T.C. Sum m ary Opi ni on 20 16 -1 6

UNITED STAT ES TAX COURT

DEBORAH LEE BEAN AND NE AL ALL AN BERKOW ITZ, Peti ti on ers v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 64 0- 12 S L. Fi le d Ap ril 13 , 20 16 .
Deb or ah Lee Bea n andNeal All anBerk owi tz , pro ses e. Ch ris to ph er M. M en czer , forres po nd en t.

SUMM ARY OPINION VASQUEZ, Ju dg e: Thi s ca se was h eardpu rs ua ntto th e p ro vi si on s o f se ct io n 7 46 3 of t he Int ern al Rev enue Co de ineffe ctwhenth e p et it io n was fil ed .

1 Pu rs ua ntto sec ti on 74 63 (b ), th e d eci si on to be en te redis no t re vi ewab le by any 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 enue Co de in effe ctat a ll rel ev an t t im es .-2 -

ot he r co urt, an d t hi s o pi ni on sh al l n otbe tre at edas p rece de ntforan y ot he r cas e. Thi s ca se ari se s fr om

a pe ti ti on forrev ie w fil edinres po ns e to a Not ic e o f Dete rm in at io n C on cern in g C ol le ct io n Act io n( s) Und er Se ct io n 6 32 0 a nd/o r 63 30 (n ot ic e o f de te rm in at io n) . The i ss ue forde ci si on is whet he r res po nd en t m ay pr oc eedwith c ol le ct io n o f pe ti ti on ers ’ 20 08 tax li ab il it y . Bac kg ro un d So m e o f th e fac ts ha ve be enst ip ul at edan d a re s o fo un d. Th e st ip ul at io n o f fact s an d t he att ach edex hi bi ts are i nc or po rat edhe rei n b y

th is refe ren ce. At t he ti m e p et it io ne rs fil edth ei r pe ti ti on , th ey were re si de nt s o f Ro wlet t, Tex as . On Fe brua ry

22 , 20 00 , th e In te rn al Rev enue Serv ic e (IR S) as se ss eda trus t fu ndreco ve ry

pe na lt y of $ 58 ,21 7 a ga in stMs . Bean forth e qua rte rly peri oden di ng Sep te m be r 30 , 19 98 (TFRP l iabi li ty). Pet it io ne rs fil edth ei r 20 07 Fed eral in co m e ta x re tu rnan d c la im edth ereo n anov erp aym en t o n t he ba si s o f a wit hh ol di ng cred itof $ 1,6 60 an d ast im ul us cred itof $ 1,2 00 . The IR S al lo wedth e fu ll am ou nt s o f th e cre di ts . On Ap ril 15 , 20 08 , th e IRS ap pl ie d p et it io ne rs ’ withh ol di ng cred itof $ 1,6 60 ag ai ns t the TFRP l iabi li ty for the qu art erl y pe rio d e nd in g S ep te m

be r 30 , 19 98 . On Ju ne 30 , 20 08 , th e IRS ap pl ie d p et it io ne rs ’ st im ul us cred itof $ 1,2 00 ag ai ns t the TFRP l iabi li ty for the qu art erl y pe rio d e nd in g S ep te m

be r 30 , 19 98 .-3 -

Pet it io ne rs fil edth ei r 20 08 Fed eral in co m e ta x re tu rnlat e an d re po rte d th ereo n i nc om e ta x o f $1 0,1 69 an d s el f-em pl oym en t t ax of $ 4,3 33 . On Nov em be r 29 , 20 10 , th e IRS ass es se d p et it io ne rs ’ 20 08 tax of $ 14 ,50 2. Onth ei r 20 08 return pe ti ti on ers als o c la im eda carry ov er wi th ho ld in g c red itof $ 1,6 60 an d areco ve ry reb at e cre di t o f $1 ,20 0. Th e IRS di sa ll owe d b ot h c red it s b ecau se th e IRS ha d gr an te d t he ful l am ou nt s wi th res pe ctto 20 07 . On Nov em be r 29 , 20 10 , th e IRS m ai le d p et it io ne rs a m ath e rro r no ti ce i nf orm in g t he m

