# T.C. Mem o. 2 01 6- 10 3

UNITED STAT ES TAX COURT

RICKEY L. DRILLING, Peti ti on er v . COMMI SSIONER OF INTERNAL REVENU E, Resp on de nt

Doc ke t No . 63 47 -1 2L. Fi le d M ay 25 , 20 16

.

R. Je an et te Parh am , for pe ti ti on er.

Dav id Bau di li o M or a, fo r res po nd en t.

CONTENTS

FINDINGS OF FACT.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

1. Dril li ng ’s For m

10 40 EZ for 2 00 7.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2. The IRS’s n ot ic e to Dril li ng th at it ha d fi le d a no ti ce o f li en ; Dri ll in g’s in it ia l co ll ect io n- rev ie w hea rin g b efo re t he App eal s Off ic e.

. . . . . . . . . . . . 6

3. Dril li ng ’s pet it io n, t he Co ur t’s re m an d o rd er, an d t he su pp le m en ta l

co ll ect io n- rev ie w hea rin g.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

4. Tria l . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

# - 2 -

[* 2] OPINION.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

1. W it hd rawi ng no ti ce o f li en or r el eas in g l ie n fo r 20 07

. . . . . . . . . . . . . . . . . 39

2. The $4 ,00 0 o ffer -in -co m pr om is e..

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

a. Rea so na bl e co ll ect io n p ot en ti al

.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

b. Sp eci al cir cu m st an ces

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

c. Co un te ro ffer

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

3. Co rrec ti on of a m ou nt s o f ta x l ia bi li ti es

. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

4. Co nc lu si on s.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

MEMOR ANDUM FINDINGS OF FACT AND OPINION

MORR ISON, Ju dg e: Thi s i s an ap pe al pu rs ua nt to sec ti on s 6 32 0( c) an d

63 30 (d )(1 ) by w hi ch pe ti ti on er Ri ck ey L. Drill in g s eek s t hi s C ou rt’s re vi ew of a 1



# de te rm in at io n o f th e App eal s Off ic e o f th e In te rn al Rev en ue Serv ic e (IR S)

su st ai ni ng th e fi li ng of a no ti ce o f fed eral tax li en for th e ta x years 2 00 4, 2 00 5, an d

20 07 . That de te rm in at io n was m ad e aft er t he App eal s Off ic e h ad co nd uc te d a

co ll ect io n- rev ie w hea rin g u nd er s ect io n 6 33 0( b) an d a su pp le m en ta l co ll ect io nrev ie w hea rin g p ur su an t t o a rem an d b y th is Co ur t. The de te rm in at io n was m ad e

Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o t he Int ern al 1


# Rev en ue Co de (26 U.S.C.) as am en de d a nd in effe ct at a ll rel ev an t t im es . All R ul e refe ren ces are t o t he Tax C ou rt R ul es of P ract ic e an d P ro ced ur e.

# - 3 -

[* 3] in a su pp le m en ta l n ot ic e o f de te rm in at io n d at ed Ju ly 29, 2 01 3. It is de sc rib ed

in fra p p. 3 2- 38 . W e h ol d t ha t t he App eal s Off ic e d id no t er r in it s d et erm in at io n.

FINDINGS OF FACT

W he n h e fi le d t he pe ti ti on , Dril li ng was a res id en t o f Tex as

.

1. Dril li ng ’s For m

10 40 EZ for 2 00 7

Apr il 15 , 20 08 , was t he fil in g d ead li ne for Dril li ng ’s 20 07 fed eral -in co m eta x re tu rn . On o r be fo re t ha t d at e, Dril li ng fil ed a Fo rm 10 40 EZ, “ In co m e Tax

Ret ur n fo r Si ng le an d J oi nt Fil ers W it h No Depe nd en ts ”, wit h t he IRS. On t he 2



# Fo rm 10 40 EZ, Drill in g re po rte d $ 14 ,60 5 a s h is tax du e (b efo re ac co un ti ng for an y

pa y m en ts of t ax an d a ny am ou nt s o f ta x wi th he ld fro m hi s wag es ). Dril li ng m ad e

a p ay m en t o f $4 75 wit h t he Fo rm 10 40 EZ. H e d id no t at ta ch a Fo rm W -2 , “ W ag e

an d Tax Sta te m en t” , to th e Fo rm 10 40 EZ. A Fo rm

W -2 wou ld ha ve st at ed ho w

m uc h was wit hh el d fr om

Dril li ng ’s wage s fo r fed eral in co m e ta x.

Fo r th e d at e Apr il 18 , 20 08 , th e IRS m ad e an en try on it s re co rd s for 3



# Dril li ng ’s 20 07 tax y ear t ha t t he re was a “ Paym en t wi th ret ur n” . The am ou nt of

Dril li ng co nt en ds th at th e Fo rm 10 40 EZ was fi le d t im el y . The IR S d oe s 2



# no t t ak e a p os it io n o n wh et he r th e fo rm was t im el y . As in di cat ed in th e te xt , we fin d t ha t t he for m

was t im el y

.
Unl es s o th erwi se in di cat ed , refer en ces to th e IRS ’s “ reco rd s” are t o F or m 3


# 43 40 , “ Cert ifi cat e o f Ass es sm en ts , Pay m en ts , and Oth er Sp eci fie d M at te rs ”, al so kn own as a n a cco un t t ran sc rip t, an d t he in fo rm at io n re fle ct ed in th e fo rm s.

# - 4 -

[* 4] th is en try is -$ 47 5. Th is en try su pp or ts ou r fi nd in g t ha t Dri ll in g m ad e a $ 47 5

pa y m en t wi th hi s Fo rm

10 40 EZ for 2 00 7. Th is en try als o s up po rts ou r fi nd in g t ha t

Dril li ng fil ed hi s re tu rn ti m el y

. 4



# On J un e 4 , 20 08 , th e IRS sen t Dri ll in g a let te r st at in g t ha t i t h ad rece iv ed hi s

Fo rm 10 40 EZ for 2 00 7 b ut th at it ne ed ed “ m or e in fo rm at io n t o p ro ces s t he ret ur n

accu rat el y .” In pa rti cu la r, th e le tt er m ad e th e fo ll owi ng req ue st of Dri ll in g:

“ Pl eas e p ro vi de a fo rm

wit h i nf or m at io n t ha t s up po rts th e wag e o r wit hh ol di ng

en try of $ 14 ,13 0.0 0 o n l in e 7 , For m 10 40 EZ. It co ul d b e Fo rm W -2 , For m

W -2 G

(fo r ga m bl in g wi nn in gs ), or

Fo rm 10 99 -R (fo r pe ns io n i nc om e).” Th e le tt er

su pp or ts ou r fi nd in g t ha t Dri ll in g d id no t at ta ch a Fo rm W -2 to th e Fo rm

10 40 EZ. 5



# Our reas on in g i s as fol lo ws. The da te of t he en try in t he IRS’s re co rd s, 4 

# Apr il 18 , 20 08 , su gg es ts th at th e IRS rece iv ed th e Fo rm 10 40 EZ arou nd Apri l 1 8, 20 08 . If th e IRS rece iv ed th e Fo rm 10 40 EZ arou nd Apri l 1 8, 2 00 8, t ha t s ug ge st s th at Dril li ng pro ba bl y

m ai le d t he Fo rm

10 40 EZ on or b efo re Ap ril 15 , 20 08 . If Dril li ng m ai le d t he ret ur n o n o r be fo re Ap ril 15 , 20 08 , th en he fil ed th e ret ur n ti m el y . A retu rn th at is m ai le d o n o r be fo re t he fil in g d ead li ne da te is de em ed fil ed ti m el y . Sec. 7 50 2; sec . 30 1.7 50 2- 1( a), Pro ced . & Adm in . Reg s.

The IRS co nt en ds th at Dril li ng di d n ot att ach a Fo rm W -2 to th e Fo rm 5 

# 10 40 EZ. D ril li ng co nt en ds he di d a tt ach a Fo rm W -2 . Dril li ng di d n ot tes ti fy th at he att ach ed a Fo rm

W -2 to th e Fo rm

10 40 EZ. N or di d h e p ro vi de do cu m en ta ry

ev id en ce t ha t h e at ta ch ed a Fo rm W -2 to th e Fo rm

10 40 EZ. T he Fo rm

10 40 EZ it se lf i s n ot in th e rec or d. On Ju ne 4, 2 00 8, t he IRS h ad to req ue st a Fo rm W -2 fro m Dril li ng . This su gg es ts to us th at Dril li ng ha d n ot att ach ed a Fo rm W -2 to hi s Fo rm 10 40 EZ. As n ot ed lat er i n t hi s o pi ni on , on Apri l 1 5, 2 01 1, Dri ll in g’s re pr es en ta ti ve (co nt in ue d...)

# - 5 -

[* 5] Fo r th e d at e Ju ly 14, 2 00 8, t he IRS m ad e an en try in i ts reco rd s fo r

Dril li ng ’s 20 07 tax y ear. Th e en try was “ Tax ret ur n fi le d” . The am ou nt of t hi s

en try was $ 14 ,60 5. An ot he r po rti on of t he IRS’s re co rd s fo r Dril li ng ’s 20 07 tax

y ear s ta te s:

R E T U R N D U E D A T E O R R E T U R N R E C E I V E D
D A T E ( W H I C H E V E R I S L A T E R ) A p r

. 1 5 , 2 0 0 8

P R O C E S S I N G D A T E J u l

. 1 4 , 2 0 0 8



# The Ju ly 14, 2 00 8 e nt ry

in th e IRS ’s reco rd s o f “ Tax ret ur n fi le d” an d t he

id en ti fic at io n o f Ju ly 14, 2 00 8, as th e “ PROCESS ING DATE” ind ic at e to us th at

th e IRS fin al ly pro ces se d t he Fo rm 10 40 EZ arou nd Ju ly 14, 2 00 8. Th e $ 14 ,60 5

am ou nt ass oc ia te d wi th th e Ju ly 14, 2 00 8 e nt ry su pp or ts ou r fi nd in g o f fac t t ha t

Dril li ng ha d re po rte d $ 14 ,60 5 o n t he Fo rm 10 40 EZ as h is tax du e (b efo re

acco un ti ng for pa y m en ts an d wag e wit hh ol di ng ).

Dril li ng di d n ot res po nd to th e IRS ’s Ju ne 4, 2 00 8 re qu es t fo r hi s Fo rm W -2

.

(...co nt in ue d) 5 

# fax ed th e App eal s Off

ic e a Fo rm

W -2 refl ect in g t ha t $ 14 ,13 0 was wit hh el d fr om Dril li ng ’s wage s fo r th e y ear 2 00 7. Se e in fra p . 8 (fi fth do cu m en t i n t ab le ). Ther e is a -$ 14 ,13 0 e nt ry

in th e IRS ’s reco rd s fo r th e ta x year 20 07 wit h t he ex pl an at io n:

“ W -2 or 1 09 9 wi th ho ld in g” . The en try is d at ed Apri l 1 5, 2 00 8. Des pi te th is da te
, we be li ev e th is en try was m ad e sh or tl y aft er Ap ril 15 , 20 11 , th e d ay th e App eal s Offi ce re cei ve d Dri ll in g’s Fo rm W -2 vi a fax . The Ap ril 15 , 20 08 da te of t he en try
ap pe ars to us to be no t t he da te th e en try was m ad e b ut th e d at e o n wh ic h (i n t he IRS’s v ie w) Dril li ng sh ou ld be cred it ed for th e $ 14 ,13 0 a m ou nt for cert ai n

co m pu ta ti on al pu rp os es

.

# - 6 -

[* 6] 2. The IRS’s n ot ic e to Dril li ng th at it ha d fi le d a no ti ce o f li en ;

Dril li ng ’s in it ia l co ll ect io n- rev ie w hea rin g b efo re t he App eal s Off ic e

On M ay 11 , 20 10 , th e IRS m ai le d a no ti ce t o Dri ll in g t ha t o n t ha t d ay it ha d

fil ed a no ti ce o f li en in Harri s C ou nt y , Texa s, t o c ol le ct in co m e-t ax li ab il it ie s fo r

th e fo ll owi ng tax y ears in th e fo ll owi ng am ou nt s:

Year Am ou nt

20 04 $2 36 .87

20 05 2,1 44 .25

20 07 14 ,73 6.9 4

The May 11, 2 01 0 n ot ic e st at ed th at Dril li ng co ul d re qu es t a c ol le ct io n- rev ie w

he ari ng wit h t he App eal s Off ic e.

On J un e 1 7, 2 01 0, Dri ll in g m ai le d t he IRS a F or m 12 15 3, “ Req ue st for a

Co ll ect io n Du e Pro ces s o r Equ iv al en t Hea rin g” , by whi ch he req ue st ed a

co ll ect io n- rev ie w hea rin g. As to th e “ reas on ” th at Dril li ng “ di sa gr ee[d ] wit h t he

fil in g o f th e li en ”, Dril li ng m ad e th e fo ll owi ng en tri es on th e fo rm :

! Und er t he he ad in g “ Co ll ect io n Al te rn at iv e”, Dri ll in g c he ck ed bo th th e b ox

fo r “ In st al lm en t Ag reem en t” an d t he bo x fo r “ Offer i n C om pr om is e”.

! Und er t he he ad in g “ Lien ”, Dril li ng ch eck ed th e b ox for “ W it hd rawal ” an d

ex pl ai ne d: “ Orig in al ly requ es te d o ffer in co m pr om is e th en arra ng ed

# - 7 -

[* 7] in st al lm en ts whi ch y ou di d n ot de du ct un de r m ul ti pl e co ur t o rd ered

pa y m en ts . Need R el ie f.”

On Ap ril 1, 2 01 1, t he App eal s Off ic e h ad a te le ph on e co nf

eren ce wi th

Dril li ng an d h is rep res en ta ti ve , R. Jea ne tt e Par ha m . The s et tl em en t o ffi cer

as si gn ed to th e h eari ng , Alv en a Tay lo r-Whit e, m ad e n ot es of wh at tra ns pi red

du rin g t he tel ep ho ne co nf eren ce. The no te s re fle ct th at Set tl em en t Offi cer Taylo rW hi te ask ed Parh am

whet he r Dril li ng ha d a ny iss ue s t o ra is e b es id es th os e

di sc us se d i n t he Fo rm

12 13 5; Parh am

res po nd ed th at Dril li ng wis he d t o s ub m it an

am en de d t ax ret ur n fo r 20 07 ; Pa rh am st at ed th at Dril li ng ha d n ot be en gi ve n c red it

fo r $1 4,1 29 of f

ed eral in co m e ta x wi th ho ld in g fo r 20 07 ; Se tt le m en t Offi cer

Tay lo r-Whit e rev ie wed cert ai n re co rd s an d a gr eed th at Dril li ng ha d n ot be en gi ve n

cred it for $1 4,1 29 of f

ed eral in co m e ta x wi th ho ld in g; Parh am st at ed th at sh e h ad

“ no is su e” wi th th e ta x l ia bi li ti es for 20 04 an d 2 00 5; Set tl em en t Offi cer Taylo rW hi te res po nd ed to Dril li ng ’s req ue st for a co ll ect io n a lt ern at iv e b y st at in g t ha t

Dril li ng ha d n ot fil ed hi s 2 00 6 a nd 20 08 ret ur ns ; Pa rh am pro m is ed to fax ret ur ns

fo r 20 06 an d 2 00 8 a nd an am en de d 2 00 7 re tu rn ; Pa rh am st at ed th at li en

wit hd rawal wou ld faci li ta te th e co ll ect io n o f ta x; Set tl em en t Offi cer Taylo r-Whit e

ex pl ai ne d t o P arh am

th e d iff eren ce b et ween an “ IA” [i ns ta ll m en t ag reem en t] and

# - 8 -

[* 8] an “ of

fer” ; an d S et tl em en t Offi cer Taylor -Whit e g av e Par ha m un ti l Ap ril 15

,

20 11 , to pro vi de “ th e ad dt l i nf o” [i.e ., th e ad di ti on al in fo rm at io n].

On Ap ril 15 , 20 11 , Parh am fax ed to Set tl em en t Offi cer Taylo r-Whit e a s et

of do cu m en ts . Here is a pa rti al li st of t he do cu m en ts :

Date of do cu m en t Des cri pt io n o f do cu m en t
Apr . 15 , 20 11 A For m 65 6, “ Offer i n C om

pr om is e”
Apr . 15 , 20 11 A For m 43 3- A, “ Co ll ect io n In fo rm at io n S ta te m en t fo r W ag e Earn ers an d S el f-Em

pl oyed In di vi du al s”

Non e A For m 10 40 A, “ U.S. Ind iv id ua l In co m e Tax Ret ur n” , for th e ta x year 20 07 ; o n l in e 3 8, “ Fed eral in co m e ta x wi th he ld fro m Fo rm s W-2 an d 1 09 9” , is typed th e am ou nt $1 4,1 30

. Non e A For m 10 40 X, “ Am en de d U.S. In di vi du al Inc om e Tax Ret ur n” , for th e ta x year 20 07 ; o n t he li ne for fed eral in co m e ta x wi th he ld , $0 was t y

pe d fo r th e “ [o ]rigi na l am ou nt or a s pr ev io us ly adjus te d” an d $ 14 ,13 0 was typed for th e “ Co rrec t

am ou nt ”.

Non e A For m W -2 , “ W ag e an d Tax Sta te m en t” , for th e ta x year 20 07 fro m

Ocean eeri ng Int ern at io na l In c.; u nd er “ Fed eral in co m e ta x wi th he ld ” is th e am ou nt $1 4,1 30

. Apr . 15 , 20 11 A For m 10 40 EZ, “ In co m e Tax Ret ur n fo r Si ng le an d J oi nt Fi le rs W it h No Depe nd en ts ”, fo r th e ta x year 20 10
Apr . 15 , 20 11 A For m 10 40 , “ U.S. Ind iv id ua l In co m e Tax Ret ur n” for th e ta x year 20 08

Non e A For m 10 40 EZ for t ax y ear 2 00 6

# - 9 -

[* 9] Aug . 29

, 20 03 An o rd er o f th e Co un ty Cou rt a t Law o f Aus ti n C ou nt y ,

Tex as , ren de red on Jan ua ry 7, 2 00 2, an d ra ti fie d o n Au gu st 29 , 20 03 , req ui rin g Dri ll in g t o m ak e ch il d- su pp or t p ay m en ts of $2 50 pe r m on th , beg in ni ng on Jan ua ry 14 , 20 02 , un ti l h is ch il d i s 1 8 years o ld an d re qu iri ng Dril li ng ’s em pl oyers t o wit hh ol d $ 25 0 p er m on th fro m hi s ea rn in gs for ch il d s up po rt
Sep t. 1 4, 2 00 4 An o rd er o f th e Co un ty Cou rt a t Law o f Aus ti n C ou nt y ,

Tex as , st at in g t ha t o n Au gu st 29 , 20 03 , th e co ur t h ad ord ered Dril li ng to pa y

ch il d s up po rt o f $2 50 pe r m on th , beg in ni ng Ja nu ary 14 , 20 02 , and th at , as o f Aug us t 3 1, 2 00 4, Dri ll in g

was $4 ,00 0 i n a rrea rs on ch il d- su pp or t p ay m en ts ; t he ord er gr an te d a jud gm en t ag ai ns t Dri ll in g fo r $4 ,00 0 a nd ord ered hi m to pa y th e jud gm en t b y

pa y in g $ 50 pe r m on th be gi nn in g Octo be r 14 , 20 04 . The o rd er re qu ire d Dri ll in g t o p ay “ cas h

m ed ic al su pp or t” as “ ad di ti on al ch il d s up po rt” of $ 10 0 p er

m on th be gi nn in g Oct ob er 1 4, 2 00 4, u nt il hi s ch il d a tt ai ne d t he
ag e o f 18 . The o rd er req ui red Dril li ng ’s em pl oyers t o wit hh ol d c hi ld su pp or t fr om hi s ea rn in gs

. Sep t. 2 7, 2 00 5 A jud gm en t o f th e 1 55 th Ju di ci al Dis tri ct Co ur t o f Aus ti n

Co un ty, Tex as , in cas e No. 2 00 1R -0 04 6, s us pe nd in g a 10

- y ear p ris on sen te nc e im

po se d o n Dri ll in g fo r co m m it ti ng an act of a rs on on Sep te m

be r 9, 1 99 9, an d p la ci ng Dril li ng in

co m m un it y su pe rv is io n Sep t. 2 7, 2 00 5 An am en de d o rd er o f th e 1 55 th Ju di ci al Dis tri ct Co ur t o f

Aus ti n C ou nt y , Texa s, i n c as e No. 2 00 1R -0 04 6, re qu iri ng Dril li ng to m ak e res ti tu ti on of $ 10 5,0 00 , an a m ou nt co m po se d of $7 0,0 00 res ti tu ti on to Aus ti n C ou nt y Farm ers Mu tu al Fir e In su ran ce Co . and $3 5,0 00 to Lori Dril li ng an d p ro vi di ng th at th e “ ab ov e u np ai d t ot al is to be pa id in pa y m en ts of $ 15 0.0 0 each m on th for res ti tu ti on to Lori Dril li ng , un ti l fu ll y pa id ” to th e Co m m un it y Su pe rv is io n a nd Co rrec ti on s Dep art m en t an d th at th e fi rs t p ay m en t wo ul d b e d ue on Sep te m be r 1, 2 00 5

# - 10 -

[* 10 ] Ju ly 27, 20 05 A let te r to Dril li ng fro m th e 1 55 th Ju di ci al Dis tri ct
, Co m m un it y Su pe rv is io n & Co rrec ti on s Dep art m en t, re ga rd in g

cas e No. 2 00 1R -0 04 6, s ta ti ng th at Dril li ng ha d fa il ed to m ak e pa y m en t t owa rd res ti tu ti on , th at he was d el in qu en t $ 30 0, an d th at if h e d id no t m ak e p ay m en t b y Aug us t 4 , 20 05 , he h ad to
ap pe ar i n c ou rt o n Au gu st 9, 2 00 5
May 5, 20 06 A on e-p ag e ch il d- su pp or t s ta te m en t fr om th e St at e o f Tex as li st in g t he las t 1 2 p ay m en ts m ad e b y Dril li ng . The l as t
pa y m en t i s a $ 18 4.6 2 p ay m en t m ad e o n Ap ril 24 , 20 06 . The li st ed pa y m en ts were b iwee kl y . The s ta te m en t co nt ai ne d t he

en try “ Co ur t o rd ered pa y m en t fo r May $4 00 .00 ”. Acco rd in g to th e st at em en t t he re was an arre arag e o f $2 ,65 8.3 9 i n c hi ld

su pp or t p ay m en ts an d i nt eres t.

Non e An o rd er o f th e Co un ty Cou rt a t Law o f Aus ti n C ou nt y ,

Tex as , req ui rin g Dri ll in g t o m ak e ch il d- su pp or t p ay m en ts of $8 59 .86 pe r m on th , wit h t he fir st pa y m en t o n M ay 1, 2 00 8, fo r th e su pp or t o f hi s d au gh te r un ti l t he da ug ht er re ach es th e ag e o f 18 y ears , and req ui rin g h is em pl oyers t o wi th ho ld

am ou nt s fo r ch il d s up po rt f ro m hi s ea rn in gs ; t he ord er i s t it le d

“ Ord er i n S ui t t o M od ify Paren t-C hi ld Rel at io ns hi p”

. Dec. 1 6, 2 00 5 A lea se si gn ed by D ril li ng an d a co te na nt all owi ng Dril li ng

an d t he co te na nt to li ve in a ho us e in Baytown , Texa s, d ur in g

an in it ia l t erm

of S ep te m

be r 1 t o Oct ob er 1 , 20 05 , and th en

ren ewab le m on th to m on th , for a ren t o f $8 50 pe r m on th

On Ap ril 19 , 20 11 , Set tl em en t Offi cer Taylo r-Whit e m ad e n ot es ab ou t t he

Apr il 15 , 20 11 fax . Accor di ng to th e n ot es , Set tl em en t Offi cer Taylo r-Whit e

fo rward ed co pi es of t he do cu m en ts to “ MSC /C OIC” (a pp aren tl y th e IRS ’s off

erin -co m pr om is e u ni t). Sh e fo rward ed th e “ ta x re tu rn s fo r ta xp ds [ta x p eri od s]

20 06 , am en de d 2 00 7, 2 00 8, & 20 10 ” to “ Serv ic e Ct r to be pro ces se d a s p os si bl e

# - 11 -

[* 11 ] du pl ic at es .” The IR S’s reco rd s fo r th e ta x year 20 07 sh ow t ha t t he IRS: (1)

cred it ed Dril li ng wit h $ 14 ,13 0 fo r 20 07 , (2) eli m in at ed all ad di ti on s t o t ax for

20 07 for fai li ng to pa y

est im at ed in co m e ta x a nd in co m e ta x, an d (3 ) el im in at ed

Dril li ng ’s li ab il it y

for in te res t fo r pa y in g l at e fo r 20 07 . The rel ev an t en tri es ap pe ar

to ha ve be en m ad e in Ju ne 20 11

.
On Ap ril 29 , 20 11 , Dril li ng su bm it te d t o S et tl em en t Offi cer Taylo r-Whit e

th e Fo rm 65 6 t ha t h e h ad pre vi ou sl y fax ed to Set tl em en t Offi cer Taylo r-Whit e o n

Apr il 15 , 20 11 . On th e Fo rm 65 6, Dri ll in g o ffer ed to pa y $4 ,00 0 i n i ns ta ll m en t

pa y m en ts of $ 20 0 p er m on th for 20 m on th s. On th e fo rm , Dril li ng in di cat ed th at

th e $ 4,0 00 was o ffer ed to sat is fy hi s i nc om e-t ax li ab il it ie s fo r 20 04 , 20 05 , 20 06

,

20 07 , 20 08 , 20 09 , and 20 10 . Und er t he he ad in g “ Rea so n fo r Offer ”, Dril li ng

ch eck ed th e b ox lab el ed :

D o u b t a s t o C o l l e c t i b i l i t y
- - I h a v e i n s u f f i c i e n t a s s e t s a n d i n c o m e t o p a y t h e f u l l a m o u n t

.



# Dril li ng di d n ot ch eck th e b ox lab el ed :

E x c e p t i o n a l C i r c u m s t a n c e s ( E f f e c t i v e T a x A d m i n i s t r a t i o n )

- - I o w e t h i s a m o u n t a n d h a v e s u f f i c i e n t a s s e t s t o p a y t h e f u l l a m o u n t , b u t d u e t o m y e x c e p t i o n a l c i r c u m s t a n c e s , r e q u i r i n g f u l l p a y m e n t w o u l d

c a u s e a n e c o n o m i c h a r d s h i p o r w o u l d b e u n f a i r a n d i n e q u i t a b l e

. I

a m s u b m i t t i n g a w r i t t e n n a r r a t i v e e x p l a i n i n g m y c i r c u m s t a n c e s

.



# Als o u nd er t he he ad in g fo r “ Rea so n fo r Offer ”, th e p rep rin te d fo rm co nt ai ne d t he

fo ll owi ng pre pr in te d t ex t:

# - 12 -

[* 12 ] E x p l a n a t i o n o f C i r c u m s t a n c e s ( A d d a d d i t i o n a l p a g e s , i f n e e d e d )

T h e I R S u n d e r s t a n d s t h a t t h e r e a r e u n p l a n n e d e v e n t s o r s p e c i a l

c i r c u m s t a n c e s , s u c h a s s e r i o u s i l l n e s s , w h e r e p a y i n g t h e f u l l

a m o u n t o r t h e m i n i m u m o f f e r a m o u n t m i g h t i m p a i r y o u r a b i l i t y t o
p r o v i d e f o r y o u r s e l f a n d y o u r f a m i l y

. I f t h i s i s t h e c a s e a n d y o u

c a n p r o v i d e d o c u m e n t a t i o n t o p r o v e y o u r s i t u a t i o n , t h e n y o u r o f f e r

m a y b e a c c e p t e d d e s p i t e y o u r f i n a n c i a l p r o f i l e

. D e s c r i b e y o u r

s i t u a t i o n b e l o w a n d a t t a c h a p p r o p r i a t e d o c u m e n t s t o t h i s o f f e r

a p p l i c a t i o n

.



# On t he bl an k l in es fol lo win g t hi s p rep rin te d t ex t, Dri ll in g t y pe d t he se word s:

I h a v e b e e n o n p r o b a t i o n o r c o n d i t i o n a l b o n d s i n c e 2 0 0 1 , a n d w a s j a i l e d f o r s o m e t i m e p r i o r t o t h a t

. M y e x
- w i f e t o o k a l l o f t h e

a s s e t s w e h a d , n o t o n c e , b u t t h r e e t i m e s a s ( f o o l i s h m e a c t u a l l y b e l i e v e d t h a t w e w e r e g e t t i n g b a c k t o g e t h e r a n d ) I m o v e d b a c k w i t h
h e r t w i c e a f t e r t h e d i v o r c e

. T h a t i s w h a t e n d e d u p c a u s i n g t h e

c r i m i n a l c h a r g e s a n d j a i l

. S i n c e I h a v e b e e n o n p r o b a t i o n a n d

c o n d i t i o n a l b o n d , I h a v e b e e n a s s i g n e d w i t h t h e t a s k o f c h i l d

s u p p o r t ( n o w m o r e t h a n 8 0 0 / m o ) a n d r e s t i t u t i o n t o m y e x
- w i f e i n

a d d i t i o n t o t h e c o u r t o r d e r e d f e e s a s s o c i a t e d w i t h p r o b a t i o n

. I d o n o t e v e n h a v e a c c e s s t o e n o u g h o f m y f u n d s t o l i v e o n m y o w n , I

r e n t a p o r t i o n o f a h o u s e

. I h a v e i n c l u d e d e v i d e n c e o f m y m o n t h l y

n e c e s s a r y e x p e n s e s a n d r e q u e s t y o u c o n s i d e r t h i s o f f e r

.



