Opinion
7739-20SL
09-15-2022
JOHN EVANGELISTA TRAPASSO, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Diana L. Leyden Special Trial Judge
On July 10, 2020, petitioner timely filed a petition in this case. Petitioner seeks review of a Notice of Determination Concerning Collection Actions Under Section 6320 or 6330 of the Internal Revenue Code (notice of determination), dated February 21, 2020. The notice of determination sustained a proposed levy with respect to petitioner's unpaid tax liability for 2015.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
On August 11, 2022, respondent filed a Motion for Summary Judgment (motion) under Rule 121. Respondent filed in support of the motion a declaration by Jennifer Arthur, an Internal Revenue Service (IRS) attorney representing respondent in this case. Petitioner filed a response objecting to respondent's motion on September 5, 2022.
The Court uses the term "IRS" to refer to administrative actions taken outside of these proceedings. The Court uses the term "respondent" to refer to the Commissioner of Internal Revenue, who is the head of the IRS and is respondent in this case, and to refer to actions taken in connection with this case.
Petitioner resided in California at the time the petition in this case was filed with the Court.
Upon review of the record on respondent's motion, the Court concludes that there are no genuine issues of material fact, and that respondent is entitled to judgment as a matter of law.
Background
The record on respondent's motion and the record establishes the following.
2015 Federal Tax Return
Petitioner filed his federal income tax return 2015 on June 6, 2016. With that return petitioner filed a Form 4852, Substitute Form W-2 and indicated he did not have any wages provided by his employer because "he was not working for a federal entity but am a private sector worker." Petitioner reported on his 2015 tax return a refund of $13,398.42. Of that refund, the Internal Revenue Service (IRS) credited $4,592.55 to a balance due on petitioner's federal 2011 tax return, applied 42,212.07 to a "non-IRS debt" and issued the remaining refund of $8,845.41.
The IRS subsequently examined petitioner's 2015 tax return and issued to petitioner a notice of deficiency dated April 25, 2018, proposing a deficiency in federal income tax in the amount of $7,138, and an I.R.C. § 6662(a) penalty in the amount of $1,427.
Petitioner also filed his 2013 federal income tax return, which year is not at issue in this case. In that federal income tax return petitioner made arguments that the IRS deemed frivolous. The IRS sent petitioner a letter on July 7, 2016, informing petitioner that he had claimed frivolous positions on his 2013 federal income tax return, including "[a]rguing that filing and paying taxes is voluntary" and "[e]xcluding salaries and/or wages from income based on the argument that the value of services is not taxable or that salaries and/or wages are not income". The IRS sent petitioner another letter on August 3, 2016, also informing petitioner that his arguments in a May 19, 2016, letter were frivolous and had no basis in law.
As of August 3, 2022, petitioner's tax liability for 2015 was $12,937.18. The accrued interest as of August 15, 2022, was $3,748.62. The accrued penalty as of August 15, 2022, was $2,849.36.
Collection Due Process Hearing
On October 19, 2018, the IRS issued a Notice of intent to levy and notice of your right to a hearing, Intent to seize your property or rights to property (notice of intent to levy) with respect to petitioner's 2015 tax liability. The notice of intent to levy advised petitioner of his right to request a Collection Due Process (CDP) hearing.
Petitioner timely submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing, to challenge the proposed levy and with respect to his unpaid tax liability for 2015. Petitioner incorrectly checked the box for a withdrawal of a lien even though he filed the form to contest a proposed levy. He did not offer any collection alternatives. Instead, he wrote as his explanation "[l]evy was not following proper procedures; see Attached Explanation." In the attached explanation petitioner contested the validity of the IRS's claim and requested a certified photocopy of the record of assessment before he would respond further to the notice of intent to levy.
Petitioner's CDP hearing request was assigned to the Independent Office of Appeals (Appeals Office) Settlement Officer Eleanor Gaxiola (SO). The SO verified that she did not have prior involvement with petitioner for the tax or tax year at issue in this case.
