T.C. Summary Opinion 2008-128

UNITED STATES TAX COURT

JONATHAN L. HALL, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 11674-06S. Filed September 22, 2008.

Jonathan L. Hall, pro se.

Jay A. Roberts, for respondent.

PANUTHOS, Chief Special Trial Judge: This case was heard

pursuant to the provisions of section 7463 of the Internal

Revenue Code in effect at the time the petition was filed. 

Pursuant to section 7463(b), the decision to be entered is not

reviewable by any other court, and this opinion shall not be

treated as precedent for any other case. Unless otherwise
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1 Respondent conceded that the Federal tax lien for 2000

would be withdrawn because the lien was filed reflecting a zero

balance owed for 2000. After the filing, the Internal Revenue

Service (IRS) assessed a collection fee, interest, and an

addition to tax for failure to pay tax reported on a return. At

trial respondent’s counsel agreed that the IRS would abate the

remaining 2000 balance and withdraw the lien for 2000.

indicated, subsequent section references are to the Internal

Revenue Code, as amended.

This case is before the Court on petitioner’s request for

review of the Internal Revenue Service (IRS) Appeals Office

(Appeals) determination to sustain the filing of a Federal tax

lien with respect to petitioner’s 2000 through 2003 income tax

liabilities. After a concession, the issue before the Court is

whether respondent abused his discretion in sustaining the lien

filing with respect to petitioner’s income tax liabilities for

taxable years 2001 through 2003.1

Background

Petitioner resided in Virginia when he filed the petition. 

The parties filed a stipulation of facts and a supplemental

stipulation of facts, with attached exhibits. We find those

facts and incorporate the stipulations by this reference.

Petitioner worked as a laborer during 2000, 2001, 2002, and

2003 (the years in issue). Petitioner received Forms 1099-MISC,

Miscellaneous Income, for each of the years in issue. He

reported his earnings and claimed various expenses for each year

on Schedule C, Profit or Loss From Business, and he reported a
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self-employment tax liability for each year. Petitioner had no

Federal income tax withheld from the payments he received, and he

made no estimated tax payments. He filed balance due returns for

the years in issue and did not remit payment with those returns.

In 2002 petitioner entered into an installment agreement and

made payments toward his outstanding tax liabilities, but he

defaulted on the installment agreement in 2005, when he stopped

making payments. Respondent filed the notice of Federal tax lien

on May 3, 2005, and mailed a Notice of Federal Tax Lien Filing

and Your Right to a Hearing Under IRC 6320, dated May 4, 2005, to

petitioner. Petitioner timely submitted Form 12153, Request for

a Collection Due Process Hearing, and received a date for a

telephone hearing. The day before the scheduled hearing,

petitioner called the Appeals officer and asked to postpone the

hearing for 90 days. The officer refused the delay but allowed

petitioner additional time to submit information he wanted

considered. Petitioner submitted nothing beyond his initial

hearing request, and the officer issued a Notice of Determination

Concerning Collection Action(s) Under Section 6320 and/or 6330

(notice of determination), sustaining the lien filing.

Petitioner timely petitioned for judicial review of the

notice of determination. In response to motions from respondent,

the Court granted a continuance and remanded the case so that

Appeals could provide petitioner a face-to-face collection
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2 The settlement officer (SO) stated that petitioner was not

entitled to challenge the underlying tax liabilities in the

collection hearing because he had had a prior opportunity to so

challenge; i.e., when he received a notice of intent to levy

dated Apr. 16, 2005 (before the May 4, 2005, notice of Federal

tax lien filing). However, the Apr. 16, 2005, levy notice, which

is the subject of another case, docket No. 26741-06S, involves

petitioner’s tax liabilities for tax year 2004 only, not any of

the years at issue in this case (2000 through 2003). In any

event, the SO afforded petitioner the opportunity to challenge

the underlying tax liabilities at the hearing.

hearing. Appeals assigned a different settlement officer (SO) to

conduct the hearing on remand. Before the hearing the SO

informed petitioner that Appeals could not consider collection

alternatives without: (1) Proof of his current compliance with

Federal income tax obligations, including tax return filing and

estimated tax payments; and (2) completed collection information

form(s), with supporting documentation.2

On April 30, 2007, the SO and his supervisor met with

petitioner for several hours. Petitioner sought withdrawal of

the notice of lien on account of hardship and the adverse effect

on his credit, and he requested currently noncollectible (CNC)

status as a collection alternative. The SO refused to consider

collection alternatives during the meeting because petitioner had

not provided proof of compliance or the requested collection

information before or at the meeting. 

