T.C. Memo. 2005-156

UNITED STATES TAX COURT

BRIAN AND TINA NICKLAUS, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 8587-04L. Filed June 27, 2005.

Brian Nicklaus and Tina Nicklaus, pro se.

Aimee R. Lobo-Berg, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

COLVIN, Judge: Respondent sent petitioners a Notice of

Determination Concerning Collection Action(s) Under Sections 6320

and/or 6330 (the levy determination) on April 15, 2004, in which

respondent determined to proceed with collection by levy from

both petitioners of income tax liabilities for 1993 and 1994 and

from Brian Nicklaus for 1995-2000.
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The sole issue for decision is whether respondent's

determination was an abuse of discretion. We hold that it was

not.

Unless otherwise stated, section references are to the

Internal Revenue Code. Rule references are to the Tax Court

Rules of Practice and Procedure. References to petitioner are to

Brian Nicklaus.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. 

Petitioners are married and had a mailing address in Stevenson,

Washington, when the petition was filed.

A. Petitioners’ Prior Tax Court Case Relating to Respondent’s

Lien for Petitioners’ Tax Years 1993-96

Petitioners had a prior case in this Court, Nicklaus v.

Commissioner, 117 T.C. 117 (2001), in which we sustained

respondent’s determination that notices of Federal tax lien for

petitioners’ 1993-96 income tax liabilities had been properly

recorded.

Petitioners filed Federal income tax returns for 1993 and

1994 in September 1995. Id. at 117. Respondent prepared

substitutes for petitioners’ 1995 and 1996 returns and issued a

notice of deficiency to petitioners for their 1993-96 tax years. 

Id. Petitioners did not file a petition with this Court for

1993-96. Id.
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Respondent assessed tax, penalties, and interest for

petitioners’ 1993-96 tax years and sent them a notice of balance

due for those years. Id. at 117-118. Prior to November 25,

1998, petitioners received a notice from respondent that

respondent intended to collect tax owed by petitioners for those

years by levy. Id. at 118. On November 25, 1998, respondent

issued a notice of levy to two banks with respect to petitioners’

tax liabilities for 1993-95. Id.

Respondent filed notices of Federal tax lien with respect to

petitioners’ 1993-96 tax years on July 16, 1999. Id. at 118. 

Petitioners timely requested a hearing. Id. Respondent’s

Appeals Office conducted the hearing and gave petitioners copies

of Forms 4340, Certificate of Assessments and Payments, for 1993-

96. Id. at 119. After the hearing, respondent issued a notice

of determination sustaining the notice of Federal tax lien. Id.

at 119-120.

Petitioners timely filed a petition with this Court to

obtain judicial review of respondent’s notice of determination

relating to the lien. A trial was held. On brief, petitioners

said that the sole issue was whether the requirements for issuing

a Form 4340 had been met. Id. at 120. In our opinion in that

case, we held that the requirements for sustaining the notice of

Federal tax lien had been met because Form 4340 establishes a

presumption that tax was validly assessed, and petitioners had
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not shown any irregularity in respondent’s assessment procedures. 

Id. at 120-122.

B. Respondent’s Notice of Levy for Petitioner’s Tax Years 1993-

2000 and Tina Nicklaus’s Tax Years 1993-94

Respondent prepared substitutes for petitioner’s returns for

tax years 1997-99 on February 1, 2001, and for 2000 on July 11,

2002. Respondent issued notices of deficiency to petitioner for

1997-2000 on dates not stated in the record. Petitioner did not

file a petition in this Court for those years. Respondent

assessed tax, additions to tax, and interest for petitioner’s tax

years 1997-99 on July 14, 2003, and for his tax year 2000 on

September 8, 2003.

On September 9, 2004, respondent sent a Final Notice -

Notice of Intent to Levy and Notice of Your Right to a Hearing to

Tina Nicklaus for income taxes for 1993 and 1994 and to

petitioner for 1993-2000. Petitioners filed separate requests

for a hearing under section 6330(b).

Appeals Officer Jean Duncan (Duncan) was assigned to

petitioners’ case. Duncan gave petitioners Forms 4340 for 1993-

2000 before the hearing under section 6330(b). As part of their

section 6330(b) hearing, petitioners gave Duncan seven documents

including petitioner’s description of respondent’s actions with

respect to petitioners’ 1993-2000 tax years and copies of various

transcripts.
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1 Petitioners do not contend that sec. 7491(a) applies in

this case and have not established that they met the requirements

of sec. 7491(a)(2).