On July 1, 2019, the IRS Office of Appeals was renamed the IRS Independent Office of Appeals. See Taxpayer First Act, Pub. L. No. 116-25, § 1001, 133 Stat. 981, 983 (2019). We will use the name in effect at the times relevant to this case, i.e., the Office of Appeals or Appeals.
On July 22, 2019, SO Gaxiola prepared a letter to petitioner acknowledging receipt of petitioner's request for a CDP hearing. The letter scheduled a telephone conference for August 28, 2019, at 11:00 am PST. Petitioner did not call the SO at the scheduled date and time of the CDP hearing. The SO also attempted to call petitioner at the scheduled time, but petitioner did not respond. On August 29, 2019, the SO sent a follow-up letter to petitioner, granting him fourteen additional days to contact the SO. The letter informed petitioner that if he did not respond in the allotted time, a determination would be made based on the information currently in the administrative file. Petitioner did not provide any of the information requested in the August 29, 2019, letter.
On February 13, 2020, the SO submitted the case for closure and the Appeals Office issued the notice of determination on February 21, 2020, sustaining the proposed levy action. The SO noted in the notice of determination that petitioner provided no alternatives to collection and did not submit financial information necessary to consider any collection alternatives. Additionally, even though petitioner did expressly dispute his liability, the SO asserted that he was not able to dispute the liability because IRS records indicated that he had a previous opportunity to challenge the liability when he responded to the April 25, 2018, notice of deficiency in a June 20, 2018, letter and did not do so. Therefore, the SO determined that he was precluded from raising the underlying liability during his CDP hearing. Finally, pertaining to petitioner's lien withdrawal request on petitioner's Form 12153, the SO confirmed that there was no lien filing by the IRS for the year in issue.
In his July 10, 2020, petition, petitioner argued that "[t]he determination does not make clear what error was made on my 2015 tax return" and that "I did not make any errors on my 2015 tax forms; I stand by their accuracy and think the IRS is wrong is [sic] trying to claim there are errors on my tax form." Petitioner raised no further arguments or facts in his petition.
Discussion
A. Summary Judgment
Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Florida Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Either party may move for summary judgment upon all or any part of the legal issues in controversy. Rule 121(a). The Court may grant summary judgment only "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits or declarations, if any, show that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law." Rule 121(a) and (b); see Naftel v. Commissioner, 85 T.C. 527, 529 (1985).
Respondent, as the moving party, bears the burden of proving that there is not any genuine dispute that exists as to any material fact and that respondent is entitled to judgment as a matter of law. See FPL Grp., Inc. v. Commissioner, 115 T.C. 554, 559 (2000); Bond v. Commissioner, 100 T.C. 32, 36 (1993); Naftel v. Commissioner, 85 T.C. at 529. In deciding whether to grant summary judgment, the factual materials and inferences drawn from them must be considered in the light most favorable to the nonmoving party. FPL Grp., Inc. v. Commissioner, 115 T.C. at 559; Bond v. Commissioner, 100 T.C. at 36; Naftel v. Commissioner, 85 T.C. at 529. The party opposing summary judgment must set forth specific facts which show that a question of genuine material fact exists and may not rely merely on allegations or denials in the pleadings. Rule 121(d); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Grant Creek Water Works, Ltd. v. Commissioner, 91 T.C. 322, 325 (1988); King v. Commissioner, 87 T.C. 1213, 1217 (1986).
B. Hearings Under I.R.C. § 6330
I.R.C. § 6331(a) authorizes the Commissioner to levy upon property and property rights of a taxpayer liable for taxes who fails to pay those taxes within 10 days after notice and demand for payment. I.R.C. § 6331(d) provides that the levy authorized by I.R.C. § 6331(a) may be made with respect to any unpaid tax only after the Commissioner has notified the person in writing of his intention to make the levy at least 30 days before any levy action is begun. I.R.C. § 6330 elaborates on I.R.C. § 6331 and provides that the written notice must inform the taxpayer of her right to request a CDP hearing. I.R.C. § 6330(a)(3)(B); Treas. Reg. § 301.6330-1(b)(1).