# At t he same tim e th at he su bm it te d t he Fo rm 65 6 (t he off

er-i n- co m pr om is e

fo rm ), Dril li ng su bm it te d a co ll ect io n- in fo rm at io n s ta te m en t t ha t h e h ad

pr ev io us ly faxed on Apri l 1 5, 2 01 1. In t he sec ti on of t he st at em en t fo r as se ts
, 6



# Dril li ng st at ed th at he own ed th e fo ll owi ng ass et s:

The pa rti es ag ree i n t he ir b rie fs th at Dril li ng : (1 ) su bm it te d t he co ll ect io n- 6 

# in fo rm at io n s ta te m en t at th e sa m e ti m e h e su bm it te d t he off er-i n- co m pr om is e fo rm

an d (2 ) su bm it te d t he off er-i n- co m pr om is e fo rm

on Apri l 2 9, 2 01 1. Th us th e pa rti es ag ree t ha t Dri ll in g s ub m it te d t he co ll ect io n- in fo rm at io n s ta te m en t o n Ap ril 29 , 20 11

.

# - 13 -

[* 13 ] Ass et Valu e Fu rth er ex pl an at io n

Cas h o n h an d $3 2

Ban k a cco un t wi th JP M or ga n Cha se 32

40 1K i nv es tm en t wi th W el ls Farg o P la n Ad m in is tra to r 16 ,45 7 $1 8,6 13 va lu e m in us $2 ,15 6 lo an ba la nc e

20 10 Fo rd XTL (veh ic le ) -9 ,43 7 $2 4,7 88 va lu e m in us $3 4,2 25 lo an ba la nc e

20 07 Hon da H75 0 (v eh ic le ) 2,0 00

Hou se ho ld fur ni sh in gs 1,0 00

Sai lb oa t 1,0 00

Tot al 11 ,08 4

In th e se ct io n o f th e fo rm for m on th ly inc om e an d e xp en se s, Dri ll in g s ta te d t ha t

hi s t ot al in co m e was $6 ,55 3 a nd hi s t ot al li vi ng ex pe ns es were $ 5,9 65 , whi ch is a

di ffer en ce o f $5 88 . Inc lu de d i n t he $5 ,96 5 i n t ot al li vi ng ex pe ns es was $ 1,1 20 in

“ Co ur t Ord ered Pay m en ts ”.

Dril li ng ’s off

er-i n- co m pr om is e was refe rred to an off er-i n- co m pr om is e

sp eci al is t at th e IRS . The s pe ci al is t cr eat ed work pa pe rs refl ect in g h er

de te rm in at io ns reg ard in g t he off er-i n- co m pr om is e. The o ffer -in -co m pr om is e

sp eci al is t d et erm in ed th at Dril li ng ’s net eq ui ty in as se ts was $ 15 ,13 4.4 0. Sh e se t

fo rth he r cal cu la ti on s fo r th is fig ur e in a ta bl e, th e es se nt ia l el em en ts of wh ic h a re:

# - 14 -

[* 14 ]

A s s e t / E q u i t y T a b l e

A s s e t V a l u e ( p o s t d e b t )

r e p o r t e d b y D r i l l i n g

o n F o r m 6 5 6 V a l u e ( p o s t d e b t )

d e t e r m i n e d b y

s p e c i a l i s t R e a s o n s g i v e n i n t a b l e f o r d i f f e r e n c e b e t w e e n t h e t w o v a l u e s

C a s h o n h a n d $ 3 2

- 0

- N o t e x p l a i n e d

.

B a n k a c c o u n t

w i t h J P M o r g a n C h a s e 3 2

- 0

- N o t e x p l a i n e d

.

4 0 1 K i n v e s t m e n t

w i t h W e l l s F a r g o P l a n A d m i n i s t r a t o r 1 6

, 4 5 7 $ 1 2

, 7 3 4

. 4 0 T h e $ 1 8

, 6 1 3 v a l u e ( p r e

- d e b t ) t h a t w a s r e p o r t e d b y D r i l l i n g w a s m u l t i p l i e d b y a n 8 0 % q u i c k

s a l e m u l t i p l i e r

. T h e r e s u l t i n g v a l u e , $ 1 4

, 8 9 0

. 4 0

, w a s t h e n r e d u c e d b y a $ 2

, 1 5 6 d e b t

t h a t D r i l l i n g h a d r e p o r t e d

.

2 0 1 0 F o r d X T L ( v e h i c l e ) - 9

, 4 3 7

- 0

- T h e $ 2 4

, 7 8 8 v a l u e ( p r e

- d e b t ) t h a t w a s r e p o r t e d b y D r i l l i n g w a s m u l t i p l i e d b y a n 8 0 % q u i c k

s a l e m u l t i p l i e r

. T h e r e s u l t i n g v a l u e , $ 1 9

, 8 3 0

. 4 0

, w a s e n t i r e l y a b s o r b e d b y a $ 3 4

, 2 2 5 d e b t
, b r i n g i n g t h e v a l u e t o $ 0

.

2 0 0 7 H o n d a H 7 5 0 ( v e h i c l e ) 2

, 0 0 0 1

, 6 0 0

. 0 0 T h e $ 2

, 0 0 0 v a l u e r e p o r t e d b y D r i l l i n g w a s

m u l t i p l i e d b y a n 8 0 % q u i c k

- s a l e m u l t i p l i e r

.

H o u s e h o l d
f u r n i s h i n g s 1

, 0 0 0

- 0

- T h e $ 1

, 0 0 0 v a l u e r e p o r t e d b y D r i l l i n g w a s

m u l t i p l i e d b y a n 8 0 % q u i c k

- s a l e m u l t i p l i e r

. T h e r e s u l t i n g v a l u e , $ 8 0 0

, w a s e n t i r e l y

a b s o r b e d b y a $ 8

, 3 7 0 d e b t t h a t t h e s p e c i a l i s t

a p p a r e n t l y w a s a p p r i s e d o f t h r o u g h s o u r c e s

o t h e r t h a n t h e F o r m 6 5 6

.

S a i l b o a t 1

, 0 0 0 8 0 0

. 0 0 T h e $ 1

, 0 0 0 v a l u e r e p o r t e d b y D r i l l i n g w a s

m u l t i p l i e d b y a n 8 0 % q u i c k

- s a l e m u l t i p l i e r

.

T o t a l 1 1

, 0 8 4 1 5
, 1 3 4

. 4 0



# The work pa pe rs als o p ro vi de d t he cal cu la ti on s u nd erl y in g t he off er-i nco m pr om is e sp eci al is t’s d et erm in at io n t ha t Dri ll in g’s m on th ly inc om e was $6 ,55 3

(th e sa m e am ou nt he rep or te d o n t he Fo rm 65 6) an d t ha t h is m on th ly exp en se s

were $ 6,4 38 (co m

pa red to th e $ 5,9 65 he rep or te d o n t he Fo rm 65 6) . Of th e $ 6,4 38

# - 15 -

[* 15 ] in m on th ly exp en se s, $ 1,1 20 was fo r “ Co ur t Ord ered Pay m en ts ”. (Thi s

$1 ,12 0 was th e sa m e am ou nt Dril li ng rep or te d.). Th e d iff eren ce b et ween m on th ly

in co m e an d m on th ly exp en se s, as de te rm in ed by the sp eci al is t, was $1 15 . The

of fer- in -co m

pr om is e sp eci al is t d et erm in ed th at Dril li ng ha d $ 13 ,80 0 o f fu tu re

in co m e ($ 11 5 m on th ly net in co m e) × (1 20 m on th s) an d $ 15 ,13 4.4 0 t ot al ass et s, fo r

a to ta l am ou nt of $ 28 ,93 4.4 0 (t he so -cal le d re as on ab le co ll ect io n p ot en ti al ) th at he

co ul d u se to pa y

hi s t ax li ab il it ie s. At t he en d o f th e wor kp ap ers , th e o ffer -in

co m pr om is e sp eci al is t wro te :

T o t a l L i a b i l i t y : $ 1 2 , 5 0 0

. 7 8

O r i g i n a l O f f e r A m o u n t : $ 4 , 0 0 0

R e c o m m e n d a t i o n : B a s e d u p o n y o u r f u t u r e i n c o m e a n d e q u i t y i n

a s s e t s y o u h a v e t h e a b i l i t y t o f u l l p a y y o u r l i a b i l i t y

.



# On Oct ob er 2 7, 2 01 1, t he IRS o ffer -in -co m pr om is e g ro up pre pa red a le tt er

to Dril li ng st at in g:

W e h a v e i n v e s t i g a t e d y o u r o f f e r d a t e d 0 4 / 1 5 / 2 0 1 1 i n t h e

a m o u n t o f $ 4 , 0 0 0

. 0 0

. A c o p y o f y o u r o f f e r i s e n c l o s e d

.

W e h a v e m a d e a p r e l i m i n a r y d e c i s i o n t o r e j e c t y o u r o f f e r f o r t h e f o l l o w i n g r e a s o n ( s ) :

B a s e d u p o n t h e i n f o r m a t i o n y o u p r o v i d e d , w e h a v e d e t e r m i n e d
t h a t y o u h a v e t h e a b i l i t y t o p a y y o u r l i a b i l i t y i n f u l l w i t h i n t h e t i m e p r o v i d e d b y l a w

. Y o u r s p e c i a l c i r c u m s t a n c e s d i d n o t w a r r a n t

a h a r d s h i p

. W e m a d e t h i s d e t e r m i n a t i o n o n t h e f o l l o w i n g

c o m p u t a t i o n s :

T o t a l n e t e q u i t y i n a s s e t s : $ 1 5 , 1 3 4

. 4 0
T o t a l a b i l i t y t o p a y : $ 1 5 , 1 3 4

. 4 0
T o t a l b a l a n c e d u e : $ 1 2 , 5 0 0

. 7 8 ( T h r o u g h 0 5 / 0 2 / 2 0 1 1 )
A m o u n t y o u o f f e r e d : $ 4 , 0 0 0

. 0 0

# - 16 -

[* 16 ] C o p i e s o f o u r w o r k s h e e t s h a v e b e e n e n c l o s e d f o r y o u r r e v i e w

.

T h e d e c i s i o n t o r e j e c t y o u r o f f e r i s a p r e l i m i n a r y d e c i s i o n

m a d e b y C o l l e c t i o n p e r s o n n e l

. D u e t o t h e f a c t t h a t y o u f i l e d a

r e q u e s t f o r a C o l l e c t i o n D u e P r o c e s s ( C D P ) h e a r i n g , w e a r e f o r w a r d i n g y o u r c a s e t o A p p e a l s

. A f i n a l d e t e r m i n a t i o n o n t h e

o f f e r w i l l b e i s s u e d b y A p p e a l s i n c o n j u n c t i o n w i t h t h e C D P c a s e

.

A n y p a y m e n t s m a d e w i t h y o u r o f f e r w i l l b e a p p l i e d t o y o u r t a x l i a b i l i t y a n d w i l l n o t b e r e t u r n e d t o y o u

.



# The l et te r st at es th at th e o ffer -in -co m pr om is e sp eci al is t’s wo rk pa pe rs were

en cl os ed wit h i t. The IRS co nt en ds th at it m ai le d t he let te r (an d, p res um ab ly the 7



# wor kp ap ers ) to Dril li ng . Dril li ng co nt en ds th e IRS di d n ot sen d h im th e le tt er o r

th e wor kp ap ers

.

On Dec em

be r 13 , 20 11 , Set tl em en t Offi cer Taylo r-Whit e m ad e th e

fo ll owi ng no te s i n t he IRS’s fi le s ab ou t Dri ll in g’s o ffer -in -co m pr om is e:

R e v i e w e d r e j e c t e d o f f e r i n c o m p r o m i s e :

B r i e f B i o : t p i s u n m a r r i e d , t p i s 4 9 y r s o l d , r e s i d e s i n N o n

- C P

s t a t e ; L R F 3 0 / 2 0 1 0 s h o w s 0 d e p e n d e n t , b u t F 4 3 3

- A s h o w 1 d e p e n d e n t ; O E a l l o w e d 2 i n h / h

R e v i e w o f c o m p u t e r t r a n s c r i p t s : n o o p e n e x a m / C I a u d i t s / c s e d i s s u e s ; t p s u b m i t t e d a n a m e n d e d t x r e t u r n f o r C D P t x p d 2 0 0 7 s i n c e i n i t i a l a n a l y s i s ; a m e n d e d t a x r e t u r n r e d u c e d t x l i a b t o $ 0 ; l e a v i n g a c r e d i t o f $ 2 7 6

. 6 5 ;

B a l d u e f o r C D P t x p d s ( 2 0 0 4 / 2 0 0 5 ) i s n o w $ 3 4 2 2

. 2 2 ; w i t h n o n

- C D P
t x p d s ( 2 0 0 6 / 2 0 0 8 ) t h e t o t a l b a l d u e i s $ 6 7 9 8

. 1 9 t h r u 1 2 / 3 0 / 1 1 ;

C f i n k / 2 8 4 8 : J e a n e t t e P a r h a m , L e v e l A , c a f # 5 0 0 5

- 8 1 0 7 8 R , c o n t a c t #
9 7 9

- 8 2 6

- 4 8 3 8

C a u s e o f t a x l i a b : i n s u f f i c i e n t f i t a n d / o r f t p e s t t x p y m t s C o m p l i a n c e : t p i s i n c o m p l i a n t [ s i c ] w / f i l i n g r e q u i r e m e n t s ; L R F 2 0 1 0 1 2
I n o l e s : n o x
- r e f #

I r p t r l : 2 0 1 0 I r p t r l s h o w $ 8 1 , 4 4 1 m e d i c a r e w a g e s



# Here an d e ls ewh ere, we re fer t o t he Co m m is si on er o f In te rn al Rev en ue , 7



# res po nd en t i n t hi s ca se , as “ th e IRS ”.

# - 17 -

[* 17 ] P r e v i o u s S t : 2 4 ; C u r r e n t S t : 7 1

L i e n s : l i e n h a s b e e n f i l e d o n C D P t x p d s B a s i s : T p s u b m i t t e d a D A T C O f f e r t o c o m p r o m i s e s i n g l e t x l i a b f o r t x p d ( s ) 3 0 / 2 0 0 4 , 2 0 0 5 , 2 0 0 6 , 2 0 0 7 , 2 0 0 8 , 2 0 0 9 , 2 0 1 0 ; p e r O E ’ s

w k s h e e t t p o w e d f o r o n l y 2 0 0 4 , 0 5 , 0 6 , 0 7 , 0 8 ; t x l i a b w a s $ 1 2 , 5 0 0

. 7 8
C u r r e n t b a l a n c e d u e : $ 6 7 8 8

. 7 6 t h r u 1 1 / 1 6 / 1 1
T e r m s : t p o f f e r e d t o p a y $ 4 0 0 0 S h o r t

- T e r m D e f e r r e d P a y m e n t ; $ 2 0 0

s u b m i t t e d w / o f f e r ; b a l o f $ 3 8 0 0 p a y a b l e @ $ 2 0 0 o n t h e 5 o f e a c h th

m o n t h f o r a t o t a l o f 2 0 m o n t h s

. A p p l i c a t i o n F e e : t p s u b m i t t e d $ 1 5 0 a p p l i c a t i o n f e e , f u n d s a p p l i e d

w / D P C 3 3 t o t x p d 3 0 / 2 0 0 4
T i p r a : t p p r o v i d e d $ 2 0 0 T i p r a p y m t , a p p l i e d w / D P C 3 4 t o t x p d 2 0 0 4 1 2

R e a s o n f o r R e j e c t i o n : R e j e c t i o n b a s e d o n R C P f r o m N R E i n a s s e t s

a n d f u t u r e i n c o m e

.

A E T : n e t e q t y i n a s s e t s : $ 1 5 , 1 3 4

. 4 0
I E T : $ 1 1 5 i n d i s c r e t i o n a r y i n c o m e C O I C R C P : $ 2 8 , 9 3 4

. 4 0

D u e t o C D P , O E d i d n o t m a i l a f o r m a l r e j e c t i o n o f o f f e r t o t p ;

r e j e c t i o n w a s s u b j e c t t o A p p e a l s r e v i e w ; n o F 1 3 7 1 1 p r o v i d e d b y t p / p o a l i s t i n g a p p e a l i s s u e s

.

A p p e a l s P o s i t i o n :

I r e v i e w e d t h e O E ’ s c a s e h i s t o r y & w o r k s h e e t s a n d c o n c u r w i t h t h e

r e j e c t i o n r e c o m m e n d a t i o n ; O E w o r k e d t h e c a s e u n d e r S t r e a m l i n e d
C r i t e r i a ; p e r O E t h e r e w e r e n o s i g n i f i c a n t d i s c r e p a n c i e s b e t w e e n t p ’ s c l a i m e d f i g u r e s o n t h e F 4 3 3

- A & i n t e r n a l s o u r c e s ; s o , O E

a l l o w e d t p ’ s c l a i m e d f i g u r e s :

P l a n o f a c t i o n : a t t e m p t t o c o n t a c t t p v i a t e l e p h o n e t o d i s c u s s a n I A a s a p o s s i b l e c o l l e c t i o n a l t e r n a t i v e

.



# On Dec em

be r 13 , 20 11 , Set tl em en t Offi cer Taylo r-Whit e p rep ared a le tt er t o

Dril li ng . The l et te r sa id :

I h a v e r e v i e w e d t h e c a s e f i l e a n d t h e i n f o r m a t i o n y o u p r e v i o u s l y

s u b m i t t e d t o t h e O f f e r E x a m i n e r

.

T h e O f f e r E x a m i n e r ’ s p r e l i m i n a r y d e c i s i o n w a s t o r e j e c t y o u r o f f e r b a s e d o n y o u r R e a s o n a b l e C o l l e c t i o n P o t e n t i a l

. I ’ v e e n c l o s e d a

c o p y o f t h e O f f e r ’ s w o r k s h e e t s f o r y o u r r e v i e w

.

R e v i e w t h e w o r k s h e e t a n d p r o v i d e t h e F o r m 1 3 7 1 1 , a d d r e s s i n g t h e d i s a g r e e d i t e m s

. P r o v i d e d o c u m e n t a t i o n s u p p o r t i n g y o u r p o s i t i o n

o n t h e i t e m s t h a t y o u d o n o t a g r e e w i t h

.

A p p e a l s [ s i c ] p r e l i m i n a r y d e t e r m i n a t i o n i s t o s u s t a i n t h e

r e j e c t i o n o f y o u r o f f e r

.

# - 18 -

[* 18 ] M y r e v i e w o f t h e O f f e r E x a m i n e r ’ s w o r k s h e e t s h o w s t h a t y o u w e r e
p r a c t i c a l l y a l l o w e d a l l c l a i m e d e x p e n s e s o n y o u r F o r m 4 3 3

- A

.

P l e a s e p r o v i d e t h e a b o v e i n f o r m a t i o n b y D e c e m b e r 2 9 , 2 0 1 1

. N o t e : M y p r e l i m i n a r y d e t e r m i n a t i o n i s t o s u s t a i n t h e f i l e d N o t i c e

o f F e d e r a l T a x L i e n d u e t o f a i l u r e t o p r o v i d e d o c u m e n t a t i o n t h a t

w i t h d r a w i n g [ s i c ] t h e l i e n w i l l f a c i l i t a t e t h e c o l l e c t i o n o f
t a x e s

. I f y o u w i s h t o p r o v i d e a d d i t i o n a l i n f o r m a t i o n f o r m e t o

c o n s i d e r a l i e n w i t h d r a w a l , p l e a s e d o s o b y t h e a b o v e d e a d l i n e d a t e

.

F Y I : T h e c r i t e r i a f o r a l i e n w i t h d r a w a l u n d e r a D i r e c t D e b i t
I n s t a l l m e n t A g r e e m e n t ( D D I A ) :

E l i g i b i l i t y R e q u i r e m e n t s f o r a D D I A L i e n W i t h d r a w a l :

• T h e c u r r e n t a m o u n t y o u o w e m u s t b e $ 2 5 , 0 0 0 o r l e s s

• I f y o u o w e m o r e t h a n $ 2 5 , 0 0 0 , y o u m a y p a y d o w n t h e b a l a n c e t o $ 2 5 , 0 0 0 p r i o r t o r e q u e s t i n g t h e l i e n

w i t h d r a w a l t o b e e l i g i b l e

• Y o u r D i r e c t D e b i t I n s t a l l m e n t A g r e e m e n t m u s t f u l l p a y t h e a m o u n t y o u o w e w i t h i n 6 0 m o n t h s o r b e f o r e t h e C o l l e c t i o n S t a t u t e e x p i r e s , w h i c h e v e r i s e a r l i e r

• Y o u m u s t b e i n f u l l c o m p l i a n c e w i t h o t h e r f i l i n g a n d
p a y m e n t r e q u i r e m e n t s



# The IRS co nt en ds th at it sen t a c op y of t he let te r to Dril li ng an d a no th er co py to

Parh am . The IR S d oe s n ot tak e a p os it io n o n wh en it sen t t he let te r, whi ch is

da te d Dec em

be r 13 , 20 11 . Sett le m en t Offi cer Taylo r-Whit e’s no te s s ay sh e

m ai le d t he let te r on Decem be r 15 , 20 11 . Dril li ng co nt en ds th at alt ho ug h t he let te r

was da te d Dec em

be r 13 , 20 11 , it was n ot m ai le d u nt il Decem be r 20 , 20 11

.

Dril li ng als o c on te nd s t ha t n ei th er h e n or Parh am rece iv ed th e le tt er u nt il aft er t he

Decem be r 29 , 20 11 res po ns e d at e g iv en by the let te r an d t ha t wh en th ey di d fi na ll y

rece iv e th e le tt er, t he off

er-i n- co m pr om is e sp eci al is t’s wo rk pa pe rs were n ot

en cl os ed . W e n eed no t d et erm in e whe n t he IRS s en t t he let te r, or whet he r it

# - 19 -

[* 19 ] en cl os ed th e wor kp ap ers wit h t he let te r, be cau se th e App eal s Off ic e

pr ov id ed th e wor kp ap ers to Dril li ng in 20 13 du rin g t he su pp le m en ta l h eari ng it

he ld pu rs ua nt to th e rem an d b y th is Co ur t.

On J an ua ry

11 , 20 12 , Parh am

lef t a v oi ce m es sa ge wit h S et tl em en t Offi cer

Tay lo r-Whit e st at in g t ha t s he ha d ju st rece nt ly recei ve d t he let te r da te d Dec em be r

13 , 20 11 , and th at sh e h ad ne ve r rec ei ve d t he work pa pe rs co nc ern in g t he IRS’s

rev ie w of Dri ll in g’s o ffer -in -co m pr om is e. Set tl em en t Offi cer Taylo r-Whit e wro te

in he r no te s: “ [S]he l eft vo ic e m es sg st at in g t ha t s he recd m y ad dt l i nf o l tr t he 1s t

of th e y r & t he de ad li ne to res po nd was 1 2/ 29 /1 1; sh e al so st at ed th at th e OE’ s

wks he et s wer e n ot sen t as st at ed in m y lt r.” Her n ot es in di cat e th at sh e tr ie d

un su cces sf

ul ly to t el ep ho ne Parh am twi ce b ut do no t i nd ic at e th at sh e se nt Parh am

an ot he r co py of th e o ffer -in -co m pr om is e sp eci al is t’s wo rk pa pe rs

.

On J an ua ry

31 , 20 12 , th e App eal s Off ic e is su ed th e in it ia l n ot ic e o f

de te rm in at io n. Th e n ot ic e st at ed th at be cau se Dril li ng ha d n ot res po nd ed to th e

Decem be r 13 , 20 12 let te r by the de ad li ne im po se d b y th e le tt er (Dec em

be r 29

,

20 11 ), th e App eal s Off

ic e’s pr el im in ary de ci si on to reject th e o ffer ha d b eco m e

fin al . The n ot ic e al so st at ed th at : (1 ) Dril li ng ha d d is ag reed wit h t he am ou nt of

hi s 2 00 7 t ax li ab il it y

be cau se he was n ot gi ve n c red it for fed eral in co m e ta x

wit hh ol di ng for th e y ear, (2 ) a rev ie w of t he IRS re co rd s s ho wed th at Dril li ng ha d

# - 20 -

[* 20 ] be en gi ve n c red it for th e wit hh ol di ng s, an d (3 ) th ere was no lo ng er a b al an ce

du e fo r 20 07 . The Ap pe al s Off ic e su st ai ne d t he fil in g o f th e n ot ic e o f li en

.

On Fe br ua ry

3, 2 01 2, t he IRS co nt en ds , it s Oct ob er 2 7, 2 01 1 l et te r to

Dril li ng (whi ch was p ur

po rte dl y acco m pa ni ed by a cop y

of t he off

er-i nco m pr om is e sp eci al is t’s wo rk pa pe rs ) was ret ur ne d t o i t b y th e U.S. Po st al Serv ic e

wit h a no te st at in g t ha t i t h ad be en refu se d b y th e rec ip ie nt . Dril li ng co nt en ds th at

th e IRS ne ve r se nt th e le tt er t o h im . W e n eed no t d et erm in e whe th er t he IRS s en t

th e Oct ob er 2 7, 2 01 1 l et te r to Dril li ng be cau se th e App eal s Off ic e g av e Dri ll in g a

co py of th e o ffer -in -co m

pr om is e sp eci al is ts ’s work pa pe rs in 20 13 when it he ld th e

su pp le m en ta l h eari ng pu rs ua nt to a rem an d b y th is Co ur t.

3. Dril li ng ’s pet it io n, t he Co ur t’s re m an d o rd er, an d t he su pp le m en ta l

co ll ect io n- rev ie w hea rin g

On M arch 1, 2 01 2, Dri ll in g fi le d t he pe ti ti on ch al le ng in g t he Jan ua ry 31

,

20 12 no ti ce o f de te rm in at io n. In th e p et it io n, Dri ll in g a ll eg ed th at Parh am ne ve r

rece iv ed th e wor kp ap ers . In i ts en ti ret y th e p et it io n s ta te s:

T a x p a y e r m e t c r i t e r i a t o h a v e o f f e r i n c o m p r o m i s e a c c e p t e d

. I R S f a i l e d t o p r o v i d e d o c u m e n t a t i o n w i t h n o t i c e o f t i m e t o c o m m e n t

a n d d i d n o t p r o v i d e n o t i c e o f t i m e t o c o m m e n t t i m e l y

. B y t h e t i m e T a x p a y e r ’ s r e p r e s e n t a t i v e r e c e i v e d t h e i n c o m p l e t e n o t i c e ( n o t i c e

w i t h o u t w o r k s h e e t t h a t i t a l l e g e d w a s i n c l u d e d ) t h e t i m e t o

r e s p o n d h a d e l a p s e d

. T o t h i s d a y , o t h e r t h a n t h e n o t i c e d e c l i n i n g t h e o f f e r i n c o m p r o m i s e , T a x p a y e r h a s r e c e i v e d n o e x p l a n a t i o n o f
t h e d e n i a l

.

T a x p a y e r s u b m i t t e d a s c h e d u l e s h o w i n g t h a t t h e e x p e n s e s i n c u r r e d f o r n e c e s s a r i e s a n d u n d e r o t h e r g o v e r n m e n t w i t h h o l d i n g

o r d e r s c o n s u m e d a l l o f t h e i n c o m e o f t a x p a y e r

. F o r t h i s r e a s o n ,

# - 21 -

[* 21 ] t h e $ 2 0 0

. 0 0 p e r m o n t h t o p a y a l l t a x e s w i t h o u t p e n a l t i e s i s

r e a s o n a b l e

.



# On M arch 7, 2 01 3, t he IRS fi le d a m ot io n t o re m an d t he cas e. In th e m ot io n

th e IRS st at ed : “ W hi le th e res po nd en t [t he IRS] do es no t ad m it th at th e

wor kp ap ers in qu es ti on were n ot in fact sen t t o t he pe ti ti on er, t he ad m in is tra ti ve

fil e d oe s n ot de fin it el y

est ab li sh th at th e wor kp ap ers were re -m ai le d t o t he

pe ti ti on er af

te r he req ue st ed same thr ou gh hi s at to rn ey .” The m ot io n c on ti nu ed :

“ Acco rd in gl y , res po nd en t wi ll pro vi de a co py of th e wor kp ap ers to pe ti ti on er’s

co un se l an d re qu es ts th at th e cas e b e rem an de d t o t he set tl em en t o ffi cer t o a ll ow

th e p et it io ne r to ad dr es s t he is su es rai se d i n t he work pa pe rs .” The m ot io n a dv is ed

th at Dril li ng ha d n o o bjec ti on to th e g ran ti ng of t he m ot io n.

On Ma rch 7, 2 01 3, t he Co ur t g ran te d t he m ot io n t o re m an d. It ord ered th e

cas e “ rem an de d t o re sp on de nt ’s Offic e o f App eal s fo r th e p ur po se of a ffo rd in g

pe ti ti on er an ad m in is tra ti ve he ari ng pu rs ua nt to I.R.C. s ect io n 6 33 0.”

