TAX COURT OPINION

Case: Donald Joseph Byk
Docket Number: 9964-09S
Judge: Panuthos
Opinion Type: summary
Filed: 09/16/2010
Pages: 10

T . C . Summary Opinion 2010 -137 UNITED STATES TAX COURT DONALD JOSEPH BYK, Petit-ioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 9964-095. Filed September 16, 2010. Donald Joseph Byk, pro se . Robert Saal, 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 when the petition was filed.1 Pursuant to section 7463 (b) , the decision to be entered is not reviewable by IUnless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended. All Rule references are to the Tax Court Rules of Practice and Procedure. sERVE SEP 1 6 2019 any other court, and this opinion shall not be treated as precedent for any other case. - 2. - This case is before the Court on petitioner's request for judicial review of respondent' s determination sustaining a notice of Federal tax lien (NFTL) filing to collect employment taxes for the tax period ending June 30, 2000 . Background Some of the facts have been stipulated, and we incorporate the stipulation and the accompanying exhibits by this reference. Petitioner resided in New Jersey when his petition was filed. Petitioner operated a dental practice beginning in 1972, His practice was separated into general dentistry and orthodontics. Petitioner operated the general dentistry practice as a businesà reported on Schedule C, Profit or Loss GFröm Business . He' operated the orthodontics practice as. a corporation. Sometime in 200'7/ petitioner received a letiter from respondent stating that Form 941, Employer' s Quarterly Federai Tax Return, for petitioner' s general dentistry business had not been filed for the tax period ending June 30 2000 . Petitioner called his accountant; and _an apparent ret ained copy of Form 941 for the c[ueátioned tax period was sent to "respondent . No remittance accompanied the Form 941 sent in 2007. - 3 - Respondent treated the Form 941 sent in 2007 as an original return filed as of January -7, 2008. Respondent issued petitioner a Notice of Federal Tax Lien Filing and Your,Right to a Hearing Under I.R.C. 6320 dated.October 7, 2008, stating that petitioner had not fully paid his employment tax liabilities for the tax period ending June 30, 2000. Respondent received petitioner's Form 12153, Request for a Collection Due Process or Equivalent Hearing on November 26, 2008. Petitioner-participated in a telephone collection due process (CDP) hearing on February '10, 2009, where he asserted that the employment tax was paid in'2000. Petitioner did not offer any collection alternatives. A Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 was issued on April 17, 2009, stating that the tax liability for the tax period ending June 30, 2000, was valid and had not been paid. The notice states: "Collection followed all legal and procedural requirements and the actions taken or proposed were appropriate under-the circumstances." The attachment to the notice of determination states the requirements of any regulation or administrative procedure to the proposed levy or NFTL filing have Appeals has obtained verification from the IRS office collecting the tax that applicable law, with respect been met. Computer records indicate that the notice and demand, notice of federal Collection Due Process hearing were issued. tax lien filing, and notice of a right to a intent to levy-and/or notice of Discussion If a taxpayer fails to' pay ariy Federalancome tax liability after notice and demand, a lien in favor of the United States is imposed one all the property of theadelinquent taxpayer. Sec 6321. Within 5 business days after filing a tiax lien, the IRS must provide written notice of that filincj to the taxpayer. Sec 6320 (a) . After receiving such notice, the taxpayer .may request an administrative hearing before the Office of Appeals. Sec 6320 (a) (3) (B) . A CDP hearing concerningsa lien under section 6320;is to be conducted intaccordance with the relevant provisions of section 6330. Sec. 26320 (c) . We have jurisdiction under section 36330 (d) (1) to review the Commissioner's determination that the NFTL was proper and that the Commissioner may-proceed to collect by it.2 In reviewing the Commissioner's decision to'sustain - a 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 y Commissioner, 114 To C. 176, 181-182 (2000) . The Court reviews any other administrative determination regarding proposed 2The Pension Protection Act of 2006, Pub. L. 109-280, sec. 