T.C. Summary Opinion 2009-136
UNITED STATES TAX COURT
TIMOTHY P. SZULCZEWSKI, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20264-06S. Filed September 2, 2009.
Timothy P. Szulczewski, pro se.
Laura L. Buckley, for respondent.
GOLDBERG, Special Trial Judge: This case was heard pursuant
to the provisions of section 7463 of the Internal Revenue Code in
effect at the time the petition was filed. Pursuant to section
7463(b), the decision to be entered is not reviewable by any
other court, and this opinion shall not be treated as precedent
for any other case. Unless otherwise indicated, subsequent
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section references are to the Internal Revenue Code, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
The issue for decision is whether respondent abused his
discretion in sustaining the filing of a notice of Federal tax
lien for collection of petitioner’s unpaid 2002 tax liability.
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. Petitioner resided at
Birch Hill Drive in California when he filed his petition.
Petitioner worked and as of the date of trial continued to
work as a union dockworker for Roadway Express, Inc. (Roadway),
loading and unloading ships at the Port of Long Beach and driving
trucks to several of the corporation’s facilities. Petitioner’s
job required him to travel periodically away from home. He
married and had two children, one born in 1992 and the other in
1994. In 1997 petitioner “blew out” his shoulder on the job and
was unable to work for the next 5 years. He began receiving
Social Security disability benefits of approximately $1,300 per
month and continued to receive the Social Security benefit at
least through 2005.
The physical and financial strains took their toll. On
August 21, 2000, petitioner and his wife divorced. She left the
children in petitioner’s primary physical custody and moved to
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Rhode Island. Petitioner also underwent a chapter 13 bankruptcy.
Petitioner owned a house on Birch Hill Drive until December 2,
2002, when the bankruptcy trustee sold petitioner’s house to
petitioner’s brother, who allowed petitioner to continue to
reside there as a tenant.
Petitioner returned to work at Roadway in 2002 earning gross
wages of $34,606. Meanwhile, his union representative researched
petitioner’s out-of-work circumstances and determined that
petitioner was entitled to union disability benefits of
approximately $700 per month from the date of injury in 1997. As
a result petitioner received from Prudential Insurance Co. of
America (Prudential), the carrier for the union’s disability and
pension fund, a distribution of $40,884 in 2002 compensating him
for the past 5 years of unpaid disability benefits. Petitioner
continued to receive the monthly benefit from Prudential at least
through 2005.
The Court received in evidence a copy of petitioner’s self-
prepared 2002 tax return. On the return petitioner listed Birch
Hill Drive as his address and dated his signature August 14,
2003. Petitioner filed as a head of household, claiming his two
children as dependents. Petitioner reported adjusted gross
income of $56,034, consisting of wages of $34,606, interest
income of $12, taxable Social Security benefits of $13,148, and
$8,268 of disability benefits, the latter amount representing 1
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year of disability benefits. Petitioner claimed total itemized
deductions of $29,325 comprising $5,358 in State and local, real
estate, and personal property taxes; $23,480 in mortgage
interest; and $487 in charitable contributions. Petitioner also
claimed dependency exemption deductions for his two children, a
child tax credit of $1,200, and a dependent care credit of $960.
With respect to the attached Form 2441, Child and Dependent Care
Expenses, petitioner listed Rachel Ortega at a Flintlock Road
address as the provider of the child care. The 2002 return shows
no income tax due and an overpayment of $14 resulting from
withholding for 2002.
According to a Form 4340, Certificate of Assessments,
Payments, and Other Specified Matters (certificate of
assessments) for 2002 received into evidence, the Internal
Revenue Service (IRS) timely received an automatic extension
request from petitioner to file his 2002 Federal income tax
return, but has no record of receiving petitioner’s 2002 Federal
income tax return.
Because the IRS had no record that petitioner filed a 2002
Federal income tax return, on May 27, 2004, the IRS prepared a
substitute for return (SFR) for 2002. The SFR shows adjusted
gross income for 2002 of $88,648, consisting of wages of $34,605,
interest of $12, taxable Social Security disability benefits of
$13,147, and the distribution from Prudential of $40,884. The
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IRS allowed a single exemption and a standard deduction,
resulting in a tax due of $18,599, and showing $14 in Federal
income tax withholdings.
According to petitioner, in or about July 2004 he moved
about 5 miles away from Birch Hill Drive to live with his
girlfriend on Flintlock Road. At the time of his move petitioner
did not notify the IRS of his change of address; however,
petitioner stated that he notified the U.S. Postal Service
(Postal Service or PS) of his address change.
About a month earlier petitioner had received a letter dated
June 6, 2004, addressed to him at Birch Hill Drive, from the IRS
Service Center in Holtsville, New York, requesting that he
provide his 2002 Federal income tax return to Holtsville with the
top portion of the letter attached.