Duncan reviewed respondent’s administrative records for

petitioners and all documents submitted by petitioners. Duncan

considered petitioners’ arguments and concluded that petitioners

had not shown that there were any irregularities in assessment

procedures for the years in issue.

Respondent sent petitioners a Notice of Determination with

respect to the levy concerning their income tax liability for

1993 and 1994 on April 15, 2004. Respondent sent a Notice of

Determination to petitioner with respect to the levy concerning

income tax he owed for 1995-2000 on April 15, 2004. Petitioners

timely filed a petition in this Court.

On Forms 4340 for 1995 and 1996, Tina Nicklaus’s Social

Security number is partially incorrect and petitioner’s first

name is misspelled.

OPINION

A. Contentions of the Parties and Background

Petitioners contend that respondent’s transcripts show that

respondent did not follow proper assessment procedures and that

this Court lacked jurisdiction in their prior case before this

Court and in this case. Petitioners ask that we vacate the

decision in their prior case and that we remand this case to

respondent.1 
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Respondent contends that petitioners are collaterally

estopped from alleging irregularities in the assessment of their

tax liabilities for 1993-96. Respondent also contends that all

requirements have been met for respondent to collect taxes that

petitioners owe for 1993-2000. 

Section 6330 (pertaining to levies) provides for

administrative and judicial review of certain collection actions. 

The Commissioner is required to give a taxpayer written notice

that a Federal tax lien has been filed and/or that the

Commissioner intends to levy and to explain to the taxpayer that

such collection actions may be challenged on various grounds at

an administrative hearing. See Davis v. Commissioner, 115 T.C.

35, 37 (2000); Goza v. Commissioner, 114 T.C. 176, 179 (2000).

Section 6330(c)(1) requires the Appeals Office to obtain

verification that “the requirements of any applicable law or

administrative procedure have been met.” Section 6330(c)(2)

prescribes the matters that a person may raise at an

administrative hearing. Section 6330(c)(2)(A) provides that a

person may raise issues such as spousal defenses, the

appropriateness of the Commissioner's intended collection action,

and possible alternative means of collection. See Sego v.

Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner,

supra.
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B. Whether This Court Has Jurisdiction in This Case

Petitioners contend that this Court lacks jurisdiction in

this case because (1) the underlying tax liability at issue is

for employment or excise tax, and (2) respondent may not file a

substitute for return for individual income tax.

1. Whether the Underlying Liability Is for Employment or

Excise Tax

Petitioner contends that records that he obtained from

respondent under the Freedom of Information Act, 5 U.S.C. sec.

552 (2000), show that employment or excise taxes, but not income

taxes, are at issue in this case, and that respondent’s records

show that petitioners were employers. We disagree.

On each of the Forms 4340 for the years in issue, respondent

certified that respondent assessed individual income tax. On the

Final Notice - Notice of Intent to Levy & Your Notice Of a Right

To A Hearing, respondent identified Form 1040, U.S. Individual

Income Tax Return, as the form for the underlying tax which

respondent seeks to collect. Petitioners wrote “1040” in the

space for “Tax Form Number(s)” on their requests for a hearing

under section 6330. The notice of determination states that it

relates to income tax and the form number is Form 1040. We

conclude that respondent seeks to collect Federal individual

income tax from petitioners for 1993-94 and from petitioner for

1995-2000.
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2 The seven returns are: Form 940, Employer’s Annual

Federal Unemployment Tax Return; Form 941, Employer’s Quarterly

Federal Tax Return; Form 943, Employer’s Annual Tax Return for

Agricultural Employees; Form 720, Quarterly Federal Excise Tax

Return; Form 2290, Heavy Vehicle Use Tax Return; Form CT-1,

Employer’s Annual Railroad Retirement Tax Return; and Form 1065,

U.S. Partnership Return of Income.

3 Sec. 6020 provides:

SEC. 6020. RETURNS PREPARED FOR OR EXECUTED BY

SECRETARY.--

(a) Preparation of return by Secretary.--If any

person shall fail to make a return required by this

title or by regulations prescribed thereunder, but

shall consent to disclose all information necessary for

the preparation thereof, then, and in that case, the

Secretary may prepare such return, which, being signed

by such person, may be received by the Secretary as the

return of such person.

