T.C. Memo. 2016-134
UNITED STATES TAX COURT
MARK ALVA WEST, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7648-15L. Filed July 19, 2016.
Mark Alva West, pro se.
Karen Lynne Baker, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
KERRIGAN, Judge: This collection due process (CDP) case was
commenced in response to a Notice of Determination Concerning Collection
Action(s) under Section 6320 and/or 6330 of the Internal Revenue Code dated
February 19, 2015, upholding a proposed collection action regarding petitioner’s
-2-
[*2] unpaid tax liability for tax year 2012. We must consider whether
respondent’s determination to proceed with the collection action was proper.
Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect at all relevant times, and all Rule references are to the Tax
Court Rules of Practice and Procedure. All monetary amounts are rounded to the
nearest dollar.
FINDINGS OF FACT
Petitioner resided in Texas when the petition was filed. Petitioner worked
as an engineer for many years. For tax year 2012 petitioner received wages of
$148,507.
Petitioner and his wife requested an extension of time to file their 2012
Form 1040, U.S. Individual Income Tax Return. Petitioner did not pay timely
estimated tax for tax year 2012. On April 15, 2013, petitioner and his wife made a
payment of $10,000 and applied withholding credits of $7,922 to their income tax
for tax year 2012. They made another payment of $10,972 on October 26, 2013,
for a total of $28,894. Their 2012 tax return showing tax due of $28,540 was
marked as received by respondent on October 25, 2013. Their tax return was
signed on October 15, 2013.
-3-
[*3] On December 9, 2013, respondent assessed against petitioner and his wife
the following for tax year 2012: $28,540 (Form 1040 tax); $354 (estimated tax
addition to tax); $478 (late filing addition to tax); $372 (late payment addition to
tax); and $171 (interest). The assessment totaled $29,914. The payments made by
petitioner and his wife on April 15 and October 26, 2013, satisfied the Form 1040
tax and the estimated tax addition to tax. The current unpaid liability is for the late
filing addition to tax, the late payment addition to tax, and the interest.1
On July 31, 2014, respondent sent petitioner a Letter 1058, Final Notice of
Intent to Levy and Your Right to Hearing, for petitioner’s late filing addition to
tax, late payment addition to tax, and interest for 2012. Petitioner submitted a
Form 12153, Request for a Collection Due Process or Equivalent Hearing, dated
August 19, 2014, and included a letter which raises concerns about the additions
to tax and interest. Petitioner had a telephone CDP hearing on January 7, 2015.
At the hearing petitioner neither provided the settlement officer with any
1
The Tax Court is a court of limited jurisdiction, in that this Court possesses
only adjudicatory powers that Congress has conferred upon it. Naftel v.
Commissioner, 85 T.C. 527, 529 (1985). That adjudicatory power encompasses
the redetermination of deficiencies and the determination of overpayments. Secs.
6214(a), 6512(a). We do not have jurisdiction over either the Form 1040 tax or
the estimated tax addition to tax since they both have been paid. See secs.
6211(a), 6213(a).
-4-
[*4] collection alternatives nor entered into an installment agreement or an offer-
in-compromise.
Respondent sent petitioner the Notice of Determination Concerning
Collection Action(s) under Section 6320 and/or 6330 on February 19, 2015,
sustaining the proposed levy. In his timely filed petition, petitioner contends that
there was no failure to timely file his income tax return despite filing after the
deadline because he filed as expediently as possible and that he has overpaid his
tax for previous years.
OPINION
Section 6330 requires the Secretary to furnish a person notice and
opportunity for a hearing before an impartial officer or employee of the Internal
Revenue Service (IRS) Appeals Office (Appeals) before making a levy on the
person’s property. At the hearing the person may raise any relevant issue relating
to the unpaid tax or the proposed levy, including spousal defenses, challenges to
the appropriateness of the collection action, and offers of collection alternatives.
Sec. 6330(c)(2). The person may challenge the existence or the amount of the
underlying tax liability for any period only if the person did not receive a notice of
deficiency or did not otherwise have an opportunity to dispute the liability. Sec.
6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000).
-5-
[*5] I. Standard of Review
Once Appeals issues a notice of determination, the person may seek review
in this Court. Sec. 6330(d)(1). Where the validity of the underlying tax liability is
properly at issue, we review the determination de novo. Sego v. Commissioner,
114 T.C. at 610; Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). The
taxpayer has the burden of proof regarding his or her underlying tax liability. See
Rule 142(a). A taxpayer may not challenge an underlying tax liability during a
CDP hearing unless the taxpayer did not receive a statutory notice of deficiency
for the liability or did not otherwise have the opportunity to dispute the liability.
Sec. 6330(c)(2)(B); see also Montgomery v. Commissioner, 122 T.C. 1, 9 (2004).