On Ap ril 16 , 20 13 , Set tl em en t Offi cer Li nd a A. Hartf ie l i n t he App eal s

Offi ce s en t a l et te r to Dril li ng ad vi si ng hi m th at sh e h ad be en ass ig ne d h is

co ll ect io n- rev ie w cas e o n re m an d fr om th e Tax Co ur t. Set tl em en t Offi cer Har tfi el

en cl os ed wit h t he let te r: (1 ) th e Oct ob er 2 7, 2 01 1 l et te r fro m th e IRS off

er-i nco m pr om is e g ro up an d (2 ) th e wor kp ap ers th at ha d b een crea te d b y th e o ffer -in

co m pr om is e sp eci al is t.

# - 22 -

[* 22 ] On Ap ril 30 , 20 13 , Set tl em en t Offi cer Har tfi el ha d a face -to -fac e co nf eren ce

wit h P arh am . Sett le m en t Offi cer Har tfi el m ad e th e fo ll owi ng no te s re ga rd in g t he

co nf eren ce:

M e t w i t h P O A a t t h e a p p o i n t e d t i m e t o d i s c u s s r e m a n d e d C D P L N

c a s e

. S h e r e c e i v e d t h e p a c k a g e I m a i l e d o u t 4 / 1 6 / 2 0 1 3 t h a t

c o n t a i n e d t h e p r e l i m i n a r y d e t e r m i n a t i o n f r o m M O I C d a t e d
1 0 / 2 7 / 2 0 1 1

. I s s u e s : D i s c u s s e d I E T / A E T & P O A w a n t s t p ’ s f i n a n c i a l

c o n d i t i o n a t t h e t i m e t h e t a x b e c a m e d u e c o n s i d e r e d , n o t c u r r e n t

.

* * * * * * *

I e x p l a i n e d t h e f o l l o w i n g t o t h e P O A :

1

. D A T C O I C ’ s a r e c a l c u l a t e d b a s e d o n c u r r e n t a b i l i t y t o p a y , n o t
p a s t

. T h a t i s t h e l a w

. W e r e v i e w e d t h e A E T a n d P O A d i s p u t e d t h e f a c t t h a t t h e S e r v i c e w o u l d b e e n t i t i l e d [ s i c ] t o t h e t p s 4 0 1 K

. I

a d v i s e d e v e n i f w e t o o k t h a t o f f t h e A E T , t h e t p c a n f u l l p a y t h e l i a b i l i t y

. P O A a d m i t t e d t h e t p i s m a k i n g d e c e n t m o n e y , b u t w a s

a d a m a n t t h a t t h e o f f e r b e c a l c u l a t e d o n w h e n h e w a s m a k i n g m i n i m u m

w a g e

. I t o l d h e r t h a t w a s n o t p o s s i b l e , t h e l a w i s c l e a r , c u r r e n t i n c o m e / a s s e t s a r e w h a t a r e c o n s i d e r e d i n t h i s t y p e o f o f f e r

. I

a d v i s e d t h e P O A t h a t a g r e e d w i t h t h e 1 0 / 2 7 / 2 0 1 1 p r e l i m i n a r y d e c i s i o n a n d t h e o f f e r i s r e j e c t e d

.

2

. I s u g g e s t e d t h e t p e n t e r i n t o a n g u a r a n t e e d / s t r e a m l i n e i n s t a l l m e n t a g r e e m e n t t o f u l l p a y t h e l i a b i l i t y

. P a y m e n t s c o u l d b e a s l o w a s $ 7 0 p e r m o n t h

. P O A s a i d t h a t i s n o t p o s s i b l e b e c a u s e

s h e d o e s n ’ t t h i n k t h e t p o w e s t h e a m o u n t I t o l d h e r $ 4 2 0 4

. 0 6

. S h e t h i n k s t h e S e r v i c e h a s n o t g i v e n t h e t p c r e d i t f o r a l l o f h i s
p a y m e n t s a n d h a s c o n t i n u e d t o c h a r g e h i m t o o m u c h i n t e r e s t

. I
p r o v i d e d h e r w i t h t r a n s c r i p t s f o r 2 0 0 4

- 2 0 1 2 w h i c h i n c l u d e d n o n C D P
y e a r s , b u t w e r e v i e w e d o n l y t h e C D P y e a r s

.

3

. P O A s t a t e d t h e y f i l e d t h e o f f e r b e c a u s e t h e S O s a i d s h e h a d t o h a v e i t t o n o t f i l e t h e N F T L

. T h i s i s n o t c o r r e c t , b e c a u s e t h e t p
g o t i n t o A p p e a l s a f t e r t h e l i e n w a s f i l e d

. T h e f i l i n g g a v e h i m C D P r i g h t s

. T h e P O A h a d h e r f a c t s c o n f u s e d

.

4

. P O A d i s p u t e d t h e a m o u n t o n t h e l i e n f o r 2 0 0 4

. I e x p l a i n e d t h e $ 2 3 6

. 8 7 w a s t h e U B A a n d w h a t t h a t m e a n t

. I r e v i e w e d t h e t r a n s c r i p t

w i t h h e r i t e m b y i t e m , p u l l e d I N T S T B , a d d e d u p t h e i n t e r e s t a n d
p e n a l t y c h a r g e s a n d r e p e a t e d l y t r i e d t o e x p l a i n h o w b a l a n c e s a r e
p a i d

.

5

. P O A i s c o n v i n c e d t h a t t h e S e r v i c e i s p l a y i n g a s h e l l g a m e o n t h e t a x p a y e r a n d h a s c h a r g e d h i m t o o m u c h i n t e r e s t

. I a s k e d w h a t
t h a t m e a n t a n d s h e s a i d w h e n t h e t a x p a y e r o n l y o w e s $ 2 3 8

. 8 7 a n d
t h e S e r v i c e c o l l e c t e d m o r e t h a n t h a t a m o u n t , t h e t a x p a y e r c a n ’ t

w i n

. I e x p l a i n e d U B A a g a i n a s w e l l a s a c c r u e d p e n a l t y a n d i n t e r e s t

.

# - 23 -

[* 23 ] 6

. P O A s t a e d [ s i c ] t h e y f i l e d t h e o f f e r t o p a y t h e t a x a n d
h a v e p e n a l t y a n d i n t e r e s t a b a t e d

. I e x p l a i n e d t h a t i s n o t t h e
p u r p o s e o f a D A T C o f f e r w h i c h s e t t l e s a l l o r n o t h i n g

. I e x p l a i n e d i n t e r e s t i s r e q u i r e d t o b e c h a r g e d b y l a w w i t h t h e e x c e p t i o n o f

e r r o n e o u s r e f u n d s a n d m i n i s t e r i a l a c t s

. P O A s a i d t h e r e w e r e e r r o r s

m a d e

. I d e f i n e d m i n i s t e r i a l a c t a s m o r e t h a n a m e r e m i s t a k e , i t

m u s t b e e g r e g i o u s o n t h e S e r v i c e ’ s p a r t a n d i s d i f f i c u l t t o
q u a l i f y f o r

. I c o n c l u d e d t h a t t h i s t a x p a y e r d o e s n ’ t h a v e a n y

m i n i s t e r i a l r e a s o n f o r i n t e r e s t a b a t e m e n t

.

7

. I a s k e d w h a t i s p e n a l t y r e a s o n a b l e c a u s e a n d s h e s a i d y o u

s h o u l d n ’ t k i c k a d o g w h e n i t s [ s i c ] d o w n a n d t h e n a d d e d t h a t h e

c o u l d n ’ t p a y t h e t a x e s

. I t o l d h e r n e i t h e r r e a s o n s f e l l u n d e r R e a s o n a b l e C a u s e

. B u t i f s h e w a n t e d t o p r o v i d e m e w i t h a w r i t t e n

s t a t e m e n t , I w o u l d c o n s i d e r i t

. S h e s a i d s h e h a s n e v e r b e e n a s k e d
f o r t h a t b e f o r e

. I t o l d h e r i t w a s u p t o h e r t o p r o v i d e t h e i n f o r m a t i o n o r n o t

.

8

. A f t e r m u c h d i s c u s s i o n b a c k a n d f o r t h w h e r e I t r i e d t o r e l a y t h e v a r i o u s c h a r g e s a n d c r e d i t s , I a s k e d t h e P O A w h a t s h e w a n t e d

. S h e s a i d s h e w a n t e d m e t o t e l l h e r w h e r e t o f i n d t h e f a c t o r s f o r i n t e r e s t a n d p e n a l t y c a l c u l a t i o n s t h a t t h e S e r v i c e u s e d

. I t o l d
h e r i n s t r u c t i o n s t o 1 0 4 0 a n d P u b 1 7 a r e u s e f u l i n h o w t h e c h a r g e s

a r e a s s e s s e d

. A s f a r a s t h e f a c t o r s , u s e i r s

. g o v s e a r c h i e n g i n e [ s i c ] t o s e e w h a t s h e c o u l d f i n d

. I e x p l a i n e d I u s e d t h e o f f i c i a l
t r a n s c r i p t s t o d e t e r m i n e i n t e r e s t a n d p e n a l t y c h a r g e s a n d d o n ’ t

n e e d f a c t o r s t o d o s o

. P O A t h e n a s k e d a b o u t c r e d i t i n t e r e s t o n t h e

c r e d i t p e r i o d s a n d w a n t e d m e t o c a l c u l a t e c r e d i t i n t e r e s t f o r t h e t a x p a y e r

. I t o l d h e r t h a t f i r s t , h e m a y o r m a y n o t b e e n t i t i t l e d [ s i c ] t o i t a n d s e c o n d I d i d n ’ t k n o w h o w t o c a l c u l a t e t h i s a m o u n t

a s i t w o u l d b e a u t o m a t i c a l l y g e n e r a t e d i f w a r r a n t e d

.

9

. F i n a l l y , w e a g r e e d t h a t I w o u l d t e l e p h o n e P O A 5 / 6 / 2 0 1 3 @ 9 : 0 0 A M t o s e e i f s h e i s i n a g r e e m e n t w i t h t h e i n t e r e s t c h a r g e s o n 2 0 0 4

. I f s h e i s s h e t h i n k s a n I A m a y b e a g r e e a b l e

. I f n o t , I w i l l

e x p l a i n s h e c a n f i l e a 8 4 3 c l a i m o u t s i d e t h e s c o p e o f t h i s a p p e a l

.

1 0

. B e s i d e s a b a t e m e n t P O A a l s o b r o u g h t u p t h e n e w i s s u e t h a t a n O I C w a s f i l e d 5 / 2 0 0 6

. S h e s h o w e d m e h e r c o p y o f t h e F 6 5 6 a n d s a i d

s h e n e v e r h e a r d a n y t h i n g a b o u t t h e o f f e r

. I r e v i e w e d t h e t r a n s c r i p t s a n d f o u n d n o o f f e r p e n d i n g a r o u n d t h e s a m e t i m e , b u t d i d s e e r e q u e s t f o r I A

. I t o l d h e r t h e O I C w a s r e a l l y a n I A

r e q u e s t

. P O A s a i d t h e y t o l d h e r t o p a y $ 4 3 a n d t h e y d i d o n t h e

o f f e r

. I t o l d h e r $ 4 3 w a s a n I A f e e a n d t h a t t h e o f f e r w a s a n I A

r e q u e s t

.

1 1

. A s a l l i s s u e s w e r e a d d r e s s e d , t h e c o n f e r e n c e w a s c l o s e d

.



# Dur in g t he face -to -fac e co nf eren ce, Set tl em en t Offi cer Har tfi el ask ed Parh am for a

writ te n s ta te m en t fr om

Dril li ng ex pl ai ni ng why th e App eal s Off ic e sh ou ld ab at e

# - 24 -

[* 24 ] pe na lt ie s an d i nt eres t. Howev er, Dri ll in g d id no t s ub m it a writ te n s ta te m en t 8



# Dril li ng di sp ut es th at Set tl em en t Offi cer Har tfi el m ad e th is req ue st . The 8



# ev id en ce s up po rts th e p ro po si ti on th at Set tl em en t Offi cer Har tfi el m ad e su ch a req ue st . Firs t, Se tt le m en t Offi cer Har tfi el ’s no te s q uo te d a bo ve (po in t 7 ) st at e:

“ [I]f sh e wan te d t o p ro vi de m e wit h a writ te n s ta te m en t, I wo ul d c on si de r it . She

sa id sh e h as ne ve r be en ask ed for th at be fo re. I to ld he r it was u p t o h er t o p ro vi de th e in fo rm at io n o r no t.” Fu rth erm or e, at tri al Set tl em en t Offi cer Har tfi el tes ti fie d:

W e d i s c u s s e d p e n a l t y a n d i n t e r e s t , a n d I t o l d M s

. P a r h a m i f

- - y o u k n o w , i f s h e f e l t s t r o n g l y a b o u t t h a t , w h i l e i n t e r e s t i s r e q u i r e d b y l a w , i f s h e w a n t e d t o s u b m i t a w r i t t e n s t a t e m e n t f o r r e a s o n a b l e

c a u s e o f a b a t e m e n t o f p e n a l t y a n d i n t e r e s t , y o u k n o w , I w o u l d

c e r t a i n l y c o n s i d e r a w r i t t e n s t a t e m e n t , b u t t h a t a p e n a l t y

a b a t e m e n t r e q u e s t n e e d e d t o b e i n w r i t i n g t o m e

. A n d s h e t o o k
t h a t u n d e r a d v i s e m e n t

.



# In it s o pe ni ng bri ef, t he IRS p ro po se d t he fol lo win g fi nd in g o f fac t:

D u r i n g t h e s u p p l e m e n t a l c o l l e c t i o n d u e p r o c e s s h e a r i n g S e t t l e m e n t
O f f i c e r H a r t f i e l r e q u e s t e d t h a t p e t i t i o n e r ’ s c o u n s e l s u b m i t a

w r i t t e n s t a t e m e n t c o n c e r n i n g t h e p e t i t i o n e r ’ s r e q u e s t t h a t i n t e r e s t a n d p e n a l t i e s b e a b a t e d

.



# In su pp or t o f th is pro po se d fi nd in g o f fact , th e IRS cit es Set tl em en t Offi cer Hart fie l’s n ot es , her

tes ti m on y , and ot he r po rti on s o f th e rec or d. In hi s an swe rin g br ie f, Dril li ng ob

jects to th e p ro po se d fi nd in g o f fac t, g iv in g t he fol lo win g re as on :

W i t h t h e e x c e p t i o n o f d o c u m e n t s e x p r e s s l y p r e p a r e d f o r l i t i g a t i o n

a n d s e l f s e r v i n g t e s t i m o n y , n o d o c u m e n t a t i o n o r l e t t e r t o P e t i t i o n e r r e q u e s t e d a d d i t i o n a l i n f o r m a t i o n r e l a t e d t o t h e

a b a t e m e n t o f i n t e r e s t a n d p e n a l t i e s

. A n o f f e r i n c o m p r o m i s e , b y d e f i n i t i o n , i s t o c o m p r o m i s e t h e t a x p a y e r ’ s l i a b i l i t y w i t h o u t

r e g a r d t o w h e t h e r i t i s o r i g i n a l t a x o r p e n a l t i e s a n d i n t e r e s t

. P e t i t i o n e r s u b m i t t e d a n o f f e r i n c o m p r o m i s e w h i c h b y i t s n a t u r e

r e q u e s t s t h a t p a r t o f t h e l i a b i l i t y a s c a l c u l a t e d b y t h e I n t e r n a l
R e v e n u e S e r v i c e b e a b a t e d i n e x c h a n g e f o r p a y m e n t

.



# Dril li ng ’s ob

jecti on lac ks m eri t. Bo th Set tl em en t Offi cer Har tfi el ’s no te s an d h er te st im on y m ak e cl ear t ha t t he req ue st for a writ te n s ta te m en t was no t a wri tt en req ue st . It i s t he refo re i rrel ev an t t o t he va li di ty of th e p ro po se d fi nd in g o f fac t t ha t

“ no do cu m en ta ti on or l et te r” co nt ai ne d t hi s re qu es t. Fu rth erm or e, Dril li ng ’s ob jecti on th at hi s o ffer -in -co m pr om is e in cl ud ed a cl ai m for ab at em en t o f in te res t

(co nt in ue d...)

# - 25 -

[* 25 ] co nc ern in g t he ab at em en t o f in te res t an d p en al ti es du rin g t he co ns id erat io n

of th e su pp le m en ta l co ll ect io n d ue pro ces s h eari ng

. 9



# On M ay 6, 2 01 3, Se tt le m en t Offi cer Har tfi el m ad e th e fo ll owi ng no te s i n

he r fi le s:

C h e c k e d A O I C f o r p r i o r o f f e r s r e f e r e n c i n g t h e o n e t h e p o a s a i d w a s

s e n t i n 5 / 2 0 0 6

. N o r e c o r d o f a n y p r i o r o f f e r , o n l y t h e c u r r e n t

o n e t h a t w a s r e j e c t e d

. C h e c k e d A M S , d e t e r m i n i n g A C S l e v i e d & t h e n t p w a n t e d $ 5 0 I A a r o u n d 5 / 4 / 2 0 0 6 w h i c h i s a b o u t t h e s a m e t i m e t h e P O A s a y s f i l e s t h e o f f e r

. A s I t o l d t h e P O A d u r i n g t h e c o n f e r e n c e , P O A o f f e r w a s a n I A r e q u e s t

. T h e i n i t i a l I A c o u l d n ’ t b e g r a n t e d b e c a u s e t h e t p h a d n ’ t f i l e [ s i c ] a l l o f h i s r e t u r n s

.



# On M ay 7, 2 01 3, Se tt le m en t Offi ce Hart fie l s po ke wit h P arh am on th e

te le ph on e. Hart fie l m ad e th e fo ll owi ng no te s i n h er fi le ab ou t t he co nv ers at io n:

W e d i s c u s s e d t h e f i r s t o f f e r t h a t I a g r e e d w i t h h e r t u r n e d o u t t o b e a n I A t h a t t p d e f a u l t e d o n w h e n h e d i d n ’ t f i l e h i s r e t u r n s

. I

e x p l a i n e d a g a i n w h y t h e c u r r e n t O I C c o u l d n ’ t b e r e c o m m e n d e d f o r



# (...co nt in ue d) 8



# an d p en al ti es do es no t re sp on d t o t he IRS’s p ro po se d fi nd in g o f fac t, wh ic h

co nc ern s wh at Set tl em en t Offi cer Har tfi el ask ed of Dri ll in g a t t he su pp le m en ta l he ari ng , no t t he na tu re o f Dril li ng ’s off er-i n- co m pr om is e. Dril li ng ’s ob

jecti on is

ev as iv e an d n on res po ns iv e.

Dril li ng di sp ut es th is fact on th e g ro un d t ha t h is off er-i n- co m pr om is e fo rm , 9 

# whi ch he ch arac te riz es as a n “ ex cep ti on al cir cu m st an ces st at em en t” , con st it ut ed a writ te n s ta te m en t co nc ern in g t he ab at em en t o f in te res t an d p en al ti es . W e d is ag ree. Fi rs t, Dri ll in g fa xe d h is off er-i n- co m pr om is e fo rm

on Apri l 1 5, 2 01 1. Hi s fo rm

co ul d n ot ha ve be en a res po ns e to th e App eal s Off ic e’s req ue st for

a writ te n st at em en t, m ad e d ur in g t he su pp le m en ta l h eari ng on Apri l 3 0, 2 01 3. Se co nd

, Dril li ng ’s off

er-i n- co m pr om is e fo rm

ex pl ai ne d wh y

he co ul d n ot pa y

th e p en al ti es

an d o th er l ia bi li ti es , no t wh y he was n ot li ab le in th e fi rs t p la ce. Bo th in ti m in g

an d s ub st an ce, t he off

er-i n- co m pr om is e fo rm

is no t a r es po ns e to Set tl em en t Offi cer Har tfi el ’s req ue st for a writ te n s ta te m en t co nc ern in g t he ab at em en t o f in te res t an d p en al ti es

.

# - 26 -

[* 26 ] a c c e p t e d A s s e t s + i n c o m e a r e g r e a t e r t h a n b a l a n c e d u e &

e v e n i f a l l a s s e t s a r e d i s c o u n t e d ( 4 0 1 K

- - m a i n l y ) , t h e t p c a n p a y $ 1 1 5 p e r m o n t h w h i c h w o u l d f u l l p a y t h e $ 4 K + b a l a n c e d u e w i t h i n t h e C S E d

. I a s k e d t h e P O A i f s h e w a n t e d a n I A a n d h e r r e s s p o n s e [ s i c ] w a s s h e d o e s n ’ t b e l i e v e t h e l i a b i i t y [ s i c ] i s c o r r e c t b e c a u s e t h e t r a n s c r i p t s a r e w r o n g

. S h e s t a r t e d d i s c u s s i n g 2 0 0 3

w h i c h i s n o t p a r t o f t h e C D P a n d b r o u g h t u p t h e f a c t t h a t h e r

a c t u a r i a l t a b l e s d i f f e r e d f r o m t h e t r a n s c r i p t s

. I t o l d h e r t h o s e t r a n s c r i p t s a r e w h a t I r e l y o n a n d i f s h e f e l t t h e r e w e r e i n c o r r e c t p e n a l t y o r i n t e r e s t c h a r g e s o r p a y m e n t d a t e s , s h e c o u l d
f i l e a F o r m 8 4 3 C l a i m f o r R e f u n d t h r o u g h n o r m a l c h a n n e l s

. T h e P O A d e c l i n e d t h e I A a n d I t o l d h e r t h a t I w o u l d i s s u e t h e s u p p l e m e n t a l
N O D a n d s i n c e t h e r e w e r e n o o t h e r i s s u e s , t h e c o n f e r e n c e w a s

c o n c l u d e d

.



# On M ay 7, 2 01 3, Pa rh am

sen t a l et te r to th e co un se l fo r th e IRS . The l et te r

st at ed :

T h i s l e t t e r i s w r i t t e n e x c l u s i v e l y f o r t h e p u r p o s e s o f

s e t t l e m e n t n e g o t i a t i o n s , w i t h a l l o f t h e r i g h t s a n d p r i v i l e g e s

a t t a c h e d t h e r e t o

.

I h a d s u c h g r e a t h o p e s f o r t h e a d m i n i s t r a t i v e h e a r i n g , b u t
t o n o a v a i l

. A l t h o u g h M s

. H a r t f i e l ' s t i t l e i s S e t t l e m e n t O f f i c e r ,
s e t t l e m e n t a s i t i s g e n e r a l l y d e f i n e d i n l e g a l v e n u e s d i d n o t

a p p e a r t o b e h e r g o a l

.

I u n d e r s t a n d t h a t w e a r e t a s k e d w i t h a J o i n t S t a t u s R e p o r t

o n o r b e f o r e M a y 2 8 , 2 0 1 3

. I a m l i t e r a l l y o u t o f t h e c o n t i n e n t a l
U S u n t i l M a y 2 2 , 2 0 1 3 ( a d a y t h a t I w i l l p r o b a b l y s p e n d

r e a c q u i r i n g p e t s f r o m b o a r d i n g f a c i l i t i e s , a n d u n p a c k i n g )

. I a m , b y n o t i c e t o a l l c o u r t s b u t t h i s o n e ( w h i c h I w i l l t r y t o r e m e d y b e f o r e I l e a v e ) o n v a c a t i o n f r o m M a y 6 t o M a y 2 6 , 2 0 1 3

. T h i s t r i p h a s b e e n p l a n n e d f o r m o r e t h a n a y e a r

. I d i d n o t e x p e c t n o t t o

r e a c h a m u t u a l a g r e e m e n t o n t h i s o n e

.

I t i s f o r t h a t r e a s o n , I a m p r o v i d i n g y o u t h i s l e t t e r t o

a t t e m p t t o d i s c u s s s o m e o f t h e i s s u e s h e r e t h a t t h e a p p e a l s

o f f i c e r w a s n o t w i l l i n g t o d i s c u s s

.

S o m e b a c k g r o u n d :

I n 2 0 0 6 , M r

. D r i l l i n g r e c e i v e d a n o t i c e o f i n t e n t t o l e v y

w i t h r e g a r d t o 2 0 0 3 , 2 0 0 4 a n d 2 0 0 5

. I n r e s p o n s e , a n d b e c a u s e o f
t h e l e g a l i s s u e s h e h a d b e e n i n v o l v e d i n f o r s o m e y e a r s , h e f i l e d

a n o f f e r i n c o m p r o m i s e

. R a t h e r t h a n a c c e p t i n g t h e o f f e r , t h e I R S

s e t u p a p a y m e n t p l a n ( y o u w i l l s e e n o t a t i o n s o f t h a t i n t h e

a c c o u n t t r a n s c r i p t s )

. T h e I R S w a s t o d r a f t t h e m o n t h l y i n s t a l l m e n t s o f $ 4 3

. 0 0 a n d c h a n g e

.

A t t h e t i m e o f t h e i n s t a l l m e n t p l a n , t h e i n t e n t t o l e v y

s h o w e d t h e f o l l o w i n g t a x l i a b i l i t i e s : 2 0 0 3

- - $ 8 3 6

. 7 7 ( i n c l u d i n g
p e n a l t y a n d i n t e r e s t t o 1 1

- 0 6

- 2 0 0 6 ; 2 0 0 4

- - $ 2 3 8 6

. 9 0 ( i n c l u d i n g

# - 27 -

[* 27 ] p e n a l t y a n d i n t e r e s t t o 1 1

- 6

- 2 0 0 6 ) a n d 2 0 0 5

- - $ 2 1 7 2

. 2 3 ( i n c l u d i n g p e n a l t i e s a n d i n t e r e s t a s o f 1 1

- 0 6

- 2 0 0 6 )
O n M a y 3 , 2 0 0 6 , M r

. D r i l l i n g f i l e d t h e F i r s t O f f e r i n C o m p r o m i s e o f f e r i n g 1 2 1 0

. 0 0 o v e r f i v e y e a r s a t t h e r a t e o f $ 1 0

. 0 0

p e r m o n t h

. T r a n s c r i p t s r e p o r t t h i s a s a p a y m e n t a g r e e m e n t ,
a l t h o u g h n o a c k n o w l e d g m e n t w a s e v e r s e n t o u t b y t h e I R S

. I n t e r e s t

a n d p e n a l t i e s c o n t i n u e d t o a c c r u e

.

W h e n t h e s e c o n d l i e n w a s n o t i c e d , a n d t h e A d m i n i s t r a t i v e D u e P r o c e s s h e a r i n g w a s h e l d w i t h M s

. T a y l o r
- W h i t e , s h e i n d i c a t e d t h a t
t h e i n s t a l l m e n t p l a n h a d b e e n t e r m i n a t e d f o r n o n

- p a y

. T h e n o n

- p a y d o e s n o t n o w a p p e a r t o b e t r u e

. W h a t d o e s a p p e a r t o b e t r u e i s t h a t n o n e o f t h e p a y m e n t s w e r e t i m e l y c r e d i t e d a g a i n s t 2 0 0 4 o r 2 0 0 5

. T a x y e a r 2 0 0 3 w e n t f r o m a c o l l e c t i o n a m o u n t o f $ 8 3 6

. 7 7 t o a n

o v e r p a y m e n t o f $ 1 7 3 7

. 5 8 ( w i t h n o i n t e r e s t c r e d i t )

. T h i s a m o u n t w a s

a p p l i e d , i n l u m p s u m t o 2 0 0 4 o n F e b r u a r y 2 7 , 2 0 0 9 ( t w o y e a r s a f t e r

a l l e g i n g t h a t p a y m e n t s h a d n o t b e e n u n d e r t h e p a y m e n t a g r e e m e n t

. D u r i n g t h o s e t w o y e a r s , 2 0 0 4 w a s c h a r g e d w i t h b o t h i n t e r e s t a n d
l a t e p a y m e n t p e n a l t i e s m o n t h l y o n a m o u n t s t h a t w e r e s i t t i n g i n 2 0 0 3 , b e c a u s e t h e I R S h a d a p p l i e d m o r e p a y m e n t s t h a n w e r e

n e c e s s a r y t o p a y 2 0 0 3

. M r

. D r i l l i n g i s n o t i n c o n t r o l o f h o w t h e I R S a l l o c a t e s p a y m e n t s h e m a k e s u n d e r a g r e e m e n t s , t h e a c c o u n t i n g i s s t r i c t l y i n t h e h a n d s o f t h e I R S

.

M o v i n g o n

. W h e n a n o t i c e o f F e d e r a l T a x L i e n F i l i n g w a s

r e c e i v e d f r o m a

. y o u r o f f i c e i n d a t e d [ s i c ] M a y 1 1 , 2 0 1 0 , t h e l i e n i n d i c a t e d t h e f o l l o w i n g a m o u n t s :

a

. 2 0 0 4

- - $ 2 3 6

. 8 7 ; b

. 2 0 0 5

- - $ 2 1 4 4

. 2 5 a n d

c

. 2 0 0 7

- - $ 1 4 7 3 6 3

. 9 4

. [ s i c ]

F o l l o w i n g t h e r e q u e s t f o r a d m i n i s t r a t i v e h e a r i n g a n d f i l i n g t h e O f f e r , t h i s g r e w b y :

a

. 2 0 0 4

- - $ 3 8 8

. 0 0 ; b

. 2 0 0 5

- - 3 5 8

. 8 1 ,
c

. 2 0 0 6

- - 1 4 6 7

. 4 8
d

. 2 0 0 7

- - 3 4 6 3

. 3 4 , a n d

e

. 2 0 0 8

- - $ 1 1 5 8

. 6 6

.

