United States Tax Court

T.C. Memo. 2023-138

GEORGE E. KOSMIDES,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

—————

Docket No. 15941-17L. Filed November 16, 2023.

—————

Stephen P. Kauffman and Terry L. Goddard, Jr., for petitioner.

David A. Indek, for respondent.

MEMORANDUM OPINION

PUGH, Judge: In this collection case petitioner seeks review 

pursuant to sections 6320(c)1 and 6330(d)(1) of determinations by the 

Internal Revenue Service (IRS) to uphold a Notice of Intent to Levy (levy 

notice) and the filing of a Notice of Federal Tax Lien (lien notice). The 

issue for decision is whether the IRS Office of Appeals abused its

discretion in sustaining these collection actions.2 We conclude that it did 

not.

1 Unless otherwise indicated, statutory references are to the Internal Revenue 

Code, Title 26 U.S.C., in effect at all relevant times, regulation references are to the 

Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and 

Rule references are to the Tax Court Rules of Practice and Procedure. We round all 

monetary amounts to the nearest dollar.

2 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.

Served 11/16/23
2

[*2] Background

This case was submitted fully stipulated under Rule 122. The 

stipulated facts are incorporated by this reference. Petitioner resided in 

Maryland when he timely filed his Petition.

Petitioner did not collect, account for, and pay over employment 

taxes reportable on Form 941, Employer’s Quarterly Federal Tax 

Return, for the second quarter of 2009 through the fourth quarter of 

2012.3 The IRS assessed civil penalties against him under section 6672 

(commonly called trust fund recovery penalties).

To collect these outstanding liabilities from petitioner, in early 

2016 the IRS issued first the levy notice, which covered the second 

quarter of 2009 through the third quarter of 2011, and then the lien 

notice, which covered the second quarter of 2009 through the fourth 

quarter of 2012.

Petitioner timely submitted Form 12153, Request for a Collection 

Due Process or Equivalent Hearing, for each notice. In both hearing 

requests, petitioner indicated that he wanted a collection alternative, 

checking the boxes for “Installment Agreement,” “Offer in Compromise,” 

and “I Cannot Pay Balance.”

Appeals Officer Wade (AO Wade) was assigned petitioner’s 

administrative hearing requests. Petitioner provided numerous 

documents to AO Wade, including Form 433–A, Collection Information 

Statement for Wage Earners and Self-Employed Individuals. He offered 

to enter into an installment agreement under which he would pay $400 

per month but would not liquidate any portion of his retirement account. 

This offered amount would not pay petitioner’s liability by the collection 

period expiration date (CPED) and therefore was considered a partial 

payment installment agreement (PPIA). 

AO Wade did not accept petitioner’s offered PPIA. She noted an 

inability to separate his business and personal expenses. On the basis 

of her review of the documents petitioner provided, she determined that 

petitioner could make monthly payments of $3,375, and offered him an 

installment agreement for that amount; this agreement would have 

satisfied his outstanding tax liability within 72 months. AO Wade 

determined that he was not eligible for an offer-in-compromise because 

3 Section 6672(a) imposes the requirement to “collect, truthfully account for, 

and pay over any tax imposed by this title.”
3

[*3] he could pay the liability in full by the CPED (and he never 

submitted a Form 656, Offer in Compromise). Petitioner rejected AO 

Wade’s proposed installment agreement.

After AO Wade issued a notice of determination (original notice) 

sustaining both collection actions, petitioner timely petitioned this 

Court for review. The case then was remanded to Appeals for further 

consideration of documents that petitioner provided after the original 

notice.

Appeals Officer Teti (AO Teti) was assigned both the levy notice 

and the lien notice on remand. Petitioner gave AO Teti updated 

documents, including an updated Form 433–A. These documents 

showed that he had monthly income of $12,482 and a retirement account 

balance of $117,839. 