th atth e cre di ts cla im edon th ei r 20 08 return h adbe endi sa ll owe d. On M ay 30 , 20 11 , th e IRS m ai le d p et it io ne rs a Lett er 1 05 8, Fi na l No ti ce o f In te ntto Levy andNot ic e o f You r Ri gh t t o aHeari ng , with re sp ectto th ei r ou ts ta nd in g i nc om e ta x l iabi li ty for 2 00 8. OnJune 17 , 20 11 , th e IRS rece iv ed pe ti ti on ers ’ Fo rm

12 15 3, Re qu es t fo r a Co ll ect io n Du e Pro ces s o r Equ iv al en t Heari ng , inres po ns e to th e le vy no ti ce. Inth ei r Fo rm 12 15 3 p et it io ne rs st at edth e fo ll owi ng : “ I am

no t l iabl e fo r (I d on ’t owe) a ll of t he tax es , th is is cu rren tl y be fo re the tax advo cat es off ic e, we ha ve no t h adth e o pp ortuni ty to ch al le ng e th is in co urt.” On No ve m

be r 14 , 20 11 , Set tl em en t Offi cer Ni co le D. Matt he ws o f th e Mem ph is App eal s Off

ic e m ai le d p et it io ne rs a le tt er s ch edul in g atel ep ho ne co ll ect io n due pro ces s (C DP) h eari ng forDecem be r 12 , 20 11 . In the let te r-4 -

Set tl em en t Offi cer M at th ews st at edth atsh e co ul d c on si de r co ll ect io n a lt ern at iv es on ly if pe ti ti on ers pro vi de d: (1) a co m pl et edFo rm

43 3- A, Col le ct io n In fo rm at io n St at em en t fo r W ag e Earn ers an d S el f-Em pl oyed In di vi du al s an d (2 ) a s ig ne d Fed eral in co m e ta x re tu rnfor 20 10 . Sett le m en t Offi cer M at th ews in st ru ct ed pe ti ti on ers to subm itth es e it em s b y Nov em be r 28 , 20 11 . Peti ti on ers di d n ot subm itth e reque st edin fo rm at io n. On Dec em

be r 12 , 20 11 , Set tl em en t Offi cer M at th ews co nduc te d the sc he du le d C DP he ari ng with p et it io ne rs . Duri ng th e CDP h eari ng pe ti ti on ers ch al le ng edth e TFRP l iabi li ty for the qu art erl y pe rio d e nd in g S ep te m

be r 30 , 19 98 . Set tl em en t Offi cer M at th ews in fo rm edpe ti ti on ers th atsh e d idno t h av e juri sd ic ti on to co ns id er the TFRP l iabi li ty. Pet it io ne rs th enreque st edth at Set tl em en t Offi cer M at th ews rem ov e th e en ti re am ou ntdu e. Set tl em en t Offi cer Mat th ews advi se d p et it io ne rs th atsh e d idno t h av e th e au th or it y to rem ov e th e en ti re b al an ce due . Duri ng th e co ur se of t he CDP h eari ng pe ti ti on ers di d n ot pr op os e an y

co ll ect io n a lt ern at iv e. On Dec em be r 21 , 20 11 , th e IRS is su ed pe ti ti on ers a no ti ce o f de te rm in at io n s us ta in in g the pro po se d l ev y . Pet it io ne rs 2 ti m el y pe ti ti on edth is Co urt fo r rev ie w of t he no ti ce o f de te rm in at io n. Befo re the no ti ce o f de te rm in at io n was is su ed , Set tl em en t Offi cer 2 Mat th ews ve rif

ie d t ha t al l l eg al an d a dm in is tra ti ve requi rem en ts forco ll ect io n h ad be enm et .-5 -

