T.C. Memo. 2008-291
UNITED STATES TAX COURT
GALEN K. AND KATHERINE J. HEICHEL, ET AL.,1 Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 13504-05L, 13505-05L, Filed December 22, 2008.
13534-05L.
Galen K. and Katherine J. Heichel, pro sese.
Fred E. Green, Jr., for respondent.
MEMORANDUM OPINION
SWIFT, Judge: In these consolidated cases, petitioners
challenge respondent’s proposed levies under section 6330
1
Cases of the following petitioners are consolidated
herewith: Galen K. and Katherine J. Heichel, docket No. 13505-
05L; and Galen K. Heichel, docket No. 13534-05L.
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relating to petitioners’ outstanding Federal income taxes for
1999, 2000, 2001, and 2002.
Petitioners argue that respondent abused his discretion in
refusing to credit $41,137 tax overpayments for 1986 through 1998
(non-CDP years) against petitioners’ $29,203 outstanding Federal
income taxes for 1999, 2000, 2001, and 2002 (CDP years).
Respondent argues that the $41,137 tax overpayments for the non-
CDP years are barred by the refund period of limitations under
section 6511 and are not available for credit against
petitioners’ $29,203 outstanding taxes for the CDP years.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue.
Background
The facts in this case have been fully stipulated. At the
time the petition was filed, petitioners resided in Minnesota.
For many years, although some Federal income taxes were
withheld from petitioners’ wages, petitioners did not file
Federal income tax returns. For 1986 through 2001, respondent
prepared substitute individual Federal income tax returns for
petitioners, mailed to petitioners timely notices of deficiency,
and made timely deficiency assessments against petitioners.
During 1994 through 2004, as a result of levies on
petitioners’ wages, respondent received funds on petitioners’
behalf and credited the funds against the outstanding Federal
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income taxes respondent had assessed against petitioners for 1986
through 2001.
On May 17, 2004, petitioners untimely filed with respondent
joint Federal income tax returns for 1986 through 2002.
Respondent accepted these tax returns as correct, and respondent
made adjustments to petitioners’ tax accounts for each year
consistent with the taxes reported on petitioners’ late-filed
Federal income tax returns.
In view of the above adjustments respondent made to
petitioners’ tax accounts, the funds respondent previously had
received and credited against petitioners’ adjusted Federal
income taxes resulted in overpayments for a number of the non-CDP
years. Respondent credited the overpayments for the non-CDP
years which respondent concluded were allowable under the section
6511 refund period of limitations to other tax periods of
petitioners.
Petitioners’ total $41,137 overpayments, however, for the
non-CDP years which respondent concluded were not allowable under
the section 6511 refund period of limitations were transferred to
an excess collections account. The $41,137 overpayments
consisted solely of funds respondent had received on petitioners’
account before May 17, 2001.
Also, after the above adjustments, petitioners still owed
$29,203 in Federal income taxes for the CDP years. On August 7,
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2004, with respect to 1999, on September 30, 2004, with respect
to 2000 and 2001, and on January 27, 2005, with respect to 2002,
respondent mailed to petitioners notices of intent to levy for
the $29,203 petitioners owed for the CDP years. Petitioners
timely requested an Appeals Office collection hearing under
section 6330 relating to respondent’s proposed levies.
At the Appeals Office hearing petitioners raised an issue as
to the appropriateness of the proposed levies in light of the
alternative or substitute assets that petitioners believed should
be available (namely, the $41,137 overpayments relating to the
non-CDP years). See sec. 6330(c)(2)(A)(ii) and (iii).
Because respondent received the $41,137 more than 3 years
before May 17, 2004, the date petitioners filed their Federal
income tax returns for the non-CDP years, respondent’s Appeals
Office concluded that the $41,137 was not available for refund or
credit against petitioners’ outstanding taxes for the CDP years.
Respondent’s Appeals Office issued notices of determination to
petitioners sustaining the proposed levies for the CDP years.