During an in-person conference with AO Teti, petitioner asked

whether he was eligible for an offer-in-compromise and offered to enter 

into a PPIA of $450 per month. In calculating this PPIA amount, he

estimated monthly expenses of (1) $994 for vehicle ownership expenses 

for two vehicles (his monthly loan payments for the vehicles were $611 

and $381, respectively); (2) $1,586 for health insurance expenses, which 

included $1,077 in premiums for a secondary health insurance plan; 

(3) $1,380 for home equity line of credit payments, which were in 

addition to the standard monthly housing expense for two people in his

locale ($1,982); and (4) $950 for credit card payments. His offer did not 

include a downpayment from his retirement account.

After an initial review of the documents and information 

petitioner provided, AO Teti determined that he could afford an 

installment agreement of $4,400 per month which could fully pay his 

liability by the CPED. AO Teti initially proposed an installment 

agreement with monthly payments of $4,400 and a $40,000 

downpayment from petitioner’s retirement account. In the light of AO 

Teti’s initial determination that petitioner could fully pay the liability 

by the CPED, AO Teti determined that he was not eligible for an offerin-compromise.

Petitioner rejected AO Teti’s initial proposal and again offered to 

enter into a PPIA of $450 per month with no downpayment, providing 

additional supporting documents. He did not challenge his underlying 

liability in the supplemental hearing with AO Teti or during the first 

administrative hearing with AO Wade. 
4

[*4] In the supplemental notice of determination (supplemental 

notice), AO Teti did not accept petitioner’s PPIA offer because he 

determined that petitioner could pay a substantially higher amount

under collection guidelines set forth in the Internal Revenue Manual

(IRM).4 AO Teti made a final determination that petitioner could afford 

a monthly payment of $4,059 and a downpayment of at least $9,197 from 

his retirement account.

To calculate the downpayment that petitioner could afford to 

make, AO Teti referenced IRM 5.15.1.27 (Nov. 17, 2014). Because 

petitioner had an individual retirement account, was close to 

retirement, and was over age 591⁄2, AO Teti followed IRM 5.15.1.27(3), 

which instructed him to:

Determine if the taxpayer will need the income from 

the plan to provide for necessary living expenses. If so, 

consider the impact on income and expenses when the 

taxpayer is expected to retire. If income from the plan will 

not be needed when the taxpayer retires, determine if the 

plan should be liquidated now or at the time the taxpayer 

retires to avoid the early withdrawal penalty. If the plan is 

liquidated early, equity is the cash value less any expense 

for liquidating the account and early withdrawal penalty.

AO Teti calculated the income shortfall that the plan would need 

to cover using petitioner’s and his spouse’s joint life expectancy, while 

also taking into account additional contributions over the subsequent

years, and determined that petitioner could liquidate $13,728 of his 

retirement account and still have sufficient funds to cover living 

expenses. AO Teti then reduced the $13,728 by one-third for state and 

federal taxes to come up with a downpayment of $9,197 that would be 

required for an acceptable installment agreement.

In calculating the expenses that petitioner could claim for vehicle 

ownership, AO Teti allowed petitioner the standard amount under IRM 

5.15.1.9 (Nov. 17, 2014) for the first vehicle ($497) and the actual loan 

payment for the second vehicle ($381), resulting in a total allowed 

vehicle ownership expense of $878 per month.

4 Unless otherwise indicated, all IRM references are to the version of the IRM 

that was in effect on the date of petitioner’s supplemental administrative hearing and 

the date the supplemental notice was issued.
5

[*5] AO Teti allowed petitioner monthly expenses of $509 for his 

primary, employer-provided health insurance plan premiums; $1,982 for 

his housing expense, which was the standard monthly housing expense 

for two people in petitioner’s locale; and a miscellaneous amount of 

$1,202 which can be applied to credit card debt. See IRM 5.15.1.10(3)

(Nov. 17, 2014).

AO Teti noted that because petitioner requested a PPIA he was 

allowed only “necessary expenses” under IRM 5.15.1.7(1) (Oct. 2, 2012).

AO Teti did not allow petitioner’s claimed monthly expenses for excess

vehicle ownership expenses, secondary health insurance premiums, 

non-housing-standard home equity line of credit payments, and nonmiscellaneous credit card payments because they were not “necessary 

expenses.”