(b) Execution of Return by Secretary.--

(1) Authority of Secretary to execute return.--If

any person fails to make any return required by any

internal revenue law or regulation made thereunder at

the time prescribed therefor, or makes, willfully or

(continued...)

2. Whether Respondent May Prepare Substitutes for

Individual Income Tax Returns

Petitioners contend that respondent may not prepare

substitutes for returns for them because part 5.1.11.6.10 of the

Internal Revenue Manual (IRM) (May 27, 1999) lists seven returns2

that may be prepared under the authority of section 6020(b) and

does not mention Form 1040.

We disagree. The Internal Revenue Service may prepare

substitute returns for taxpayers who fail to do so themselves.

Sec. 6020(b)(1);3 Cabirac v. Commissioner, 120 T.C. 163, 171-172
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3(...continued)

otherwise, a false or fraudulent return, the Secretary

shall make such return from his own knowledge and from

such information as he can obtain through testimony or

otherwise.

(2) Status of returns.--Any return so made and

subscribed by the Secretary shall be prima facie good

and sufficient for all legal purposes.

4 Respondent does not contend and we need not decide whether

the returns prepared by respondent in this case meet the

requirements of sec. 6020(b) in all respects.

(2003); Millsap v. Commissioner, 91 T.C. 926, 936 (1988); see

also United States v. Updegrave, 80 AFTR 2d 97-5290, 97-1 USTC

par. 50,465 (E.D. Pa. 1997). IRM provisions not cited by

petitioners state that respondent may prepare substitutes for

Forms 1040 under section 6020(b). See, e.g., IRM, pt.

3.0.273.40.3(6) (Jan. 1, 2005), pt. 5.1.15.2 (July 30, 1999). We

conclude that respondent may prepare substitutes for petitioners’

individual income tax returns for the years in issue,4 and that

this Court has jurisdiction to review respondent’s determination

to proceed with collection.

C. Whether Petitioners Are Collaterally Estopped From

Contending That Irregularities Exist in Assessment of Their

Tax Liabilities for 1993-96

We held in Nicklaus v. Commissioner, 117 T.C. at 121, that

respondent had properly assessed petitioners’ tax liabilities for

1993-96 and that those liabilities remain unpaid. Respondent

contends that collateral estoppel precludes petitioners from
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alleging irregularities in the assessment of their Federal income

taxes for 1993-96. 

If collateral estoppel applies, issues which were litigated

and decided in an earlier case cannot be relitigated by the

parties or their privies. Montana v. United States, 440 U.S.

147, 153 (1979); Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326

n.5 (1979); Commissioner v. Sunnen, 333 U.S. 591, 597 (1948). 

Collateral estoppel protects adversaries from the expense and

vexation of multiple lawsuits, conserves judicial resources, and

fosters reliance on judicial action by minimizing the possibility

of inconsistent decisions. Montana v. United States, supra at

153-154; Meier v. Commissioner, 91 T.C. 273, 282-284 (1988). 

Collateral estoppel applies if the following requirements

are met: (1) The issue in the second suit is identical to the

issue decided in the first suit, Commissioner v. Sunnen, supra at

599-600; (2) there is a final judgment rendered by a court of

competent jurisdiction, Peck v. Commissioner, 90 T.C. 162, 166

(1988), affd. 904 F.2d 525 (9th Cir. 1990); Gammill v.

Commissioner, 62 T.C. 607, 613 (1974); (3) the parties to the

second suit are the same as the parties to the first suit or in

privity with them, Peck v. Commissioner, supra at 166-167;

Gammill v. Commissioner, supra at 614-615; (4) the parties

actually and necessarily litigated the matters at issue, and the

resolution of those matters was essential to the prior decision,

Commissioner v. Sunnen, supra at 598, 601; (5) the controlling
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facts and legal principles remain unchanged, id. at 599-600; and

(6) there are no special circumstances that would warrant making

an exception to the normal rules of issue preclusion, Montana v.

United States, supra at 162; Meier v. Commissioner, supra at

291-292.

