PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b), THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE.
PANUTHOS, Chief Special Trial Judge: This case was heard pursuant to the provisions of
This case is before the Court on petitioner's request for review of the Internal Revenue Service (IRS) Appeals Office (Appeals) determination to sustain the filing of a Federal tax lien with respect to petitioner's 2000 through 2003 income tax liabilities. After a concession, the issue before the Court is whether respondent abused his discretion in sustaining the lien filing with respect to petitioner's income tax liabilities for taxable years 2001 through 2003. 1*127
BackgroundPetitioner resided in Virginia when he filed the petition. The parties filed a stipulation of facts and a supplemental stipulation of facts, with attached exhibits. We find those facts and incorporate the stipulations by this reference.
Petitioner worked as a laborer during 2000, 2001, 2002, and 2003 (the years in issue). Petitioner received Forms 1099-MISC, Miscellaneous Income, for each of the years in issue. He reported his earnings and claimed various expenses for each year on Schedule C, Profit or Loss From Business, and he reported a self-employment tax liability for each year. Petitioner had no Federal income tax withheld from the payments he received, and he made no estimated tax payments. He filed balance due returns for the years in issue and did not remit payment with those returns.
In 2002 petitioner entered into an installment agreement and made payments toward his outstanding tax liabilities, but he defaulted on the installment agreement in 2005, *128 when he stopped making payments. Respondent filed the notice of Federal tax lien on May 3, 2005, and mailed a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under
Petitioner timely petitioned for judicial review of the notice of determination. In response to motions from respondent, the Court granted a continuance and remanded the case so that Appeals could provide petitioner a face-to-face collection hearing. Appeals assigned a different settlement officer (SO) to conduct the hearing on remand. Before the hearing the SO informed petitioner *129 that Appeals could not consider collection alternatives without: (1) Proof of his current compliance with Federal income tax obligations, including tax return filing and estimated tax payments; and (2) completed collection information form(s), with supporting documentation. 2
On April 30, 2007, the SO and his supervisor met with petitioner for several hours. Petitioner sought withdrawal of the notice of lien on account of hardship and the adverse effect on his credit, and he requested currently noncollectible (CNC) status as a *130 collection alternative. The SO refused to consider collection alternatives during the meeting because petitioner had not provided proof of compliance or the requested collection information before or at the meeting.
During the collection hearing petitioner asserted that he had been improperly classified as an independent contractor by the people for whom he provided services during the years in issue. Petitioner claimed that the alleged employer paid him a lower "employee hourly rate" and not a higher "independent contractor rate". Petitioner attempted to challenge the underlying tax liabilities solely on the basis that respondent should determine his proper classification. The SO observed that the outstanding liabilities resulted from petitioner's filing his returns as an independent contractor and discussed petitioner's submitting amended Federal income tax returns for any years petitioner considered himself an employee as well as petitioner's submitting Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. Petitioner did not provide any documentation to support a challenge to the existence or amounts of the underlying tax liabilities *131 for the years at issue.
Petitioner also argued that the liens should be removed to allow him to obtain credit so he could purchase a computer. The SO and his supervisor explained that one purpose of the tax liens is to prevent a taxpayer from acquiring additional debt that could compete for funds needed to pay tax liabilities.
The SO allowed petitioner additional time to submit proof of current compliance with his Federal income tax obligations and to provide the collection information required to evaluate collection alternatives. Using the information petitioner submitted after the hearing, which indicated that petitioner did not have assets available for collection and did not have positive monthly disposable income, the SO determined that the only collection alternative available was to place petitioner's account in CNC status.
Petitioner did not submit any amended returns or a Form SS-8 to the SO. On September 7, 2007, the SO issued a Supplemental Notice of Determination Concerning Collection Actions Under
At *132 trial petitioner sought judicial determination of his classification (employee vs. independent contractor) and removal of the Federal tax liens. Respondent conceded the employment question, agreeing to accept whichever status petitioner preferred. 3*133
DiscussionIn reviewing the Commissioner's decision to sustain collection actions, where the validity of the underlying tax liability is properly at issue, the Court reviews the Commissioner's determination of the underlying tax liability de novo.