Petitioner contended that the $1,077 expense for secondary 

health insurance premiums was necessary because a previous medical 

condition might return and he was unsure whether his primary health 

insurance would cover it. AO Teti determined that this argument was 

too speculative because it anticipated that his medical condition would

return and his primary health insurance provider would refuse 

coverage. Petitioner also argued that existing federal law mandating 

coverage of preexisting conditions may be repealed or struck down and 

if that happened and he lost his job (the source of his primary health 

insurance) he might not be able to acquire health insurance covering his 

preexisting medical condition. AO Teti determined that this argument 

was too speculative because it hinged on federal law changing and

petitioner losing his primary health insurance coverage.

Petitioner contended that the $1,380 expense for home equity line 

of credit payments and the $950 expense for credit card payments were

necessary because if he stopped making these payments his credit score 

could be harmed which could affect his security clearance at his 

employment which could affect his ability to earn income. AO Teti noted 

that petitioner provided no supporting information for this credit-score 

argument and that outstanding tax debts also might be an issue for his

security clearance. AO Teti also noted that allowing the home equity line 

of credit payments solely because of their potential effect on his credit 

score would “render the housing standard . . . meaningless.” Finally, 

AO Teti noted that IRM 5.15.1.10(3) states that “[c]redit cards are 

generally considered a method of payment, rather than a specific 

expense” and that only the miscellaneous amount referenced in that 
6

[*6] section can be applied to credit card debt—to allow an additional 

amount expressly for credit card debt in effect would duplicate expenses.

Petitioner rejected AO Teti’s installment agreement and urged 

AO Teti to accept his offered PPIA of $450 per month with no 

downpayment. Petitioner did not dispute his underlying tax liability in 

the first or supplemental administrative hearing.

The supplemental notice sustained both collection actions, stating

that petitioner’s offered PPIA was too low considering his financial 

information and the IRM.

Discussion

I. Standard of review

In a collection case our standard of review depends on whether 

the underlying tax liability is in issue. Where the taxpayer’s underlying 

liability is properly at issue, we review the IRS’s determination de novo. 

Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 

114 T.C. 176, 181–82 (2000). Section 6330(c)(2)(B) permits taxpayers to 

challenge the existence or amount of their underlying tax liability only 

if they did not receive a notice of deficiency or otherwise have a prior 

opportunity to contest that liability.

Where the underlying tax liability is not properly at issue, we 

review the IRS’s determinations for abuse of discretion. Hoyle v. 

Commissioner, 131 T.C. 197, 200 (2008), supplemented by 136 T.C. 463 

(2011); Goza, 114 T.C. 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). The burden is on the taxpayer to prove that the 

Appeals officer abused his discretion. Rules 122(b), 142(a); see Woodral 

v. Commissioner, 112 T.C. 19, 23 (1999).

Petitioner’s underlying liability is not at issue (nor does he assert 

otherwise); therefore we review the IRS’s determination for abuse of 

discretion.

II. Abuse of discretion

In deciding whether an Appeals officer abused his discretion in 

sustaining a collection action, we consider whether he (1) properly 

verified that the requirements of applicable law or administrative 
7

[*7] procedure have been met, (2) considered any relevant issues the 

taxpayer 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.” §§ 6320(c), 6330(c)(3).

When this Court remands a case to Appeals and a supplemental 

determination is issued, we review the supplemental determination. 

Hoyle, 136 T.C. at 468. Our review of the record establishes that AO Teti 

properly discharged his statutory responsibilities in the supplemental 

determination.

A. Verification

AO Teti reviewed and confirmed that all legal and procedural

requirements were followed and that the collection actions were 

appropriate under the circumstances. Our review of the record confirms 

that AO Teti satisfied the verification requirement.

B. Issues raised

Petitioner’s primary contention is that AO Teti abused his 

discretion by rejecting petitioner’s proposed PPIA of $450 per month 

with no downpayment. Petitioner argues that AO Teti acted arbitrarily 

by considering petitioner’s retirement account as an asset and by

disallowing various expenses.

