TAX COURT OPINION

Case: Juanito D. Cortez & Priscilla S. Cortez
Docket Number: 14741-17
Judge: Goeke
Opinion Type: bench
Filed: 07/02/2018
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 20217 DRC DANIEL DILLON GARCIA, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 15144-17 L. ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at Los Angeles, California, containing his oral findings of fact and opinion rendered at the trial session at which this case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. July 2, 2018 SERVED Jul 03 2018 3 1 2 3 4 5 6 7 8 9 Bench Opinion by Judge Joseph Robert Goeke June 22, 2018 Daniel Dillon Garcia v. Commissioner of Internal Revenue Docket No. 15144-17L THE COURT: The Court has decided to render oral findings of fact and opinion in this case, and the following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. This 10 opinion is rendered pursuant to the authority in Rule 152 11 of the Tax Court Rules of Practice and Procedure and 12 pursuant to section 7459(b) of the Internal Revenue Code. 13 Other section references throughout this opinion are to 14 the Internal Revenue Code as applicable to the issues 15 before the Court in this case. 16 17 18 19 The present case is before us based upon our jurisdiction under section 6330(d) to review petitions filed seeking review of respondent's determinations to proceed with collection action pursuant to section 6330. 20 At the time the petitioner filed his petition in this 21 22 case, he resided in California. The petitioner was a paid tax return preparer for at least 2012 and 2013. For the 23 2013 taxable year respondent determined that the 24 petitioner prepared 131 income tax returns claiming the 25 earned income credit under section 32, and respondent made (9773406-2250 operationseerrbetsmet www.escribetsnet 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 a determination that the petitioner had not complied with the due diligence requirements in allowing that credit as a return preparer. That determination ultimately has led to this case. The case was tried in Los Angeles, California on June 18, 2018 and petitioner testified. In addition, the parties stipulated facts and exhibits which were admitted into the record. This stipulation of facts is based almost entirely on the administrative record, which was prepared in the context of the hearing petitioner had relative to respondent's notice of proposed levy. On June 8th, 2015 respondent assessed penalties pursuant to section 6695(g) in the amount of $65,500 for 2013. This amount was equal to $500 per return times the 131 tax returns respondent deemed to be deficient, as far as 16 petitioner's due diligence. The determination to assert 17 18 19 this penalty against the petitioner was subject to a Form 8278, which was signed by the immediate supervisor of the revenue agent who made the determination to impose the 20 penalty under section 6695(g). The same supervisor also 21 approved the imposition of the penalty on workpaper 300, 22 which is characterized as the Civil Penalty Approval form. 23 On May 5th, 2016 the respondent filed a notice 24 of federal tax lien in Riverside County, California 25 related to the penalties which are at issue in this case. cúbers 5 1 2 3 4 5 6 7 8 9 10 11 On May the 3rd, 2016, respondent issued a Letter 3172 Notice of Federal Tax Lien Filing and Your Right to a Hearing under section 6320. The petitioner did not pursue a hearing upon receipt of this notice. The parties have stipulated that the petitioner received the Letter 3172 notice that was mailed on May 3rd, 2016. On November 23rd, 2016, respondent issued a Letter 1058 Final Notice/Notice of Intent to Levy and Notice of Your Right to a Hearing for the unpaid penalties for 2013. On December 19th, 2016 the petitioner submitted a Form 12153, Request for a Collection Due Process or 12 Equivalent Hearing. The petitioner's request was assigned 13 14 15 16 17 18 to a settlement officer, and on March 2nd, 2017 the settlement officer issued a letter to the petitioner and scheduled a hearing for March 27th, 2017. The hearing was held on March 27th, 2017 over the telephone. During the hearing the petitioner stated that he could not pay the unpaid penalties for 2013 and 19 asked for penalty relief. The settlement officer advised 20 petitioner that he was precluded from challenging the 21 underlying liability in the hearing because he had 22 previously had an opportunity to challenge the hearing and 23 had failed to do so. The settlement officer specifically 24 25 referred to the letter the petitioner received on May 3rd, 2016. The settlement officer told the petitioner that he BEllilli (973)406-2250|operationseerrbers.net|www.esoibenmet would need to file a Form 433-A, Collection Information Statement, in order for the settlement officer to evaluate 6 the possibility of collection from the petitioner's current available income and assets. On April 6th, 2017 the settlement officer received a package from the petitioner including the Form 433-A, bank statements, and other financial documents. Based upon this information the petitioner asserted that his monthly expenses exceeded his income by only $14 per 1 2 3 4 5 6 7 8 9 10 month. 