On Fe brua ry

11 , 20 13 , at t he tri al cal en da r he ldinDall as , Texa s, p et it io ne rs rai se d ane w is su e b y

cla im in g fo r th e fi rs t t im e th atMr. Berko wit z was en ti tl edto in jure d s po us e rel ie f wit h re sp ectto th e 2 00 7 o ve rp aym en t tha t was ap pl ie d ag ai ns t the TFRP l iabi li ty. Als o a t the tri al cal en da r pe ti ti on ers m ad e anora l m ot io n fo r co nt in ua nc e, whi ch th e Co urt g ran te d t o a ll ow t he pa rti es to co ns id er Mr. Be rk owi tz ne wly rai se d c la im forin jure d s po us e rel ie f. Mr. Be rk owi tz subm it te d t o t he IRS a F orm 83 79 , Inju redSp ou se All oc at io n, re qu es ti ng rel ie f fo r 20 07 . The IR S th enm ad e anadm in is tra ti ve de te rm in at io n t ha t M r. Berk owi tz was e nt it le d t o i njuredsp ou se rel ie f. Co ns eque nt ly, th e IRS is su edMr. Berko wit z a l et te r in fo rm in g h im th athi s reque stforin

jure d s po us e rel ie f fo r 20 07 ha d b een gra nt edan d t ha t the rel ie f wou ldbe ap pl ie d a ga in sthi s o ut st an di ng 20 08 joi ntli ab il ity . Rath er tha n imm ed ia te ly perfo rm in g t he co nt em pl at edoff se t, re sp on de ntha s h el d thi s cr ed itin ab ey an ce p en di ng th e res ol ut io n o f th is cas e. Dis cu ss io n I. St atut ory

Fram ewo rk Sect io n 6 33 1( a) au th or iz es th e Sec ret ary to lev y up onpro pe rty andpro pe rty rig ht s o f a t ax pa y er l iabl e fo r ta x i f th e ta xp ay er fa il s t o p ay th e ta x wi th in 10 da y s aft er n ot ic e an d d em an d fo r paym en t i s m ad e. Sect io n 6 33 0( a) p ro vi de s tha t n o-6 -

le vy m ay be m ad e o n a ny pro pe rty or ri gh t t o p ro pe rty of an y pe rs on un le ss th e Secr et ary ha s n ot ifi edsu ch pe rs on inwrit in g o f th e ri gh t t o ahe ari ng be fo re the le vy is m ad e. If a t ax pa y er re qu es ts a he ari ng inres po ns e to a no ti ce o f le vy purs ua ntto se ct io n 6 33 0, a h eari ng sh al l b e h el d b efo re an im pa rti al off

ic er o r em

pl oyee of App eal s. Sec . 63 30 (b )(1 ), (3 ). At th e h eari ng th e ta xp ay er m ay rai se an y rel ev an t is su e, in cl ud in g app ro pr ia te sp ou sa l d efen se s, ch al le ng es to th e ap pr op ria te ne ss of th e co ll ect io n a ct io n, an d c ol le ct io n a lt ern at iv es . Sec. 6 33 0( c)(2 )(A). Afte r th e h eari ng anApp eal s o ffi cer m us t d et erm in e whe th er an d ho w to pro ceedwith c ol le ct io n, t ak in g i nt o a cco un t, am on g o th er thi ng s, wh ethe r an y pro po se d c ol le ct io n a ct io n b al an ces th e n eedforth e eff ic ie ntco ll ect io n o f ta xe s wi th th e le gi ti m at e co nc ernof t he tax pa y er tha t the co ll ect io n a ct io n b e n o m or e in tru si ve th anne ces sary . See s ec. 6 33 0( c)(3 ). Sect io n 6 33 0( d) (1 ) gr an ts th is Co urt juris di ct io n t o re vi ew th e d et erm in at io n m ad e b y App eal s i n c on ne ct io n with t he he ari ng . II. Ju ris di ct io n Gen eral ly The Tax C ou rt i s a c ou rt o f li m it edjuri sd ic ti on , sec . 74 42 , andm ay ex erci se juri sd ic ti on on ly to the ex te ntex pr es sl y au th or iz edby Con gr es s, St ewartv. Co m m is si on er, 1 27 T.C. 10 9, 1 12 (20 06 ); Es ta te of Yo un g v . Comm is si on er, 8 1-7 -