The Court received into evidence a copy of a completed PS
Form 3800, Certified Mail Receipt, and a completed PS Form 3811,
Domestic Return Receipt. The identifying 20-digit certified mail
numbers on the two Postal Service forms are identical, confirming
that petitioner sent an envelope to the IRS Service Center in
Fresno, California, on August 15, 2004, and that the IRS Fresno
Service Center received the same envelope on August 23, 2004.
According to petitioner the envelope contained the copy of his
2002 Federal income tax return that Holtsville had requested, and
that on or about the same date, August 15, 2004, he timely mailed
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his 2003 Federal income tax return to Fresno reporting his
address as Flintlock Road. Respondent has no record of receiving
petitioner’s 2003 Federal income tax return, and at trial
petitioner did not offer a copy of his 2003 return into evidence.
The 2002 certificate of assessments has an entry that the
IRS issued a notice of deficiency for 2002 on August 31, 2004, to
petitioner. Because petitioner did not file a petition with this
Court seeking a redetermination of his 2002 Federal income tax
deficiency, on February 21, 2005, the IRS assessed the following
amounts for 2002: (1) $18,599 in Federal income tax, (2) $1,950
in interest, (3) $4,182 for failure to file a tax return, (4)
$2,137 for failure to pay tax, and (5) $621 for failure to pay
estimated tax.
Attempting to collect petitioner’s unpaid Federal income tax
liability for 2002, the IRS sent a notice of intent to levy dated
June 11, 2005, by certified mail to petitioner at the Birch Hill
Drive address. The Postal Service could not complete the
delivery, and on or about August 23, 2005, returned the unclaimed
envelope to the IRS.
On November 14, 2005, the IRS mailed a final notice of levy
to petitioner at the Birch Hill Drive address. On February 3,
2006, the IRS received the first of three levy payments of
$206.55 from Roadway. The IRS posted the second and third
payments on March 3 and April 3, 2006, respectively. The IRS
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also attempted to levy on petitioner’s Social Security disability
benefits.
On or before February 17, 2006, after the first IRS levy,
petitioner called the IRS telephone number that Roadway’s payroll
department had given him, talked to an IRS representative about
the levy action, and informed the IRS representative that
Flintlock Road, not Birch Hill Drive, was his correct address.
Nonetheless, the IRS prepared two separate Notices of
Federal Tax Lien Filing and Your Right to a Hearing Under IRC
6320, both addressed to petitioner at his former Birch Hill Drive
address and both noting they were being sent by certified mail.
One notice was dated February 17, 2006, and the other notice was
dated February 23, 2006, but otherwise both notices contained
nearly identical information. The certificate of assessments
shows that the IRS sent only one notice, the one dated February
23, 2006, to petitioner. The notices state in relevant part that
the IRS had filed on February 14, 2006, at the County Recorder
for Los Angeles County, California, a Federal tax lien for
$27,268, which was the current unpaid balance of petitioner’s
assessed 2002 tax liability.
The residents living at Birch Hill Drive forwarded the
notice of Federal tax lien filing to petitioner, who in turn
timely sent Form 12153, Request for a Collection Due Process
Hearing, dated March 23, 2006, to the IRS explaining that he
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disagreed with the lien filing because his “tax return for 2002
was sent to and received by the IRS”. On the Form 12153
petitioner listed Flintlock Road as his address.
In response the IRS Appeals Office mailed three letters
dated April 26, May 30, and June 22, 2006, to petitioner at his
Flintlock Road address, which were apparently the first instances
where the IRS used petitioner’s Flintlock Road address. In the
letters respondent offered petitioner an “opportunity for a
conference by personal interview” and noted that for Appeals to
consider collection alternatives petitioner had to submit his
delinquent Federal income tax returns and a completed Form 433-A,
Collection Information Statement for Wage Earners and
Self-Employed Individuals. Petitioner did not respond to the
letters from Appeals, and he did not provide the information
Appeals requested.
In a notice of determination dated September 1, 2006,
addressed to petitioner at Flintlock Road, sent by certified mail
from the IRS Fresno, California, Appeals Team Manager, Appeals
sustained the filing of the notice of Federal tax lien because
Appeals found that: (1) The IRS had met all the legal and
administrative requirements for the collection action, (2) the
collection action properly balanced the need for the efficient
collection of taxes with the legitimate concern that the
collection action be no more intrusive than necessary, and (3)
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petitioner had not established grounds for a withdrawal of the
lien. Petitioner received the notice of determination from his
girlfriend, who was still residing at the Flintlock Road address
and who signed for the certified mail delivery.
Petitioner, listing Birch Hill Drive as his address, timely
petitioned the Court with respect to respondent’s notice of
determination. At trial, petitioner did not call any witnesses.
