T.C. Summary Opinion 2010-32
UNITED STATES TAX COURT
PHILIP EDWARD SAMS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1802-09S. Filed March 16, 2010.
Philip Edward Sams, pro se.
Daniel N. Price, for respondent.
DAWSON, 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.1 Pursuant to section
7463(b), the decision to be entered is not reviewable by any
1
Unless otherwise indicated, section references are to the
Internal Revenue Code, as amended, and Rule references are to the
Tax Court Rules of Practice and Procedure.
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other court, and this opinion shall not be treated as precedent
for any other case.
This proceeding was commenced in response to a Notice of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330 with respect to petitioner’s Federal income tax
liabilities for 2002, 2003, and 2004. The issue presented for
decision is whether the Internal Revenue Service (IRS) Appeals
Office abused its discretion regarding its determination that
petitioner is not entitled to a claimed overpayment credit of
$2,918 from 2002 to be applied against his 2003 income tax
liability.
Background
The parties did not submit a stipulation of facts with
exhibits. Instead, respondent filed on August 7, 2009, pursuant
to Rule 91(f), a motion to show cause why proposed facts and
evidence should not be accepted as established for the purposes
of this case. On August 10, 2009, the Court granted respondent’s
motion and issued an order for petitioner to show cause. On
September 15, 2009, petitioner filed a detailed response to
respondent’s motion and to the Court’s order to show cause by
agreeing or accepting paragraphs 1 through 30 of respondent’s
Exhibit A, as well as attached Exhibits 1-J through 26-J. But
petitioner objected to Exhibit 18-J and moved to strike it as
irrelevant and invasive of his privacy. At trial the Court
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denied petitioner’s motion to strike Exhibit 18-J. Accordingly,
the facts, documents, and evidence in respondent’s proposed
stipulation of facts as well as Exhibits 1-J through 26-J were
deemed established, admitted, and made a part of the record. In
addition, the Court admitted petitioner’s Exhibit 30-P.
Petitioner resided in Texas when he filed his petition. He
is an engineer who experienced some interruptions in his
employment with different corporations at various times. He did
not file timely Federal income tax returns for 1999 through 2007.
He filed his returns for each of those years with IRS Appeals,
New Orleans Office, on July 31, 2008.
Respondent generated substitutes for returns pursuant to
section 6020(b) for 2002, 2003, and 2004 and issued separate
notices of deficiency for each year determining that petitioner
was liable for the following income tax deficiency and additions
to tax:
Additions to Tax
Sec. Sec.
Year Deficiency 6651(a)(1) 6651(a)(2) Sec. 6654
2002 $2,616 $588.60 $536.28 ---
2003 5,469 1,178.27 756.75 $133.95
2004 5,204 130.72 49.38 ---
Petitioner received the notices of deficiency but did not
petition this Court for redeterminations. Therefore the taxes
due were assessed. The IRS then proceeded to collect by levy the
balances due for 2002 through 2004. On February 14, 2008, the
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IRS sent petitioner a Final Notice-Notice of Intent to Levy and
Notice of Your Right to a Hearing. Petitioner timely requested a
collection due process hearing, and petitioner was granted a
collection due process telephone hearing on December 15, 2008.
Petitioner had requested in the late-filed returns, including
those for 2002, 2003, and 2004, that overpayments resulting from
excess wage withholding and estimated tax payments from each
preceding year be credited to each succeeding year. The
pertinent information relating to petitioner’s claimed
overpayments is as follows:
Tax Date Return Claimed Overpayment
Year Filed From Prior Year
1999 7/31/2008 $294
2001 7/31/2008 247
2002 7/31/2008 2,918
2003 7/31/2008 2,583
2004 7/31/2008 35
On January 15, 2009, the IRS sent petitioner a notice of
determination regarding the proposed levy action. It stated that
the proposed levy action would not be taken and that collection
action would be temporarily suspended pending an improvement in
petitioner’s financial situation. The attachment to the notice
of determination, prepared by Settlement Officer Richard J.
Wempe, shows that there is no current balance of tax due for 2002
and 2004. It also contains the following analysis of
petitioner’s claimed overpayment credit:
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2. Issues raised by the taxpayer:
Challenges to the existence or amount of the liability:
Prior to the CDP hearing the taxpayer filed amended tax
returns with the Service Center. Those returns led to
adjustments to the SFR assessments that were previously
made. Taxpayer now contests the Service’s failure to
post credits (See “Other issues” below).
Other Issues:
Taxpayer contends that overpayments from other periods
(years 1999 and 2001) are sufficient to pay the
outstanding balance.
My analysis:
Taxpayer argues for the offset of overpayments from
years 1999 & 2001 to the remaining unpaid liability.
The law (IRC Sec. 6511) provides for a period of three
(3) years from the due date of a tax return during
which a taxpayer can file a return claiming return of
an overpayment of tax. Beyond that timeframe the
overpayment is no longer refundable or available for
offset to other liabilities.