T.C. 87 9, 8 80 -8 81 (19 83 ). Ques ti on s o f juri sd ic ti on are fu nd am en ta l; when ev er i t ap pe ars th atth is Co urt m ay lac k ju ris di ct io n, tha t que st io n m us t b e ad dr es se d. Whe el er’s Pea ch tre e Ph arm acy, In c. v. Co m m is si on er, 3 5 T.C. 1 77 , 17 9 (1 96 0) . Und er s ect io n 6 33 0( d) (1 ), we ha ve juri sd ic ti onov er the de te rm in at io n m ad e b y App eal s, an d o urjuri sd ic ti on is de fin edby the sco pe of t ha t d et erm in at io n. Fre ije v. Co m m is si on er, 1 25 T.C. 14 , 25 (20 05 ). A. 20 07 Over

pa ym en t Pet it io ne rs arg ue th atres po nd en t erredinap pl y in g t he ir 2 00 7 o ve rp aym en t ag ai ns t the TFRP l iabi li ty rath er tha n re fu nd in g i t t o t he m . Whe n atax pay er h as m ad e anov erp aym en t o f ta x, the Co m m is si on er h as bro addi sc ret io n t o c red itth at ov erp aym en t t o a no th er l iabi li ty--a di sc ret io n g iv ento th e IRS by sect io n 6 40 2( a). W e se e n o b as is forcri ti ci zi ng res po nd en t’s ex erci se of h is di sc ret io n t o app ly the ov erp aym en t ag ai ns t the TFRP l iabi li ty rath er than re fund in g i t t o p et it io ne rs . Co ns eque nt ly, pe ti ti on ers ’ 20 07 ov erp aym en t was pro pe rly app li edag ai ns t the TFRP l iabi li ty. Pet it io ne rs als o arg ue th atres po nd en t erredby fail in g t o app ly the ir 2 00 7 ov erp aym en t ag ai ns t the ir 2 00 8 t ax li ab il ity . In ap pr op ria te cir cum st an ces , we m ay de te rm in e in a CDP ca se whet he r a cre di t av ai labl e fro m an ot he r ta x year sh ou ldbe ap pl ie d a ga in stth e ta xp ay er’s l iabi li ty for the y ear b efo re the Co urt-8 -

(h ere, 2 00 8) . Butwe cando th is on ly whe n acred itfro m an othe r ta x year in di sp ut ab ly exi st s. Weberv. Co m m is si on er, 1 38 T.C. 34 8, 3 66 (20 12 ). Onl y no nr efund edor n oty etap pl ie d “ av ai labl e” cr ed it s ar is in g i n n on de te rm in at io n y ears m ay

be co ns id eredby thi s C ou rt wh ende te rm in in g wh ethe r a t ax li ab il it y at is su e h as be enreduc edor e li m in at ed ; u nt il th e cre di t h as ful ly m at eri al iz ed , th e ta xp ay er m erel y

ass ert s a c la im

forcred it , whi chis be y on d t he sco pe of o ur juri sd ic ti on in a CDP ca se . See i d. at36 0- 37 0; see als o Ev eret t As so cs ., Inc . v. Co m m is si on er, T.C. Mem o. 2 01 2- 14 3. Pe ti ti on ers cla im edtwo cred it s o n t he ir 20 08 return. Re sp on de ntdi sa ll owe d b oth c red it s b ecau se th e fu ll am ou nt s h ad al read y be enall owe d a ndap pl ie d wi th res pe ctto 20 07 . Once r es po nd en t ap pl ie d pe ti ti on ers ’ 20 07 ov erp aym en t ag ai ns t the TFRP l iabi li ty, th e o ve rp aym en t am ou nt was no lo ng er an “ av ai labl e cre di t” th atco ul d b e ap pl ie d t o t he 20 08 tax y ear. It ha d, i n o th er wo rd s, b een us edup . Res po nd en t’s d efen se to an y subs eque ntcla im fo r refu ndof t he ov erp aym en t wo ul d b e acc or d a ndsat is fact io n b ecau se th e cl ai m ha s al read y

