T.C. Memo. 2011-38
UNITED STATES TAX COURT
ELIJAH B. FREEMAN, JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 18302-08L. Filed February 9, 2011.
Elijah B. Freeman, pro se.
Steven M. Webster, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
MORRISON, Judge: The petitioner, Elijah B. Freeman, Jr.,
filed a petition pursuant to sections 6320(c) and 6330(d)1 to
challenge a determination and a supplemental determination of the
IRS Appeals Office sustaining the filing of a notice of federal
1
All section references are to sections of the Internal
Revenue Code of 1986, as amended.
2
tax lien to collect section 6672 trust fund recovery penalties
from Freeman. The penalties relate to withholdings of payroll
taxes for periods ended December 31, 2003; December 31, 2004;
March 31, 2005; June 30, 2005; September 30, 2005; December 31,
2005; and March 31, 2006 (the periods at issue). We find that
the Appeals Office did not abuse its discretion in sustaining the
filing of the notice of federal tax lien.
FINDINGS OF FACT
This case was tried. The parties submitted a stipulation of
facts, which the Court hereby incorporates into its findings of
fact. Freeman resided in North Carolina when he filed the
petition.
Freeman is the president of Dulatown Outreach Center, a
charitable organization based in Caldwell County, North Carolina.
Dulatown Outreach Center was unable to pay its quarterly payroll
tax liabilities in full. In May 2007, Freeman was assessed
section 6672 trust fund recovery penalties as a responsible
officer of Dulatown Outreach Center.
Freeman and his spouse filed a joint income tax return for
the tax year 2006. On June 4, 2007, the IRS assessed the tax
liability reported on the return, as well as penalties.
On September 17, 2007, the IRS filed two notices of federal
tax lien on Freeman’s property in Guilford County, North
Carolina. The first notice was filed to collect section 6672
3
trust fund recovery penalties for the periods at issue. The
second notice was filed to collect the Freemans’ joint income tax
liability for 2006. On September 18, 2007, the IRS sent two
letters to Freeman notifying him of the filing of the two notices
of federal tax lien. Freeman was entitled to request an
administrative hearing under section 6320(b)(1). He requested
such a hearing, and he indicated on his request form that he
wished to discuss an installment agreement. He also indicated
that he sought innocent-spouse relief.
After he requested the hearing, Freeman paid the 2006 joint
income tax liability. Freeman withdrew his request for a hearing
with respect to the notice of federal tax lien to collect the
income tax liability. The IRS released the notice. During a
telephone conference on May 5, 2008, Freeman urged the Appeals
Office to withdraw the remaining notice of federal tax lien (the
notice to collect the section 6672 trust fund recovery penalties)
because the notice was damaging his credit. The Appeals Office
determined that Freeman’s monthly disposable income was $1,060
and that in September 2008 his mortgage would be fully paid and
his monthly disposable income would increase to $1,860. It
offered an installment agreement under which Freeman would pay
$500 per month for one year and $1,200 per month after that.
Freeman rejected the offer. On June 24, 2008, the Appeals Office
issued a notice of determination. It stated that Freeman had
4
claimed that his “business also had an installment agreement for
the payroll tax liability.” The Appeals Office stated that
Freeman did not submit an acceptable collection alternative. It
determined that the criteria for withdrawing a notice of federal
tax lien under section 6323(j) were not met. It also stated the
notice of federal tax lien was necessary to establish the federal
government’s priority against other creditors even though it may
have adversely affected Freeman’s credit.
To challenge the determination, Freeman filed a Tax Court
petition. The petition states that Freeman had entered into an
installment agreement. As the attorneys for the Commissioner
prepared the case for trial, they determined that the Appeals
Office had erred in computing Freeman’s monthly disposable income
as $1,060. The Commissioner moved to remand the case. On April
17, 2009, the Court granted the motion and remanded the case to
the Appeals Office for the purpose of reconsidering the terms of
an installment agreement. On remand, the Appeals Office
determined that Freeman’s monthly disposable income was $919. It
offered to enter into an installment agreement under which
Freeman would make payments of $919 per month to resolve his
liability for section 6672 penalties. Freeman did not respond to
the offer. On June 30, 2009, the Appeals Office issued a
supplemental determination under section 6320 sustaining the
notice of federal tax lien.
5
OPINION
When the IRS makes an assessment of unpaid taxes, a tax lien
arises against all the property of the taxpayer. Sec. 6322.