O f t h e s e a m o u n t s , 1 6 6 0

. 3 3 w e r e p e n a l t i e s a n d i n t e r e s t o n 2 0 0 4 , 2 0 0 5 , 2 0 0 6 a n d 2 0 0 8 j u s t s i n c e t h e n o t i c e o f l i e n

. L o o k i n g

a t j u s t 2 0 0 4 , 2 0 0 5 , 2 0 0 6 a n d 2 0 0 8 t h e t o t a l r e q u e s t e d a t t h e t i m e

o f t h e s e c o n d O I C w a s $ 1 0 6 3 7

. 4 0

. M r

. D r i l l i n g o f f e r e d $ 4 0 0 0

. 0 0 a t
t h e r a t e o f $ 2 0 0

. 0 0 p e r m o n t h , a n d p a i d t h e i n i t i a l f e e o f $ 1 5 0

. 0 0 , t h e n s e t o u t m a k i n g p a y m e n t s

. I n i t i a l p a y m e n t s w e r e n o t

m a d e b e c a u s e w e d i d n o t k n o w t o w h e r e o r w h o m u n t i l t h e M s

. T a y l o r
- W h i t e p r o v i d e d g u i d a n c e o n t h i s m a t t e r , w e l l a f t e r t h e i n i t i a l a d m i n i s t r a t i v e d u e p r o c e s s h e a r i n g

.

T h e 2 0 0 7 y e a r h a s n o t b e e n m e n t i o n e d i n t h i s b e c a u s e i t w a s

a c t u a l l y m o r e t h a n f u l l y p a i d

. I n f a c t , i t h a d a c r e d i t o f $ 2 7 6

. 6 5 ( a g a i n o n w h i c h n o i n t e r e s t w a s a c c r u e d o r p a i d )

. T h e I R S h a d
f a i l e d t o p o s t h i s w i t h h e l d t a x t o t h e r e t u r n

.

# - 28 -

[* 28 ] O u r p o s i t i o n :

T h e I R S F r e s h S t a r t I n s t a l l m e n t A g r e e m e n t p u b l i c a t i o n i n d i c a t e s t h a t t h e p a y m e n t p l a n ( a t t h e t i m e t h e s e c o n d O I C w a s

s u b m i t t e d ) h a d t o b e r e p a i d w i t h i n 5 y e a r s

. C o l l e c t i o n P r o c e s s P u b l i c a t i o n 5 9 4 p r o v i d e s t h a t a n O f f e r i n C o m p r o m i s e m a y b e

r e q u e s t e d i f " y o u c a n t ' s [ s i c ] p a y t h e a m o u n t y o u o w e i n f u l l o r t h r o u g h i n s t a l l m e n t s

. " P u b l i c a t i o n 5 9 4 a l s o p r o v i d e s t h a t F o r m 6 5 6 i s a p p r o p r i a t e i f y o u a r e u n a b l e t o p a y t h e a m o u n t d u e , h a v e a n

e c o n o m i c h a r d s h i p , o r o t h e r s p e c i a l c i r c u m s t a n c e s t h a t w o u l d c a u s e
p a y i n g t h e a m o u n t d u e t o b e u n j u s t

. T h e o f f e r i n c o m p r o m i s e m a d e b y M r

. D r i l l i n g n e v e r r e q u e s t e d a r e d u c t i o n i n t a x e s o n l y t h e
p e n a l t i e s a n d i n t e r e s t b e c a u s e h e w a s h a v i n g h i s e a r n i n g s c l a i m e d b y s o m a n y g o v e r n m e n t e n t i t i e s

. W e p r o v i d e d , a n d t h e I R S h a s

a c c e p t e d t h e e x p e n s e s a n d i n c o m e o f M r

. D r i l l i n g a t t h e t i m e o f

s u b m i s s i o n t h a t s h o w e d h i s l e f t o v e r i n c o m e f o r p a y m e n t t o t h e I R S

w a s $ 1 1 5

. 0 0 p e r m o n t h

. A f i v e y e a r p a y o u t o n $ 1 0 6 3 7

. 4 0 w o u l d b e $ 3 5 4

. 5 8 p e r m o n t h , m o r e t h a n t h r e e t i m e s t h e a m o u n t a v a i l a b l e

. T h i s d o e s n o t i n c l u d e c u r r e n t t a x e s t h a t h a v e y e t t o b e r e p o r t e d

. M o r e o v e r , M r

. D r i l l i n g w e r e [ s i c ] a b l e t o s h o w t h e I R S t h a t t h e d e b t s o f M r

. D r i l l i n g i n c l u d e d c o l l e c t i o n s b y t h e S t a t e o f T e x a s t h a t , i f u n m a d e , c o u l d a f f e c t h i s l i b e r t y ( a c r i m i n a l r e s t i t u t i o n

o r d e r c o l l e c t e d b y P r o b a t i o n ) , a n d c h i l d s u p p o r t g a r n i s h m e n t s o f

m o r e t h a n $ 1 0 0 0

. 0 0 / m o n t h , a n o t h e r d e b t t h a t i f u n p a i d c o u l d

a f f e c t h i s l i b e r t y

. W i t h o u t h i s l i b e r t y , M r

. D r i l l i n g w o u l d b e

u n a b l e t o p a y t h e I R S

. M r

. D r i l l i n g h a s o n e a n d o n l y o n e a s s e t o f

a n y s i z e w h i c h i s a q u a l i f i e d r e t i r e m e n t p l a n

. E v e n F o r m 6 5 6
B o o k l e t w a r n s o f f u t u r e t a x i m p l i c a t i o n s i f a 4 0 1 K i s u s e d t o p a y p a s t t a x e s , a n d t o c o n t a c t t h e I R S o r a t a x a d v i s o r b e f o r e d o i n g

s o

. Y e t , t h i s a s s e t i s p o i n t e d t o a s a m e a n s f o r M r

. D r i l l i n g t o
p a y b a c k t a x e s b y M s

. H a r t f i e l

. G e n e r a l l y , r e t i r e m e n t p l a n s a r e

n o t s e i z a b l e a c c o r d i n g t o P u b l i c a t i o n 5 9 4 , n o r i s t h e r e a n y g u a r a n t e e h e i s v e s t e d o r h a s t h e r i g h t t o m a k e a l o a n o r d i s t r i b u t i o n

. I t i s f o r t h e s e r e a s o n s t h a t M r

. D r i l l i n g m a d e a n O f f e r i n C o m p r o m i s e , n o t a r e q u e s t f o r a p a y m e n t p l a n

.

I h a v e i n c l u d e d t h e s c h e d u l e s p r e p a r e d b y t h e I R S a s S c h e d u l e S e t C f o r y o u r e a s y r e v i e w

. A c o u p l e o f n o t e s o n t h e

s c h e d u l e s : 1 ) a s t o t h e r e t i r e m e n t f u n d , 2 0 % b a c k u p w i t h h o l d i n g

a l o n e i s i n e x c e s s o f $ 2 8 0 0

. 0 0 p l u s t h e $ 2 1 6 5

. 0 0 e n c u m b r a n c e , a n d 2 ) t h e c l a i m t h a t M r

. D r i l l i n g c l a i m e d h i s e n t i r e m o n t h l y i n c o m e

a s h o m e a n d m a i n t e n a n c e e x p e n s e i s a t y p o g r a p h i c a l e r r o r

. T h e

c a l c u l a t i o n i n d i c a t e s a 1 0 y e a r p a y o u t a t $ 1 1 5

. 0 0 p e r m o n t h , w h i l e t h e o f f e r i n c o m p r o m i s e i s l i m i t e d t o 2 4 m o n t h s a n d t h e p a y m e n t

a g r e e m e n t i s l i m i t e d t o 6 0 m o n t h s

. E v e n t h e n , w i t h 1 0 a d d i t i o n a l

y e a r s o f l a t e p a y m e n t a n d i n t e r e s t a c c r u a l s , t h e a c c o u n t s w o u l d

n o t b e p a i d a t t h e e n d o f a t e n y e a r p e r i o d e i t h e r

.

F o r m B o o k l e t 6 5 6 O f f e r i n C o m p r o m i s e s e t s o u t t h a t a O f f e r

w h i c h i s m a d e t o r e p a y o v e r t i m e , m u s t b e p a y a b l e w i t h i n 2 4

m o n t h s

. M r

. D r i l l i n g p r o m i s e d t o p a y ( a n d i n f a c t d i d p a y ) $ 2 0 0

p e r m o n t h u n t i l h e h a d p a i d $ 4 0 0 0

. 0 0

. I n f a c t , w h e n a d d e d t o

o t h e r p a y m e n t s w h i c h w e w i l l d i s c u s s i n a m o m e n t , h e p a i d $ 5 2 0 0

. 0 0 , m o s t l y a t t h e r a t e o f $ 2 0 0 p e r m o n t h

. T h e e x c e p t i o n s t o t h i s w a s w h e n M s

. T a y l o r W h i t e t o l d M r

. D r i l l i n g t h a t h e h a d t o

c o m e u p w i t h $ 5 0 0 b y a d a t e c e r t a i n f o r h e r t o c o n s i d e r t h e O I C ,
a n d t h e $ 7 0 0

. 0 0 h e p a i d t o f i n i s h p a y i n g t h e t a x e s o n t h e 2 0 1 0 t a x

# - 29 -

[* 29 ] r e t u r n

. T h i s a m o u n t w a s d i v e r t e d b y M s

. T a y l o r
- W h i t e t o t h e 2 0 0 4 r e t u r n ( i t s h o u l d n o t h a v e b e e n , b u t t h a t i s a l a t e r

s u b j e c t )

.

M s

. T a y l o r
- W h i t e a n d M s

. H a r t f i e l h a v e b o t h d e t e r m i n e d t h a t
t h e i n f o r m a t i o n p r o v i d e d s h o w s t h a t M r

. D r i l l i n g c a n p a y t h e d e l i n q u e n c y i n f u l l w i t h i n a 6 0 m o n t h p e r i o d f r o m t h e d a t e o f t h e

a [ s i c ] p a y m e n t p l a n

. T h e p r o b l e m i s t h a t p a y m e n t p l a n i s a n

e x t e n s i o n o f t h e t w o y e a r o f f e r i n c o m p r o m i s e p a y m e n t s s o t h e y a r e

r e a l l y c o l l e c t i n g o v e r 7 y e a r s n o t 5

. R e g a r d l e s s , I o b v i o u s l y d i s a g r e e w i t h t h e i r m a t h

.

M s

. H a r t f i e l w a s o f t h e o p i n i o n t h a t p e n a l t i e s a n d i n t e r e s t

w o u l d n o t b e c o m p r o m i s e d y e t , a g a i n i n B o o k l e t 6 5 6 i t s t a t e s , " I f

y o u r o f f e r i s i n d e f a u l t , a l l c o m p r o m i s e d t a x d e b t s , i n c l u d i n g
p e n a l t i e s a n d i n t e r e s t , w i l l b e r e i n s t a t e d

. " I f i t i s

r e i n s t a t e d , i t h a d t o b e c o m p r o m i s e d a t t h e t i m e t h e o f f e r w a s

a c c e p t e d

.

I a m p r o v i d i n g y o u , w i t h t h i s l e t t e r , t w o s e t s o f s c h e d u l e s

.

S c h e d u l e S e t A i s a c o r r e c t i o n o f t h e c a l c u l a t i o n s i n t h e t r a n s c r i p t s p r o v i d e d b y M s

. H a r t f i e l

. T h e c a l c u l a t i o n c o r r e c t s t h e i n t e r e s t c a l c u l a t i o n s a n d t h e l a t e p a y m e n t p e n a l t y b y a p p l y i n g t h e
p a y m e n t s o n l y t o a y e a r t h a t h a s a t a x l i a b i l i t y b a l a n c e d u e a n d

c a r r i e s a n y c r e d i t f r o m a p r i o r y e a r o v e r t o t h e n e x t y e a r w i t h a l i a b i l i t y b a l a n c e d u e i n t h e m o n t h t h a t i t b e c o m e s a n o v e r p a y m e n t

. T h i s m e a n s t h a t t h e r e c a l c u l a t i o n c e a s e s a p p l y i n g p a y m e n t s t o a
p a r t i c u l a r t a x y e a r w h e n t h e l i a b i l i t y i s p a i d i n f u l l a n d m o v e s

a n y o v e r p a y m e n t t o t h e n e x t y e a r w i t h a l i a b i l i t y

. I n d o i n g t h i s

o n l y 2 0 0 5 , 2 0 0 8 a n d 2 0 1 0 ( w h i c h w a s a n e n g i n e e r e d l i a b i l i t y I w i l l

e x p l a i n i n a f e w m i n u t e s ) h a v e a s s e s s m e n t s s t i l l d u e

. T h e 2 0 0 8

y e a r w a s n o t p a r t o f t h e l i e n o r t h e o r i g i n a l o f f e r , b u t w a s a d d e d b y M s

. T a y l o r
- W h i t e , a n d 2 0 1 0 w a s c r e a t e d b y M s

. T a y l o r
- W h i t e

. T h e T o t a l o f t h e t h r e e i s $ 3 8 2 2

. 0 4 w i t h i n t e r e s t a n d p e n a l t i e s a c c r u e d
t o J u n e 1 , 2 0 1 3

. M s

. H a r t f i e l s e e m s t o f e e l t h a t s h e i s b e i n g
g r a c i o u s i s [ s i c ] o f f e r i n g M r

. D r i l l i n g a n o p p o r t u n i t y t o m a k e 6 0

p a y m e n t s o f $ 7 0 , a t o t a l o f $ 4 2 0 0

. 0 0 a s o f M a y , 2 0 1 3 ( w i t h i n c r e a s i n g i n t e r e s t a n d p e n a l t i e s )

. I n o t h e r w o r d s , p a y $ 7 0

. 0 0

p e r m o n t h f o r f i v e m o r e y e a r s o n l y t o h a v e t h e p r o b l e m c o n t i n u i n g

.

S c h e d u l e S e t B t a k e s o n e e x t r a s t e p

. I t r e v e r s e s t h e $ 7 0 0

. 0 0
t h a t M r

. D r i l l i n g p a i d f o r 2 0 1 0 t h a t M s

. T a y l o r
- W h i t e a p p l i e d t o 2 0 0 4 , a n d l i k e s e t A s t o p s a p p l y i n g p a y m e n t s t o t h e t a x y e a r w h e n

a l l l i a b i l i t i e s h a v e b e e n p a i d , a n d c a r r i e s o v e r p a y m e n t s f o r w a r d

o r b a c k ( b a s e d o n t h e I R S t r a n s c r i p t s p r o v i d e d ) a t t h e t i m e t h e

o v e r p a y m e n t i s a p p a r e n t

. U n d e r t h i s s c e n a r i o , M r

. D r i l l i n g o n l y h a s t w o t a x y e a r s w i t h o u t s t a n d i n g l i a b i l i t i e s , 2 0 0 5 a n d 2 0 0 8 , f o r

a t o t a l o f $ 3 7 5 5

. 7 8

. T h e a c t o f a p p l y i n g t h e $ 7 0 0

. 0 0 t o y e a r f o r

w h i c h i t w a s i n t e n d e d m a k e s a d i f f e r e n c e o f $ 6 6

. 2 6 i n p e n a l t i e s

a n d i n t e r e s t

.

T h e r e w o u l d b e a d d i t i o n a l r e d u c t i o n i n p e n a l t y a n d i n t e r e s t i n 2 0 0 4 i f t h e $ 1 7 3 7

. 5 8 c o u l d b e a p p l i e d a s r e c e i v e d i n s t e a d o f a l u m p s u m t w o y e a r s l a t e r , w h i c h w o u l d r i p p l e t h r o u g h a n d r e d u c e f u t u r e y e a r s p e n a l t i e s a n d i n t e r e s t , b u t t h a t i s a n o t h e r s t o r y ,
a n d I d o n o t h a v e t h o s e t r a n s c r i p t s t o o b t a i n t h e a p p r o p r i a t e d a t e f o r a p p l i c a t i o n t o 2 0 0 4

.

# - 30 -

[* 30 ] O f a l l o f t h e s e a m o u n t s , $ 2 1 6 8

. 7 2 r e p r e s e n t s p e n a l t i e s a n d
i n t e r e s t o n 2 0 0 4 , 2 0 0 5 , 2 0 0 6 a n d 2 0 0 8 s i n c e t h e n o t i c e o f l i e n w a s

s e n t o u t b y t h e I R S

. I f t h i s a m o u n t w e r e e l i m i n a t e d , a s a r e s u l t

o f t h e O f f e r i n C o m p r o m i s e , M r

. D r i l l i n g w o u l d b e f a c e d w i t h o n l y $ 1 6 5 3

. 3 2 u n d e r t h e S e t A s c e n a r i o , o r $ 1 5 8 7

. 0 6 u n d e r t h e S e t B

s c e n a r i o

.

W i t h o u t r e g a r d t o a l l o f t h i s , a t t h i s p o i n t , M r

. D r i l l i n g h a s p h y s i c a l l y p a i d $ 6 3 8 3 8

. 6 2 a g a i n s t a p u r e t a x d e b t o f $ 6 3 1 5 9

. 0 0
f o r t h e y e a r s 2 0 0 4

- 2 0 1 1

. H e i s n o t a t a x d e a d b e a t , j u s t a m a n t h a t h a d t h e g o v e r n m e n t t a k i n g s o m u c h o f h i s m o n e y h e h a d n o t h i n g t o l i v e o n f o r a f e w y e a r s

.

R e q u e s t e d R e s o l u t i o n

I r e a l l y w o u l d l i k e t o p u t t h i s t o r e s t , b u t I c a n n o t

r e c o m m e n d t o m y c l i e n t t h a t h e a g r e e t o p a y m o r e t h a n h e c u r r e n t l y

o w e s i n t a x e s p e n a l t i e s a n d i n t e r e s t t o s e t t l e t h i s

. I s t h e r e

a n y w a y w e c a n c a l l i t e v e n , o r s e t t l e i t f o r t h e $ 1 5 8 7

. 0 6 ? T h e S e t t l e m e n t O f f i c e r w o u l d n o t h e a r o f t h i s o f f e r , h o w e v e r , I h a v e

n e g o t i a t e d s e t t l e m e n t a g r e e m e n t s w i t h c o u n s e l b e f o r e , a n d i t i s

n o t l i k e I d o n o t h a v e t h e c a l c u l a t i o n s t o b a c k u p m y o f f e r

.



# The co un se l fo r th e IRS sen t Pa rh am ’s let te r of May 7, 20 13 , to Set tl em en t

Offi cer Har tfi el , who read th e le tt er an d m ad e th e fo ll owi ng no te s i n h er fi le s:

I r e v i e w e d t h e i n f o r m a t i o n P a r h a n [ s i c ] s e n t t o M o r a d a t e d 5 / 7 / 1 3 :

P O A d i s p u t e s t h e e q u i t y i n t h e 4 0 1 K

. A s I ’ v e m e n t i o n e d b e f o r e ,
e v e n i f t h e 4 0 1 K a m o u n t i s r e d u c e d t o z e r o , t p c a n f u l l p a y t h r u $ 1 1 5 p e r m o n t h

.

I r e v i e w e d t h e p a c k a g e o f i n f o r m a t i o n w h e r e P O A m a k e s h e r a r g u m e n t
t h a t t h e t p h a s a l r e a d y p a i d i n a l o t o f $ $ , t h e a m o u n t c o u l d b e l e s s i f

1

. S c h e d u l e S e t A i s u s e d t o c o r r e c t t h e c a l c u l a t i o n s i n t h e T D S
t r a n s c r i p t s I p r o v i d e d

. t h e c a l c u a l t i o n s [ s i c ] c o r r e c t i n t e r e s t

c a l c u l a t i o n s a n d t h e l a t e p a y m e n t p e n a l t y b y a p p l y i n g t h e p a y m e n t s

o n l y t o a y e a r t h a t h a s t a x e s o w e d a n d c a r r i e s a n y c r e d i t f r o m a
p r i o r y e a r o v e r t o t h e n e x t y e a r w i t h a l i a b i l i t y b a l a n c e d u e i n t h e m o n t h t h a t i t b e c o m e s a n o v e r p a y m e n t

. T o t h e P O A t h i s m e a n s t h a t t h e r e c a l c u l a t i o n c e a s e s a p p l y i n g p a y m e n t s t o a p a r t i c u l a r
y e a r w h e n t h e l i a b i l i t y i s p a i d i n f u l l a n d m o v e s a n y o v e r p a y m e n t
t o t h e n e x t y e a r w i t h a l i a b i l i t y

.

2

. S c h e d u l e B t a k e s o n e e x t r a s t e p

. I t r e v e r s e d t h e $ 7 0 0 t h a t M r D r i l l i n g p a i d f o r 2 0 1 0 t h a t t h e p r i o r C D P S O a p p l i e d t o 2 0 0 4 a n d
l i k e S e t A s t o p s a p p l y i n g p a y m e n t s t o t h e t a x y e a r w h e n a l l
l i a b l i t i e s [ s i c ] h a v e b e e n p a i d a n d c a r r i e s o v e r p a y m e n t s f o r w a r d

o r b a c k ( b a s e d o n t r a n s c r i p t s p r o v i d e d ) a t t h e t i m e t h e

o v e r p a y m e n t i s a p p a r e n t

. . [ s i c ] U s i n g S c h e d u l e B P O A s t a t e s l e a v e s t p w i t h o n l y 2 t a x y e a r s w i t h o u t s t a n d i n g l i a b i l i t i e s 2 0 0 5

# - 31 -

[* 31 ] a n d 2 0 0 8 , f o r t o t a l o f $ 3 , 7 5 5

. 7 8

. T h e a c t o f a p p l y i n g t h e $ 7 0 0 t o t h e y e a r i t w a s i n t e n d e d ( 2 0 1 0 ? ) m a k e s a d i f f e r e n c e o f $ 6 6

. 2 6 i n P & I

.

T h e r e w o u l d b e a d d i t i o n a l r e d u c t i o n i n P & I i n 2 0 0 4 i f t h e $ 1 7 3 7

. 5 8 c o u l d b e a p p l i e d a s r e c e i v e d i n s t e a d o f a l u m p s u m t w o
y e a r s l a t e r w h i c h w o u l d r i p p l e t h r o u g h a n d r e d u c e f u t u r e y e a r s P &
I

. B u t t h a t i s a n o t h e r s t o r y a n d s h e s t a t e s s h e d o e s n ’ t h a v e t h e t r a n s c r i p t s t o t o [ s i c ] o b t a i n t h e a p p r o p r i a t e d a t e f o r

a p p l i c a t i o n t o 2 0 0 4

.

O f a l l o f t h e s e a m o u n t s $ 2 1 6 8

. 7 2 r e p r e s e n t s P & I o n 2 0 0 4 2 0 0 5 2 0 0 6 & 2 0 0 8 s i n c e t h e n o t i c e o f l i e n w a s s e n t o u t b y I R S

. I f t h i s

a m o u n t w a s e l i m i n a t e d , a s a r e s u l t o f t h e O I C , t h e t p w o u l d b e
f a c e d w i t h o n l y $ 1 6 5 3

. 3 2 u n d e r S e t A o r $ 1 5 8 7

. 0 6 u n d e r S e t B

.

P O A a d d s t h a t t p h a s p a i d $ 6 3 8 3 8

. 6 2 a g a i n s t p u r e t a x d e b t o f $ 6 3 , 1 5 9 f o r 2 0 0 4

- 2 0 1 1

. H e i s n o t a t a x d e a d b e a t , j u s t a m a n t h a t h a d t h e g o v e r n m e n t t a k i n g s o m u c h o f h i s $ $ t h a t h e h a d n o t h i n g t o l i v e o n f o r a f e w y e a r s

.

3

. P O A ’ s r e q u e s t e d r e s o l u t i o n , w h i l e s h e w o u l d l i k e t o p u t t h i s t o r e s t , b u t s h e c a n n o t r e c o o m e n d [ s i c ] t o t h e t p t h a t h e a g r e e t o
p a y m o r e t h a n h e c u r r e n t l y o w e s i n t a x e s , p e n a l t i e s & i n t e r e s t t o

s e t t l e t h i s

. I s t h e r e a n y w a y w e c a n c a l l i t e v e n , o r s e t t l e f o r t h e $ 1 , 5 8 7

. 0 6 S h e c o n c l u d e s b y s a y i n g t h e S O ( m e ) w o u l d n o t h e a r

o f t h i s o f f e r , h o w e v e r , P O A s t a t e s s h e h a s n e g o t i a t e d s e t t l e m e n t

a g r e e m e n t s w i t h c o u n s e l b e f o r e a n d i t i s n o t l i k e I d o n o t h a v e t h e c a l c u l a t i o n s t o b a c k u p m y h e r o f f e r

.

W h i l e t h i s i s t h e f i r s t t i m e I ’ v e s e e n o r h e a r d t h i s s p e c i f i c

a m o u n t $ 1 5 8 7

. 0 6 , t h e P O A i s c o r r e c t i t i s n o t a n a g r e e a b l e a m o u n t

.

4

. I c o m p l e t e d D e c i s i o n I A w i t h o u t c o n s d e r i n g [ s i c ] t h e 3 y e a r s

o f c r e d i t s $ 8 8 1

. 5 3 o n 2 0 0 4 , $ 2

. 5 7 o n 2 0 0 6 & $ 2 7 6

. 6 5 o n 2 0 0 7 t o t o a l [ s i c ] $ 1 1 6 0

. 7 5 t p w i l l f u l l p a y @ $ 1 1 5 p e r m o n t h o n 9 / 2 8 / 2 0 1 7

. W i t h t h e c r e d i t , I e s t i m a t e d t h e t a x e s w o u l d b e p a i d 1 0

m o n t h s e a r l i e r o r 1 1 / 2 8 / 2 0 1 6

. I n f a c t D e c i s i o n I A s h o w s $ 6 0 p e r

m o n t h w o u l d f u l l p a y t h e l i a b i l i t y

. S e e t h e D e c i s i o n I A i n t h e

c a s e f i l e

.

5

. I c h e c k e d t h e $ 7 0 0 p y m t P O A s t a t e s w a s i n t e n d e d t o 2 0 1 0 , o n R T R , i t i s a m o n e y o r d e r a n d n o d e s i g n a t i o n i s m a d e o n t h e
p a y m e n t

.

6

. I c h e c k e d t h e C D P c a r a t s a n d t h e p r i o r S O n o t e d i n h e r 4 / 1 / 2 0 1 1 , t p d i d n o t h a v e a n y i s s u e w i t h t h e t a x l i a b i l i t y o n 2 0 0 4

a n d 2 0 0 5

. F o r 2 0 0 7 , t h e S O g a v e t h e t p a n o p p o r t u n i t y t o f i l e a n

a m e n d e d r e t u r n , w h i c h t h e y d i d a n d t h e t a x w a s r e d u c e d a s

r e f l e c t e d o n I D R S w i t h c u r r e n t $ 2 7 6

. 5 6

- c r e d i t

. T h i s w a s d u e t o M a t h E r r o r 5 8 2 w h e r e t p d i d n ’ t i n c l u d e F o r m W 2 o r o t h e r d o c u m e n t f o r F I T c l a i m e d

. S i n c e t h e C D P p e r i o d s a r e a l l s e l f f i l e d a n d t p f i l e d a m e n d e d r e t u r n f o r 2 0 0 7 , t h e t a x p a y e r i s p r e c l u d e d f r o m

r a i s i n g t h e l i a b i l i t y a s a n i s s u e i n t h i s C D P h e a r i n g

.

7

. R e g a r d i n g t h e P O A ’ s n o w r a i s i n g t h e l i a b i l i l i t y [ s i c ] a s a n i s s u e , t h e C D P y e a r s a r e a l l s e l f f i l e d r e t u r n s

. 2 0 0 7 w a s a d j u s t e d

# - 32 -

[* 32 ] b a s e d o n t h e a m e n d e d r e t u r n f i l e d b y t h e t p b e c a u s e t h i s
y e a r h a d M a t h E r r o r 5 8 2 m e a n i n g t h e t p d i d n o t i n c l u d e t h e W 2 o r

o t h e r d o c u m e n t c l a i m i n g F I T w i t h t h e t a x r e t u r n

. T h e I R M s t a t e s : 8

. 2 2

. 5

. 4

. 2

. 1 ( 0 3

- 2 9

- 2 0 1 2 ) V a l i d A s s e s s m e n t

- S e l f
F i l e d R e t u r n ( 1 ) W h e r e a s s e s s m e n t o f t h e t a x i s b a s e d o n a s e l f

- f i l e d r e t u r n , i t i s s u f f i c i e n t t o r e l y o n t h e T C 1 5 0 o n I D R S c o m m a n d c o d e T X M O D
t o c o n f i r m t h e v a l i d i t y o f t h e a s s e s s m e n t

. ( 2 ) I f t h e t a x p a y e r d i s p u t e s t h e l i a b i l i t y o n t h e s e l f f i l e d

r e t u r n , s e e I R M 8

. 2 2

. 8

. 7 , L i a b i l i t y I s s u e s a n d R e l i e f f r o m L i a b i l i t y , S e l f

- F i l e d R e t u r n s

.

F u r t h e r m o r e , 8

. 2 2

. 8

. 7 ( 0 3

- 2 9

- 2 0 1 2 ) S e l f

- F i l e d R e t u r n s ( 1 ) I f a t a x p a y e r s d i s p u t e s t h e l i a b i l i t y o n a s e l f

- f i l e d r e t u r n , p r o v i d e t h e m w i t h a d e a d l i n e o f a t l e a s t 2 1 c a l e n d a r d a y s t o f i l e

a n a m e n d e d r e t u r n w i t h y o u

.