Section 6159 authorizes the Commissioner to enter into written 

agreements allowing taxpayers to pay tax in installment payments if he 

deems that the “agreement will facilitate full or partial collection of such 

liability.” Subject to exceptions not relevant here, the decision to accept 

or reject installment agreements lies within the discretion of the 

Commissioner. See Thompson v. Commissioner, 140 T.C. 173, 179 

(2013); Treas. Reg. § 301.6159-1(a), (c)(1)(i). In reviewing an Appeals 

officer’s determinations we do not make an independent evaluation of 

what would be an acceptable collection alternative. See Thompson, 140 

T.C. at 179; Murphy, 125 T.C. at 320. Rather, our review is limited to 

determining whether he abused his discretion. See Thompson, 140 T.C. 

at 179.

The installment agreement petitioner proposed was a PPIA

because he offered to pay some but not all of his outstanding liabilities

by the CPED. AO Teti considered petitioner’s collection alternative and 

rejected it because it was not in compliance with the IRM guidelines for 
8

[*8] granting a PPIA. See, e.g., id.; IRM 5.14.2.1 (Mar. 11, 2011). This is 

not an abuse of discretion; we have repeatedly held that an Appeals

officer does not abuse his discretion when he adheres to published IRM 

collection guidelines. See, e.g., Eichler v. Commissioner, 143 T.C. 30, 39 

(2014); Kelly v. Commissioner, T.C. Memo. 2022-73, at *9.5 Petitioner

does not claim that the IRM guidelines are wrong. Rather, petitioner 

claims AO Teti misapplied the guidelines in making his determination.

We therefore examine the IRM guidelines. See Wadleigh v. 

Commissioner, 134 T.C. 280, 294 n.13 (2010).

1. Equity in assets: petitioner’s retirement account

We begin with petitioner’s argument that his retirement account 

is off limits. The IRM states that “[b]efore a PPIA may be granted, equity 

in assets must be addressed and, if appropriate, be used to make 

payment,” IRM 5.14.2.1(2), and “[f]unds held in a retirement . . . plan 

are considered an asset,” IRM 5.15.1.27(1).

AO Teti followed IRM 5.15.1.27(3) by calculating the amount of 

petitioner’s retirement account that would be needed to pay living 

expenses and reducing the amount that could be withdrawn to take into 

account federal and state taxes. Citing Gurule v. Commissioner, T.C. 

Memo. 2015-61, petitioner contends that AO Teti abused his discretion 

by not following the procedures under IRM 5.11.6.3 (Aug. 16, 2017), 

which provide instructions for levying against a retirement account. 

But AO Teti was not levying against petitioner’s retirement 

account. Cf. Wadleigh, 134 T.C. at 294–95 (reviewing IRM guidelines

outlining the Commissioner’s ability to levy on retirement income and 

accounts when the Commissioner sought to levy on those assets).

Rather, he was evaluating petitioner’s proposed PPIA, and under IRM 

5.15.1.27(3) as part of his evaluation he considered petitioner’s 

retirement account as an asset. We conclude AO Teti did not abuse his 

discretion in determining that petitioner could liquidate at least part of 

his retirement account to make a downpayment towards an installment 

agreement.

5 However, the provisions of the IRM do not carry the force and effect of law or 

confer rights on taxpayers. Eichler, 143 T.C. at 39 (citing Fargo v. Commissioner, 447 

F.3d 706, 713 (9th Cir. 2006), aff’g T.C. Memo. 2004-13).
9 

2. Monthly expenses

Additionally, “[t]he taxpayer must agree to pay the maximum 

monthly payment based upon the taxpayer’s ability to pay.” IRM

5.14.2.1.1(7) (Sept. 19, 2014). The Commissioner generally determines a 

taxpayer’s ability to pay by subtracting allowable monthly expenses 

from the taxpayer’s monthly income. For purposes of a PPIA, the 

taxpayer is allowed his “necessary expenses.” See, e.g., Thompson, 140 

T.C. at 179–80. Necessary expenses are those “necessary to provide for a 

taxpayer’s and his or her family’s health and welfare and/or production 

of income.” IRM 5.15.1.7(1).

a) Vehicle ownership

The applicable standard for vehicle ownership expenses is $497 

per month per vehicle. Petitioner requested $994 per month in vehicle 

ownership expenses for two vehicles. Petitioner’s monthly loan 

payments for his two vehicles were $611 and $381, respectively. AO Teti 

properly followed IRM 5.15.1.9 by allowing petitioner the standard 

vehicle ownership expense ($497) for the vehicle with an auto loan above 

the standard and the actual vehicle ownership expense ($381) for the 

second vehicle.