The lien is perfected against subsequent creditors once the IRS
files a notice of federal tax lien with the appropriate local
government. Sec. 6323(a), (f)(1). The IRS may withdraw the
notice of federal tax lien if “the taxpayer has entered into an
agreement under section 6159 to satisfy the tax liability for
which the lien was imposed by means of installment payments,
unless such agreement provides otherwise”. Sec. 6323(j)(1).
At an Appeals Office hearing after the issuance of a notice
of federal tax lien, the taxpayer may raise any issue related to
the notice of federal tax lien, including challenges to the
appropriateness of the notice of federal tax lien and offers of
installment agreements. Secs. 6330(c)(2)(A), 6320(c). The
Appeals Office must consider the issues raised by the taxpayer in
making its determination. Sec. 6330(c)(3). The determination of
the Appeals Office is reviewed by this Court for abuse of
discretion when, as here, the amount of the underlying liability
is not at issue. Hoyle v. Commissioner, 131 T.C. 197, 200
(2008).
Freeman contends that he signed an installment agreement.
Therefore, he argues, the Appeals Office erred in sustaining the
notice of federal tax lien. Freeman introduced the installment
6
agreement at trial. The agreement was signed by Freeman on
behalf of Dulatown Outreach Center to settle its “Form 941”
liability. As an employer, Dulatown Outreach Center was required
to withhold Federal Insurance Contributions Act (FICA) tax and
income taxes from its employees’ wages and pay them over to the
United States. See sec. 3402(a)(1) (requiring employer to
withhold income tax from wages); sec. 3403 (employer is liable
for paying income tax it is required to withhold); sec. 3101
(imposing FICA tax on wage earners); sec. 3102(a) (requiring
employer to withhold from wages the amount of the tax imposed by
section 3101); sec. 3102(b) (employer is liable for paying tax it
is required to withhold under section 3102(a)). Dulatown
Outreach Center was also liable for the employer’s share of FICA
taxes. See sec. 3111(a) and (b). All these liabilities are
reported on Form 941, Employer’s Quarterly Federal Tax Return.
Section 6672(a) imposes a penalty on persons, other than the
employer, who are responsible for withholding taxes. Liability
under section 6672 is different from the employer’s liability for
payment of tax required to be withheld. See United States v.
Pomponio, 635 F.2d 293, 298 (4th Cir. 1980) (“Their individual
liability under the statute is separate and distinct from that of
the corporations”.).2 The installment agreement concerns the
2
While the liabilities are separate as a conceptual matter,
the IRS endeavors to collect a trust fund tax only once--from the
(continued...)
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liability of Dulatown Outreach Center for failing to pay taxes it
was required to withhold, not the section 6672 penalty liability
of Freeman. Therefore the installment agreement did not justify
the release of the notice of federal tax lien to collect
Freeman’s section 6672 penalty liability.
Freeman also argues on brief that the Appeals Office failed
to consider that the notice of federal tax lien impaired
Freeman’s credit. However, the determination notice itself
reflects that this was considered. The record does not show that
the Appeals Office abused its discretion in its consideration of
the effect on Freeman’s credit. See sec. 6330(c)(2)(A)(ii),
(3)(B).
Freeman also argues on brief that he is entitled to
innocent-spouse relief because the notice of federal tax lien
concerns Dulatown Outreach Center, and his spouse is not
connected with that organization. The record does not show that
the Appeals Office abused its discretion in (1) treating
Freeman’s innocent-spouse claim as a request that he be relieved
of his 2006 income tax liability and (2) determining that he had
withdrawn that request when that liability was paid.
Freeman also argues on brief that the assessment was
incorrectly calculated. However, the determination notice
2
(...continued)
employer if possible, and if not, from a responsible party.
United States v. Pomponio, 635 F.2d 293, 298 (4th Cir. 1980).
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reflects that Freeman did not dispute the amount of his liability
at the hearing, and he does not contend otherwise. See sec.
301.6320-1(f)(2), A-F3, Proced. & Admin. Regs. (the taxpayer can
ask the Tax Court to consider only issues that were raised at the
hearing). Nor does his petition dispute the amount of his
liability. Rule 34(b)(4), Tax Court Rules of Practice and
Procedure (petition must clearly and concisely specify the errors
made by the IRS). He is therefore barred from disputing the
liability at trial.
The determination and supplemental determination of the
Appeals Office were not an abuse of discretion.
To reflect the foregoing,
Decision will be entered
for respondent.