( 2 ) I f t h e t a x p a y e r f a i l s t o a m e n d t h e r e t u r n a f t e r d i s p u t i n g t h e l i a b i l i t y , n o t e t h e o p p o r t u n i t y o f f e r e d t o a d d r e s s l i a b i l i t y i n t h e a t t a c h m e n t t o t h e d e t e r m i n a t i o n o r d e c i s i o n l e t t e r

.

( 3 ) A p p e a l s c a n r e d u c e t h e l i a b i l i t y o n a s e l f

- f i l e d r e t u r n

. T h e r e i s n o s t a t u t e o f l i m i t a t i o n s f o r r e q u e s t i n g a b a t e m e n t b u t t h e r e i s R e f u n d S t a t u t e E x p i r a t i o n D a t e f o r c r e d i t s a n d r e f u n d s i n I R C 6 5 1 1

.

M y d e t e r m i n a t i o n b a s e d o n t h e a n a l y s i s a b o v e i s t h a t a n o f f e r i n

c o m p r o m i s e c a n n o t b e r e c o m m e n d e d f o r a c c e p t a n c e b e c a u s e h e c a n f u l l p a y , t h e I A w a s d e c l i n e d , t h e n e w i s s u e s o f t h e l i a b i l i t y a r e
p r e c l u d e d b e c a u s e t h e t a x p a y e r w a s p r o v i d e d a p r i o r o p p o r t u n i t y 4 / 1 / 2 0 1 1 t o r a i s e t h e l i a b i l i t y a s a n i s s u e

.


# On J ul y 29 , 20 13 , th e App eal s Off ic e is su ed a su pp le m en ta l n ot ic e o f

de te rm in at io n s us ta in in g t he fil in g o f th e n ot ic e o f li en . Atta ch ed to th e

su pp le m en ta l n ot ic e was th e fo ll owi ng tex t:

A t t a c h m e n t t o S u p p l e m e n t a l N o t i c e o f D e t e r m i n a t i o n

T y p e o f T a x T a x P e r i o d C D P N o t i c e D a t e

1 0 4 0 1 2 / 3 1 / 2 0 0 4 0 6 / 1 7 / 2 0 1 0

1 0 4 0 1 2 / 3 1 / 2 0 0 5 0 6 / 1 7 / 2 0 1 0

1 0 4 0 1 2 / 3 1 / 2 0 0 7 0 6 / 1 7 / 2 0 1 0

T o t a l o w e d t h r o u g h 0 7 / 1 5 / 2 0 1 3 $ 3 , 1 5 1

. 1 4

# - 33 -

[* 33 ] S u m m a r y a n d R e c o m m e n d a t i o n

T h e c a s e w a s r e m a n d e d b y t h e C o u r t t o p r o v i d e t h e t a x p a y e r w i t h
t h e o f f e r i n c o m p r o m i s e c a l c u l a t i o n s u s e d b y t h e M e m p h i s C a m p u s S e t t l e m e n t O f f i c e r t o r e j e c t t h e t a x p a y e r ’ s $ 4 , 0 0 0

. 0 0 o f f e r i n

c o m p r o m i s e s u b m i t t e d w i t h i n t h e C o l l e c t i o n D u e P r o c e s s s y s t e m

. T h e t e r m s w e r e $ 2 0 0 a m o n t h f o r 2 0 m o n t h s f o r i n c o m e t a x y e a r s 1 2 / 2 0 0 4 , 1 2 / 2 0 0 5 , 1 2 / 2 0 0 6 , 1 2 / 2 0 0 7 , 1 2 / 2 0 0 8 a n d 1 2 / 2 0 1 0

.

T h e t a x p a y e r t i m e l y f i l e d a C o l l e c t i o n D u e P r o c e s s ( C D P ) H e a r i n g R e q u e s t u n d e r I n t e r n a l R e v e n u e C o d e ( I R C ) S e c t i o n 6 3 2 0 , i n

r e s p o n s e t o t h e L e t t e r 3 1 7 2 , N o t i c e o f F e d e r a l T a x L i e n F i l i n g a n d
Y o u r R i g h t t o a H e a r i n g

. T h e A u t o m a t e d C o l l e c t i o n S y s t e m i s s u e d
t h e n o t i c e o n M a y 1 1 , 2 0 1 0 b y C e r t i f i e d M a i l , R e t u r n R e c e i p t
R e q u e s t e d

. T h e l a s t d a y t o t i m e l y f i l e a n a p p e a l w a s J u n e 1 7 , 2 0 1 2

. T h e t a x p a y e r ’ s a p p e a l o n F o r m 1 2 1 5 3 w a s p o s t m a r k e d J u n e 1 7 , 2 0 1 2 a n d r e c e i v e d o n J u n e 2 1 , 2 0 1 2

. T h e r e f o r e , t h e p r o t e s t w a s t i m e l y

.

W h i l e t h e t a x p a y e r d i s a g r e e d w i t h t h e f i l i n g o f t h e N o t i c e o f
F e d e r a l T a x L i e n , n o c o l l e c t i o n a l t e r n a t i v e s u c h a s a b o n d w a s
p r o p o s e d

. I n s t e a d , t h e t a x p a y e r s u b m i t t e d a n o f f e r i n c o m p r o m i s e f o r $ 4 , 0 0 0

. 0 0 o n A p r i l 1 5 , 2 0 1 1

. I f t h e o f f e r w a s a c c e p t e d , t h e N o t i c e o f F e d e r a l T a x L i e n w o u l d b e a u t o m a t i c a l l y r e l e a s e d a f t e r

a l l o f t h e p a y m e n t t e r m s w e r e m e t

.

H o w e v e r , t h e p r e l i m i n a r y e v a l u a t i o n r e v e a l e d t h a t t h e o f f e r i n

c o m p r o m i s e s h o u l d b e r e j e c t e d b e c a u s e t h e t a x p a y e r c o u l d f u l l p a y t h e t a x e s

. T h e N o t i c e o f D e t e r m i n a t i o n s t a t i n g t h i s w a s d a t e d
J a n u a r y 3 1 , 2 0 1 2

.

T h e t a x p a y e r t i m e l y f i l e d h i s p e t i t i o n t a k i n g h i s c a s e t o T a x C o u r t b e c a u s e h e n e v e r r e c e i v e d t h e p r e l i m i n a r y o f f e r i n

c o m p r o m i s e c a l c u l a t i o n s

. R e s p o n d e n t a g r e e d t o r e m a n d t h e c a s e t o A p p e a l s i n o r d e r t o a s s u r e t h a t t h e t a x p a y e r r e c e i v e d t h e

w o r k p a p e r s i n q u e s t i o n a s w e l l a s p r o v i d e h i m t h e o p p o r t u n i t y t o d i s c u s s t h e m w i t h a S e t t l e m e n t O f f i c e r

.

T h e T a x C o u r t g r a n t e d r e s p o n d e n t ’ s m o t i o n a n d o r d e r e d t h a t t h e t a x p a y e r w o u l d r e c e i v e a s u p p l e m e n t a l h e a r i n g

. T h e c a s e w a s

r e m a n d e d t o H o u s t o n A p p e a l s

.

H o u s t o n A p p e a l s c o n d u c t e d t h e s u p p l e m e n t a l h e a r i n g o n A p r i l 3 0 , 2 0 1 3 i n a f a c e t o f a c e m e e t i n g a t t h e H o u s t o n A p p e a l s O f f i c e w i t h
R e p r e s e n t a t i v e , R

. J e a n e t t e P a r h a n [ s i c ]

. A s a f o l l o w u p , a n o t h e r

c o n f e r e n c e w a s h e l d b y t e l e p h o n e o n M a y 7 , 2 0 1 3

. I t w a s d e t e r m i n e d t h a t t h e t a x p a y e r ’ s o r i g i n a l o f f e r a m o u n t o f $ 4 , 0 0 0 w a s

c o r r e c t l y r e j e c t e d

.

T h e t a x p a y e r c a n f u l l p a y t h e l i a b i l i t y ; t h e r e f o r e t h e o f f e r i n

c o m p r o m i s e i s r e j e c t e d

. T h e t a x p a y e r w a s o f f e r e d t h e c o l l e c t i o n

a l t e r n a t i v e o f a n i n s t a l l m e n t a g r e e m e n t , b u t d e c l i n e d

.

F o r t h e C D P p e r i o d s a b o v e , t h e t a x p a y e r o w e s $ 3 , 1 5 1

. 1 4 f i g u r e d
t h r o u g h J u l y 1 5 , 2 0 1 3

. T h i s d o e s n ’ t t a k e i n t o a c c o u n t t h e $ 8 8 1

. 5 3

# - 34 -

[* 34 ] a n d $ 2 7 6

. 6 5 c r e d i t s o n t h e D e c e m b e r 3 1 , 2 0 0 5 a n d D e c e m b e r 10

3 1 , 2 0 0 7 p e r i o d s , r e s p e c t i v e l y

. T h e r e a r e o t h e r b a l a n c e s o w i n g o f $ 2 , 2 3 6

. 4 0 f i g u r e d t h r o u g h J u l y 1 5 , 2 0 1 3 t h a t a r e n o t p a r t o f t h i s C D P c a s e

.

B r i e f B a c k g r o u n d

T h e M e m p h i s , T N C a m p u s A p p e a l s U n i t w a s a s s i g n e d t h e o r i g i n a l
N o t i c e o f F e d e r a l T a x L i e n f i l e

. T h e S e t t l e m e n t O f f i c e r h e l d t h e h e a r i n g o n A p r i l 1 , 2 0 1 1

. O n A p r i l 1 5 , 2 0 1 1 , t h e F o r m 6 5 6 , O f f e r i n C o m p r o m i s e a s w e l l a s s u p p o r t i n g d o c u m e n t s w e r e f a x e d t o t h e S e t t l e m e n t O f f i c e r

.

O n O c t o b e r 2 7 , 2 0 1 1 , t h e C e n t r a l i z e d O f f e r i n C o m p r o m i s e G r o u p

s e n t t h e t a x p a y e r i n f o r m a t i o n t h a t t h e y h a d p r e l i m i n a r i l y d e t e r m i n e d t h a t t h e o f f e r s h o u l d b e r e j e c t e d

. T h e n , t h e M e m p h i s S e t t l e m e n t O f f i c e r r e v i e w e d t h e p r e l i m i n a r y d e t e r m i n a t i o n o n N o v e m b e r 1 6 , 2 0 1 1

.

H e r e v a l u a t i o n w a s t h a t t h e p r e l i m i n a r y d e c i s i o n w a s c o r r e c t a n d
t h a t t h e o f f e r s h o u l d b e r e j e c t e d

. T h e S e t t l e m e n t O f f i c e r

c o m m u n i c a t e d t h e r e j e c t i o n i n a l e t t e r t o t h e t a x p a y e r a n d

r e p r e s e n t a t i v e o n D e c e m b e r 1 3 , 2 0 1 1

. C o p i e s o f t h e w o r k p a p e r s
p r e p a r e d b y t h e C e n t r a l i z e d O f f e r i n C o m p r o m i s e U n i t w e r e i n c l u d e d i n t h e m a i l i n g

.

H o w e v e r , a f t e r s e v e r a l a t t e m p t e d t e l e p h o n e c o n t a c t s b e t w e e n t h e S e t t l e m e n t O f f i c e r a n d R e p r e s e n t a t i v e , R

. J e a n e t t e P a r h a n [ s i c ]

w e r e u n s u c c e s s f u l , t h e N o t i c e o f D e t e r m i n a t i o n s u s t a i n i n g t h e N o t i c e o f F e d e r a l T a x L i e n a n d r e j e c t i n g t h e $ 4 , 0 0 0 o f f e r i n

c o m p r o m i s e w a s s e n t o n J a n u a r y 3 1 , 2 0 1 2

. A s a r e s u l t , t h e t a x p a y e r t i m e l y f i l e d h i s p e t i t i o n t o T a x C o u r t w h e r e t h e c a s e w a s

r e m a n d e d o n r e s p o n d e n t ’ s m o t i o n

.

S e t t l e m e n t O f f i c e r , L i n d a H a r t f i e l , w a s a s s i g n e d t h e r e m a n d e d c a s e

o n A p r i l 1 2 , 2 0 1 3

. T h e c o u r t r e q u i r e d t h a t t h e p e t i t i o n e r b e
p r o v i d e d w i t h a n e w h e a r i n g t o d i s c u s s t h e i s s u e s r a i s e d i n t h e i r C o l l e c t i o n D u e P r o c e s s p r o c e e d i n g

.

I n p a r t i c u l a r , t h e p e t i t i o n e r w a s t o b e p r o v i d e d a c o p y o f t h e

w o r k p a p e r s u s e d b y t h e i n i t i a l S e t t l e m e n t O f f i c e r i n M e m p h i s

. T h e s e d o c u m e n t s w e r e u s e d t o d e t e r m i n e t h a t t h e t a x p a y e r w a s n o t

e n t i t l e d t o s e t t l e h i s i n c o m e t a x d e b t t h r o u g h a n o f f e r i n

c o m p r o m i s e a s r e q u e s t e d d u r i n g t h e i n i t i a l C o l l e c t i o n D u e P r o c e s s h e a r i n g

.

T h e n , t h e p e t i t i o n e r w a s t o b e p r o v i d e d w i t h a n o p p o r t u n i t y t o d i s c u s s t h e m a t t e r r a i s e d i n t h e w o r k p a p e r s

. T h e d e a d l i n e f o r t h i s a c t i o n w a s M a y 7 , 2 0 1 3

.



# The set tl em en t o ffi cer t es ti fie d t ha t 2 00 5 was an erro r an d t he co rrec t year 1 0



# was 20 04 . Dril li ng do es no t ch al le ng e th e su pp le m en ta l d et erm in at io n o n t he ba si s o f th is erro r.

# - 35 -

[* 35 ] W h e n M s

. H a r t f i e l w a s u n a b l e t o r e a c h t h e r e p r e s e n t a t i v e b y t e l e p h o n e , s h e m a i l e d t h e p e t i t i o n e r a n d r e p r e s e n t a t i v e a l e t t e r

o n A p r i l 1 5 , 2 0 1 3

. T h e c o r r e s p o n d e n c e c o n t a i n e d t h e O c t o b e r 2 7 , 2 0 1 1 p r e l i m i n a r y d e t e r m i n a t i o n a n d w o r k p a p e r s a s r e q u i r e d b y t h e

c o u r t

. I n a d d i t i o n , t h r e e p o s s i b l e h e a r i n g d a t e s w e r e p r o v i d e d t o f u r t h e r a s s i s t t h e t a x p a y e r i n u n d e r s t a n d i n g w h y t h e o f f e r i n

c o m p r o m i s e w a s r e j e c t e d

.

A f t e r l e a v i n g d a i l y v o i c e m a i l m e s s a g e s w i t h t h e r e p r e s e n t a t i v e , M s

. P a r h a n [ s i c ] r e t u r n e d M s

. H a r t f i e l ’ s c a l l o n A p r i l 2 3 , 2 0 1 3

. T h e A p r i l 3 0 , 2 0 1 3 i n p e r s o n m e e t i n g w a s a g r e e d u p o n f o r n o o n

.

T h e h e a r i n g t o o k p l a c e a s s c h e d u l e d

. T h e O c t o b e r 2 7 , 2 0 1 3 o f f e r i n c o m p r o m i s e c h a r t s w e r e d i s c u s s e d i n d e t a i l

. A s t h e

r e p r e s e n t a t i v e p r o v i d e d n o n e w i n f o r m a t i o n t o c h a n g e t h e o u t c o m e

o f t h e o f f e r i n c o m p r o m i s e f i g u r e s , t h e d e t e r m i n a t i o n w a s t h a t t h e

o f f e r i n c o m p r o m i s e w a s c o r r e c t l y r e j e c t e d

. I n a d d i t i o n , t h e N o t i c e o f F e d e r a l T a x L i e n w a s s u s t a i n e d

.

L e g a l a n d P r o c e d u r a l R e q u i r e m e n t s

T h i s S e t t l e m e n t O f f i c e r v e r i f i e s t h a t s h e h a s h a d n o p r i o r i n v o l v e m e n t w i t h r e s p e c t t o t h e s p e c i f i c t a x p e r i o d s e i t h e r i n A p p e a l s o r C o m p l i a n c e

.

T h e c o l l e c t i o n s t a t u t e h a s b e e n s u s p e n d e d ; t h e c o l l e c t i o n p e r i o d

a l l o w e d b y s t a t u t e t o c o l l e c t t h e s e t a x e s h a s b e e n s u s p e n d e d b y t h e a p p r o p r i a t e c o m p u t e r c o d e s f o r t h e t a x p e r i o d s a t i s s u e

.

C o l l e c t i o n f o l l o w e d a l l l e g a l a n d p r o c e d u r a l r e q u i r e m e n t s a n d t h e

a c t i o n s t a k e n o r p r o p o s e d w e r e a p p r o p r i a t e u n d e r t h e

c i r c u m s t a n c e s

.

I s s u e s r e l a t i n g t o t h e u n p a i d l i a b i l i t y

I n i t i a l l y , o n t h e F o r m 1 2 1 5 3 , R e q u e s t f o r a C o l l e c t i o n D u e P r o c e s s H e a r i n g f o r t h e t a x a b l e y e a r s 2 0 0 4 , 2 0 0 5 a n d 2 0 0 7 , t h e t a x p a y e r

s t a t e d t h a t h e o r i g i n a l l y r e q u e s t e d a n o f f e r i n c o m p r o m i s e

. T h e t a x p a y e r a l s o w r o t e o n t h e F o r m 1 2 1 5 3 t h a t h e h a d a r r a n g e d f o r i n s t a l l m e n t p a y m e n t s t h a t w e r e n o t d e d u c t e d u n d e r m u l t i p l e c o u r t

o r d e r e d p a y m e n t s

.

D u r i n g t h e t e l e p h o n e h e a r i n g h e l d b y t h e M e m p h i s S e t t l e m e n t
O f f i c e r o n A p r i l 1 , 2 0 1 1 , t h e R e p r e s e n t a t i v e c h a l l e n g e d t h e 2 0 0 7
t a x l i a b i l i t y

. T h i s w a s b e c a u s e t h e t a x p a y e r i n d i c a t e d h e h a d n o t

r e c e i v e d c r e d i t f o r t h e F e d e r a l I n c o m e W i t h h e l d t h a t y e a r

.

T h e t a x p a y e r w a s g i v e n t h e p r o p e r t i m e t o f i l e a n a m e n d e d i n c o m e t a x r e t u r n f o r 2 0 0 7

. T h i s r e s u l t e d i n t h e t a x p a y e r r e c e i v i n g

c r e d i t f o r h i s w i t h h o l d i n g a n d t h e l i a b i l i t y e x t i n g u i s h e d

. T h e M e m p h i s S e t t l e m e n t O f f i c e r d o c u m e n t e d t h a t t h e t a x p a y e r d i d n o t

r a i s e a n y l i a b i l i t y i s s u e s f o r 2 0 0 4 o r 2 0 0 5

.

A s m e n t i o n e d b e f o r e , o n A p r i l 1 5 , 2 0 1 1 , t h e $ 4 , 0 0 0

. 0 0 o f f e r i n

c o m p r o m i s e w a s f a x e d t o t h e M e m p h i s S e t t l e m e n t O f f i c e r

. A f t e r t h e
p r e l i m i n a r y d e t e r m i n a t i o n w a s m a d e t o r e j e c t t h e o f f e r , A p p e a l s

a g r e e d w i t h t h e C e n t r a l i z e d O f f e r i n C o m p r o m i s e i n i t i a l c a l l

. T h e

# - 36 -

[* 36 ] N o t i c e o f D e t e r m i n a t i o n w a s i s s u e d r e s u l t i n g i n t h e c a s e b e i n g r e m a n d e d t o A p p e a l s

.

D u r i n g t h e s u p p l e m e n t a l h e a r i n g h e l d b y S e t t l e m e n t O f f i c e r L i n d a H a r t f i e l , t h e O c t o b e r 2 7 , 2 0 1 1 c h a r t s w e r e v e r i f i e d r e c e i v e d b y t h e r e p r e s e n t a t i v e a n d d i s c u s s e d i n d e t a i l

. H o w e v e r , t h e

r e p r e s e n t a t i v e d i d n o t u n d e r s t a n d w h y t h e t a x p a y e r ’ s o f f e r i n

c o m p r o m i s e w a s n o t a c c e p t e d b y t h e S e r v i c e

.

M s

. H a r t f i e l e x p l a i n e d t h a t a n o f f e r i s c o m p r o m i s e d [ s i c ] o f t w o

c o m p o n e n t s :

1

. ) e q u i t y i n a s s e t s 2

. ) m o n e y l e f t o v e r a t t h e e n d o f t h e m o n t h a f t e r b a s i c l i v i n g

e x p e n s e s a r e p a i d

.

A f t e r v e r i f y i n g t h e t a x p a y e r ’ s f i n a n c i a l c o n d i t i o n h a d n o t

c h a n g e d , t h e r e p r e s e n t a t i v e w a s t o l d t h e r e a s o n s t h a t t h e o f f e r i n

c o m p r o m i s e w a s r e j e c t e d

. I n a d d i t i o n , t h e N o t i c e o f F e d e r a l T a x L i e n w a s a l s o r e v i e w e d

.

O f t h e m a n y i s s u e s r a i s e d d u r i n g t h e s u p p l e m e n t a l h e a r i n g , o n e o f

n o t e w a s t h a t t h e r e p r e s e n t a t i v e w a n t e d t h e o f f e r c a l c u l a t e d b a s e d

o n t h e t a x p a y e r ’ s p a s t f i n a n c i a l c o n d i t i o n

. S h e i n s i s t e d t h a t t h e

o f f e r b e c a l c u l a t e d t o c o m p u t e h i s a b i l i t y t o p a y u s i n g t h e i n c o m e t h a t t h e t a x p a y e r e a r n e d i n t h e y e a r s t h a t h e w a s t r y i n g t o

c o m p r o m i s e

. A p p e a l s e x p l a i n e d t h a t w h e n a n o f f e r s u c h a s t h i s i s f i l e d , t h e r e q u i r e m e n t i s t h a t t h e t a x p a y e r ’ s c u r r e n t f i n a n c i a l

c o n d i t i o n b e e v a l u a t e d

.

O f f e r i n C o m p r o m i s e D i s c u s s i o n

B y a p p l y i n g t h i s s t a n d a r d , A p p e a l s d e t e r m i n e d t h a t t h e t a x p a y e r h a s e q u i t y i n a s s e t s a s w e l l a s a m o n t h l y s u r p l u s o f f u n d s t h a t

a l l o w s h i m t h e a b i l i t y f u l l p a y t h e t a x e s

. S p e c i f i c a l l y , t h e t a x p a y e r h a s a n i n v e s t m e n t / r e t i r e m e n t a c c o u n t v a l u e d f o r o f f e r i n

c o m p r o m i s e p u r p o s e s a t $ 1 2 , 7 3 4

. T h i s a m o u n t a l o n e i s m o r e t h a n t h e l i a b i l i t y

.

H o w e v e r , t h e t a x p a y e r h a s o t h e r a s s e t s t o t o t a l $ 1 5 , 1 3 4

. O n t o p

o f t h e a s s e t s , t h e t a x p a y e r c a n p a y $ 1 1 5

. 0 0 a m o n t h a f t e r m e e t i n g b a s i c l i v i n g c o s t s

. T h i s i s b a s e d o n i n c o m e o f $ 6 , 5 5 3 a n d m o n t h l y

o r d i n a r y a n d n e c e s s a r y e x p e n s e s o f $ 6 , 4 3 8

. W h e n t h e t o t a l o f t h e

o f f e r i n c o m p r o m i s e c a l c u l a t i o n s e x c e e d s t h e t a x l i a b i l i t y , t h e t a x p a y e r w i l l n o t r e c e i v e a n o f f e r i n c o m p r o m i s e

.

A d d i t i o n a l i s s u e s r a i s e d r e l a t i n g t o t h e u n p a i d l i a b i l i t y

M s

. H a r t f i e l a c c o m m o d a t e d e v e r y r e q u e s t f o r i n f o r m a t i o n w e l l a b o v e t h e c o u r t ’ s r e q u i r e m e n t s

. F o r e x a m p l e , w h e n t h e r e p r e s e n t a t i v e
q u e s t i o n e d t h e a m o u n t o f p e n a l t y a n d i n t e r e s t c h a r g e d , c o m p u t e r

c o m p u t a t i o n s r e f l e c t i n g t h e s e c h a r g e s w e r e p r o v i d e d

. W h e n t h e

r e p r e s e n t a t i v e w a n t e d a d d i t i o n a l t i m e t o c o n s u l t a c t u a r i a l t a b l e s

r e g a r d i n g t h e a c c u r a c y o f t h e c h a r g e s , M s

. H a r t f i e l o b l i g e d M s

. P a r h a n [ s i c ]

.

H o w e v e r , w h e n M s

. P a r h a n [ s i c ] r a i s e d t h e t a x p a y e r ’ s l i a b i l i t i e s f o r t h e t a x a b l e y e a r s 2 0 0 4 a n d 2 0 0 5 , M s

. H a r t f i e l a d v i s e d h e r t h a t

# - 37 -

[* 37 ] s h e w a s p r e c l u d e d f r o m d o i n g s o

. T h i s i s b e c a u s e t h e t a x p a y e r p r e v i o u s l y h a d t h e o p p o r t u n i t y i n t h e A p r i l 1 , 2 0 1 1
h e a r i n g t o r a i s e a n y l i a b i l i t y i s s u e s

. A t t h a t t i m e s h e r a i s e d 2 0 0 7 a s a n i s s u e

. T h e M e m p h i s S e t t l e m e n t O f f i c e r c l e a r l y d o c u m e n t e d t h a t t h e t a x p a y e r d i d n o t r a i s e a n y l i a b i l i t y i s s u e s f o r 2 0 0 4 o r 2 0 0 5

. F u r t h e r m o r e , t h e r e p r e s e n t a t i v e t r i e d t o r a i s e i s s u e s t h a t w e r e n o t p a r t o f e i t h e r t h e i n i t i a l C D P h e a r i n g o r

r a i s e d b y t h e t a x p a y e r i n h i s p e t i t i o n b e f o r e t h e T a x C o u r t

. E v e n t h o u g h t h e t a x p a y e r c a n p a y t h e l i a b i l i t y i n f u l l , M s

. H a r t f i e l o f f e r e d t h e c o l l e c t i o n a l t e r n a t i v e o f a n i n s t a l l m e n t

a g r e e m e n t o n s e v e r a l o c c a s i o n s t o t h e t a x p a y e r t h r o u g h h i s

r e p r e s e n t a t i v e , M s

. P a r h a n [ s i c ]

. T h e a c c e p t a b l e m i n i m u m m o n t h l y p a y m e n t a m o u n t w a s $ 6 0

. E a c h t i m e t h e o f f e r w a s d e c l i n e d

.

F i n a l l y , t h e r e p r e s e n t a t i v e s e n t r e s p o n d e n t ’ s C o u n s e l D a v i d M o r a

c o r r e s p o n d e n c e d a t e d M a y 7 , 2 0 1 3

. M r

. M o r a r e c e i v e d t h e i n f o r m a t i o n o n M a y 9 , 2 0 1 3

. I n i t , M s

. P a r h a n [ s i c ] r e q u e s t e d
t h a t t h e a t t o r n e y g e t i n v o l v e d w i t h t h e c a s e

. T h i s i s b e c a u s e t h e

s u p p l e m e n t a l h e a r i n g s d i d n o t a c h i e v e t h e o u t c o m e M s

. P a r h a n [ s i c ]

w a n t e d

.

I n g e n e r a l , a s O f f i c e o f C h i e f C o u n s e l d o e s n o t i n v o l v e i t s e l f i n t h e i s s u e s o f C o l l e c t i o n D u e P r o c e s s c a s e s , t h e c o r r e s p o n d e n c e w a s
p r o v i d e d t o M s

. H a r t f i e l f o r r e v i e w

. M s

. H a r t f i e l c o n s i d e r e d a l l

o f t h e i n f o r m a t i o n s u b m i t t e d

. H o w e v e r , t h e d o c u m e n t s d i d n o t

c h a n g e t h e f a c t t h a t t h e o f f e r i n c o m p r o m i s e i s n o t a v i a b l e

o p t i o n f o r t h e t a x p a y e r

. F u r t h e r m o r e , t h e t a x p a y e r d e c l i n e d t h e

o f f e r o f a n i n s t a l l m e n t a g r e e m e n t o f $ 6 0

. 0 0 p e r m o n t h

.

A p p e a l s m e t t h e c o u r t r e q u i r e m e n t s o f t h e r e m a n d e d c a s e s

. T w o h e a r i n g s w e r e h e l d w i t h t h e r e p r e s e n t a t i v e w h e r e t h e r e j e c t e d

o f f e r i n c o m p r o m i s e w a s d i s c u s s e d i n d e t a i l

.

T h e t a x p a y e r ’ s c u r r e n t f i n a n c i a l c o n d i t i o n h a s n o t c h a n g e d t o h i s d e t r i m e n t

. S i n c e t h e t a x p a y e r c a n f u l l p a y , t h e r e p r e s e n t a t i v e

w a s a d v i s e d t h a t t h e o f f e r i n c o m p r o m i s e w a s r e j e c t e d

. F u r t h e r m o r e , t h e c o l l e c t i o n a l t e r n a t i v e o f a n i n s t a l l m e n t

a g r e e m e n t w a s d e c l i n e d

. T h e r e p r e s e n t a t i v e ’ s r e q u e s t i n h e r M a y 7 , 2 0 1 3 c o r r e s p o n d e n c e t o c a l l i t e v e n o r s e t t l e f o r $ 1 , 5 8 7

. 0 6 i s d e n i e d

.