11 12 13 14 On April 7th, 2017 the petitioner and the settlement officer conducted a second telephone call and continued their hearing process. During this second call the petitioner attempted, again, to challenge the 15 underlying liability and the settlement officer reiterated 16 his position that the underlying liability was foreclosed 17 because of the prior opportunity to challenge that. The 18 19 settlement officer also stated that he had made review of the financial information provided by the petitioner and 20 had determined based upon IRS guidelines that the 21 petitioner could afford to pay $617 per month as part of 22 23 an installment agreement. Petitioner did not dispute the settlement 24 officer's calculations of the amounts which the petitioner 25 could pay using IRS guidelines at the trial of this case 73)406-2250loperationseescribetsmet|wwwasalbetsmet 1 2 3 4 5 6 7 8 on June 18, 2018. Petitioner did say that he believed he could establish that he had performed the proper due diligence and that he should not have been assessed the penalty in the first place. The settlement officer proposed the installment agreement of $617 per month, but petitioner declined this proposal because he stated that was more than he could pay. On June 15, 2017 the settlement officer had respondent issue, via certified 9 mail, a Letter 3192, Notice of Determination Concerning 10 Collection Action. Petitioner then petitioned this Court 11 12 for a review of that determination. In the Notice of Determination, the settlement 13 officer determined that all the procedural requirements 14 had been met, and the settlement officer sustained the 15 notice of levy. We first look at whether respondent, in 16 assessing the penalties against the petitioner, complied 17 with section 6751(b)(1) which provides that "no penalty 18 under this title shall be assessed unless the initial 19 determination of such assessment is personally approved in 20 writing by the immediate supervisor of the individual 21 making such a determination, or such higher level official 22 as the secretary may designate." 23 24 The stipulated record in this case establishes that respondent had complied with this provision, and 25 petitioner did not in any way challenge that determination t973)406-2250loperationseestrbermet[varw.escribersJiet 8 by the settlement officer. Petitioner's position at trial was solely that he should be allowed to pursue the underlying tax liability which the settlement officer did not permit during the hearing process. Settlement officer relied upon 6630(c)(2)(B) which provides as follows: "The person may also raise at the hearing challenges to the existence or amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability." The petitioner did not receive a notice of 1 2 3 4 5 6 7 8 9 10 11 12 13 deficiency. So the question becomes whether the 14 petitioner otherwise had an opportunity to dispute the tax 15 liability. It is clear, based upon the stipulated facts 16 which are uncontested, that the petitioner did receive an 17 opportunity for a hearing in May of 2016 regarding the 18 19 20 lien which was filed in Riverside County, California. The fact that the petitioner did not pursue that opportunity is the basis of the settlement officer'sdetermination that 21 petitioner had a prior opportunity and, therefore, that 22 petitioner a seeking to have the underlying liability 23 heard at the hearing in question in this case is 24 precluded. Respondent relies upon Treas. Reg. Section 25 301.6330-1(e)(3) Q&A-E7 as well as Yasqur v. Commissioner, (973)406-2250|operationseeserbe,uet|www.esalbermet T.C. Memo. 2016-77, that if a taxpayer did receive a notice of lien prior to receiving the notice of levy that was before the Court, this notice of lien was a prior 9 opportunity for a hearing. Petitioner did not challenge this determination at court, other than to say he did have records of the underlying liability. He did not explain why he did not seek review of the liability in the context of the lien notice which he had previously received. We believe the settlement officer's interpretation of the law in this matter, however harsh, is correct, and we find no basis to overturn the settlement officer's determination in this regard. Likewise, regarding the determination that the settlement 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 officer offered $617 per month as the amount that 16 petitioner should have to pay in an agreed installment 17 18 19 agreement, we note that the settlement officer carefully conformed his proposal to IRS guidelines and that we are not in position to find that such an analysis is a breach 20 of the settlement officer's obligation to carefully review 21 the facts and information of the case in assessing the 22 appropriate action and collection alternatives he would 23 offer the petitioner. 24 Petitioner did not challenge the determination 25 of $617 at trial, as we noted previously3 hÊÉ we cannot $73)406-2250|operationsgescribessewt|wwwascribersmet 10 find that the settlement officer abused discretion in that determination. Finally, we note that the record in this case conforms with the record which we have held is necessary to sustain compliance with section 6751 in a collection due process case. Blackburn v. Commissioner, 150 T.C. (2018). We would end this opinion noting that we are sympathetic to the petitioner's situation where he is frustrated that he has not had a review of his position on the underlying liability merits. His only alternative that we can see at this point would be to seek at least 1 2 3 4 5 6 7 8 9 10 11 12 13 some form of a refund action by paying at least some of 14 15 16 17 18 19 the liability in question. However, this is not within our jurisdiction and plays no role in our determination of the present case. Based upon our analysis of the record in this case and the law, we conclude that a decision will be entered for respondent, and this concludes the Court's 20 oral findings of fact and opinion in this case. (Whereupon, at 10:30 a.m., the above-entitled matter was concluded.) 21 22 23 24 25 9733406-2250|operatierseer,betsmet[www.esalbersnet