T.C. Memo. 2007-155

UNITED STATES TAX COURT

THEODORE C. AND DENISE M. SCHWARTZ, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 2914-06L. Filed June 18, 2007.

Theodore C. and Denise M. Schwartz, pro sese.

Michele E. Craythorn, for respondent.

MEMORANDUM OPINION

RUWE, Judge: Petitioners filed a petition in response to a

notice of determination concerning collection action(s) under

section 6320 and/or 6330, in which respondent determined that a

proposed levy should proceed to collect petitioners’ unpaid tax
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1 Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the years in issue, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.

2 Petitioners originally sought to have this case conducted

under the small tax case procedures of sec. 7463(f)(2). However,

because petitioners’ total unpaid tax exceeds $50,000, this Court

removed the small tax case designation and discontinued

proceeding under the small tax case procedures of sec. 7463. See

Schwartz v. Commissioner, 128 T.C. 6 (2007). 

liabilities for 1997 through 2003 (years at issue).1 Pursuant to

section 6330(d), petitioners seek review of respondent’s

determination.2 The issue for decision is whether the Appeals

officer abused her discretion in determining not to consider

petitioners’ collection alternative.

Background

The stipulation of facts and the attached exhibits are

incorporated herein by this reference. When the petition was

filed, petitioners resided in San Rafael, California.

Petitioner Theodore C. Schwartz is a self-employed dentist. 

Petitioners received two Final Notices of Intent to Levy and

Notice of Your Right to a Hearing (Final Notices), each issued on

June 7, 2005, regarding petitioners’ unpaid Federal income taxes,

including penalties and interest, as follows:

Year Unpaid tax

1997 $2,052.96

1998 12,861.03

1999 27,040.65
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2000 20,154.68

2001 37,315.70

2002 30,729.60

2003 23,566.81

 Total 153,721.43 

On July 5, 2005, petitioners, through their authorized

representative, executed and submitted a Form 12153, Request for

a Collection Due Process Hearing. Attached was a letter, which

stated in relevant part:

Levies placed on bank accounts would cause undue

hardship. The taxpayer has made Estimated Tax Deposits

for 2005. The taxpayer is completing Financial Form

433-A. This will assist in determining repayment

ability. It would also result in the inability to

pursue all avenues to resolve this liability and

prevent the repayment of the outstanding liability owed

to the Internal Revenue Service.

In light of the taxpayer’s current situation, it is

requested that no enforcement action take place against

Theodore and Denise Schwartz. The taxpayer is

interested in resolving this liability as quickly and

efficiently as possible. 

On September 15, 2005, respondent sent petitioners a letter

acknowledging receipt of petitioners’ case in respondent’s San

Jose Appeals Office. On September 23, 2005, Appeals Officer

Colleen Cahill (Ms. Cahill) sent petitioners a letter inviting

them to contact her to schedule a section 6330 hearing and to

request that petitioners provide a completed Form 433-A,

Collection Information Statement for Wage Earners and SelfEmployed Individuals, a signed 2004 tax return, and proof of
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3 Also on Sept. 23, 2005, Ms. Cahill made a real property

ownership search to verify petitioners’ residence address and to

determine that petitioners have sufficient equity in their home

to satisfy their tax liabilities. 

4 On or about May 23, 2005, petitioners submitted to

respondent via fax Forms 433-A, Collection Information Statement

for Wage Earners and Self-Employed Individuals, and 433-B,

Collection Information Statement for Businesses. The record is

unclear as to why Ms. Cahill requested that petitioners submit

Form 433-A 4 months after they already submitted it. 

5 Mr. Riggs’s letter explained that petitioners intended to

sell their residence in order to pay their tax liabilities, but

requested that petitioners “be granted a stay of enforcement

along with a minimal monthly payment plan until the sale of the

residence.” The letter did not suggest a monthly payment amount,

but requested that the parties work together to arrive at an

appropriate amount.

estimated tax payments for 2004 and 2005.3 On October 19, 2005,

Ms. Cahill sent petitioners a second letter providing petitioners

with a second opportunity to contact her to schedule a section

6330 hearing and to submit the requested documentation.4 

Petitioners’ authorized representative, Dwayne Riggs, II

(Mr. Riggs), held a section 6330 hearing by telephone on December

2, 2005, for the years at issue with Ms. Cahill, who had no prior

involvement with respect to the unpaid tax. On the same day, Mr.

Riggs faxed to Ms. Cahill a letter offering a collection

alternative in the form of an installment agreement.5

Petitioners were not current with their 2005 estimated tax

payments at the time of their section 6330 hearing, and Mr. Riggs

did not raise any issues regarding the validity or the amount of

the liability or any other issues during the section 6330
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hearing. The Appeals Office issued a notice of determination

concerning collection action(s) under section 6320 and/or 6330

for the years at issue on January 3, 2006. The Appeals Office

determined that it could not consider petitioners’ proposal for a

collection alternative because petitioners were not current with

estimated tax payments, that enforced collection action was not

more intrusive than necessary, and that the IRS should proceed

with the collection action. Petitioners timely filed a petition

to the Tax Court challenging respondent’s determination.