Respondent called Maria Vargas, a paralegal in respondent’s
Office of Chief Counsel in California. Respondent called no
other witnesses and could not produce a copy of the notice of
deficiency for 2002 or a PS Form 3877. The Court concluded the
trial and closed the record.
Discussion
Petitioner’s sole challenge, in his petition, to
respondent’s notice of determination is that he never received a
hearing in response to the lien filing where he could discuss his
underlying Federal income tax liability for 2002. Petitioner
argues that if he had a hearing, he would show respondent that he
did not have a balance due for 2002, and therefore, respondent
should cease all collection actions related to 2002.
Respondent counters that the Court should sustain the notice
of determination for 2002 because: (1) The IRS Appeals office in
Fresno, California, offered petitioner multiple opportunities to
meet with an Appeals officer to discuss the circumstances
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surrounding the filing of a notice of Federal tax lien for 2002
and to discuss collection alternatives; (2) petitioner never
responded to the offers from the Appeals Office; (3) petitioner
failed to provide the missing tax returns and the financial
information that the Appeals office had requested; and (4) the
Appeals officer did not find and petitioner did not provide any
valid reason why respondent should withdraw the notice of Federal
tax lien.
Respondent argues additionally that petitioner had two prior
opportunities to challenge the underlying liability for 2002, in
each instance petitioner failed to take advantage of the
opportunity, and therefore petitioner’s underlying liability for
2002 was not properly at issue when the Appeals officer offered a
collection hearing. According to respondent, petitioner’s first
opportunity arose when the IRS properly mailed the 2002 notice of
deficiency dated August 31, 2004, by certified mail to petitioner
at his last known address--Birch Hill Drive. Petitioner failed
to petition the Tax Court seeking a redetermination. Respondent
contends the second opportunity occurred when the IRS sent by
certified mail to petitioner at his Birch Hill Drive address the
notice of intent to levy dated June 11, 2005, seeking to collect
petitioner’s unpaid 2002 Federal income tax liability. The
Postal Service returned the levy notice unclaimed to the IRS, and
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petitioner failed to request a hearing with respondent’s Appeals
office.
Regardless of the parties’ contentions the threshold issue
is whether respondent’s assessment of the 2002 Federal income tax
liability is valid. Respondent’s arguments presuppose that the
Secretary mailed a valid notice of deficiency and that petitioner
failed to timely petition this Court seeking a redetermination,
thereby permitting the IRS to assess the deficiency. Petitioner
did not file a petition with this Court for redetermination
within 90 days of the purported mailing date of the notice of
deficiency. In fact petitioner emphasizes that he never received
a notice of deficiency.
Respondent may collect the unpaid Federal income tax
deficiency only if respondent properly assessed the income tax
deficiency. Generally, except as otherwise provided, the
Secretary may not assess a deficiency in tax unless the Secretary
has first mailed a notice of deficiency to the taxpayer. Sec.
6213(a); Butti v. Commissioner, T.C. Memo. 2008-82. None of the
statutory exceptions set forth in section 6213(a) applies here.
When the Secretary determines that a deficiency in tax
exists, he is authorized to send a notice of deficiency to the
taxpayer by certified or registered mail addressed to the
taxpayer at the taxpayer’s last known address. Sec. 6212(a) and
(b). However, where a taxpayer maintains that he did not receive
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a notice of deficiency and the Commissioner is unable to produce
a copy of the notice, then the Commissioner “[bears] the burden
of establishing both the existence of a notice of deficiency
[mailed] to petitioners for * * * [the] year as well as the date
of its mailing.” Pietanza v. Commissioner, 92 T.C. 729, 736
(1989), affd. without published opinion 935 F.2d 1282 (3d Cir.
1991). The Commissioner must “introduce evidence showing that
the notice of deficiency was properly delivered to the Postal
Service for mailing.” Coleman v. Commissioner, 94 T.C. 82, 90
(1990).
We examine respondent’s evidence, noting that we decide the
issue on the basis of the preponderance of the evidence. See
Sego v. Commissioner, 114 T.C. 604, 611 (2000); Casey v.
Commissioner, T.C. Memo. 2009-131. Respondent did not produce at
trial a copy of the notice of deficiency or a PS Form 3877.
Instead, to meet his burden respondent relies on paragraph 13 of
the stipulation of facts, the certificate of assessments, and the
testimony of Ms. Vargas.
With respect to the stipulation of facts, the parties
stipulated that on August 31, 2004, the IRS mailed the notice of
deficiency to petitioner by certified mail to petitioner’s last
known address. However, in the very next sentence the parties
stipulated further that “Petitioner claims he did not receive the
Statutory Notice dated August 31, 2004.” We relieve petitioner
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of his stipulation regarding respondent’s mailing of the notice.
Since the fundamental basis of petitioner’s argument is that he
did not receive the notice of deficiency, he would have no
knowledge as to when, how, where, or if respondent sent a notice.