be enall owe d. Se e Weber v . Comm is si on er, 1 38 T.C. at 3 61 -3 62 . Thu s, b ecau se pe ti ti on ers ’ 20 07 ov erp aym en t h adbe enpro pe rly offs etun de r se ct io n 6 40 2( a), i t was no lo ng er av ai labl e to cla im for20 08 .-9 -

B. Ove rp aym en t o f Sec ti on 66 72 Pen al ty Pet it io ne rs ap pe ar t o arg ue inth e al te rn at iv e th at , bec au se res po nd en t im pr op erl y ap pl ie d t he ir 2 00 7 o ve rp aym en t t o ano ne xi st en t TFRP li ab il it y , th ey are e nt it le d t o app ly an o ve rp aym en t o f $2 ,86 0 a ga in stth ei r 20 08 tax li ab il it y . In ot he r wor ds , pet it io ne rs arg ue th atth e TFRP l iabi li ty has be enov erp ai d andth at th e o ve rp aym en t i s “ av ai labl e” t o b e cre di te d t o t he ir 2 00 8 t ax li ab il it y . Pet it io ne rs ’ co nt en ti on pro po se s t ha t we turn fr om th e subjec t o f th ei r 20 08 tax li ab il it y --the li ab il it y

who se co ll ect io n i s atis su e--a ndad dr es s t he di st in ct qu es ti on of t he TFRP l iabi li ty. W e can no t d o s o. We lackjuri sd ic ti on to de te rm in e whe th er a t ax pa y er o ve rp ai d h er TFRP li ab il it y forpe rio ds no t s ub

ject to th e n ot ic e o f de te rm in at io n. Se e id . at 3 69 (st at in g t ha t the Co urt l ack s juri sd ic ti on “ to ad

jud ic at e a d is pu te d re fu ndcla im th atis un rel at edto th e li ab il it y th e IRS pro po se s t o c ol le ct ”); Ever et t As so cs ., Inc . v. Co m m is si on er, T.C. Mem o. 20 12 -1 43 , sl ip op . at 1 7 (s ta ti ng th atth e Co urt l ack s juris di ct io n t o “ co ns id er, d e no vo , th e en ti rety

of p et it io ne r’s ta x l iabi li ty for the no nd et erm in at io n p eri od ”). As we s ta te d i n Webe r, to ex pa ndth e CDP re gi m e in th is m an ne r wou ldm ean th at itwou ldno t b e co nf

in edto on ly the CDP ta x p eri od , bu t tha t a C DP he ari ng co ul d be co m e analm os t p le na ry rev ie w of t he tax pa y er’s s itua ti onvi s- a-v is th e IRS for al l l iabi li ti es an d fo r al l p eri od s; an d ade li nque nttax pa y er wo ul d h av e th e p owe r-1 0-

to ha ltIRS co ll ect io n o f an y gi ve n t ax si m

pl y by fili ng a refu ndcla im

forany ot he r ta x. Weberv. Co m m is si on er, 1 38 T.C. at 3 70 . III. Mat h Err orPro vi si on s Pet it io ne rs ap pe ar t o arg ue th atth e ch an ge s m ad e to th ei r 20 08 rep orti ng po si ti onwere n otm ath e rro rs subjec t t o a dju st m en t u nd er s ect io n 6 21 3( b) (1 ). Pet it io ne rs ass ertth atth e 2 00 8 a dju st m en ts co ul d o nl y be m ad e b y