T h e S e t t l e m e n t O f f i c e r r e v i e w e d t h e c r i t e r i a t o w i t h d r a w a N o t i c e

o f F e d e r a l T a x L i e n u n d e r I R C § 6 3 2 3 ( j )

. N o i n f o r m a t i o n o r d o c u m e n t a t i o n w a s s u b m i t t e d c o n f i r m i n g t h a t w i t h d r a w a l o f t h e l i e n

w o u l d f a c i l i t a t e c o l l e c t i o n

.

L i e n W i t h d r a w a l

I R C § 6 3 2 3 ( j ) g i v e s t h e S e r v i c e t h e a u t h o r i t y t o w i t h d r a w N o t i c e s

o f F e d e r a l T a x L i e n u n d e r c e r t a i n c i r c u m s t a n c e s

. T h e N F T L m a y b e

w i t h d r a w n u n d e r t h e f o l l o w i n g c o n d i t i o n s :

( a ) t h e f i l i n g o f t h e n o t i c e w a s p r e m a t u r e o r o t h e r w i s e n o t i n a c c o r d a n c e w i t h t h e S e r v i c e s a d m i n i s t r a t i v e p r o c e d u r e s , ( b ) t h e t a x p a y e r e n t e r e d i n t o a n a g r e e m e n t u n d e r S e c t i o n 6 1 5 9 t o s a t i s f y t h e t a x l i a b i l i t y f o r w h i c h t h e l i e n w a s i m p o s e d b y m e a n s o f i n s t a l l m e n t p a y m e n t s , u n l e s s s u c h a g r e e m e n t
p r o v i d e s o t h e r w i s e ,

# - 38 -

[* 38 ] ( c ) w i t h d r a w a l o f s u c h n o t i c e w i l l f a c i l i t a t e t h e c o l l e c t i o n o f

t h e t a x l i a b i l i t y , o r ( d ) w i t h t h e c o n s e n t o f t h e t a x p a y e r o r t h e N a t i o n a l
T a x p a y e r A d v o c a t e , t h e w i t h d r a w a l o f s u c h n o t i c e w o u l d b e i n t h e b e s t i n t e r e s t o f t h e t a x p a y e r ( a s d e t e r m i n e d b y t h e N a t i o n a l T a x p a y e r A d v o c a t e ) a n d t h e U n i t e d S t a t e s

.

N o n e o f t h e s e c o n d i t i o n s h a v e b e e n m e t

. T h e r e f o r e , t h e r e i s n o b a s i s f o r w i t h d r a w i n g t h e l i e n

.

N o a d d i t i o n a l i s s u e s w e r e r a i s e d

.

B a l a n c i n g e f f i c i e n t t a x c o l l e c t i o n w i t h c o n c e r n r e g a r d i n g i n t r u s i v e n e s s

I R C S e c t i o n § [ s i c ] 6 3 3 0 ( c ) ( 3 ) ( C ) r e q u i r e s t h a t t h e S e t t l e m e n t
O f f i c e r d e t e r m i n e i f t h e f i l e d N o t i c e o f F e d e r a l T a x L i e n b a l a n c e s t h e n e e d f o r e f f i c i e n t c o l l e c t i o n o f t h e t a x e s w i t h t h e l e g i t i m a t e

c o n c e r n o f t h e t a x p a y e r t h a t a n y c o l l e c t i o n a c t i o n b e n o m o r e i n t r u s i v e t h a n n e c e s s a r y

. N o c o l l e c t i o n a l t e r n a t i v e t o t h e t a x l i e n w a s p r o p o s e d b y t h e t a x p a y e r

.

T h e I R S f o l l o w e d p r o p e r p r o c e d u r e s i n f i l i n g t h e t a x l i e n

. T h e f i l i n g o f a t a x l i e n w a s n e c e s s a r y t o p r o t e c t t h e g o v e r n m e n t ’ s i n t e r e s t a g a i n s t t h i r d p a r t y c r e d i t o r s

. I t i s t h e d e t e r m i n a t i o n

o f A p p e a l s t h a t t h e f i l e d t a x l i e n b a l a n c e s t h e n e e d f o r e f f i c i e n t

c o l l e c t i o n o f t a x e s w i t h t h e t a x p a y e r ’ s l e g i t i m a t e c o n c e r n t h e

a c t i o n i s n o m o r e i n t r u s i v e t h a n n e c e s s a r y

.

C o n c l u s i o n

T h e s u p p l e m e n t a l h e a r i n g w a s h e l d a s d i r e c t e d b y t h e C o u r t w i t h
t h e p e t i t i o n e r g i v e n t h e o p p o r t u n i t y t o r e c e i v e a n d d i s c u s s t h e

o f f e r i n c o m p r o m i s e c o m p u t a t i o n s t h a t w e r e u s e d w h e n t h e M e m p h i s S e t t l e m e n t O f f i c e r d e t e r m i n e d r e j e c t i o n w a s t h e c o r r e c t d e c i s i o n

. T h e o u t c o m e o f t h e h e a r i n g s w a s t h a t t h e $ 4 , 0 0 0 o f f e r d a t e d A p r i l
1 5 , 2 0 1 1 w a s c o r r e c t l y r e j e c t e d a n d t h e d e c i s i o n i s s u s t a i n e d

. I n

a d d i t i o n , t h e f i l i n g o f t h e l i e n i s a l s o u p h e l d a s i t i s n e e d e d t o
p r o t e c t t h e g o v e r n m e n t ’ s i n t e r e s t a g a i n s t o t h e r c r e d i t o r s

.



# 4. Tria l

On Oct ob er 2 5, 2 01 3, t he Co ur t n ot ifi ed Dril li ng an d t he IRS t ha t t he cas e

wou ld be tri ed du rin g t he tri al ses si on be gi nn in g M arch 17 , 20 14 , in Hou st on ,

Tex as

.

# - 39 -

[* 39 ] On M arch 17 , 20 14 , th e fi rs t d ay of t he tri al ses si on , th e IRS fil ed a m ot io n

to di sm is s t he cas e o n g ro un ds of m oo tn es s as to th e ta x years 2 00 4 a nd 20 07 . On

Mar ch 18 , 20 14 , Dril li ng fil ed a res po ns e to th e m ot io n. Th e Co ur t re se rv ed

ru li ng on th e m ot io n. On Marc h 1 8 a nd 19 , 20 14 , th e Co ur t h el d t he tri al . After

th e tr ia l, t he pa rti es fil ed si m ul ta ne ou s o pe ni ng bri efs an d t he n s im ul ta ne ou s

an swe rin g b rie fs . In h is op en in g b rie f, Dril li ng att ach ed va rio us do cu m en ts :

pr ov is io ns of t he Int ern al Rev en ue Man ua l, p or ti on s o f th e In te rn al Rev en ue

Co de , IRS p ub li cat io ns , an I RS n ews rel eas e, an d i nt ern al IRS m em or an da . The

IRS m ov ed to st rik e th es e at ta ch m en ts to hi s b rie f on th e g ro un ds th at th ey : (1 )

are i rrel ev an t, (2 ) are no t i n t he tri al reco rd , and (3) were n ot pro vi de d b y Dril li ng

to co un se l fo r th e IRS be fo re t ria l.

OPINION

In hi s o pe ni ng bri ef Dri ll in g i de nt ifi es th ree e rro rs th at he co nt en ds were

m ad e b y th e App eal s Off

ic e: (1) fai li ng to “ rel eas e” t he li en for 20 07 , (2)

m is ha nd li ng hi s $ 4,0 00 off er-i n- co m pr om is e, an d (3 ) fai li ng to co rrec t t he

am ou nt s o f hi s t ax li ab il it ie s. We di sc us s ea ch of t he se all eg ed erro rs in tu rn

.

1. W it hd rawi ng no ti ce o f li en or r el eas in g l ie n fo r 20 07

On M ay 11 , 20 10 , th e IRS fil ed a no ti ce o f li en to co ll ect in co m e-t ax

li ab il it ie s fr om

Dril li ng for tax y ears 20 04 , 20 05 , and 20 07 . Dril li ng co nt en ds th at

# - 40 -

[* 40 ] th e li en was “ pr em at ur e o r ot he rwis e n ot in acco rd an ce wi th ad m in is tra ti ve

pr oc ed ur es of t he Secr et ary”, tha t i t was “ im pr op erl y fil ed ”, an d c om

pl ai ns th at th e

IRS h as y et to “ rel eas e” t he li en . In s up po rt o f hi s ar gu m en ts , Dril li ng rel ie s o n

th e fo ll owi ng fact ua l p ro po si ti on s:

! In Apri l 2 00 8 h e fi le d h is 20 07 tax ret ur n, re po rti ng th e am ou nt of t ax th at

ha d b een wit hh el d fr om

hi s wag es for 20 07

.

! He at ta ch ed to th is ret ur n h is Fo rm W -2 fro m

hi s emplo y er s ho win g t he

am ou nt of wi th ho ld in g. (We hav e fo un d, h owe ve r, th at he di d n ot att ach th e

Fo rm W -2 .).

! Tay lo r-Whit e, th e se tt le m en t o ffi cer wh o h an dl ed th e in it ia l co ll ect io nrev ie w hea rin g, co nf

irmed th at Dril li ng ha d n ot be en gi ve n c red it for th e

wit hh ol di ng

. 1 1



# The IRS’s re sp on se s t o t he se arg um en ts are t hr eefo ld . Firs t, t he IRS ar gu es

th at when th e n ot ic e o f li en was fi le d, Dri ll in g “ was no t en ti tl ed to th e wit hh ol di ng

cred it for th e ta xa bl e y ear 2 00 7 b ecau se he refu se d t o p ro vi de res po nd en t [t he

IRS] wit h s ub st an ti at io n fo r th is cred it .” The n ot ic e o f li en was fi le d o n M ay 11

,

20 10 . It was no t u nt il Apri l 1 5, 2 01 1, t he IRS ar gu es , th at Dril li ng pro vi de d

Set tl em en t Offi cer Taylo r-Whit e’s no te s o f th e Apr il 1, 2 01 1 1 1



# te le co nf eren ce s ta te : “ [R]evi ew of IRPTRL/ TXMOD for 20 07 sh ow t p was nt [si c] gi ve n c red it for

$1 4,2 19 of f

it ”.

# - 41 -

[* 41 ] su bs ta nt ia ti on for

th e cre di t. (On Apri l 1 5, 2 01 1, Pa rh am fax ed a Fo rm

W -2

to th e App eal s Off

ic e ref le ct in g t ha t Dri ll in g’s em pl oyer ha d wi th he ld $1 4,1 30

fro m hi s wag es for

fed eral in co m e ta x.) At so m e p oi nt th erea fte r, th e IRS cred it ed

Dril li ng $1 4,1 30 for 20 07 . The IR S co nc lu de s t ha t “ [t]he li en m et th e

req ui rem en ts of I .R.C. § 63 23 wit h re sp ect to th e ta xa bl e y ear 2 00 7 a t t he ti m e it

was fil ed .” Seco nd , th e IRS co nt en ds th at Dril li ng di d n ot rai se th e arg um en ts at

th e ad m in is tra ti ve lev el

. Thi rd , th e IRS co nt en ds th at th e cas e sh ou ld be 1 2



# di sm is se d a s m oo t as it rel at es to th e 2 00 7 year. It co nt en ds th at it ha s d et erm in ed

th at Dril li ng ha s fu ll y

pa id hi s l ia bi li ty for t he 20 07 tax y ear, t ha t as a m at te r of

la w “ on ce re sp on de nt co nc ed es th at th ere i s n o u np ai d l ia bi li ty for t he y ear i n

di sp ut e u po n wh ic h a li en or l ev y co ul d b e b as ed , th e cas e is m oo t”

, an d t ha t t he 1 3



# IRS d oe s n ot ne ed to , or i nt en d t o, t ak e co ll ect io n a ct io n wi th res pe ct to Dril li ng ’s

20 07 li ab il it y

.

In it s o pe ni ng bri ef t he IRS s ta te s: “ In th is cas e th e p et it io ne r [Dri ll in g] 1 2



# ap pe ars to co nt en d t ha t t he no ti ce o f fed eral tax li en was fi le d p rem at ur el y wit h

res pe ct to th e ta xa bl e y ear 2 00 7 b ecau se du rin g t he in it ia l co ll ect io n d ue pro ces s he ari ng th e res po nd en t [t he IRS] con ced ed th e p et it io ne r’s li ab il it y for th at
pe rio d.” It as se rts : “ [T]he p et it io ne r di d n ot rai se th is is su e d ur in g t he co ll ect io n du e p ro ces s h eari ng or t he su pp le m en ta l co ll ect io n d ue pro ces s h eari ng .” Dril li ng

co nt en ds th at he di d ra is e th e arg um en ts

.

Fo r th is leg al pro po si ti on th e IRS cit es Ch ou v. Co m m is si on er, T.C. 1 3


# Mem o. 2 00 7- 10 2, s li p o p. at 17 (ci ti ng Green e-Th ap ed i v . Com m is si on er, 1 26 T.C. 1, 7 (20 06 )).

# - 42 -

[* 42 ] A tax pa y er’s l ia bi li ty for a t ax is in it ia ll y est ab li sh ed when th e IRS m ak es a

bo ok ke ep in g e nt ry

cal le d a n “ as se ss m en t” . Sec. 6 20 3 (a ss es sm en t i s m ad e b y

reco rd in g t he li ab il it y

of t he tax pa y er i n t he off ic e o f th e Sec ret ary of

th e

Treas ur y ); s ee M ic ha el I. Sal tz m an , IRS Pra ct ic e & Pro ced ur e, pa ra. 1 4A.0 5, at

14 -3 4 (r ev . 2d ed . 20 02 up da te d t o 2 01 6) (“ A tax pa y er’s l ia bi li ty for a t ax is

es ta bl is he d b y

an ass es sm en t o f th e ta x.” ). After th e IRS ass es se s t ax , it m us t

de m an d p ay m en t o f th e ta x. Se c. 63 03 (a). Th e d em an d m us t b e m ad e wit hi n 6 0

da y s o f as se ss m en t. Id . If th e ta xp ay er (i .e., th e “ pe rs on li ab le to pa y ” th e “ ta x” )

fai ls to pa y

th e ta x a fte r pa y m en t i s d em an de d, a l ie n i s i m po se d i n fa vo r of

th e

Uni te d S ta te s o n a ll th e ta xp ay er’s p ro pe rty by op erat io n o f se ct io n 6 32 1. Se ct io n

63 22 pro vi de s t ha t t he li en im po se d b y sec ti on 63 21 ari se s o nc e th e IRS ha s m ad e

an ass es sm en t. The l ie n c on ti nu es un ti l t he li ab il it y for th e am ou nt ass es se d “ is 1 4



# sa ti sf ie d o r be co m es un en fo rcea bl e b y reas on of l ap se of t im e.” Sec . 63 22

.

Und er s ec. 6 32 1, a l ie n i s i m po se d o nl y

if t he pe rs on is “ li ab le to pa y ” th e 1 4



# ta x. Fo r se c.-6 32 1 p ur

po se s, a p ers on is li ab le to pa y a ta x i f th e ta x i s as se ss ed

. See M ic ha el I. Sal tz m an , IRS Pra ct ic e & Pro ced ur e, pa ra. 1 4.0 5, at 14 -3 3 (r ev . 2d ed . up da te d t o 2 01 6) . Secs . 63 21 an d 6 32 2 h av e b een in te rp ret ed to m ak e

as se ss m en t a p reco nd it io n o f th e li en . W il li am D. Elli ot , Fed eral Tax C ol le ct io ns , Lien s, an d Lev ie s, p ara. 9 .03 , at 9 -6 to 9-7 (2d ed . 20 14 ) (al th ou gh sec . 63 21 do es

no t m en ti on ass es sm en t, “ th e m ai ns tre am vi ew is th at sec ti on s 6 32 1 a nd 63 22 are read to ge th er an d t hu s a t ax ass es sm en t i s re qu ire d b efo re a t ax li en is crea te d.” ).

# - 43 -

[* 43 ] The li en im

po se d b y sec ti on 63 21 do es no t t ran sf er cu st od y

of t he pro pe rty

to th e fed eral go ve rn m en t. Will ia m D. Elli ot t, Fe de ral Tax C ol le ct io ns , Lien s, an d

Lev ie s, p ara. 9 .05 , at 9 -1 5 (2 d e d. 2 01 4) ; Sa lt zm an , su pr a, pa ra. 1 4A.0 4, at 14

-

30

. Rat he r, it est ab li sh es th e p rio rit y of t he go ve rn m en t’s ri gh ts to pro pe rty ov er 1 5



# th e ri gh ts of t he tax pa y er an d c ert ai n t y pe s o f cre di to rs . See Mi nn . Dep’t o f

Rev en ue v. Un it ed Sta te s, 1 84 F.3d 72 5, 7 27 -7 29 (8t h C ir. 1 99 9) (un fil ed fed eral

ta x l ie n p rev ai ls ag ai ns t s ub se qu en t u np erfe ct ed st at e ta x l ie n) ; Su pe rp um pe r, In c.

v. Ner la nd Oil , Inc . (In re Nerl an d Oi l, In c.), 3 03 F.3d 91 1, 9 17 (8t h C ir. 2 00 2)

(fed eral tax li en ba se d o n a ss es sm en ts oc cu rri ng in 19 93 an d 1 99 4 t oo k p rio rit y

ov er cl ai m

of p riv at e cre di to r who se li en was p erfe ct ed in 19 96 ); S te ve n R . Mat he r

& Pau l H. W ei sm an , Fed eral Tax C ol le ct io n P ro ced ur e--Li en s, Lev ie s, Su it s an d

Thi rd Part y

Liab il it y , 63 7- 2d Tax M gm t. (B NA), at A-5 (20 13 ). Once th e li en

ari se s, t he IRS can sei ze t he pro pe rty su bjec t t o t he li en th ro ug h i ts lev y po wer. 1 6



# The fil in g o f a n ot ic e o f li en , an a ct io n d is cu ss ed lat er, al so do es no t 1 5



# tra ns fer c us to dy of th e p ro pe rty to t he go ve rn m en t. Ell io tt , su pr a, pa ra. 1 0.0 3, at 10 -5

.
Lik e m an y

of t he st at ut or y

pro vi si on s g ov ern in g fe de ral tax co ll ect io n, t he 1 6



# st at ut e au th or iz in g t he IRS t o l ev y do es no t re fer t o t he IRS b ut to th e “ Secr et ary”, whi ch m ean s t he Secr et ary of th e Treas ur y

an d h is de le ga te s. See sec

. 77 01 (a)( 11 )(B) an d (1 2) (A)(i ). In p ract ic e th e Sec ret ary ha s d el eg at ed th e ta x

co ll ect io n p owe rs to th e IRS . See, e.g ., sec . 30 1.6 33 1- 1( a)(1 ), Pro ced . & Adm in

. Reg s. Fo r si m

pl ic it y , we refer to th e IRS rat he r th an th e Sec ret ary whe n re ferr in g (co nt in ue d...)

# - 44 -

[* 44 ] Secs . 63 31 (a), 6 33 2; Sal tz m an , su pr a, pa ra. 1 4A.0 4, at 14 -3 0 t o 1 4- 31

. 1 7



# The pro pe rty is t he n s ol d. Se e se cs . 63 35 , 63 42 . As an alt ern at iv e to sei zi ng th e

pr op ert y , th e g ov ern m en t ca n c on ve rt i ts tax li en in to m on ey th ro ug h a li en

fo recl os ur e su it , a type o f act io n e st ab li sh ed by sect io n 7 40 3. Se e Sal tz m an su pr a,

pa ra. 1 4A.0 9[ 2], at 1 4- 91 (rev . ed. 2 00 2 u pd at ed to 20 16 ) (ex pl ai ni ng why th e

go ve rn m en t m ig ht pro ceed by a lie n- fo recl os ur e su it rat he r th an sei ze p ro pe rty

th ro ug h l ev y ). Sect io n 7 40 3( a) p ro vi de s t ha t t he Att or ne y Gene ral m ay

di rect th at

a ci vi l ac ti on be fil ed in U.S. Dist ric t Co ur t “ to en fo rce t he li en of t he Uni te d

St at es ” u nd er t he Int ern al Rev en ue Co de . The U.S. Dis tri ct Co ur t wi ll “ fin al ly

de te rm in e th e m eri ts of a ll cla im s t o a nd li en s u po n t he pro pe rty” and “ whe re a

cl ai m or i nt eres t o f th e Uni te d S ta te s t he rei n i s es ta bl is he d” m ay sel l t he pro pe rty

an d d is tri bu te th e p ro ceed s t o t he Uni te d S ta te s an d o th er cl ai m an ts . Sec. 7 40 3( c).

The li en im

po se d b y sec ti on 63 21 is no t v al id ag ai ns t fo ur types of p ers on s

(p ur ch as ers , sec ur it y -in te res t h ol de rs , m ech an ic ’s li en or s, an d ju dg m en t-l ie n

cred it or s) un ti l t he IRS fi le s a n ot ic e o f li en . Sec. 6 32 3( a). The IRS fi le s t he

(...co nt in ue d) 1 6



# to th os e co ll ect io n s ta tu te s.

Befo re i t ca n m ak e th e le vy, tho ug h, i t m us t g iv e th e ta xp ay er 3 0 d ay s t o 1 7



# req ue st a co ll ect io n- rev ie w hea rin g wi th it s Ap pe al s Off ic e. Sec. 6 33 0( a)(1 ), (2 ), (3 )(B)

.

# - 45 -

[* 45 ] no ti ce o f li en wit h t he go ve rn m en t o f th e st at e o r lo cal area in whi ch th e

pr op ert y is lo cat ed . Sec. 6 32 3( f). The no ti ce i s a p ub li c d oc um en t. Ell io tt , su pr a,

pa ra. 1 0.0 1, at 10 -2 . It s erv es as a warn in g t o s ub se qu en t p ur ch as ers or l en de rs

th at th os e p ers on s’ in te res ts in th e p ro pe rty will be lo wer i n p rio rit y th an th e

in te res t o f th e Uni te d S ta te s. Id .; Sa lt zm an , su pr a, pa ra. 1 4A.0 4, at 14 -3 1.

Sect io n 6 32 3(

j)(1) pro vi de s t ha t t he IRS m ay “ wit hd raw” a f

il ed no ti ce o f

li en in va rio us cir cu m st an ces , on e o f whi ch is if t he IRS d et erm in es th at “ th e fi li ng

of su ch no ti ce was pre m at ur e o r ot he rwis e n ot in acco rd an ce wi th ad m in is tra ti ve

pr oc ed ur es of t he Secr et ary [o f th e Treas ur y ]. ” Sec. 6 32 3( j)(1) (A). The I RS

wit hd raws a no ti ce o f li en by fili ng a no ti ce o f li en wit hd rawal wit h t he same

go ve rn m en ta l o ffi ce wi th whi ch it fil ed th e n ot ic e o f li en . Sec. 6 32 3( j)(1) . The

effe ct of wi th dr awin g t he no ti ce o f li en is th at th e rel ev an t In te rn al Rev en ue Co de

pr ov is io ns are “ ap pl ie d a s i f th e wit hd rawn no ti ce h ad no t b een fil ed ”. Id

.

Sect io n 6 32 5( a) re qu ire s t he IRS, “ [s ]ubjec t t o s uc h re gu la ti on s as th e

Secr et ary [o f th e Treas ur y ] m ay pre sc rib e”, t o “ is su e a ce rti fic at e o f rel eas e o f an y

li en im po se d wi th res pe ct to an y in te rn al rev en ue tax no t l at er t ha n 3 0 d ay s af te r

th e d ay * * * [t ]he Sec ret ary [i.e ., th e IRS ] fin ds th at th e li ab il it y for th e am ou nt

as se ss ed , to ge th er wi th all in te res t i n re sp ect th ereo f, ha s b een ful ly sati sf ie d o r ha s

be co m e le ga ll y

un en fo rcea bl e”. Reg ul at io ns un de r se ct io n 6 32 5( a) p ro vi de th at

# - 46 -

[* 46 ] when a fi le d n ot ic e o f li en li st s m ul ti pl e ta x l ia bi li ti es , th e IRS “ sh al l” is su e

a cer ti fic at e o f rel eas e n o l at er t ha n 3 0 d ay s af te r fi nd in g t ha t al l t he tax li ab il it ie s

li st ed in th e n ot ic e o f li en ha ve be en ful ly sati sf ie d o r ha ve be co m e le ga ll y

un en fo rcea bl e (u nl es s t he tax pa y er re qu es ts th e is su an ce o f a cer ti fic at e o f rel eas e

wit h re sp ect to a pa rti cu la r li ab il it y li st ed in th e n ot ic e). See sec . 30 1.6 32 5-

1( a)(1 ), (6 ), Pro ced . & Adm in . Reg s. Sec ti on 63 25 (f) p ro vi de s t ha t i f th e IRS

is su es a cert ifi cat e o f rel eas e o f li en an d a ls o fi le s t he cert ifi cat e wit h t he same

go ve rn m en ta l o ffi ce wi th whi ch it fil ed th e n ot ic e o f li en , th en th e li en refe rred to

in th e n ot ic e is ex ti ng ui sh ed

.

Sect io n 6 32 6 p ro vi de s:

(a) In Gene ral .--In su ch for m an d a t s uc h t im e as th e Sec ret ary [i.e ., th e IRS ] sh al l p res cri be by regu la ti on s, an y pe rs on sh al l b e al lo wed to ap pe al to th e Sec ret ary [i.e ., th e IRS ] aft er t he fil in g o f a

no ti ce o f a l ie n u nd er t hi s s ub ch ap te r [s ecs . 63 20 to 63 27 ] on th e pr op ert y or t he rig ht s t o p ro pe rty of s uc h p ers on for a rel eas e o f su ch li en all eg in g a n e rro r in th e fi li ng of t he no ti ce o f su ch li en

.
(b ) Cer ti fic at e o f Rel eas e.--If th e Sec ret ary [i.e ., th e IRS ] de te rm in es th at th e fi li ng of t he no ti ce o f an y li en was e rro ne ou s, t he Secr et ary [i.e ., th e IRS ] sh al l ex pe di ti ou sl y (an d, t o t he ex te nt
pr act ic ab le , wit hi n 1 4 d ay s af te r su ch de te rm in at io n) is su e a cert ifi cat e o f rel eas e o f su ch li en an d s ha ll in cl ud e in su ch cert ifi cat e a st at em en t t ha t s uc h fi li ng was e rro ne ou s.

See s ec. 3 01 .63 26 -1 , Pro ced . & Adm in . Reg s.

# - 47 -

[* 47 ] In 19 98 Co ng res s amend ed th e In te rn al Rev en ue Co de to req ui re t ha t an y

ti m e th e IRS fil es a no ti ce o f li en , it m us t o ffer th e ta xp ay er a co ll ect io n- rev ie w

he ari ng (al so kn own as a co ll ect io n- du e-p ro ces s h eari ng ). Sec. 6 32 0( a). If

req ue st ed by the tax pa y er, t he he ari ng is co nd uc te d b y th e IRS App eal s Off

ic e.

Sec. 6 32 0( b) (1 ). The p ert in en t p ro ced ur es for th e h eari ng are t he same as th os e

go ve rn in g h eari ng s re la te d t o l ev ie s. Sec . 63 20 (c). Th e p ro ced ur es for he ari ng s

in vo lv in g l ev ie s ar e se t fo rth in sec ti on 63 30 (c). Fi rs t, t he set tl em en t o ffi cer

ha nd li ng th e h eari ng m

us t o bt ai n v eri fic at io n fr om th e IRS th at th e req ui rem en ts

of an y ap pl ic ab le law o r ad m in is tra ti ve pro ced ur e h av e b een m et . Sec. 6 33 0( c)(1 ).

Seco nd , th e ta xp ay er m ay “ rai se at t he he ari ng an y rel ev an t i ss ue rel at in g t o t he

un pa id tax or t he pro po se d l ev y ” [o r no ti ce o f li en ], in cl ud in g c ha ll en ge s t o t he 1 8



# ap pr op ria te ne ss of t he co ll ect io n a ct io n a nd off ers of c ol le ct io n a lt ern at iv es (su ch

as off ers -in -co m

pr om is e o r in st al lm en t ag reem en ts ). Sec. 6 33 0( c)(2 )(A). Sec ti on

63 30 (c)( 2) (B) p ro vi de s t ha t t he tax pa y er m ay co nt es t t he ex is te nc e an d a m ou nt of

th e u nd erl y in g t ax li ab il it y , bu t o nl y if h e o r sh e d id no t re cei ve a no ti ce o f

de fic ie nc y

or o th erwi se ha ve an op po rtu ni ty to d is pu te th e ta x l ia bi li ty. Afte r

In Tho m ps on v. Co m

m is si on er, 1 40 T.C. 17 3, 1 78 (20 13 ), we st at ed : “ If a 1 8



# ta xp ay er re qu es ts a CDP h eari ng in res po ns e to an NFTL or a n ot ic e o f in te nt to le vy, he m ay

als o ra is e at th at he ari ng an y ot he r rel ev an t i ss ue rel at in g t o t he

un pa id tax or t he pro po se d l ev y or l ie n. Se cs . 63 30 (c)( 2) , 63 20 (c).”