IRM 5.15.1.9(1)(b.), Example 3, contemplates a similar factual 

scenario. The IRM states that “[i]f the loan payment for one vehicle 

exceeds the standard allowable amount for one car and the second loan 

payment is less than the standard allowable amount for one car, the 

allowable amounts are calculated separately.” Id. The IRM example 

uses a standard of $478, a claimed amount for Car 1 of $550, and a 

claimed amount for Car 2 of $460. Id. The IRM explains that the 

taxpayer is allowed the standard for Car 1 ($478) and the actual amount 

for Car 2 ($460). Id. AO Teti applied the same reasoning in this case, 

and he did not abuse his discretion in disallowing excess amounts 

petitioner requested. 

b) Secondary health insurance plan

AO Teti allowed petitioner’s claimed monthly expenses for his 

primary health insurance plan but disallowed petitioner’s claimed 

secondary health insurance plan expenses. In reviewing for abuse of 

discretion, the Court does not substitute its judgment for that of the 

Appeals officer. Gurule, T.C. Memo. 2015-61, at *28.

[*9]
10

[*10] Petitioner raised various arguments as to why the secondary 

health insurance expenses should qualify as necessary; however, AO 

Teti determined that petitioner’s arguments were too speculative. He 

therefore concluded that secondary health insurance plan premiums did 

not meet the necessary expense test because petitioner failed to 

demonstrate that his secondary health insurance plan would provide for 

his and his family’s health and welfare and/or production of income. See 

IRM 5.15.1.7(1). AO Teti did not abuse his discretion in concluding that 

petitioner’s secondary health insurance plan premiums did not satisfy 

the relevant test in the IRM.

c) Home equity line of credit

AO Teti allowed petitioner monthly expenses in accordance with 

the IRM housing standard guidelines. IRM 5.15.1.9(1). IRM 5.15.1.10(3) 

states that other secured debts are allowed only if they meet the 

necessary expense test. AO Teti concluded that the payments for 

petitioner’s home equity line of credit were not necessary expenses 

because petitioner failed to demonstrate that the payments were 

necessary for his and his family’s health and welfare and/or production 

of income. AO Teti’s determination that allowing a home equity line of 

credit payment would defeat the purpose of the housing and other 

expense standards was a reasonable application of the IRM. It also was

reasonable to reject petitioner’s unsupported argument that his credit 

score could be damaged if he failed to make this payment, which could 

affect his security clearance, which could affect his employment. 

d) Credit cards

AO Teti allowed petitioner only a miscellaneous expense for credit 

card debt pursuant to IRM 5.15.1.10(3) (stating that credit cards are 

considered a method of payment and that “payments for the portion of 

the credit card debt reflecting necessary living expenses are provided for 

as allowable expenses under the national and local standards”). AO Teti 

reasonably concluded that the payments for credit card debt were not 

necessary expenses because petitioner failed to demonstrate that the 

payments were necessary for his and his family’s health and welfare 

and/or production of income. Once again, he reasonably rejected 

petitioner’s unsupported argument that his credit score could be hurt if 

he failed to make this payment, which could affect his security 

clearance, which could affect his employment.
11

C. Balancing

 The record indicates that AO Teti considered whether the 

collection actions balanced the need for the efficient collection of taxes 

with petitioner’s legitimate concern that any collection action be no more 

intrusive than necessary. Because petitioner did not establish his 

eligibility for a collection alternative, AO Teti did not err in concluding 

that the collection actions were “no more intrusive than necessary.” See 

Kelly, T.C. Memo. 2022-73, at *11. We conclude that AO Teti satisfied 

the balancing requirement.

III. Conclusion

We hold that Appeals did not abuse its discretion in sustaining 

the proposed levy notice and filing of the lien notice. We have considered 

all arguments made and, to the extent not mentioned above, we conclude 

that they are moot, irrelevant, or without merit. 

To reflect the foregoing,

An appropriate decision will be entered.

[*11]