Discussion

A taxpayer is entitled to a notice before levy and notice of

the right to a fair hearing before an impartial officer of the

Internal Revenue Service Office of Appeals. Secs. 6330(a) and

(b), 6331(d). If the taxpayer requests a hearing, he may raise

in that hearing any relevant issue relating to the unpaid tax or

the proposed levy, including challenges to the appropriateness of

the collection action and “offers of collection alternatives,

which may include the posting of a bond, the substitution of

other assets, an installment agreement, or an offer-incompromise.” Sec. 6330(c)(2)(A). The taxpayer cannot raise

issues relating to the underlying tax liability if the taxpayer

received a notice of deficiency or the taxpayer otherwise had an

opportunity to dispute the tax liability. Sec. 6330(c)(2)(B). A

determination shall be made which shall take into consideration
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those issues, and “whether any proposed collection action

balances the need for the efficient collection of taxes with the

legitimate concern of the person that any collection action be no

more intrusive than necessary.” Sec. 6330(c)(3).

Petitioners raise only the issue of whether a collection

action is appropriate and argue that the collection action is

more intrusive than necessary. A petition filed under section

6330 must contain “Clear and concise lettered statements of the

facts on which the petitioner bases each assignment of error.” 

Rule 331(b)(5). We generally consider “only arguments, issues,

and other matter that were raised at the collection hearing or

otherwise brought to the attention of the Appeals Office.” 

Magana v. Commissioner, 118 T.C. 488, 493 (2002); sec. 301.6330-

1(f)(2), Q&A-F5, Proced. & Admin. Regs. Because petitioners do

not dispute the existence or amount of their underlying tax

liabilities, we review the determination for an abuse of

discretion. Lunsford v. Commissioner, 117 T.C. 183, 185 (2001);

Nicklaus v. Commissioner, 117 T.C. 117, 120 (2001). 

The Appeals officer’s consideration and rejection of

petitioners’ collection alternative, an installment agreement,

was reasonable and not an abuse of discretion. Her determination

not to consider petitioners’ proposed installment agreement was

based on applicable procedures contained in respondent’s Internal
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6 The Internal Revenue Manual provides procedures for

proposed installment agreements. See Internal Revenue Manual

sec. 5.14.1.1 to 5.14.1.6. Those procedures contain compliance

checks, which are conducted to determine a taxpayer’s eligibility

for an installment agreement, after a taxpayer requests such an

agreement. Id. sec. 5.14.1.5.1. 

Revenue Manual.6 According to these procedures, in determining

whether a taxpayer is eligible for an installment agreement, an

Appeals officer must: 

Analyze the current year’s anticipated tax liability. 

If it appears a taxpayer will have a balance due at the

end of the current year, the accrued liability may be

included in an agreement. Compliance with filing,

paying estimated taxes, and federal tax deposits must

be current from the date the installment agreement

begins. * * *

Internal Revenue Manual sec. 5.14.1.5.1(19).

The parties have stipulated that petitioners were not

current with their 2005 estimated tax payments at the time of

their section 6330 hearing. The Appeals officer informed

petitioners that she could not consider an installment agreement

if petitioners were not current with their estimated tax

payments. The Appeals officer also found that all applicable law

and procedural requirements were met. Petitioners conceded they

owe the sums demanded. Their only relevant argument is that

respondent should have accepted their proposed installment

agreement, and that a levy is more intrusive than necessary and

would cause undue hardship. 
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7 In addition to petitioners’ noncompliance with regard to

their individual income taxes, petitioners own and operate a

dental practice which is currently being levied upon by

respondent for unpaid employment taxes.

8 At trial, petitioner Theodore C. Schwartz testified and

presented evidence that he hoped would show petitioners were

current with their estimated tax payments at the time of trial. 

The Court suggested that if this were true, and was the only

obstacle to considering an installment agreement, the parties

might be able to resolve their differences. In a posttrial

status report, respondent stated that petitioners had not

satisfied their estimated tax liabilities for 2005 or 2006. 

Estimated payments, intended to ensure that current taxes

are paid, are a significant component of the Federal tax system,

and the Appeals officer was entitled to rely on their absence in

reaching her conclusions. Cox v. Commissioner, 126 T.C. 237, 258

(2006). In fact, petitioners' circumstances illustrate one of

the reasons for requiring current compliance before granting

collection alternatives such as an offer-in-compromise or an

installment agreement; namely, the risk of pyramiding tax

liability.7 Id.; see also Orum v. Commissioner, 412 F.3d 819,

821 (7th Cir. 2005), affg. 123 T.C. 1 (2004). 

We generally consider “only arguments, issues, and other

matter that were raised at the collection hearing or otherwise

brought to the attention of the Appeals Office.” Magana v.

Commissioner, supra at 493. The Appeals officer’s exercise of

discretion, therefore, must be examined in light of the facts as

they existed at the time the determination was made.

8

Accordingly, we hold that the Appeals officer did not abuse her
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discretion, and respondent may proceed with the proposed levy

action.

To reflect the foregoing,

Decision will be entered

for respondent.