If a CDP hearing is requested, the hearing is to be conducted by the Appeals Office. I.R.C. § 6330(b)(1). At the hearing the SO conducting it must verify that the requirements of any applicable law or administrative procedure have been met. I.R.C. § 6330(c)(1). The taxpayer may raise at the CDP hearing "any relevant issue relating to the unpaid tax or the proposed levy, including appropriate spousal defenses; challenges to the appropriateness of collection actions; and offers of collection alternatives". I.R.C. § 6330(c)(2)(A). Within 30 days after the Appeals Office issues a notice of determination the taxpayer may appeal the determination to the Court. I.R.C. § 6330(d)(1).
In reviewing an IRS administrative determination in a CDP case, if the underlying tax liability is properly in dispute, the Court reviews the determination regarding the underlying tax liability de novo. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). The Court reviews all other determinations for abuse of discretion. Id. at 182. 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).
Our review of CDP cases is limited to issues that a taxpayer raised during his CDP hearing. Giamelli v. Commissioner, 129 T.C. at 112-113; Magana v. Commissioner, 118 T.C. 488, 493 (2002); Treas. Reg. § 301.6330-1(f)(2), Q&A-F3.
Petitioner did not participate in the scheduled CDP hearing on August 28, 2019, did not respond to a call at that scheduled date and time from the SO, and did not respond in the allotted time to a follow up letter dated August 29, 2019, providing petitioner with a second opportunity to contact the SO within 14 days.
C. Underlying Tax Liability
The term "underlying tax liability" in I.R.C. § 6330(c)(2)(B) includes tax, additions to tax, and interest. See Katz v. Commissioner, 115 T.C. 329, 339 (2000). The taxpayer may challenge the existence or amount of her underlying tax liability in a CDP hearing only if she did not receive a notice of deficiency or otherwise have a prior opportunity to contest the underlying tax liability. I.R.C. § 6330(c)(2)(B); see Montgomery v. Commissioner, 122 T.C. 1, 8-10 (2004).
Although petitioner seems to question the underlying tax liabilities as determined by the IRS, he did not do so at his CDP hearing. Further, he received a notice of deficiency dated April 25, 2018, for the year in issue. Therefore, petitioner had a prior opportunity to contest the underlying tax liabilities and may not raise it in this case.
D. Abuse of Discretion
In deciding whether the SO abused her discretion in sustaining the collection action the Court considers whether the SO: (1) properly verified that the requirements of applicable law and administrative procedure had been met; (2) considered any relevant issues petitioner raised; and (3) considered "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the * * * [taxpayer] that any collection action be no more intrusive than necessary." See I.R.C. § 6330(c)(3).
In reviewing for abuse of discretion, the Court generally considers only the arguments, issues, and other matters that were raised at the hearing or otherwise brought to the attention of the Appeals Office. Giamelli v. Commissioner, 129 T.C. at 115.
1. Collection Alternatives
In determining whether there was an abuse of discretion the Court does not conduct an independent review and substitute its judgment for that of the settlement officer. Murphy v. Commissioner, 125 T.C. at 320. If the Appeals Office settlement officer follows all statutory and administrative guidelines and provides a reasoned, balanced decision, the Court will not reweigh the equities. Thompson v. Commissioner, 140 T.C. 173, 179 (2013).
This Court has held on numerous occasions that it is not an abuse of discretion for the Appeals Office to reject collection alternatives and sustain the proposed collection action due to the taxpayer's failure to submit requested financial information. See, e.g., McLaine v. Commissioner, 138 T.C. 228, 243 (2012); Pough v. Commissioner, 135 T.C. 344, 351 (2010); Kendricks v. Commissioner, 124 T.C. 69, 79 (2005); Orum v. Commissioner, 123 T.C. 1, 13 (2004), aff'd, 412 F.3d 819 (7th Cir. 2005); Wright v. Commissioner, T.C. Memo. 2012-24; Ranuio v. Commissioner, T.C. Memo. 2010-178; Dinino v. Commissioner, T.C. Memo. 2009-284; Huntress v. Commissioner, T.C. Memo. 2009-161; Prater v. Commissioner, T.C. Memo. 2007-241; Chandler v. Commissioner, T.C. Memo. 2005-99; Roman v. Commissioner, T.C. Memo. 2004-20.