During the collection hearing petitioner asserted that he

had been improperly classified as an independent contractor by

the people for whom he provided services during the years in
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issue. Petitioner claimed that the alleged employer paid him a

lower “employee hourly rate” and not a higher “independent

contractor rate”. Petitioner attempted to challenge the

underlying tax liabilities solely on the basis that respondent

should determine his proper classification. The SO observed that

the outstanding liabilities resulted from petitioner’s filing his

returns as an independent contractor and discussed petitioner’s

submitting amended Federal income tax returns for any years

petitioner considered himself an employee as well as petitioner’s

submitting Form SS-8, Determination of Worker Status for Purposes

of Federal Employment Taxes and Income Tax Withholding. 

Petitioner did not provide any documentation to support a

challenge to the existence or amounts of the underlying tax

liabilities for the years at issue.

Petitioner also argued that the liens should be removed to

allow him to obtain credit so he could purchase a computer. The

SO and his supervisor explained that one purpose of the tax liens

is to prevent a taxpayer from acquiring additional debt that

could compete for funds needed to pay tax liabilities. 

The SO allowed petitioner additional time to submit proof of

current compliance with his Federal income tax obligations and to

provide the collection information required to evaluate

collection alternatives. Using the information petitioner

submitted after the hearing, which indicated that petitioner did
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3 Respondent’s counsel indicated that recalculating

petitioner’s taxes as an employee would result in more taxes due

than the amounts reflected in petitioner’s original returns filed

as an independent contractor; although petitioner would be liable

for only one-half of the self-employment taxes if he filed as an

employee, he would lose the deductions for one-half of the selfemployment taxes and the expenses he originally listed on

Schedules C, Profit or Loss From Business, would be reported on

Schedules A, Itemized Deductions, where they would be subject to

the 2-percent floor imposed by sec. 67 on miscellaneous itemized

deductions (here, unreimbursed employee business expenses) and

would displace or compete with his standard deduction. 

 Petitioner refused to stipulate his employment status. 

The Court instructed petitioner that, without an express

agreement by both parties, the issue would be decided on the

(continued...)

not have assets available for collection and did not have

positive monthly disposable income, the SO determined that the

only collection alternative available was to place petitioner’s

account in CNC status.

Petitioner did not submit any amended returns or a Form SS-8

to the SO. On September 7, 2007, the SO issued a Supplemental

Notice of Determination Concerning Collection Actions Under

Section 6320 and/or 6330 (supplemental notice of determination),

determining that petitioner’s account would be placed in CNC

status and that the liens would remain in place.

At trial petitioner sought judicial determination of his

classification (employee vs. independent contractor) and removal

of the Federal tax liens. Respondent conceded the employment

question, agreeing to accept whichever status petitioner 

preferred.3 
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3(...continued)

basis of his returns as filed. No oral or written agreement as

to petitioner’s employment status was made part of the record. 

Discussion

In reviewing the Commissioner’s decision to sustain

collection actions, where the validity of the underlying tax

liability is properly at issue, the Court reviews the

Commissioner’s determination of the underlying tax liability de

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

Commissioner, 114 T.C. 176, 181-182 (2000). The Court reviews

any other administrative determination regarding proposed

collection actions for abuse of discretion. Sego v.

Commissioner, supra at 610; Goza v. Commissioner, supra at 182. 

An abuse of discretion occurs when the exercise of discretion is

without sound basis in fact or law. Murphy v. Commissioner, 125

T.C. 301, 308 (2005), affd. 469 F.3d 27 (1st Cir. 2006). If the

Court finds that a taxpayer is liable for deficiencies and

additions to tax, then the Commissioner’s administrative

determination sustaining the collection action will be reviewed

for abuse of discretion. See Downing v. Commissioner, 118 T.C.

22, 31 (2002); Godwin v. Commissioner, T.C. Memo. 2003-289, affd.

132 Fed. Appx. 785 (11th Cir. 2005).

Section 6320(c) provides that Appeals’ conduct of collection

hearings that challenge Federal tax lien filings shall generally

be consistent with the procedures set forth in section 6330(c),
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4 Respondent was not obliged to issue a notice of deficiency

to petitioner because the assessments were entered under sec. 

6201(a)(1), based on the amounts petitioner reported due on his

tax returns, along with statutory interest and additions to tax. 

Moreover, sec. 6211(a) excludes from the definition of a

deficiency the tax that taxpayers report due on their returns. 