855, 120 Stat. 1019, amended sec. 6330(d) andsgranted this Court jurisdiction over all sec. 6330 determinations made after Oct. 16, 2006. Perkins v. Commissioner, 129 T.C. 58, 63 n.7 (2007) . - 5 - collection actions for abuse of discretion. Sego v. Commissioner, supra at 610; Goza v. Commissioner, supra at 182.3 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). At the collection hearing, a taxpayer-may raise any relevant issues relating.to the unpaid tax or proposed levy, including spousal defenses, challenges to the appropriateness of ·the collection actions, and offers of collection alternatives. Sec. 6330(c) (2) (A). In addition, he may challenge the existence or amount of the underlying tax liability, but only if he did not receive a notice of deficiency or otherwise have an opportunity . to dispute such liability. Sec. 6330(c) (2) (]B). In making a determination following a collection hearing, the Appeals officer (AO) must consider: (1) Whether the requirements of any applicable law or administrative procedure have been met, (2) any relevant issues raised by the taxpayer, and (3) whether the proposed collection action balances the need for efficient collection with legitimate concerns that -the 3A challenge to the amount of tax unpaid is a challenge to the underlying tax liability and is reviewed de See Landry v. Commissioner, 116 T.C. 60, 62 (2001); see the validity of novo. also Boyd v. Commissioner, 117 T.C. 127, 131 (2001). Respondent's verification is mandatory. Therefore, a question of See Hoyle v. Commissioner, 131 T.C. 197 (2008). law, and the standard of review does not matter. the issue is collection action be no more intrusive than necessary. Sec. 6330 (c) (3) . Independent of any issue raised or argument made by the taxpayer, section 6330 (c) (1) .requires the AO conducting a CDP hearing to - "verify that the requirements of any appliâable law or administrative procedure-have been.met " Hoyle v. Commissiòner, 131 T . C. 197, 199 (20 08) . When .the CDP hearing concerns- a self - reported tax liability; the AO must verify that (1) The IRS timely assessed.the liability, (2) the taxpayer failed to pay the liability, (3) the taxpayer was given a notice and demand for payment, and (4) the taxpayer was given an NFTL filing. Med. Practice Solutions/ LLC v. Commissioner, T.C. Memo. 2009-214 If those requirements have not been met, the colleption cannot proceed, and the AO cannot sustain the proposed collectiion, action. Id. In other words, verification is required to be a part of every determination: . .Hoyle- v. Commissioner, supra at 202. "In view of the mandatory nature of the verification requirement, 'this Court will review the Appeals officer's c verification under section 6330 (c) (1) without regard to whether the taxpayer raised it at the Appeals hearing' , * * * as long as the taxpayer has adequately raised the issue in her appeal" Med. Practice Solutionsy LLC v. Commissioner, supra (quoting - 7 - Hoyle v. Commissioner; supra at 202-203). We are satisfied that petitioner raised this issue.4 In the notice of determination, the AO summarily concluded: Collection followed all legal and procedural requirements and the collection actions taken or proposed were appropriate under the circumstances." The attachment to the notice of determination simply reiterated verbatim the language that the Internal Revenue Manual states as necessary to minimally document legal and administrative review. See IRM pt. 8.22.2.2.4.7 (Oct. 30, 2007). A clear record of relevant transactions is necessary in a section 6330 court proceeding. See Wright v. Commissioner, 381 F.3d 41 (2d Cir. 2004), vacating and remanding T.C. Memo. 2002- 312.5 Respondent apparently relied upon transcripts for petitioner's general dentistry business and his corporation that 4Petitioner- raised the issue of verification in his petition by questioning the validity of respondent's claim and at trial by questioning the procedures in place to keep respondent assessing taxes from any year he wishes. petitioner's petition as a pro se litigant. Lukovsky v. Commissioner,. T.C. Memo. 2010-117 (citing Haines v. Kerner, 404 U.S. 519, 520 (1972)). We construe broadly See Rule 31(d); from sIn Wright v. Commissioner, 381 F.3d 41, 44 (2d Cir. 2004), vacating and remanding T.C. Memo. 2002-312, which was a sec. 6330 case, unsatisfactory record before it as follows: the Court of Appeals for the Second Circuit described the The parties' confusion is understandable; the