Statement for Businesses. The record is
unclear as to why Ms. Cahill requested that petitioners submit
Form 433-A 4 months after they already submitted it.
5
Mr. Riggs’s letter explained that petitioners intended to
sell their residence in order to pay their tax liabilities, but
requested that petitioners “be granted a stay of enforcement
along with a minimal monthly payment plan until the sale of the
residence.” The letter did not suggest a monthly payment amount,
but requested that the parties work together to arrive at an
appropriate amount.
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hearing. The Appeals Office issued a notice of determination
concerning collection action(s) under section 6320 and/or 6330
for the years at issue on January 3, 2006. The Appeals Office
determined that it could not consider petitioners’ proposal for a
collection alternative because petitioners were not current with
estimated tax payments, that enforced collection action was not
more intrusive than necessary, and that the IRS should proceed
with the collection action. Petitioners timely filed a petition
to the Tax Court challenging respondent’s determination.
Discussion
A taxpayer is entitled to a notice before levy and notice of
the right to a fair hearing before an impartial officer of the
Internal Revenue Service Office of Appeals. Secs. 6330(a) and
(b), 6331(d). If the taxpayer requests a hearing, he may raise
in that hearing any relevant issue relating to the unpaid tax or
the proposed levy, including challenges to the appropriateness of
the collection action and “offers of collection alternatives,
which may include the posting of a bond, the substitution of
other assets, an installment agreement, or an offer-in-
compromise.” Sec. 6330(c)(2)(A). The taxpayer cannot raise
issues relating to the underlying tax liability if the taxpayer
received a notice of deficiency or the taxpayer otherwise had an
opportunity to dispute the tax liability. Sec. 6330(c)(2)(B). A
determination shall be made which shall take into consideration
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those issues, and “whether any proposed collection action
balances the need for the efficient collection of taxes with the
legitimate concern of the person that any collection action be no
more intrusive than necessary.” Sec. 6330(c)(3).
Petitioners raise only the issue of whether a collection
action is appropriate and argue that the collection action is
more intrusive than necessary. A petition filed under section
6330 must contain “Clear and concise lettered statements of the
facts on which the petitioner bases each assignment of error.”
Rule 331(b)(5). We generally consider “only arguments, issues,
and other matter that were raised at the collection hearing or
otherwise brought to the attention of the Appeals Office.”
Magana v. Commissioner, 118 T.C. 488, 493 (2002); sec. 301.6330-
1(f)(2), Q&A-F5, Proced. & Admin. Regs. Because petitioners do
not dispute the existence or amount of their underlying tax
liabilities, we review the determination for an abuse of
discretion. Lunsford v. Commissioner, 117 T.C. 183, 185 (2001);
Nicklaus v. Commissioner, 117 T.C. 117, 120 (2001).
The Appeals officer’s consideration and rejection of
petitioners’ collection alternative, an installment agreement,
was reasonable and not an abuse of discretion. Her determination
not to consider petitioners’ proposed installment agreement was
based on applicable procedures contained in respondent’s Internal
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Revenue Manual.6 According to these procedures, in determining
whether a taxpayer is eligible for an installment agreement, an
Appeals officer must:
Analyze the current year’s anticipated tax liability.
If it appears a taxpayer will have a balance due at the
end of the current year, the accrued liability may be
included in an agreement. Compliance with filing,
paying estimated taxes, and federal tax deposits must
be current from the date the installment agreement
begins. * * *
Internal Revenue Manual sec. 5.14.1.5.1(19).
The parties have stipulated that petitioners were not
current with their 2005 estimated tax payments at the time of
their section 6330 hearing. The Appeals officer informed
petitioners that she could not consider an installment agreement
if petitioners were not current with their estimated tax
payments. The Appeals officer also found that all applicable law
and procedural requirements were met. Petitioners conceded they
owe the sums demanded. Their only relevant argument is that
respondent should have accepted their proposed installment
agreement, and that a levy is more intrusive than necessary and
would cause undue hardship.
6
The Internal Revenue Manual provides procedures for
proposed installment agreements. See Internal Revenue Manual
sec. 5.14.1.1 to 5.14.1.6. Those procedures contain compliance
checks, which are conducted to determine a taxpayer’s eligibility
for an installment agreement, after a taxpayer requests such an
agreement. Id. sec. 5.14.1.5.1.
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Estimated payments, intended to ensure that current taxes
are paid, are a significant component of the Federal tax system,
and the Appeals officer was entitled to rely on their absence in
reaching her conclusions. Cox v. Commissioner, 126 T.C. 237, 258
(2006). In fact, petitioners' circumstances illustrate one of
the reasons for requiring current compliance before granting
collection alternatives such as an offer-in-compromise or an
installment agreement; namely, the risk of pyramiding tax
liability.7 Id.; see also Orum v. Commissioner, 412 F.3d 819,
821 (7th Cir. 2005), affg. 123 T.C. 1 (2004).
We generally consider “only arguments, issues, and other
matter that were raised at the collection hearing or otherwise
brought to the attention of the Appeals Office.” Magana v.
Commissioner, supra at 493. The Appeals officer’s exercise of
discretion, therefore, must be examined in light of the facts as
they existed at the time the determination was made.8
Accordingly, we hold that the Appeals officer did not abuse her
7
In addition to petitioners’ noncompliance with regard to
their individual income taxes, petitioners own and operate a
dental practice which is currently being levied upon by
respondent for unpaid employment taxes.
8
At trial, petitioner Theodore C. Schwartz testified and
presented evidence that he hoped would show petitioners were
current with their estimated tax payments at the time of trial.
The Court suggested that if this were true, and was the only
obstacle to considering an installment agreement, the parties
might be able to resolve their differences. In a posttrial
status report, respondent stated that petitioners had not
satisfied their estimated tax liabilities for 2005 or 2006.
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discretion, and respondent may proceed with the proposed levy
action.
To reflect the foregoing,
Decision will be entered
for respondent.