Montgomery v. Commissioner, 122 T.C. 1, 16-17 (2004). As

mentioned supra note 2, the April 2005 levy notice did not

address the years at issue in this case and thus did not provide

an opportunity to dispute the underlying tax liabilities for 2000

(continued...)

(d), and (e). At the hearing the Appeals officer is required to

verify that “the requirements of any applicable law or

administrative procedure have been met.” Sec. 6330(c)(1); see

also sec. 6330(c)(3)(A). The Appeals officer is also required to

address whether the proposed collection action balances the need

for efficient tax collection with the legitimate concern that any

collection action be no more intrusive than necessary. Sec.

6330(c)(3)(C). The taxpayer may raise “any relevant issue

relating to the unpaid tax or the proposed levy”. Sec.

6330(c)(2)(A). The taxpayer is also entitled to challenge “the

existence or amount of the underlying tax liability” if he “did

not receive any statutory notice of deficiency for such tax

liability or did not otherwise have an opportunity to dispute

such tax liability.” Sec. 6330(c)(2)(B). 

Petitioner did not receive a notice of deficiency or

otherwise have an opportunity to dispute the underlying tax

liabilities before the collection hearings concerning the liens

filed for the years at issue.4 Therefore, he may challenge the
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4(...continued)

through 2003.

5 According to the Internal Revenue Manual, pt. 5.16.1.1.4

(continued...)

existence or amounts of his underlying tax liabilities for tax

years 2000 through 2003. See Montgomery v. Commissioner, 122

T.C. 1, 7-9 (2004). Although petitioner repeatedly questioned

whether he was properly classified as an independent contractor

rather than an employee, he did not challenge the reporting of

his income as self-employment income by filing a Form SS-8 or any

amended returns with the SO or by submission of evidence at

trial. Thus, while petitioner was entitled to challenge the

underlying tax liabilities, he made no such challenge during the

administrative collection proceeding or at trial. The SO did not

make any determination as to petitioner’s underlying tax

liabilities. Accordingly, the underlying tax liabilities remain

as petitioner reported. With respect to collection alternatives,

we review the SO’s determination for abuse of discretion.

Petitioner relied upon section 6323(j)(1)(A), (C), and (D)

to argue that the liens should be withdrawn. 

Section 6323(j)(1)(A) allows for withdrawal of liens that

were filed prematurely. The SO verified that the taxes were

properly assessed, that the IRS sent notice and demand for

payment to petitioner, and that petitioner defaulted on the 2002

installment agreement. The liens were not filed prematurely.5
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5(...continued)

(Sept. 19, 2005), the filing of a Federal tax lien is a

requirement of placing petitioner’s account in currently

noncollectible (CNC) status, which status petitioner had

requested from the Automated Collection function. Contrary to

petitioner’s contentions, IRS records do not reflect that his

account was ever placed in CNC status. It appears that

petitioner’s request for CNC status may have triggered the lien

filing, but his challenge to the lien filing prevented the

Secretary from applying CNC status until his collection appeal

was finally resolved. This case resolves his appeal, and, as

mentioned, the Sept. 7, 2007, supplemental notice of

determination reflects the SO’s determination that petitioner was

eligible for CNC status.

Petitioner did not submit any evidence showing that

withdrawal of the liens would facilitate collection, see sec.

6323(j)(1)(C), or would be in the best interest of petitioner and

the United States, see sec. 6323(j)(1)(D). Petitioner argued

that removing the liens would enhance his ability to earn income,

which would increase his future income subject to tax, increase

the amount of tax he would owe and pay in future years, and

enable him to make payments on his outstanding liabilities. He

provided no support for these contentions. Petitioner introduced

evidence that his application for credit to purchase a new

computer was denied and asserted that the computer would be

helpful in his business. However, petitioner did not show how

the computer would lead to increased income or how its lack would

keep petitioner from earning a living. Petitioner’s assertion

that removal of the liens would facilitate collection and would

be in the United States’ best interest is only conjectural. 
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Petitioner failed to prove that the liens should be

withdrawn pursuant to section 6323(j).

The SO verified that the legal and administrative

requirements had been met and considered whether the proposed

collection actions properly balanced collection efficiency and

intrusiveness.

On the basis of the record, we conclude that respondent

satisfied the requirements of section 6330(c) and did not abuse

his discretion in sustaining the notice of Federal tax lien for

tax years 2001 through 2003. As discussed supra note 1,

respondent has agreed to remove the lien for 2000 and to abate

the remaining balance due for that year only. Respondent’s

determination as to the liens for 2001 through 2003 is sustained.

To reflect the foregoing,

An appropriate order and

decision will be entered.