See Rule 91(e); Jasionowski v. Commissioner, 66 T.C. 312, 318
(1976) (“We do not lightly disregard facts to which the parties
have stipulated; however, where such facts are clearly contrary
to facts disclosed by the record, we refuse to be bound by the
stipulation.”).
Next we address the certificate of assessments, which shows
an entry, without elaboration, that the IRS sent a notice of
deficiency on August 31, 2004. Ordinarily, a certified
certificate of assessments is a self-authenticating document
providing sufficient evidence that the Commissioner mailed a
notice of deficiency. See United States v. Ryan, 969 F.2d 238,
239-240 (7th Cir. 1992); Craig v. Commissioner, 119 T.C. 252, 262
(2002). However, in instances as here where the taxpayer
challenges the existence of the notice of deficiency and the
Commissioner fails to produce a copy of the notice, the
Commissioner must produce additional corroborating evidence.
Typically the Commissioner produces a PS Form 3877. Among
other information PS Form 3877 shows a taxpayer’s name and
address included among the list of mail recipients for a
particular day’s batch of mailed notices of deficiency, the type
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of delivery method used, e.g., certified mail, and the signature
of a Postal Service employee. Where the taxpayer does not
dispute the existence of the notice of deficiency, the
Commissioner’s production of a properly completed PS Form 3877 is
sufficient evidence by itself, absent evidence to the contrary,
that the Commissioner properly mailed the notice of deficiency to
the taxpayer. United States v. Zolla, 724 F.2d 808, 810 (9th
Cir. 1984);1 Coleman v. Commissioner, supra at 91. The
Secretary’s strict compliance with PS Form 3877 mailing
procedures raises a presumption of official regularity in favor
of the Commissioner. United States v. Zolla, supra; Coleman v.
Commissioner, supra.
However, as here where the taxpayer disputes the existence
of the notice of deficiency, PS Form 3877 by itself is no longer
sufficient to establish the presumption of regularity that the
Secretary mailed the notice of deficiency to the taxpayer. Butti
v. Commissioner, supra. Instead the Commissioner must come
forward with additional evidence, such as testimonial habit
evidence of mailing procedures. Coleman v. Commissioner, supra
at 92. We note again that in this case respondent failed to
produce a PS Form 3877.
1
If this case were appealable, which it is not because
petitioner elected sec. 7463(b) small tax case procedures, the
appeal would lie in the Court of Appeals for the Ninth Circuit.
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With respect to testimonial evidence, respondent called Ms.
Vargas, a paralegal in respondent’s Office of Chief Counsel. Ms.
Vargas testified that according to her review of an IRS computer
database entitled “IMF Entity Module”, three pages of which she
printed out on the morning of trial and which the Court received
into evidence, petitioner’s last known address was Birch Hill
Drive when respondent issued the notice of deficiency on August
31, 2004. Ms. Vargas explained that according to the module,
Birch Hill Drive continued to be petitioner’s last known address
until the final week of February 2006 when the IRS changed
petitioner’s last known address to Flintlock Road, presumably in
response to petitioner’s telephone instruction.
Respondent failed to establish that Ms. Vargas had any
knowledge with respect to the preparation or mailing of notices
of deficiency. Consequently, respondent may not properly rely on
the testimony of Ms. Vargas to establish a presumption of
regularity with respect to his mailing practices, and accordingly
her testimony is not helpful to respondent in meeting his burden
of proving the existence of a notice of deficiency for 2004 or
its proper mailing. A 90-day letter clerk or mailroom official
would have been more appropriate for establishing respondent’s
customary preparation and mailing practices. Coleman v.
Commissioner, supra at 92-94 (testimony from a district statutory
notice coordinator and a 90-day clerk was probative habit
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evidence); August v. Commissioner, 54 T.C. 1535, 1537-1538 (1970)
(testimony by a chief mail room clerk was persuasive); Clough v.
Commissioner, 119 T.C. 183 (2002) (declarations by an IRS Service
Center custodian of records and a Postal Service mail processing
clerk were corroborating evidence). When the existence of a
notice of deficiency is at issue, proper testimonial evidence of
customary mailing practices is critical to defeat a taxpayer’s
denial of receipt. Pietanza v. Commissioner, 92 T.C. 729 (1989);
Butti v. Commissioner, T.C. Memo. 2008-82.
Therefore, weighing the totality of the evidence in the
record we find that respondent has failed to meet his burden of
proving that he properly mailed a notice of deficiency to
petitioner at petitioner’s last known address using certified or
registered mail. Consequently the assessment here is invalid and
respondent is prohibited from conducting collection activity. It
follows that we are unable to sustain respondent’s determination
to proceed with collection by the filing of a notice of Federal
tax lien. Because the assessment is invalid, we need not address
any other of the parties’ contentions.
To reflect our disposition of the issue,
Decision will be entered
for petitioner.