Taxpayer filed tax returns for years 1999 & 2001 in
July, 2008. Those returns showed overpayments in the
amount of $294 & $2,671, respectively. Offset of those
overpayments was correctly disallowed. Those returns
were not filed by the taxpayer until well after the
statutory time for claiming refund of the overpayments
in those years.
Discussion
At trial petitioner conceded that Settlement Officer Wempe
did not abuse his discretion in determining that the proposed
levy action should not be taken and that the collection action
should be temporarily suspended pending an improvement in
petitioner’s financial condition. Petitioner stated:
But my contention is that on that point, the decision
whether to proceed on levy, there is no disagreement
between the IRS and myself on that point. Mr. Wempe
and I were in agreement with his conclusions. He felt
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that I had provided the information that he required.
I met his statutory requirements to do that.
We agree and sustain respondent’s determination that the
levy upon petitioner’s assets should not be made.
Petitioner claims he is entitled to an overpayment credit of
$2,918 from 2002 to be applied against his 2003 income tax
liability. Respondent contends that the credit is not allowable
because, as Settlement Officer Wempe determined, it is time
barred. Neither party has addressed this Court’s jurisdiction in
this proceeding to decide the credit issue.
During the collection hearing a taxpayer has the right to
challenge the existence and amount of the underlying tax
liability only if he or she did not receive a notice of
deficiency or did not otherwise have an opportunity to dispute
the tax liability. Sec. 6330(c)(2)(B). However, if the taxpayer
received a notice of deficiency or otherwise had an opportunity
to dispute the tax liability, the Appeals officer has discretion
to consider a claim as to the existence or amount of the
underlying tax liability. Sec. 301.6330-1(e)(3), Q&A-E11,
Proced. & Admin. Regs.2 However, if the taxpayer received a
2
Sec. 301.6330-1(e)(3), Q&A-E11, Proced. & Admin. Regs.,
provides the following illustrative question and answer:
Q-E11. If an Appeals officer considers the merits of a
taxpayer’s liability in a CDP [collection due process]
hearing when the taxpayer had previously received a
statutory notice of deficiency or otherwise had an
(continued...)
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notice of deficiency or otherwise had an opportunity to dispute
the underlying tax liability, the Court does not have
jurisdiction to decide the amount of the underlying tax liability
even if the Appeals officer exercised his/her discretion to do
so. See Behling v. Commissioner, 118 T.C. 572 (2002).
Petitioner received a notice of deficiency, and his claim of
entitlement to credit for overpayment of prior years’ taxes could
have been raised in a deficiency proceeding. His entitlement to
the credits is determinative of the amount of the underlying
liability. The Court does not have jurisdiction in this
collection proceeding to decide the amount of the underlying tax
2
(...continued)
opportunity to dispute the liability prior to the
issuance of a notice of intention to levy, will the
Appeals officer’s determination regarding those
liability issues be considered part of the Notice of
Determination?
A-E11. No. An Appeals officer may consider the
existence and amount of the underlying tax liability as
a part of the CDP hearing only if the taxpayer did not
receive a statutory notice of deficiency for the tax
liability in question or otherwise have a prior
opportunity to dispute the tax liability. * * * In the
Appeals officer’s sole discretion, however, the Appeals
officer may consider the existence or amount of the
underlying tax liability, * * * at the same time as the
CDP hearing. Any determination, however, made by the
Appeals officer with respect to such a precluded issue
shall not be treated as part of the Notice of
Determination issued by the Appeals officer and will
not be subject to any judicial review. * * * Even if a
decision concerning such precluded issues is referred
to in the Notice of Determination, it is not reviewable
by the Tax Court because the precluded issue is not
properly part of the CDP hearing.
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liability even though Settlement Officer Wempe exercised his
discretion to do so.3
At trial petitioner stated: “There really is no other issue
of difference between the IRS Office of Appeals position and my
position, other than the disallowance of these credits. There
was no disagreement with regard to levy or other issues that
might have been looked at by Appeals.” Consequently, because
there are no tax liabilities remaining for 2002 and 2004, those
years will be dismissed as moot, see Greene-Thapedi v.
Commissioner, 126 T.C. 1 (2006), and decision will be entered
sustaining respondent’s determination that the levy upon
petitioner’s property to collect his unpaid tax liability for
2003 should not proceed because of his current financial
situation.
3
Although we do not have jurisdiction over petitioner’s
claimed credits, we observe that the amount of an overpayment for
a tax year that is recoverable and may be credited to a later
year is limited to the amount paid within 3 years before the
filing of the claim. Sec. 6511(b)(2)(A). Petitioner’s withheld
and estimated taxes were deemed paid on the date his income tax
returns were due without regard to any extensions. He claimed
the overpayments on returns filed more than 3 years after the
date the returns were due. Thus, since the withheld and
estimated taxes were deemed paid more than 3 years before he
filed the returns, he is not entitled to a credit for any
overpayment of those taxes.
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To reflect the foregoing,
An appropriate order of
dismissal and decision will be
entered.