# - 48 -

[* 48 ] co ns id eri ng th os e is su es , th e App eal s Off ic e is to is su e it s n ot ic e o f

de te rm in at io n. Se e se c. 63 30 (c)( 3) . If th e ta xp ay er i s n ot sat is fie d wi th th e

de te rm in at io n o f th e App eal s Off ic e, th e ta xp ay er m ay

“ ap pe al su ch de te rm in at io n

to th e Tax Co ur t” . Sec. 6 33 0( d) (1 ). In s uc h a n a pp eal , th e st an da rd of r ev ie w

em pl oyed b y th e Tax Co ur t i s ab us e o f di sc ret io n, ex cep t wi th res pe ct to th e

ex is te nc e o r am ou nt of t he un de rlyin g t ax li ab il it y , for whi ch th e st an da rd of

rev ie w is de no vo . Goza v . Com m is si on er, 1 14 T.C. 17 6, 1 81 -1 82 (20 00 ). The

ev id en ti ary sc op e o f rev ie w em pl oyed b y th e Tax Co ur t i s d e n ov o. Ro bi ne tt e v

.

Co m m is si on er, 1 23 T.C. 85 , 10 1 (2 00 4) , rev ’d, 43 9 F .3d 45 5, 4 59 -4 62 (8t h C ir.

20 06 ). That m ean s t ha t t he Co ur t’s re vi ew is no t co nf in ed to ev id en ce i n t he

ad m in is tra ti ve reco rd . See Sp el tz v. Co m m is si on er, 1 24 T.C. 16 5, 1 77 (20 05 )

(ci ti ng Ro bi ne tt e v . Com m is si on er, 1 23 T.C. at 9 4- 10 4) , aff’d, 4 54 F.3d 78 2 (8 th

Ci r. 20 06 ). If th e Co ur t re m an ds a cas e to th e App eal s Off ic e, th e fu rth er h eari ng

is a su pp le m en t t o t he ori gi na l h eari ng , no t a n ew he ari ng , Kelb y v. Co m m is si on er,

13 0 T.C. 7 9, 8 6 (2 00 8) , bu t t he po si ti on of t he App eal s Off ic e th at th e Co ur t

rev ie ws i s t he po si ti on tak en in th e su pp le m en ta l d et erm in at io n, i d.

Dril li ng ’s cha ll en ge to th e App eal s Off ic e’s ha nd li ng of t he no ti ce o f li en

fil in g fo r th e 2 00 7 t ax y ear r es ts on th e fac tu al pre di cat e th at he att ach ed a Fo rm

W -2 to hi s Fo rm

10 40 EZ for 2 00 7. He co nt en ds : “ Res po nd en t l os t t he req ui si te

# - 49 -

[* 49 ] W -2 att ach ed to th e Fo rm 10 40 when fil ed .” Howev er, as we fo un d, 1 9



# Dril li ng di d n ot att ach a Fo rm W -2 to hi s Fo rm

10 40 EZ for 2 00 7. Th us we

di sa gr ee wi th th e fac tu al pre di cat e o f Dril li ng ’s cha ll en ge , i.e., th at he fil ed a Fo rm

Alo ng th e sa m e li ne s, h e arg ue s: 1 9

I t i s s u b s t a n t i a t e d b y t h e r e c o r d o n l y t h a t R e s p o n d e n t r e q u e s t e d
P e t i t i o n e r t o p r o v i d e a F o r m W

- 2

. [ T h e I R S ’ s l e t t e r t o D r i l l i n g , d a t e d J u n e 4 , 2 0 0 8 , s t a t e d t h a t i t h a d r e c e i v e d h i s F o r m 1 0 4 0 E Z b u t t h a t i t n e e d e d a F o r m W

- 2

. ] T h e r e c o r d d i d n o t s u b s t a n t i a t e t h a t P e t i t i o n [ s i c ] d i d n o t p r o v i d e o n e w i t h t h e o r i g i n a l f i l i n g ,
o n l y t h a t R e s p o n d e n t c o u l d n o t f i n d t h e o n e p r o v i d e d

.

# - 50 -

[* 50 ] W -2 . W e reject hi s ch al le ng e an d h ol d t ha t t he App eal s Off ic e d id no t er r

in it s d et erm in at io n a s t o t he li en for 20 07

. 2 0



# Dril li ng ’s cha ll en ge to th e App eal s Off ic e’s ha nd li ng of t he no ti ce o f li en 2 0 

# fil in g fo r th e 2 00 7 t ax y ear a pp aren tl y rel at es to bo th (1) th e App eal s Off ic e’s fai lu re t o wi th dr aw th e n ot ic e o f li en (be cau se hi s co nt en ti on th at th e li en was

“ pr em at ur e o r ot he rwis e n ot in acco rd an ce wi th ad m in is tra ti ve pro ced ur es of t he Secr et ary” repe at s t he word s o f se c. 63 23 (j)(1 )(A), t he pro vi si on pe rm it ti ng th e IRS t o wi th dr aw a li en no ti ce) a nd to (2) th e App eal Offic e’s fai lu re t o re le as e th e li en (be cau se he co m

pl ai ns th at th e IRS ha s yet to “ rel eas e” t he li en ). It o ccu rs to

us th at Dril li ng co ul d h av e m ad e th e al te rn at iv e arg um en t t ha t, ev en if h e h ad no t fil ed a Fo rm

W -2 , th e App eal s Off

ic e st il l er red eit he r by no t wi th dr awin g t he li en fil in g o r by no t re le as in g t he li en , or b ot h. Ho wev er, n ei th er p art y bri efed th is al te rn at iv e arg um en t. We decl in e to co ns id er t he alt ern at iv e arg um en t b ecau se to do so wou ld be to co ns id er an is su e n ot rai se d b y th e p art ie s. See Mu nf

or d, In c. v. Co m m is si on er, 8 7 T.C. 4 63 , 49 5 n .35 (19 86 ), aff’d, 8 49 F.2d 13 98 (11 th Cir

. 19 88 ). W e en te rta in Dril li ng ’s act ua l ar gu m en t (t ha t i s b as ed on hi s fa ct ua l

as se rti on th at he att ach ed a Fo rm W -2 to hi s re tu rn ), bu t t he re i s s ub st an ti al reas on to be li ev e th at th e al te rn at iv e arg um en t wo ul d p res en t d iff eren t l eg al is su es . As to whe th er t he App eal s Off

ic e sh ou ld ha ve wit hd rawn th e li en no ti ce, rec al l t ha t s ec. 63 23 (j)(1 ) pr ov id es th at th e IRS m ay wit hd raw t he fil in g o f a n ot ic e o f li en if t he fil in g o f th e n ot ic e was no t i n a cco rd an ce wi th ad m in is tra ti ve pro ced ur es

. Alt ho ug h t he pa rti es ha ve no t s up pl ie d u s wi th th ei r vi ews as t o t he ad m in is tra ti ve pr oc ed ur es go ve rn in g t he fil in g o f a n ot ic e o f li en , on e wou ld su pp os e th at it

wou ld no t b e in acco rd an ce wi th ad m in is tra ti ve pro ced ur es for th e IRS to fil e a

no ti ce o f li en when it ha s d et erm in ed th ere i s n o b al an ce d ue . The t ria l re co rd

su gg es ts th at --at so m e p oi nt aft er t he fil in g o f no ti ce o f li en --t he IRS d et erm in ed th ere was no ba la nc e d ue for 20 07 . In J un e 2 01 1 t he IRS m ad e en tri es in it s

reco rd s t ha t re fle ct ed th at Dril li ng ha d n o l ia bi li ti es for 20 07 . And on Jan ua ry 31

, 20 12 , th e App eal s Off

ic e (i n i ts in it ia l n ot ic e o f de te rm in at io n) ack no wled ge d t ha t Dril li ng no lo ng er h ad a ba la nc e d ue for 20 07 . Howev er, s ec. 6 32 3( j)(1) arg ua bl y te st s t he pro ced ur al va li di ty of a n ot ic e o f li en at t he ti m e th e n ot ic e was fil ed . It al lo ws t he IRS t o wi th dr aw a n ot ic e if “ th e fi li ng of s uc h n ot ic e was * * * n ot in

acco rd an ce wi th ad m in is tra ti ve pro ced ur es ”. (Em ph as is ad de d.) Th e n ot ic e o f li en was fi le d o n M ay

11 , 20 10 . Thu s, t he no ti ce was fil ed be fo re t he Ju ne 20 11 (co nt in ue d...)

# - 51 -

[* 51 ] Fi na ll y , we con si de r th e IRS ’s arg um en t t ha t t he cas e is m oo t as to th e y ear

20 07

. W e d is ag ree t ha t t he cas e is m oo t. Where, as he re, t he tax pa y er s eek s t o 2 1



# wit hd raw a fi le d l ie n n ot ic e, an d t he no ti ce h as no t b een wit hd rawn no r th e li en

rel eas ed , th e cas e is no t m oo t m erel y be cau se th e ta xp ay er h as pa id th e rel at ed

(...co nt in ue d) 2 0



# reco rd ke ep in g e nt rie s an d t he Jan ua ry 31 , 20 12 no ti ce o f de te rm in at io n e vi nc in g th e IRS ’s det erm in at io n t ha t n o b al an ce was du e fo r 20 07 . As to whet he r th e App eal s Off

ic e sh ou ld ha ve rel eas ed th e li en , we si m il arl y ob se rv e th at sec

. 63 26 (b ) arg ua bl y

tes ts th e p ro ced ur al va li di ty of a n ot ic e o f li en at t he ti m e th e li en was fi le d. It pro vi de s t ha t i f th e IRS “ de te rm in es th at th e fi li ng of t he no ti ce of an y li en was e rro ne ou s” (em ph as is ad de d) it sh al l i ss ue a rel eas e o f th e li en

. And alt ho ug h a no th er p ro vi si on , sec . 63 25 (a), d ire ct s t he IRS t o re le as e a l ie n i f it fin ds th e li ab il it y

for th e am ou nt of t he li en ha s b een ful ly sati sf ie d, h ere t he no ti ce of li en li st ed li ab il it ie s fo r th ree t ax y ears : 2 00 4, 2 00 5, an d 2 00 7. Al th ou gh th e IRS c on ced es th ere i s n o l ia bi li ty for 2 00 7, i t co nt en ds th ere i s a l ia bi li ty for 2 00 5. (The IRS al so co nc ed es th e 2 00 4 l ia bi li ty has be en pa id . This co nc es si on was

m ad e b y th e IRS in th is li ti ga ti on . It i s u nc le ar t ha t s uc h a de te rm in at io n h ad be en

m ad e whe n t he App eal s Off ic e was co ns id eri ng th e cas e.) Alt ho ug h t he IRS m us t rel eas e a l ie n u nd er s ec. 6 32 5( a) at th e req ue st of t he tax pa y er i f th e am ou nt of t he li en is on ly part ly sati sf

ie d, t he re i s n o e vi de nc e th at Dril li ng req ue st ed th e is su an ce o f a cer ti fic at e o f rel eas e o f th e li en wit h re sp ect to a pa rti cu la r li ab il it y , i.e., t he 20 07 li ab il it y

li st ed in th e n ot ic e. See s ec. 3 01 .63 25 -1 (a), Pr oc ed . & Adm in . Reg s. Th us , it ap pe ars th at th e co nd it io ns for rel eas in g t he li en were n ot

sa ti sf ie d. Fu rth erm or e, it ap pe ars th at Dril li ng ne ve r br ou gh t u p t he is su e o f li en rel eas e at th e App eal s Off ic e. A tax pa y er m

us t ra is e an is su e b efo re t he App eal s Offi ce b efo re t he Tax C ou rt c an co ns id er t he is su e. Sec. 3 01 .63 30 -1 (f)(2 ), Q&AF3 , Pro ced . & Adm in . Reg s.

The Tax C ou rt c an no t co ns ti tu ti on al ly reso lv e an is su e th at is m oo t 2 1 

# be cau se su ch an is su e is no t p art of a cas e o r co nt ro ve rs y un de r art . III, se c. 2, o f th e U.S. Co ns ti tu ti on , whi ch ex te nd s t he “ jud ic ia l p owe r” t o v ari ou s en um erat ed types of “ Cas es ” an d “ Co nt ro ve rs ie s” . See Gree ne -Tha pe di v. Co m m is si on er, 1 26 T.C. at 6 n.9

.

# - 52 -

[* 52 ] li ab il it y . A lie n- no ti ce fi li ng can cau se in jury to a t ax pa y er ev en aft er t he

un de rlyin g l ia bi li ty has be en pa id . See Will ia m T. Plu m b, J r., “ The Crea ti on ,

Rem ov al , and Im

pa ct of Tax Lien s” , 20 Prac . Law. 75 , 84 -8 5 (1 97 4)

(“ Co ns um m at io n o f a t ran sa ct io n i n wh ic h a tax pa y er m ig ht de si re t o e ng ag e m ay

be ser io us ly im

pe de d i f no ti ce o f a g en eral tax li en is on fil e in th e ap pr op ria te

pu bl ic off ic e, ev en if t he tax pa y er h as act ua ll y pa id th e d el in qu en cy

sec ur ed by the

li en .”). The c as es cit ed by the IRS o n t he qu es ti on of m oo tn es s ar e in ap po si te . In

Green e-Th ap ed i v . Com m is si on er, 1 26 T.C. 1, 5 (20 06 ), th e ta xp ay er ap pe al ed a

de te rm in at io n o f th e App eal s Off ic e aft er a co ll ect io n- rev ie w hea rin g re ga rd in g a

pr op os ed lev y

for 19 92 . The IR S h ad eli m in at ed th e ta xp ay er’s 1 99 2 t ax li ab il it y

by app lying an ov erp ay m en t fo r 19 99 . Id. at 5-6 . The t ax pa y er n on et he le ss

so ug ht th e Co ur t’s d et erm in at io n o f th e am ou nt of h er 1 99 2 t ax li ab il it y . Id. at 8.

The Co ur t h el d t ha t t he pro po se d l ev y (an d t he cas e) was m oo t. Id . at 7 . Unl ik e

th e ta xp ay er i n Gre en -Tha pe di , who so ug ht on ly to ch al le ng e th e am ou nt of h er

ta x l ia bi li ty for 1 99 2, Dri ll in g s eek s t he wit hd rawal of t he no ti ce o f li en . Cho u v

.

Co m m is si on er, T.C. Mem o. 2 00 7- 10 2, i s d is ti ng ui sh ab le on si m il ar g ro un ds . The

ta xp ay ers in Ch ou so ug ht a de te rm in at io n o f th ei r ta x l ia bi li ty for 2 00 1 i n a

co ll ect io n- rev ie w cas e in vo lv in g a pro po se d l ev y an d a li en -n ot ic e fi li ng for 20 01

.

Id ., sl ip op . at 1 4. Th e IRS co nc ed ed th at th e ta xp ay ers owed no tax for 20 01 , and

# - 53 -

[* 53 ] th e Co ur t h el d t he cas e was m oo t. Id . at 1 4- 17 . The Ch ou op in io n d oe s n ot

rev eal th at th e ta xp ay ers arg ue d t ha t t he li en no ti ce s ho ul d b e wit hd rawn , as

Dril li ng ha s d on e in th is cas e. W e h ol d t ha t t hi s ca se is no t m oo t as to tax y ear

20 07

. 2 2



# 2. The $4 ,00 0 o ffer -in -co m pr om is e

In Apri l 2 01 1 Dri ll in g m ad e an off er-i n- co m pr om is e (o n F or m

65 6) in

whi ch he pro po se d t o p ay $4 ,00 0 o ve r 20 m on th s t o c om pr om is e h is li ab il it ie s fo r

20 04 , 20 05 , 20 06 , 20 07 , 20 08 , 20 09 , and 20 10 . The IR S’s of fer- in -co m

pr om is e

sp eci al is t re co m

m en de d t ha t t he off

er b e reject ed be cau se sh e d et erm in ed th at th e

reas on ab le co ll ect io n p ot en ti al was $ 28 ,93 4.4 0, co m pr is in g $ 15 ,13 4.4 0 o f ne t

eq ui ty in as se ts an d $ 13 ,80 0 o f fu tu re i nc om e. Set tl em en t Offi cer Taylo r-Whit e,

who ha nd le d t he in it ia l co ll ect io n- rev ie w hea rin g, re jecte d t he off

er-i nco m pr om is e o n b eh al f of

th e App eal s Off

ic e b ecau se , sh e al le ge d, Dri ll in g h ad

fai le d t o re bu t t he an al y si s o f th e o ffer -in -co m pr om is e sp eci al is t. Du rin g t he

su pp le m en ta l co ll ect io n- rev ie w hea rin g, Se tt le m en t Offi cer Har tfi el sen t Dri ll in g

th e o ffer -in -co m

pr om is e sp eci al is t’s wo rk pa pe rs an d m et wit h P arh am . Hartfi el

As ex pl ai ne d i nf

ra p . 69 , we als o h ol d t ha t t he cas e is no t m oo t wi th 2 2



# res pe ct to tax y ear 2 00 4.

# - 54 -

[* 54 ] reject ed th e o ffer -in -co m pr om is e o n b eh al f of

th e App eal s Off

ic e, as se rti ng

th at Dril li ng co ul d fu ll y

pa y hi s l ia bi li ti es

.

Dril li ng co nt en ds th at th e App eal s Off ic e m ad e th ree g en eral erro rs in

co ns id eri ng hi s $ 4,0 00 off er-i n- co m pr om is e. Fir st , Dril li ng co nt en ds th at th e

App eal s Off

ic e m is cal cu la te d t he “ reas on ab le co ll ect io n p ot en ti al ” in va rio us

way s. Sec on d, Dri ll in g c on te nd s t ha t t he App eal s Off ic e ig no red sp eci al

ci rcu m st an ces th at wou ld ha ve req ui red acce pt an ce o f th e o ffer -in -co m pr om is e.

Thi rd , Dril li ng co nt en ds th at th e App eal s Off ic e err ed be cau se , he a ll eg es , it fai le d

to m ak e a co un te ro ffer . W e d is cu ss each of t he se th ree g en eral all eg ed erro rs in

gr eat er d et ai l b el ow.

a. Rea so na bl e co ll ect io n p ot en ti al

Dril li ng all eg es th at th e App eal s Off ic e m is cal cu la te d t he reas on ab le

co ll ect io n p ot en ti al in two way s. Fi rs t, Dri ll in g c on te nd s t ha t t he App eal s Off ic e

sh ou ld ha ve cal cu la te d h is fut ur e in co m e o ve r 24 m on th s o r 60 m on th s, n ot 12 0

m on th s. Sec on d, Dri ll in g c on te nd s t he App eal s Off ic e err ed in cal cu la ti ng th e

va lu e o f hi s as se ts

.

As Se tt le m en t Offi cer Har tfi el tes ti fie d, re as on ab le co ll ect io n p ot en ti al is an

ari th m et ic fun ct io n u se d b y th e IRS in ev al ua ti ng off ers -in -co m

pr om is e.

Rea so na bl e co ll ect io n p ot en ti al is ge ne ral ly the su m of t wo am ou nt s: equ it y

in

# - 55 -

[* 55 ] ass et s an d fu tu re i nc om e. Equ it y in ass et s i s t he va lu e o f th e ta xp ay er’s

as se ts m in us de bt s. Fu tu re i nc om e is m on th ly inc om e le ft o ve r aft er m on th ly

ex pe ns es , agg reg at ed ov er a ce rta in nu m be r of m on th s. See als o J oh ns on v.

Co m m is si on er, 1 36 T.C. 47 5, 4 85 (20 11 ) (d es cri bi ng th e co nc ep t o f rea so na bl e

co ll ect io n p ot en ti al ), aff’d, 5 02 F. App ’x 1 (D.C. Ci r. 20 13 ). The Ap pe al s Off ic e

ev al ua te d Dri ll in g’s o ffer -in -co m pr om is e b y

us in g 1 20 m on th s o f fu tu re i nc om e.

It r eject ed th e o ffer -in -co m pr om is e o n t he gro un d t ha t Dri ll in g c ou ld ful ly pay hi s

ta x l ia bi li ty out of t he two co m po ne nt s o f rea so na bl e co ll ect io n p ot en ti al , equ it y in

as se ts an d fu tu re i nc om e. Dril li ng co nt en ds th at th e App eal s Off ic e err ed in

pr ojec ti ng 12 0 m on th s o f fu tu re i nc om e an d t ha t i t s ho ul d h av e p ro jecte d o nl y

24

m on th s o r 60 m on th s.

Dril li ng co nt en ds th e App eal s Off ic e m ad e two erro rs in cal cu la ti ng th e

va lu e o f hi s as se ts . Firs t, Dri ll in g c on te nd s t ha t t he App eal s Off ic e sh ou ld ha ve

de te rm in ed th at th e av ai la bl e v al ue of h is ret ire m en t p la n i s $ 5,2 89 .20 . This

am ou nt is eq ua l t o $ 7,4 45 .20 , whi ch is 50 % of t he qu ic k- sa le va lu e o f th e p la n,

m in us $2 ,15 6 o f en cu m

br an ces . Accor di ng to Dril li ng , th is am ou nt was

ap pr op ria te be cau se he was p erm it te d t o b or ro w on ly 50% fr om hi s re ti rem en t

pl an . The IR S co nt en ds th at in cal cu la ti ng th e v al ue of Dri ll in g’s re ti rem en t p la n

“ a p ro pe r di sc ou nt was a ll owe d” an d “ ev en if t he res po nd en t h ad pro vi de d a n

# - 56 -

[* 56 ] ad di ti on al di sc ou nt th e p et it io ne r’s RCP wo ul d s ti ll ex ceed th e p et it io ne r’s

ta x l ia bi li ti es an d t he am ou nt off ered in hi s o ffer in co m

pr om is e.”

The sec on d e rro r Dril li ng all eg es was m ad e b y th e App eal s Off

ic e in

cal cu la ti ng hi s av ai la bl e as se ts was t ha t t he App eal s Off ic e sh ou ld ha ve red uc ed

hi s av ai la bl e as se ts for

th e $ 4,0 00 jud gm en t ag ai ns t Dri ll in g fo r ch il d- su pp or t

arre arag es an d t he $1 05 ,00 0 ju dg m en t ag ai ns t Dri ll in g fo r cri m in al res ti tu ti on

.

Dril li ng co nt en ds th at th e two jud gm en ts “ affe ct th e n et eq ui ty in as se ts be cau se a

St at e jud gm en t o r ch il d/ m ed ic al su pp or t ju dg m en t i ss ue d p rio r to an IRS ju dg m en t

co ul d t ak e p rece de nc e o ve r an IRS ju dg m en t ag ai ns t t he ass et s.” Th e IRS

co nt en ds th at “ cert ai n o f th e ex pe ns es all owe d b y th e res po nd en t i n d et erm in in g

th e p et it io ne r’s RCP wo ul d d is ap pe ar d ur in g t he co ll ect io n p eri od an d t ha t n o

ad jus tm en ts were m ad e fo r ei th er i nc reas es or d ecre as es in th e p et it io ne r’s

ex pe ns es .” The IR S al so co nt en ds th at it was n ot an ab us e o f di sc ret io n t o re ject 2 3



# th e o ffer -in -co m

pr om is e b ecau se th e am ou nt off ered , $4 ,00 0, i s l es s t ha n t he

reas on ab le co ll ect io n p ot en ti al , eve n a fte r m ak in g s om e o f th e ad jus tm en ts to

reas on ab le co ll ect io n p ot en ti al urg ed by D ril li ng

. 2 4



# W e n eed no t ad dr es s t hi s co nt en ti on

. 2 3



# As we ex pl ai n b el ow, we ag ree wi th th is co nt en ti on

. 2 4

# - 57 -

[* 57 ] In ad dr es si ng th e p art ie s’ di sp ut e ab ou t h ow re as on ab le co ll ect io n p ot en ti al

sh ou ld ha ve be en cal cu la te d, we fi rs t co ns id er t he effe ct of t he two jud gm en ts . As

we ex pl ai n, we co nc lu de th at th e App eal s Off ic e ap pr op ria te ly con si de red th e

effe ct of t he se two jud gm en ts on reas on ab le co ll ect io n p ot en ti al . Dril li ng all ud ed

to th e two jud gm en ts on hi s Fo rm 65 6. Un de r th e fo rm ’s sec ti on en ti tl ed

“ Exp la na ti on of C irc um st an ces ”, Dril li ng ex pl ai ne d t ha t h e h ad be en in jail , was

on pro ba ti on an d “ co nd it io na l b on d” , and ha d b een “ as si gn ed wit h t he tas k o f

ch il d s up po rt ( no w m or e th an 80 0/ m o) an d re st it ut io n t o m y ex -wif e in ad di ti on to

th e co ur t o rd ered fees ass oc ia te d wi th pro ba ti on .” On t he acco m pa nyin g

co ll ect io n- in fo rm at io n s ta te m en t (i .e., th e Fo rm 43 3- A), Dril li ng fil le d o ut a ta bl e

fo r hi s m on th ly inc om es an d e xp en se s. Un de r th e ex pe ns e cat eg or y for “ Co ur t

Ord ered Pay m en ts ”, Dril li ng en te red $1 ,12 0. When he su bm it te d t he co ll ect io nin fo rm at io n s ta te m en t t o t he App eal s Off ic e, Dril li ng in cl ud ed a co py of a co ur t

or de r th at : (1 ) award ed a $4 ,00 0 ju dg m en t ag ai ns t h im for fai li ng to pa y

ch il d

su pp or t, (2 ) req ui red hi m to pa y th e $ 4,0 00 th ro ug h i ns ta ll m en ts of $ 50 pe r m on th

,

an d (3 ) req ui red hi m

to pa y an ad di ti on al $1 00 pe r m on th in m ed ic al su pp or t. He

al so in cl ud ed a co py of a co ur t o rd er req ui rin g h im to pa y $8 59 .86 pe r m on th in

ch il d s up po rt a nd a co py of a co ur t o rd er re qu iri ng hi m to pa y $1 50 pe r m on th on a

$1 05 ,00 0 c riminal -res ti tu ti on jud gm en t. The se m on th ly am ou nt s o f co ur t-o rd ered

# - 58 -

[* 58 ] jud gm en ts ($5 0, $ 10 0, $ 85 9.8 6, an d $ 15 0) ad d u p t o $ 1,1 59 .86 . This is

cl os e to th e $ 1,1 20 Dril li ng rep or te d a s “ Co ur t Ord ered Pay m en ts ”, whi ch is als o

th e am ou nt th e IRS ’s off

er-i n- co m pr om is e sp eci al is t u se d i n c al cu la ti ng m on th ly

in co m e av ai la bl e fo r pa y in g t ax . The s pe ci al is t u se d t he se m on th ly inc om e

pr ojec ti on s, co m

bi ne d wi th he r es ti m at e o f Dril li ng ’s ass et s, t o a rri ve at r eas on ab le

co ll ect io n p ot en ti al . The Ap pe al s Off ic e, in it s i ni ti al de te rm in at io n t o s us ta in th e

fil in g o f no ti ces of l ie n, o bs erv ed th at “ [t]he re were no si gn ifi can t d iff eren ces ”

be twee n t he am ou nt s re po rte d b y Dril li ng in th e co ll ect io n- in fo rm at io n s ta te m en t

an d t he sp eci al is t’s wo rk

pa pe rs , and th e App eal s Off ic e reject ed Dril li ng ’s offerin -co m pr om is e. The C ou rt r em an de d t he cas e to th e App eal s Off ic e, whi ch ga ve

Dril li ng th e sp eci al is t’s wo rk pa pe rs an d m et wit h h is rep res en ta ti ve , Parh am . In

it s s up pl em en ta l d et erm in at io n, t he App eal s Off ic e ag ai n re li ed on th e o ffer -in

co m pr om is e sp eci al is t’s wo rk pa pe rs to reject th e o ffer -in -co m pr om is e. It a pp ears

to us th at th e sp eci al is t (a nd th e App eal s Off ic e) t oo k i nt o a cco un t t he $4 ,00 0

ch il d- su pp or t-a rrea rag e jud gm en t an d t he $1 05 ,00 0 c riminal -res ti tu ti on jud gm en t

in cal cu la ti ng Dril li ng ’s m on th ly inc om e. The Ap pe al s Off ic e red uc ed Dril li ng ’s

in co m e b y

$1 50 pe r m on th for th e ch il d- su pp or t-a rrea rag e jud gm en t an d $ 15 0 p er

m on th for th e cri m in al -res ti tu ti on jud gm en t. If t he App eal s Off ic e h ad als o

red uc ed th e es ti m at e o f Dril li ng ’s ass et s b y th e to ta l am ou nt of t he jud gm en ts , it

# - 59 -

[* 59 ] wou ld ha ve do ub le co un te d t he effec t o f th e jud gm en ts . In o ur vi ew th e

App eal s Off

ic e d id no t er r in ev al ua ti ng th e eff ect of t he two jud gm en ts on

Dril li ng ’s abi li ty to p ay

hi s t ax li ab il it ie s, i .e., hi s re as on ab le co ll ect io n p ot en ti al

.