These requirements are met in this case. First, petitioners

disputed respondent’s assessment procedures for 1993-96 in the

prior case and in this case. Thus, identical matters are at

issue in the prior case and in the instant case. Second, our

decision in the prior case is final. Third, the parties in this

case are the parties in the prior case. Fourth, during the prior

trial, petitioners and respondent actually and necessarily

litigated respondent’s assessment procedures for 1993-96 and

whether respondent’s proposed collection action for those years

was appropriate. The resolution of those matters was essential

to the decision in the first suit. Fifth, the controlling facts

and legal principles have not changed. Meier v. Commissioner,

supra at 291. Sixth, petitioners do not contend, and we do not

find, that special circumstances are present that would warrant

not applying the normal rules of issue preclusion. See Montana

v. United States, supra; Meier v. Commissioner, supra at 291-292. 

Thus, petitioners are collaterally estopped from alleging

irregularities in the assessment of their Federal income taxes

for 1993-96.
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D. Whether Requirements for Collection of Petitioners’ Tax

Liabilities Have Been Met

1. Errors on Form 4340

An assessment is made by recording the tax liability in the

office of the Secretary in accordance with rules or regulations

prescribed by the Secretary. Sec. 6203. A Form 4340, absent

evidence to the contrary, is sufficient to establish that the

assessment was properly made. United States v. Zolla, 724 F.2d

808, 810 (9th Cir. 1984); Psaty v. United States, 442 F.2d 1154,

1159 (3d Cir. 1971); Nicklaus v. Commissioner, supra at 121.

Treasury regulations require that the summary record,

through supporting records, identify the taxpayer. Sec.

301.6203-1, Proced. & Admin. Regs. Petitioners point out that

respondent misspelled petitioner’s first name and used an

incorrect Social Security number for Tina Nicklaus on the Forms

4340 for 1995 and 1996. Petitioners contend that the errors show

that the Forms 4340 are unreliable, and thus the requirements for

collection of their tax liabilities for the years in issue have

not been met. We disagree.

The Forms 4340 for 1995 and 1996 pertain only to the tax

liability of petitioner. Respondent correctly stated

petitioner’s middle initial, last name, and Social Security

number on those Forms 4340. The erroneous Social Security number

for petitioner’s spouse on the Forms 4340 for 1995 and 1996 does

not affect this case because: (1) Respondent seeks to collect by
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levy petitioner’s, and not his spouse’s, unpaid tax for those

years; and (2) an incorrect Social Security number on a Form 4340

does not invalidate the assessment shown on the form if the

taxpayer is sufficiently identified. See Frey v. United States,

87 AFTR 2d 2001-2309, 2001-1 USTC par. 50,417 (N.D. Tex. 2001),

affd. 34 Fed. Appx. 151 (5th Cir. 2002). The Forms 4340 for 1995

and 1996 sufficiently identify petitioner as the taxpayer whose

tax was assessed by respondent. 

2. Determination by Respondent

Section 6330(c)(1) requires that, in order for the

Commissioner to proceed with proposed collection, the Appeals

officer must verify that the requirements of any applicable law

or administrative procedure have been met. The record shows that

Duncan properly verified that all applicable laws and

administrative procedures governing the assessment and collection

of petitioner’s unpaid tax liabilities were met.

3. Conclusion

We conclude that respondent’s determination to proceed with

collection from petitioners was not an abuse of discretion.

E. Underlying Tax Liability

Petitioners contend for the first time in their posttrial

brief that they may dispute their underlying tax liability. We

disagree. First, we need not consider this issue because

petitioners raised it untimely. See Glass v. Commissioner, 124
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T.C. __, __ (2005); Leahy v. Commissioner, 87 T.C. 56, 64-65

(1986). In their petition, amended petition, and at trial,

petitioners disputed only the assessment procedures.

Second, a taxpayer may dispute his or her underlying tax

liability at the section 6330 hearing 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). 

Petitioners do not contend that they did not receive notices of

deficiency for the years in issue. Instead, petitioners contend

only that the notices of deficiency applied to employment or

excise tax, not income tax. We have rejected this contention at

paragraph B-1, above.

We conclude that petitioners may not dispute their

underlying tax liability.

F. Conclusion

We conclude that respondent’s determination to proceed with

levy action to collect petitioners’ tax liabilities for 1993-2000

was not an abuse of discretion.

To reflect the foregoing,

Decision will be entered

for respondent.