The term “underlying tax liability” in section 6330(d)(1) includes any amount
owed by a taxpayer pursuant to the tax laws, including additions to tax and
interest. Katz v. Commissioner, 115 T.C. 329, 339 (2000).
Petitioner did not receive a notice of deficiency and did not otherwise have
a prior opportunity to contest his underlying tax liability. At his CDP hearing
petitioner argued that despite being filed after the deadline his income tax return
should be considered on time because he filed as expediently as possible given his
circumstances and that he should not owe the additions to tax and interest because
it is unfair to have to estimate tax and that he has previously overpaid. Petitioner
-6-
[*6] properly raised his underlying tax liability, and therefore we will review
respondent’s determination de novo.
II. Underlying Liability
A. Late Filing and Late Payment Additions to Tax
Under section 7491(c), the Commissioner bears the burden of producing
evidence with respect to the liability of the taxpayer for any addition to tax. See
Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001). Section 6651(a)(1)
imposes an addition to tax if a taxpayer fails to file his Form 1040 by the due date.
The parties do not dispute that respondent received petitioner’s return on Friday,
October 25, 2013, and that it was due on October 15, 2013. Respondent has met
his burden of production.
Section 6651(a)(2) imposes an addition to tax if a taxpayer fails to pay his
Form 1040 tax by the due date. The section 6651(a)(2) addition to tax applies
only when an amount of tax is shown on a return filed by the taxpayer or prepared
by the Secretary. Sec. 6651(a)(2), (g)(2); Cabirac v. Commissioner, 120 T.C. 163,
170 (2003), aff’d without published opinion, 94 A.F.T.R. 2d (RIA) 2004-5490 (3d
Cir. 2004). Respondent has shown that petitioner did not pay his tax by the due
date. Respondent has met his burden of production.
-7-
[*7] The additions to tax under section 6651(a)(1) and (2) apply once the
Commissioner has met his burden of production unless the failure to comply was
due to reasonable cause and not due to willful neglect. The taxpayer bears the
burden of establishing reasonable cause. Higbee v. Commissioner, 116 T.C. at
446-447. Petitioner argues that the complexity of the tax law coupled with his
advanced age caused him to be unable to comply with timely filing and payment
requirements but that he filed as expediently as he could. Petitioner gave no other
explanation of why his tax return was late. Petitioner testified that he had no
documents showing when the return was mailed. Most of his arguments were
related to the estimated tax addition to tax, which is not before the Court.
Petitioner contended that he had overpaid his tax for previous years. Petitioner did
not establish that he had reasonable cause for failing to timely file his return and
pay the tax due for 2012.
B. Interest
Under section 6404(e)(1), the Commissioner may abate interest on a tax
payment if the delay in payment was attributable to an IRS employee’s “being
erroneous or dilatory in performing a ministerial or managerial act”. Petitioner
does not claim that any IRS employee behaved in such a manner. Rather,
petitioner claims that he should not be liable for interest because the IRS does not
-8-
[*8] pay taxpayers interest when it refunds amounts the taxpayers have overpaid.
The interest due for 2012 will not be abated.
III. Abuse of Discretion
We review the settlement officer’s administrative determinations regarding
nonliability issues for abuse of discretion. Hoyle v. Commissioner, 131 T.C. 197,
200 (2008). Abuse of discretion exists when a determination is arbitrary,
capricious, or without sound basis in fact or law. See Murphy v. Commissioner,
125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006). In deciding whether
the settlement officer abused his discretion in sustaining the notice of levy filing,
we consider whether he: (1) properly verified that the requirements of any
applicable law or administrative procedure have been met; (2) considered any
relevant issues petitioner raised; and (3) determined whether “any proposed
collection action balances the need for the efficient collection of taxes with the
legitimate concern of the person that any collection action be no more intrusive
than necessary.” See sec. 6330(c)(3). Our review of the record reveals that the
settlement officer conducted a thorough review of petitioner’s account, determined
that the additions to tax and interest had been properly assessed, and verified that
other requirements of applicable law and administrative procedure were followed.
-9-
[*9] Petitioner has not advanced arguments or presented evidence allowing us to
conclude that the determination to sustain the proposed collection action was
arbitrary, capricious, or without sound basis in fact or otherwise an abuse of
discretion. See Giamelli v. Commissioner, 129 T.C. 107, 115 (2007). Petitioner
neither provided the settlement officer with any collection alternatives nor entered
into an installment agreement or an offer-in-compromise. It is not an abuse of
discretion for a settlement officer to decline to consider a collection alternative
where the taxpayer does not place a specific proposal on the table. See McLaine
v. Commissioner, 138 T.C. 228, 243 (2012); Kendricks v. Commissioner, 124 T.C.
69, 79 (2005). We therefore conclude that respondent’s determination to proceed
with the proposed collection action was not an abuse of discretion.
Any contentions we have not addressed are irrelevant, moot, or meritless.
Decision will be entered
for respondent.