“ au di t” . Gen eral ly, th e Co m

m is si on er i s re qu ire d t o i ss ue a st atut ory no ti ce o f de fic ie nc y be fo re as se ss in g a ny tax in ex ces s o f th e am ou ntsh own on a return. Se c. 62 12 . Howev er, the Co m

m is si on er i s al lo wedto di rect ly ass es s l iabi li ti es ari si ng by w ay of “ a m athe m at ic al or c le ric al erro r ap pe ari ng onth e return” witho utsen di ng a no ti ce o f de fic ie nc y . Sec. 6 21 3( b) (1 ). Pet it io ne rs cla im eda $1 ,20 0 s ti m ul us cred iton th ei r 20 07 return. Des pi te be in g i nf orm edth atth ei r $1 ,20 0 c red itha d b een all owe d andoff se t ag ai ns t the TFRP l iabi li ty, pe ti ti on ers cla im eda $1 ,20 0 re co ve ry reb at e cre di t o n t he ir 2 00 8 return. Th e 2 00 8 re co ve ry reb at e cre di t was requi redto be reduc edby any adva nc e ref

un d c red it(i.e ., th e st im

ul us cred itam ou nt ) th atpe ti ti on ers ha d rece iv edin 20 07 . See s ec. 6 42 8( f) an d (g ). Any fai lu re t o re du ce the 20 08 reco ve ry reb at e cre di t i s t reat edas a ris in g o utof am athe m at ic al or c le ric al erro r-1 1-

an d i s s ub ject t o s ect io n 6 21 3( b) (1 ) m ath e rro r no ti ce p ro vi si on s. See sec . 64 28 (f)(1 ). Pet it io ne rs als o c la im eda carry ov er wi th ho ld in g c red itfro m 20 07 on th ei r 20 08 return d es pi te be in g i nf orm edth atth ei r ex ces s 2 00 7 wi th ho ld in g c red itha d be enall owe d a ndsetoff

ag ai ns t the 19 98 TFRP l iabi li ty. Thi s re su lt edinan ov ers ta te m en t o f pe ti ti on ers ’ 20 08 est im at edtax pay m en ts . Und er s ect io n 62 01 (a)( 3) , an o ve rs ta te m en t o f wit hh ol di ng cred it s o r es ti m at edtax pa ym en ts can be ad jus te d i n t he same m an ne r as a m athe m at ic al or c le ric al erro r ap pe ari ng up on th e return. Acco rd in gl y , res po nd en t p ro pe rly dis al lo wedpe ti ti on ers ’ 20 08 cred it s u nd er th e m ath e rro r pr ov is io ns of s ect io n 6 21 3( b) (1 ). IV. Oth er Is su es The reco rdsh ows th atres po nd en t p ro pe rly veri fie d t ha t the requi rem en ts of ap pl ic ab le law an d a dm in is tra ti ve pro cedur e were m etinpro ces si ng pe ti ti on ers ’ cas e. Add it io na ll y , pet it io ne rs di d n otoff er a co ll ect io n a lt ern at iv e to be co ns id ered . Howev er, ev enif t he y ha d, p et it io ne rs fai le d t o p ro vi de fin an ci al do cu m en ta ti on , ren de rin g re sp on de ntun ab le to ev al ua te co ll ect io n a lt ern at iv es . See R om anv. Co m

m is si on er, T.C. Mem o. 2 00 4- 20 ; Ro dr ig ue z v . Comm is si on er, T.C. Mem o. 2 00 3- 15 3. Fi na ll y , at t ria l p et it io ne rs off eredno ev id en ce tha t-1 2-

res po nd en t’s d eci si on to su st ai n t he pro po se d l ev y act io n c on st itut edanab us e o f di sc ret io n. Acco rd in gl y , we ho ldth atres po nd en t d idno t ab us e h is di sc ret io n i n su st ai ni ng th e p ro po se d l ev y . Inreac hi ng ou r ho ld in g, we h av e co ns id eredall arg um en ts m ad e, an d t o t he ex te ntno t m en ti on ed , we con si de r th em irr el ev an t, m oo t, o r wit ho utm eri t. To re fle ctth e fo reg oi ng , Deci si on wil l b e en te red fo r res po nd en t.