relevant .timeline and tax amounts have been reconstructed using photocopied forms, computer screen printouts, and dot-matrix printouts of tax account balances. Many ofsthese records have no supporting explanation (and therefore are inscrutable to any non-employee of * *. the IRS) * - 8 - respondent was,unable to fully explain toieither petitioner, or the Court . The Court questioned respondents about entries in the transcripts, specifically asking: about entries concerning nonfiling of returns. Respondent agreed- with the Court that the Internal Revenue Service routinely offers a transcript documenting the nonfiling of a return -or a Form 3050, Certification of Lack of Record. No such. documentation was provided.' No explanation, other than for two codes, -was given to decipher the numerous symbols and codes in respondent' s transcripts . Petitioner testified that he did not understand the letters and numbers that make up the code in respondent' s transcripts . To complicate matters , respondent' s witness could not explain to the Court many of the codes and lacronyms referenced in the transcript.® Respondent simply asserted on the 'Nor was any reason given for the léngth of time that passed between the tax period at respondent' s informing petitioner, sometime in 2007, 941 was not on file for the; tax period at issue, ending June 30, 2000, and issue that a Form - 7This isonot an issue unique to petitioner. We,have noted the documents in the administrative file and most of on prior occasions the problem of understanding IRS transcripts. 'Many of documents .labeled -as transcripts of account are full of abbreviations, alphanumeric codes, dates, and digits that are indecipherable and unintelligible without additional explanation." Barnes v. Commissioner, iT.C. "Meñio. 2010-30. [the taxpayer' s] the * * * Respondent's witness could identify two codes used in the transcripts .5 When questioned by the Court as to the meaning of other codes and when asked to explain how the transcript system works, the witness responded that she was unable to answer the (continued. . . ) basis of the incomplete testimony- of his witness, that petitioner's Form 941 for that tax period was not filed until - 9 - 2008. Petitioner supplied an apparent copy of a Forme941 from his accountant that respondent had requested. Petitioner asserts that the original return was properly-filed and sthe reported tax liability timely.paid. The issue of petitioner's filing a Form 941 raises questions about the validity of respóndent's. determination and an irregularity in thes assessment procedure. See Rivera v. Commissioner, T.C. Memo.' «2003-35, affd. 102 Fed. Appx. 594 (9th Cir. 2004). Respondent has not adéquately shown that an attempt was made to verify whether a-Form 941 was timely filed and the tax liability timely paid by petitioner in 20007. If respondent did not validly assess petitioner's tax liability, then a lien would not have.arisen with respect to that -tax liability :and collection could not proceed. See seds. 6203, 6322; see also Hoyle v. Commissioner, supra at 205. Accordingly, if assessment was invalid, the determination to proceed with the lien was error as a matter of law. See Hoyle v. Commissioner, supra at 205. A review of the entire record reveals that respondent did not offer sufficient evidence that the AO had verified that all (...continued) Court's questions. - 10 - legal and procedural requirements were met in the assessment of petitioner' s employment tax liability for the period ending June 30, 2000. It is within the Court's discretion to remand the case to Appeals for -further review. See Hoyle v. Commissioner,-131 T.C. -197 (2008); Calafati v. Commissioner, 127 T.C. 219 (2006); Lunsford v. Commissioner, 117 T.C. 183 (2001): Further review is often necessary to protect a taxpayer's due. process rights, concerning a CDP hearing. Lunsfordsv. Commissioner, supra at 189 (remand appropriater if- taxpayer not afforded proper section 6330 hearing) . Given respondent's inadequate verification and the length of time that has passed since the tax period in question, we conclude that remand is unnecessary and would not be productive. See id.; see also Marlow v. Commissioner, T.C Memo 2010-113 (citing Lunsford v. Commissioner, supra at 189) . The determination to proceed with collection without verification of all legal and procedural requirements wasserror as a matter of law. To reflect the foregoing, Decision will be entered for petitioner.