Discussion
Petitioners argue that for purposes of the refund period of
limitations under section 6511 the $41,137 non-CDP-year
overpayments should not be treated as “payments of tax” until
May 17, 2004, the day on which petitioners acknowledged their
Federal income tax liabilities via the late filing of their 1986
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through 2002 Federal income tax returns and therefore that the
$41,137 should be refundable under section 6511 and available to
pay off petitioners’ outstanding $29,203 Federal income taxes for
the CDP years.
Section 6511 contains detailed limitations on the allowance
of credits and refunds generally. Section 6511(a) sets out
the time periods for filing a claim for credit or refund of
overpayments. Section 6511(b)(2) limits the amount of tax to be
refunded to two so-called look-back periods: (1) For claims
filed within 3 years of filing a return, the refund is generally
limited to the portion of the tax paid within the 3 years
immediately before the claim was filed; (2) for claims not filed
within 3 years of filing the return, the refund is
generally limited to the portion of the tax paid during the
2 years immediately before the claim was filed. See Commissioner
v. Lundy, 516 U.S. 235, 240 (1996).
Petitioners argue that under Risman v. Commissioner, 100
T.C. 191 (1993), a remittance of funds by a taxpayer to
respondent will not be treated as a payment of tax subject to the
refund period of limitations until the taxpayer intends that the
remittance satisfies what the taxpayer acknowledges is an
existing tax liability. As stated, petitioners argue that the
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$41,137 should be treated as paid no earlier than May 17, 2004,
when petitioners acknowledged their tax liabilities by the late
filing of their Federal income tax returns.
We disagree. A taxpayer does not control the treatment and
application of funds remitted to respondent involuntarily.
Rather, respondent is permitted to treat funds involuntarily
remitted as a payment of taxes and to apply the funds to any tax
liability respondent sees fit. Slodov v. United States, 436 U.S.
238, 252 n.15 (1978).
Accordingly, funds remitted to respondent involuntarily by
way of levy on petitioners’ wages and applied by respondent to
petitioners’ outstanding tax liabilities are treated as taxes
paid by the taxpayer on the date of respondent’s levy. Risman v.
Commissioner, supra, does not hold to the contrary. As
respondent explains on brief: “The levied payments applied to
the non-CDP years * * * were confiscated to satisfy properly
assessed tax liabilities. The tax liabilities for each of the
non-CDP years had been assessed prior to receipt of the levy
payments. The levied payments were received to satisfy an
existing tax liability.” See also Baral v. United States, 528
U.S. 431 (2000).
Respondent received petitioners’ non-CDP-year $41,137
overpayments by levy before May 17, 2001, and accordingly refunds
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were, at the time petitioners filed their tax returns on May 17,
2004, barred by the period of limitations under section 6511.
All other issues petitioners raised have been considered and
are rejected. We conclude that respondent’s Appeals Office
committed no error in sustaining respondent’s proposed levies.2
To reflect the foregoing,
Decisions will be entered
for respondent.
2
It is unclear whether respondent herein still raises an
issue as to the applicability to the facts of this case of our
holding in Greene-Thapedi v. Commissioner, 126 T.C. 1 (2006), to
the effect that we do not have jurisdiction in collection cases
under secs. 6320 and 6330 to determine and order overpayments to
taxpayers once respondent’s proposed collection action has been
conceded or found to be moot. Respondent cites Greene-Thapedi in
his opening brief but not in his reply brief. In any event,
Greene-Thapedi is distinguishable in that in the instant case
respondent’s proposed levy action is not moot. Respondent still
seeks to collect from petitioners by levy $29,203, and
petitioners are not asking us to determine an overpayment or to
order a refund. Rather, as explained, petitioners are asking us
to apply $41,137 overpayments to their $29,203 outstanding tax
liabilities in lieu of approving respondent’s levies on
petitioners’ other property. This case simply involves
petitioners’ contention under sec. 6330(c)(2)(A)(ii) and (iii)
that alternative or substitute assets are available to respondent
that obviate the need for additional levies and that respondent’s
proposed levies therefore are not appropriate. See Greene-
Thapedi, supra at 11 n.19.