Petitioner did not receive a notice of deficiency or otherwise have an opportunity to dispute the underlying tax liabilities before the collection hearings concerning the liens filed for the years at issue. 4*136 Therefore, *135 he may challenge the existence or amounts of his underlying tax liabilities for tax years 2000 through 2003. See
Petitioner relied upon
Petitioner did not submit any evidence showing that withdrawal of the liens would facilitate collection, see
Petitioner failed to prove that the liens should be withdrawn pursuant to
The SO verified that the legal and administrative requirements had been met and considered whether the proposed collection actions properly balanced collection efficiency and intrusiveness.
On the basis of the record, we conclude that respondent satisfied the requirements of
To reflect the foregoing,
An appropriate order and decision will be entered.
Footnotes
1. Respondent conceded that the Federal tax lien for 2000 would be withdrawn because the lien was filed reflecting a zero balance owed for 2000. After the filing, the Internal Revenue Service (IRS) assessed a collection fee, interest, and an addition to tax for failure to pay tax reported on a return. At trial respondent's counsel agreed that the IRS would abate the remaining 2000 balance and withdraw the lien for 2000.
2. The settlement officer (SO) stated that petitioner was not entitled to challenge the underlying tax liabilities in the collection hearing because he had had a prior opportunity to so challenge; i.e., when he received a notice of intent to levy dated Apr. 16, 2005 (before the May 4, 2005, notice of Federal tax lien filing). However, the Apr. 16, 2005, levy notice, which is the subject of another case, docket No. 26741-06S, involves petitioner's tax liabilities for tax year 2004 only, not any of the years at issue in this case (2000 through 2003). In any event, the SO afforded petitioner the opportunity to challenge the underlying tax liabilities at the hearing.↩
3. Respondent's counsel indicated that recalculating petitioner's taxes as an employee would result in more taxes due than the amounts reflected in petitioner's original returns filed as an independent contractor; although petitioner would be liable for only one-half of the self-employment taxes if he filed as an employee, he would lose the deductions for one-half of the self-employment taxes and the expenses he originally listed on Schedules C, Profit or Loss From Business, would be reported on Schedules A, Itemized Deductions, where they would be subject to the 2-percent floor imposed by
sec. 67 on miscellaneous itemized deductions (here, unreimbursed employee business expenses) and would displace or compete with his standard deduction.Petitioner refused to stipulate his employment status. The Court instructed petitioner that, without an express agreement by both parties, the issue would be decided on the basis of his returns as filed. No oral or written agreement as to petitioner's employment status was made part of the record.
4. Respondent was not obliged to issue a notice of deficiency to petitioner because the assessments were entered under
sec. 6201(a)(1) , based on the amounts petitioner reported due on his tax returns, along with statutory interest and additions to tax. Moreover,sec. 6211(a) excludes from the definition of a deficiency the tax that taxpayers report due on their returns.Montgomery v. Commissioner, 122 T.C. 1">122 T.C. 1 , 16-17 (2004). As mentioned supra↩ note 2, the April 2005 levy notice did not address the years at issue in this case and thus did not provide an opportunity to dispute the underlying tax liabilities for 2000 through 2003.5. According to the Internal Revenue Manual, pt. 5.16.1.1.4 (Sept. 19, 2005), the filing of a Federal tax lien is a requirement of placing petitioner's account in currently noncollectible (CNC) status, which status petitioner had requested from the Automated Collection function. Contrary to petitioner's contentions, IRS records do not reflect that his account was ever placed in CNC status. It appears that petitioner's request for CNC status may have triggered the lien filing, but his challenge to the lien filing prevented the Secretary from applying CNC status until his collection appeal was finally resolved. This case resolves his appeal, and, as mentioned, the Sept. 7, 2007, supplemental notice of determination reflects the SO's determination that petitioner was eligible for CNC status.