In reviewing the SO's determination we do not make an independent evaluation of what would be an acceptable collection alternative. Thompson v. Commissioner, 140 T.C. 173, 179 (2013); Murphy, 125 T.C. at 320; Lipson v. Commissioner, T.C. Memo. 2012-252, 104 T.C.M. (CCH) 262, 264. Rather, our review is limited to determining whether the SO abused her discretion--that is, whether her decision to reject petitioner's offer was arbitrary, capricious, or without sound basis in fact or law. Thompson, 140 T.C. at 179; Murphy, 125 T.C. at 320.
Petitioner did not request a collection alternative and did not produce a completed Form 433-A, Collection Information Statement to the SO by September 12, 2019, as requested by the SO, to determine petitioner's finances. Because petitioner failed to submit the requested financial information to the SO, the SO determined that the levy was not more intrusive than necessary and sustained the levy, which is not an abuse of discretion.
2. Verification
The record shows that the SO properly verified that the requirements of all applicable laws and administrative procedures were met in the processing of petitioners' case and that the proposed levy balances the Government's need for the efficient collection of taxes with petitioner's concerns that the collection action be no more intrusive than necessary.
It is well established that a computer printout of a taxpayer's transcript of account, absent a showing of irregularity, provides sufficient verification of the taxpayer's outstanding liability to satisfy the requirements of I.R.C. § 6330(c)(1) (requirement that the Appeals officer conducting a collection due process (CDP) hearing obtain verification "that the requirements of any applicable law or administrative procedure had been met"). See, e.g., Davis v. Commissioner, 115 T.C. 35, 40-41 (2000); Roberts v. Commissioner, T.C. Memo 2004-100; Tornichio v. Commissioner, T.C. Memo 2002-291.
The computer printout of petitioner's transcript of account for 2015 provides sufficient verification of the action taken by the IRS, namely examining petitioner's 2015 tax return and assessing additional tax and penalties. Petitioner has not demonstrated any irregularity in the preparation of the foregoing transcript of account, and we see no reason to depart from that principle in this case. See Davis v. Commissioner, 115 T.C. at 41; Tornichio v. Commissioner, T.C. Memo 2002-291.
E. Conclusion
In sum the Court concludes that there is not any genuine dispute as to a material fact and that respondent is entitled to judgment as a matter of law sustaining the notice of determination, as supplemented, on which this case is based. Petitioner appears in his filings to challenge that the IRS and the Appeals Office denied him "due process" rights. However, as discussed in this order the actions taken by both the IRS and the Appeals Office followed the procedures set forth in the law.
The Court notes that petitioner has asserted that he is not liable for federal income taxes on his wages because he was not working for a federal entity, but was a private sector worker. Such a position has been held by this Court to be frivolous. See Smith v. Commissioner, T.C. Memo. 2021-29; Jagos v. Commissioner, T.C. Memo. 2017-202; Zook v. Commissioner, T.C. Memo.2013-128; Snow v. Commissioner, T.C. Memo.2013-114; Clark v. Commissioner, T.C. Memo. 2012-182.
The Court takes this opportunity to inform petitioner that this Court may impose a penalty of up to $25,000 if a taxpayer institutes or maintains a frivolous or groundless position or institutes or maintains a proceeding primarily for delay. I.R.C. § 6673(a)(1). Although the Court will not impose such a penalty at this time, petitioner is warned that the Court may not be so forgiving if he continues to advance frivolous and groundless arguments.
Premises considered, it is
ORDERED that respondent's Motion for Summary Judgment, filed August 11, 2022, is granted. It is further
ORDERED AND DECIDED that respondent may proceed with the proposed collection action (levy) in respect of petitioner's remaining tax liability for 2015 as determined in the notice of determination dated February 21, 2020, upon which this case is based.