Thu s, we re

ject Dri ll in g’s ar gu m en t t ha t t he App eal s Off ic e sh ou ld ha ve

m ad e ad di ti on al ad

jus tm en ts to reas on ab le co ll ect io n p ot en ti al for th e two

jud gm en ts ag ai ns t h im . Dril li ng ’s rem ai ni ng pro po se d c or rect io ns to reas on ab le

co ll ect io n p ot en ti al are t ha t: (1) th e p reen cu m br an ce v al ue of h is ret ire m en t p la n

was $7 ,44 5.2 0, n ot $1 4,8 90 .40 as d et erm in ed by the off er-i n- co m pr om is e

sp eci al is t an d (2 ) th e n um be r of m on th s o f av ai la bl e in co m e sh ou ld be 24 m on th s

or 60 m on th s, n ot 12 0 m on th s. Ev en wit h t he se two co rrec ti on s, t he reas on ab le

co ll ect io n p ot en ti al wou ld be st il l b e $ 10 ,44 9.2 0. Th e ta bl e b el ow ex pl ai ns th e

cal cu la ti on of t hi s $ 10 ,44 9.2 0 a m ou nt :

Rea so na bl e co ll ect io n p ot en ti al Po si ti on s o f th e p art ie s (Nu m be r of m on th s re fers to th e n um be r of m on th s o f av ai la bl e in co m e)

IRS (1 20 m on th s) Dril li ng

(6 0 m on th s) Dril li ng

(2 4 m on th s)

Ret ire m en t p la n

Befo re en cu m

br an ce $1 4,8 90 .40 $7 ,44 5.2 0 $7 ,44 5.2 0

Encu m br an ce 2,1 56 .00 2,1 56 .00 2,1 56 .00

After en cu m

br an ce 12 ,73 4.4 0 5,2 89 .20 5,2 89 .20

# - 60 -

[* 60 ] Ass et s o th er t ha n reti rem en t p la n 2,4 00 .00 2,4 00 .00 2,4 00 .00

Tot al ass et s 15 ,13 4.4 0 7,6 89 .20 7,6 89 .20

Num be r of m on th s o f in co m e 12 0 60 24

Mo nt hl y ne t i nc om e 11 5.0 0 11 5.0 0 11 5.0 0
(Mo nt hl y ne t i nc om e) × (m on th s) 13 ,80 0.0 0 6,9 00 .00 2,7 60 .00

Rea so na bl e co ll ect io n po te nt ia l 28 ,93 4.4 0 14 ,58 9.2 0 10 ,44 9.2 0

The reas on ab le co ll ect io n p ot en ti al urg ed by D ril li ng , $1 0,4 49 .20 , is m or e th an th e

am ou nt he off

ered , $4 ,00 0. We hav e h el d t ha t t he App eal s Off ic e d oe s n ot ab us e

it s d is cret io n i n re

jecti ng an off

er-i n- co m pr om is e whe n t he am ou nt off ered is les s

th an th e rea so na bl e co ll ect io n p ot en ti al . See Mu rp hy v. Co m m is si on er, 1 25 T.C.

30 1, 3 20 (20 05 ), aff’d, 4 69 F.3d 27 , 33 (1s t Ci r. 20 06 ); B ro m ba ch v.

Co m m is si on er, T.C. Mem o. 2 01 2- 26 5, at *2 1. We fin d t ha t t he App eal s Off ic e

di d n ot ab us e it s d is cret io n i n re jecti ng Dril li ng ’s $4 ,00 0 o ffer -in -co m pr om is e.

Dril li ng off

ered les s t ha n t he reas on ab le co ll ect io n p ot en ti al , eve n a ss um in g h e is

co rrec t t ha t t he App eal s Off ic e sh ou ld ha ve us ed 24 m on th s o f in co m e in

cal cu la ti ng reas on ab le co ll ect io n p ot en ti al . Thu s, i t i s n ot ne ces sa ry for us to

de te rm in e whe th er t he ap pr op ria te nu m be r of m on th s o f fu tu re i nc om e th at sh ou ld

ha ve be en us ed was 2 4 m on th s as Dril li ng all eg es

.

# - 61 -

[* 61 ] b. Sp eci al cir cu m st an ces

Dril li ng co nt en ds th at th e App eal s Off ic e ig no red sp eci al cir cu m st an ces th at

jus ti fie d a ccep ta nc e o f hi s o ffer -in -co m pr om is e. In th e n arra ti ve sec ti on of h is

of fer- in -co m

pr om is e fo rm , Dril li ng st at ed th at hi s fu nd s wer e so lo w th at he co ul d

no t af fo rd to li ve on hi s o wn an d h ad to ren t o nl y “ a p or ti on of a ho us e.” Dri ll in g

co nt en ds th at th e App eal s Off ic e sh ou ld ha ve de te rm in ed , on th e b as is of t hi s

na rrat iv e, th at he was “ un ab le to m eet hi s b as ic ne ed s.” We ho ld th at th e App eal s

Offi ce d id no t ab us e it s d is cret io n i n i ts co ns id erat io n o f th e fac ts rev eal ed in th e

na rrat iv e. Set tl em en t Offi cer Har tfi el tes ti fie d t ha t s he co ns id ered th e n arra ti ve

an d t ha t t he cir cu m st an ces de sc rib ed in it di d n ot jus ti fy th e acc ep ta nc e o f th e

of fer- in -co m

pr om is e. Set tl em en t Offi cer Har tfi el co ul d re as on ab ly hav e

co nc lu de d t ha t t he m ere f act th at a pe rs on can affo rd to ren t o nl y a po rti on of a

ho us e d oe s n ot m ean th at th e p ers on can no t m eet ba si c n eed s (o r th at su ch a

pe rs on wou ld no t m eet ba si c n eed s i f req ui red to pa y an ad di ti on al $2 00 pe r

m on th , th e am ou nt th at Dril li ng pro po se d t o p ay in hi s o ffer -in -co m

pr om is e).

Fu rth erm or e, th e m on th ly inc om e am ou nt s u se d b y th e App eal s Off

ic e to ok in to

acco un t Dri ll in g’s h ou si ng ex pe ns es an d re fle ct ed th at he st il l h ad in co m e

av ai la bl e aft er ex pe ns es to pa y hi s t ax li ab il it ie s.

# - 62 -

[* 62 ] c. Co un te ro ffer

Dril li ng de sc rib es hi s t hi rd po in t o f erro r as “ NO COUNTER OFFER

MADE BY REVIEW ING OFFICER” . The s up pl em en ta l n ot ic e o f de te rm in at io n

st at ed th at Set tl em en t Offi cer Har tfi el reject ed Dril li ng ’s off er-i n- co m pr om is e o f

$2 00 pe r m on th for 20 m on th s an d p ro po se d a n i ns ta ll m en t ag reem en t b y whi ch

Dril li ng wou ld pa y

$6 0 p er m on th . It ap pe ars th at Dril li ng reject ed th is

co un te ro ffer . Dril li ng arg ue s t ha t Se tt le m en t Offi cer Har tfi el ’s cou nt ero ffer was

de fect iv e in two way s. Firs t, t he co un te ro ffer wou ld ha ve res ul te d i n “ a 2 5



# si gn ifi can t o ve rp ay m en t o f th e li ab il it y owed ” b ecau se of a ll eg ed ly inc or rect

cal cu la ti on s o f li ab il it y . Seco nd , Dril li ng arg ue s t ha t Se tt le m en t Offi cer Har tfi el ’s

co un te ro ffer , whi ch was $ 60 pe r m on th , had no li m it to th e n um be r of m on th s

Dril li ng wou ld be req ui red to m ak e p ay m en ts an d t ha t “ Paym en ts of $ 60 .00 for an

un en di ng pe rio d o f ti m e is no t an off er.”

In res po ns e, th e IRS arg ue s t ha t t he App eal s Off ic e is no t re qu ire d t o m ak e

co un te ro ffer s b efo re re

jecti ng a ta xp ay er’s o ffer . It fu rth er ar gu es th at du rin g t he

su pp le m en ta l h eari ng , aft er h av in g b een gi ve n t he off er-i n- co m pr om is e

In su pp or t o f hi s v ie w th at th e App eal s Off ic e h ad a du ty to m ak e a 2 5



# co un te ro ffer , Dril li ng rel ie s o n In te rn al Rev en ue Man ua l p t. 5 .8.1 .9.4 (1 ) (Feb . 26

, 20 13 ), whi ch st at es in pa rt: “ Accep ta bl e o ffer pa y m en t t erm s s ho ul d b e de te rm in ed by the OE or t he OS an d s ho ul d n ot be li m it ed to th e p ro po sa l o f th e ta xp ay er.”

# - 63 -

[* 63 ] sp eci al is t’s wo rk

pa pe rs , Dril li ng di d n ot am en d h is off er o r m ak e a n ew

of fer, an d t ha t Dri ll in g re

jecte d t he set tl em en t o ffi cer’s co un te ro ffer . In re sp on se

to Dril li ng ’s arg um en t t ha t t he App eal s Off ic e d id no t co rrec t t he IRS’s

co m pu ta ti on s o f ta x l ia bi li ty in co ns id eri ng th e o ffer , th e IRS co nt en ds th at th e

App eal s Off

ic e m ay leg al ly rely

on acco un t t ran sc rip ts for th e p ur po se of

de te rm in in g t ha t al l l eg al an d a dm in is tra ti ve req ui rem en ts ha ve be en m et

.

W e n eed no t ad dr es s al l o f th e arg um en ts de sc rib ed ab ov e reg ard in g t he

ha nd li ng of t he co un te ro ffer . W e h av e h el d t ha t i t i s n ot an ab us e o f di sc ret io n i f

th e App eal s Off

ic e reject s t he tax pa y er’s o ffer wit ho ut en ga gi ng in an y fur th er

ne go ti at io ns wit h t he tax pa y er. See Krei t M ech . Ass oc s. v . Com m is si on er, 1 37

T.C. 12 3, 1 34 (20 11 ); s ee al so Farg o v . Com m is si on er, 4 47 F.3d 70 6, 7 12 -7 13

(9 th Cir . 20 06 ) (“ Bu t ev en tak in g Tax pa y ers at t he ir wo rd th at th e Ma nu al ex ho rts

App eal s Off

ic ers to ne go ti at e b efo re rejec ti ng an off er-i n- co m pr om is e, th ei r

co nt en ti on th at th ey

were o wed a du ty of ne go ti at io n i s i nc or rect .”), aff’g T.C.

Mem o. 2 00 4- 13 . There fo re, an y pro bl em s i n S et tl em en t Offi cer Har tfi el ’s

co un te ro ffer do no t re su lt in jud ic ia ll y -co rrec ta bl e err or

.

3. Co rrec ti on of a m ou nt s o f ta x l ia bi li ti es

Dril li ng arg ue s t ha t t he IRS h as m ad e se ve ral erro rs in cal cu la ti ng hi s t ax

li ab il it ie s. Dri ll in g’s b rie f se ts for th th e fo ll owi ng fou r al le ge d e rro rs :

# - 64 -

[* 64 ] ! “ pa y m en ts be in g c red it ed to alr ead y pa id acco un ts (20 04 )”

! “ pa y m en ts for on e y ear b ei ng reas si gn ed to an ot he r (2 01 0 p ay m en t b ei ng

reas si gn ed ba ck to 20 04 )”

! “ la ck of i nt eres t ac cru al on ov erp ay m en ts (20 04 , 20 06 , 20 07 )”

! “ in te res t i s ac cru in g o n l ia bi li ti es whi ch were as se rte d t o b e u np ai d (2 00 5,

20 08 , 20 10 aft er p ay m en t re m ov ed )”

Dril li ng ex pl ai ns th at th es e al le ge d e rro rs all in vo lv e th e m is ap pl ic at io n o f hi s

pa y m en ts by the IRS an d t ha t t he se all eg ed m is ap pl ic at io ns affe ct hi s l ia bi li ty for

pe na lt ie s an d i nt eres t (b ut no t t ax ). He co nt en ds th at , as a res ul t o f th es e err or s,

al th ou gh th e IRS cal cu la te d t ha t as of J ul y 15 , 20 13 , he o wed $5 ,38 7.5 4 o f

li ab il it y , hi s ac tu al li ab il it y was $ 1,5 87 .06

. 2 6 2 7



# In res po ns e to Dril li ng ’s arg um en ts , th e IRS arg ue s t ha t:

! To t he ex te nt Dril li ng is ch al le ng in g t he am ou nt s o f hi s i nt eres t an d p en al ty

li ab il it ie s fo r 20 04 an d 2 00 5, Dri ll in g fa il ed to ad eq ua te ly rais e th es e

In it s s up pl em en ta l n ot ic e o f de te rm in at io n t he App eal s Off ic e st at ed th at 2 6 

# fo r th e 2 00 4, 2 00 5, an d 2 00 7 t ax y ears Dril li ng owed a to ta l o f $3 ,15 1.1 4 (n ot in cl ud in g c ert ai n c red it s) an d t ha t h e h ad “ ot he r ba la nc es ” o f $2 ,23 6.4 0 t ha t was

no t p art of t he co ll ect io n- rev ie w cas e. Thes e am ou nt s wer e co m pu te d a s o f Ju ly 15 , 20 13 . The s um

of $ 3,1 51 .14 an d $ 2,2 36 .40 is $5 ,38 7.5 4.

His cal cu la ti on of $ 1,5 87 .06 was m ad e as of J un e 1 , 20 13

. 2 7

# - 65 -

[* 65 ] ch al le ng es at t he ad m in is tra ti ve lev el (wit h t he ex cep ti on of t he cal cu la ti on

of th e wit hh ol di ng cred it for 20 07 ). 2 8



# ! To t he ex te nt Dril li ng is co nt en di ng th at cred it s av ai la bl e to hi m for

ov erp ay in g t ax for hi s 2 00 4 a nd 20 07 y ears sh ou ld be ap pl ie d t o h is li ab il it y

fo r 20 05 , th e Co ur t d oe s n ot “ ha ve th e juri sd ic ti on un de r I.R.C. § 63 30 to

or de r th e ap pl ic at io n o f refu nd s o r cre di ts ” (ci ti ng Green e-Th ap ed i v

.

Co m m is si on er, 1 26 T.C. at 1 2- 13 ).

! To t he ex te nt Dril li ng is ch al le ng in g h is li ab il it y for 20 04 an d 2 00 7, h is

cl ai m s ar e m oo t b ecau se “ th e p et it io ne r’s li ab il it ie s fo r th e ta xa bl e y ears

20 04 an d 2 00 7 h av e b een eit he r co nc ed ed (20 07 ) or pa id (20 04 ) an d t he

res po nd en t i s n o l on ge r se ek in g t o c ol le ct for eit he r pe rio d.” 2 9



# The IRS co nt en ds th at Dril li ng di d n ot ch al le ng e h is un de rlyin g l ia bi li ti es 2 8 

# fo r th e ta xa bl e y ears 20 04 an d 2 00 5 d ur in g t he in it ia l h eari ng , th at th e in it ia l he ari ng co ns ti tu te d Dri ll in g’s o pp or tu ni ty to co nt es t t he li ab il it ie s, an d t ha t Dril li ng co ul d n ot co nt es t t he li ab il it y in th e su pp le m en ta l h eari ng . As th e IRS
arg ue s: “ W it h re sp ect to th e ta xa bl e y ears 20 04 an d 2 00 5 t he pe ti ti on er fi rs t ra is ed th e is su e o f th e ab at em en t o f in te res t an d p en al ti es du rin g t he su pp le m en ta l

co ll ect io n d ue pro ces s h eari ng . The p et it io ne r ha d a n o pp or tu ni ty dur in g t he in it ia l co ll ect io n d ue pro ces s h eari ng th at was h el d o n Ap ril 1, 2 01 1 t o ra is e th is is su e b ut fai le d t o d o s o.” The IR S al so co nt en ds th at Set tl em en t Offi cer Har tfi el

so ug ht a writ te n s ta te m en t fr om Dril li ng de ta il in g t he ba si s fo r hi s re qu es t fo r ab at em en t o f in te res t an d p en al ti es an d t ha t Dri ll in g fa il ed to pro vi de he r wit h

su ch a st at em en t.

W e al read y

ex pl ai ne d, s ee s up ra p art 1, t ha t we h ol d t he cas e is no t m oo t 2 9 

# (co nt in ue d...)

# - 66 -

[* 66 ] ! To t he ex te nt th at Dril li ng co nt en ds th at th e IRS wron gf ul ly app li ed

cred it s fr om

th e y ears 20 06 , 20 10 , and 20 11 to hi s l ia bi li ti es for 20 04 an d

20 05 , th es e cre di ts are o ut si de th e sc op e o f th is jud ic ia l p ro ceed in g b ecau se

th ey aro se ou ts id e th e y ears for whi ch th e li en no ti ce was fil ed

.

As we h av e ex pl ai ne d, Dri ll in g’s cl ai m th at th e IRS m is cal cu la te d h is

li ab il it ie s s te m s fr om

Dril li ng ’s con te nt io n t ha t t he IRS m is ap pl ie d v ari ou s

pa y m en ts he m ad e. Bu t h is po si ti on on bri ef t ha t h is li ab il it y to ta ls $1 ,58 7.0 6 (wi th

hi s p ay m en ts pro pe rly app li ed ) is no t s up po rte d b y an y pro po se d fi nd in gs of f

act

. 3 0



# Ru le 15 1( e)(3 ) req ui res a pa rty to p ro po se fin di ng s o f fac t i n t he po st tri al bri ef:

All bri efs sh al l * * * co nt ai n t he fol lo win g i n t he ord er i nd ic at ed :

* * * * * * *

(3 ) Pro po se d fi nd in gs of f act (in th e o pe ni ng bri ef o r br ie fs ), ba se d o n t he ev id en ce, i n t he for m of n um be red st at em en ts , each of whi ch sh al l b e co m

pl et e an d s ha ll co ns is t o f a co nc is e st at em en t o f

es se nt ia l fa ct an d n ot a reci ta l o f te st im on y no r a d is cu ss io n o r arg um en t re la ti ng to th e ev id en ce o r th e la w. In ea ch su ch nu m be red
st at em en t, t he re s ha ll be in se rte d re fere nc es to th e p ag es of t he
tra ns cri pt or t he ex hi bi ts or o th er s ou rces rel ie d u po n t o s up po rt t he
st at em en t. In an an swe rin g o r rep ly brie f, th e p art y sh al l s et for th an y ob jecti on s, t og et he r wit h t he reas on s t he refo r, to an y pro po se d

(...co nt in ue d) 2 9 

# wit h re sp ect to 20 07

.

W it h t he ex cep ti on of p ro po se d fi nd in g o f fac t 1 9, wh ic h i s d is cu ss ed in fra 3 0



# no te 31

.

# - 67 -

[* 67 ] fin di ng s o f an y

ot he r pa rty, sho win g t he nu m be rs of t he
st at em en ts to whi ch th e o bjec ti on s ar e d ire ct ed ; i n a dd it io n, t he pa rty

m ay set for th alt ern at iv e p ro po se d fi nd in gs of f act

.

In no ne of Dri ll in g’s p ro po se d fi nd in gs of f act do es he ex pl ai n wh at pa y m en ts he

m ad e, th e d at es on whi ch he m ad e th e p ay m en ts , and th e ta x p eri od s fo r whi ch he

in st ru ct ed th e IRS to ap pl y th e p ay m en ts (if

he m ad e su ch an in st ru ct io n)

. The 3 1



# $1 ,58 7.0 6 a m ou nt is fou nd on a sp read sh eet pre pa red by Parha m an d a tt ach ed to

Parh am ’s let te r of

May 7, 20 13 . Accor di ng to Dril li ng ’s bri ef, t he sp read sh eet do es

no t s ho w th at th e $ 1,5 87 .06 am ou nt is co rrec t, o nl y th at Dril li ng “ ha s n ot be en

gi ve n p ro pe r cre di t fo r pa y m en ts th at ha ve be en m ad e, an d fo r th at reas on

pe ti ti on er’s t ax li ab il it y

can no t b e d et erm in ed wit h a ny certa in ty.” T he May 7,

20 13 let te r, al on g wi th th e at ta ch ed sp read sh eet , con ta in s ex pl an at io ns an d

The re i s o ne ex cep ti on . Dril li ng ’s pro po se d fi nd in g o f fac t 1 9 i s t ha t o n 3 1 

# Apr il 15 , 20 11 , he m ai le d t he IRS a c he ck for $7 00 to ap pl y to th e ta x year 20 10

. As fa ct ua l s up po rt f

or th is pro po si ti on , Dril li ng po in ts to hi s o wn t es ti m on y . In hi s t es ti m on y , Dril li ng cla im ed th at on Apri l 1 5, 2 01 1, h e m ai le d t he IRS a t ax ret ur n fo r 20 10 rep or ti ng a ta x l ia bi li ty of $6 77 . He als o t es ti fie d t ha t h e en cl os ed a ch eck for th e am ou nt of t he li ab il it y . W hi le th is tes ti m on y pro vi de s s om e

su pp or t fo r th e p ro po si ti on th at he m ad e a p ay m en t o n Ap ril 15 , 20 11 (in th e

am ou nt of $ 67 7, n ot $7 00 as h e p ro po se s i n h is fin di ng of f act ), Dril li ng di d n ot of fer a ny of h is reco rd s t o c or ro bo rat e th e p ay m en t, s uc h a s a c an cel ed ch eck or a

co py of a b an k s ta te m en t. No r di d Dri ll in g e xp la in ho w he i ns tru ct ed th e IRS to
ap pl y th e p ay m en t. Un de r th e ci rcu m st an ces , we m ak e o nl y th e fi nd in g t ha t Dril li ng m ad e a p ay m en t. We do no t fi nd th e am ou nt of t he pa y m en t, i .e., whet he r it is $6 77 , $7 00 , or s om e o th er am ou nt ; t he da te he m ad e th e p ay m en t, i .e., Apri l 15 , 20 11 , or s om e o th er d at e; or wh et he r th e p ay m en t was acco m pa ni ed by in st ru ct io ns on ho w to ap pl y th e p ay m en t.

# - 68 -

[* 68 ] co m

pu ta ti on s o f th e am ou nt th at Dril li ng co nt en ds he owes th e IRS (an d

co nc lu de s t ha t t he am ou nt is $1 ,58 7.0 6) . Desp it e th e le tt er an d t he sp read sh eet , we

are u na bl e to res ol ve th e m eri ts of Dri ll in g’s co nt en ti on th at he owes on ly

$1 ,58 7.0 6. Fo r on e th in g, Dri ll in g’s s pr ead sh eet is in sc ru ta bl e. W e h av e o nl y th e

pr in to ut of t he sp read sh eet , no t t he un de rlyin g fo rm ul as . And as we ex pl ai ne d,

Dril li ng fai le d t o p ro po se fin di ng s o f fact in co m pl ia nc e wit h R

ul e 1 51 . Had h e

do ne so , th e IRS wou ld ha ve be en req ui red to set for th it s “ ob jecti on s, t og et he r

wit h t he reas on s t he refo r” i n i ts an swe rin g b rie f. See Ru le 15 1( e)(3 ). Thu s, ev en if

we were ab le to di sc ern Dril li ng ’s con te nt io ns fro m hi s l et te r an d t he att ach ed

sp read sh eet (whi ch we can no t), we d o n ot ha ve th e IRS ’s res po ns e to th e

co nt en ti on s. Alt ho ug h t he reco rd co nt ai ns th e IRS ’s acco un t t ran sc rip ts , whi ch th e

IRS c on te nd s s ho w cor rect am ou nt s, we ca nn ot si m pl y lo ok to th e acc ou nt

tra ns cri pt s t o d et erm in e th e IRS ’s po si ti on wit h re sp ect to th e co rrec t am ou nt s o f

Dril li ng ’s li ab il it ie s. No t al l o f th e en tri es on th es e acc ou nt tra ns cri pt s ar e

un de rs ta nd ab le to us wit ho ut fur th er ex pl an at io n. Fu rth erm or e, th e rec or d i nc lu de s

acco un t t ran sc rip ts for on ly the tax y ears 20 03 , 20 04 , 20 05 , and 20 07 . Dril li ng ’s

arg um en ts ab ou t h is co rrec t l ia bi li ti es co nc ern no t o nl y th es e y ears bu t ap pa ren tl y

20 06 , 20 08 , 20 10 , and 20 11 . The i de a th at we can di sc ern Dril li ng ’s con te nt io ns

reg ard in g h ow h is pa y m en ts were m is ap pl ie d, co m pa re t he m to th e IRS ’s

# - 69 -

[* 69 ] co nt en ti on s re ga rd in g h ow t he pa y m en ts sh ou ld ha ve be en ap pl ie d, an d t he n

cal cu la te th e co rrec t am ou nt s o f pe na lt ie s an d i nt eres t i s u nd ercu t b y Dril li ng ’s

ad m is si on in hi s b rie f th at on th e b as is of t he do cu m en ts in th e rec or d h is “ ta x

li ab il it y can no t b e d et erm in ed wit h a ny certa in ty.” Becau se Dril li ng fai le d t o

fo ll ow Ru le 15 1, we h ol d t ha t Dri ll in g i s p recl ud ed fro m arg ui ng th at hi s p ay m en ts

were m is ap pl ie d. Se e Len ih an v. Co m m is si on er, T.C. Mem o. 2 00 6- 25 9, s li p o p. at

4 n .3, af f’d wit ho ut pu bl is he d o pi ni on , 29 6 F . App ’x 16 0 (2 d C ir. 2 00 8) ; Br ewer

Qua li ty H om es , Inc . v. Co m m is si on er, T.C. Mem o. 2 00 3- 20 0, s li p o p. at 3 n .3,

aff’d, 1 22 F. App ’x 88 (5t h C ir. 2 00 4)

. Beca us e h e is pre cl ud ed fro m m ak in g 3 2



# su ch a ch al le ng e, we ne ed no t co ns id er t he IRS’s co un te rarg um en ts to Dril li ng ’s

po te nt ia l ch al le ng e. The e xc ep ti on is th e IRS ’s m oo tn es s ar gu m en t, wh ic h we m us t

co ns id er b ecau se m oo tn es s i s a t hr es ho ld co ns ti tu ti on al is su e. See s up ra n ot e 2 1.

W e h av e al read y

ex pl ai ne d wh y

th e d is pu te ov er t he 20 07 tax y ear i s n ot m oo t. See

su pr a p art 1. Fo r th e sa m e rea so n we c on si de r th e d is pu te ov er t he 20 04 tax y ear

Bec au se Dril li ng di d n ot pro po se fin di ng s o f fac ts to su pp or t h is 3 2



# co nt en ti on s t ha t p ay m en ts were m is ap pl ie d, we ca nn ot de te rm in e whe th er h is

co nt en ti on s ar e su pp or te d b y ev id en ce. If h is co nt en ti on s ar e n ot su pp or te d b y

ev id en ce, t he co nt en ti on s fa il be cau se th e b ur de n o f pr oo f be lo ng s t o Dri ll in g. Se e Ru le 14 2( a).

# - 70 -

[* 70 ] no t t o b e m oo t. W e wil l t he refo re en te r an ord er d en y in g t he IRS’s m ot io n 3 3



# to di sm is s t hi s ca se for m oo tn es s.

4. Co nc lu si on s

In it s J ul y 29 , 20 13 su pp le m en ta l n ot ic e o f de te rm in at io n, t he App eal s Off ic e

su st ai ne d t he IRS’s fi li ng of a li en no ti ce t o s ecu re t he co ll ect io n o f li ab il it ie s fo r

ta x years 2 00 4, 2 00 5, an d 2 00 7. As no te d, s ev eral co nc es si on s h av e b een m ad e b y

th e IRS an d t he App eal s Off ic e: (1) th e App eal s Off

ic e d et erm in ed th at Dril li ng

ha d n o b al an ce fo r 20 07 , (2) th e IRS co nc ed es on bri ef t ha t Dri ll in g h as no ba la nc e

fo r 20 07 , and (3) th e IRS st at es th at it wil l t ak e n o fu rth er co ll ect io n a ct io n wi th

res pe ct to 20 04 or 2 00 7. Des pi te th es e co nc es si on s, t hi s ca se is no t m oo t as

reg ard s t o 2 00 4 a nd 20 07 be cau se th e IRS ha s n ot wit hd rawn th e n ot ic e o f li en or

rel eas ed th e li en . See s up ra p art s 1 an d 3 . Alth ou gh Dril li ng ’s di sp ut e wit h t he

IRS i s n ot m oo t, Dri ll in g’s p os it io n h as no m eri t. See su pr a p art s 1 an d 3 . W e

th eref or e su st ai n t he Ju ly 29, 2 01 3 s up pl em en ta ry no ti ce o f de te rm in at io n. Al so ,

Dril li ng co nt en ds th at th e li en sh ou ld be rel eas ed as t o b ot h 2 00 4 a nd 3 3


# 20 07 . Howev er, as ex pl ai ne d s up ra n ot e 2 0, Dri ll in g d id no t re qu es t t ha t t he App eal s Off

ic e rel eas e th e n ot ic e o f li en . A no ti ce o f li en m us t b e rel eas ed on ly if al l l ia bi li ti es li st ed in th e n ot ic e o f li en ha ve be en pa id . Sec. 3 01 .63 25 -1 (a)( 1) , (6)

, Pro ced . & Adm in . Reg s. Th e IRS do es no t co ns id er t he li ab il it y for th e 2 00 5 t ax y ear t o h av e b een pa id in ful l.

# - 71 -

[* 71 ] we wil l d en y

th e IRS ’s m ot io n t o d is m is s t he cas e fo r m oo tn es s as to 20 04

an d 2 00 7.

The on ly rem ai ni ng is su e is th e IRS ’s m ot io n t o s tri ke th e d oc um en ts

at ta ch ed to Dril li ng ’s op en in g b rie f. The d oc um en ts do no t af fect ou r de ci si on an d

th eref or e we wil l d en y

th e m ot io n a s m oo t.

To re fle ct th e fo reg oi ng ,

An ap pr op ria te ord er an d

de ci si on wil l b e en te red

.