TAX COURT OPINION

Case: Roger F. Wertz
Docket Number: 6930-12SL
Judge: Guy
Opinion Type: bench
Filed: 07/01/2013
Pages: 9

CMS UNITED STATES TAX COURT WASHINGTON, DC 20217 ROGER F. WERTZ, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 6930-12SL. ) ) ) ) OR D E R 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 abovecaptioned case before Special Trial Judge Daniel A. Guy, Jr., at Columbus, Ohio, on June 19, 2013, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Daniel A. Guy, Jr. Special Trial Judge Dated: Washington, D.C. July 1, 2013 SERVED Jul 02 2013 Capital Reporting Company Bench Opinion by Special Trial Judge Daniel A. Guy, 3 Jr. June 19, 2013 Roger F. Wertz v. Commissioner Docket No. 6930-12SL 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 proceeding for the review of a collection action is a small tax case conducted pursuant to the provisions of section 7463 of the Internal Revenue Code of 1986, as amended, and Rules 170 through 174 of the Tax Court Rules of Practice and Procedure. This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court Rules of Practice and Procedure. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Hereinafter in this bench opinion, section references 23 24 25 are to the Internal Revenue Code of 1986, as amended and in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company Procedure. 1 2 Petitioner resided in Ohio at the time the 3 petition was filed, and he appeared at trial pro se. 4 5 Louis H. Hill appeared on behalf of respondent. The parties filed with the Court a stipulation of facts, 6 with accompanying exhibits, that are incorporated 7 8 9 10 11 12 13 14 15 16 herein by this reference. The stipulation includes a complete copy of the administrative record compiled by the Internal Revenue Service's Office of Appeals (Appeals Office). Petitioner was the managing partner of W2, LLC. The firm experienced financial distress and failed to pay its Federal employment tax liabilities. On April 18, 2007, petitioner and his spouse filed a Chapter 7 bankruptcy petition in the U.S. Bankruptcy Court for the Southern District of 17 Ohio. The bankruptcy court entered an order of 18 19 20 21 discharge in petitioner's case on August 7, 2007. On May 2, 2011, respondent mailed to petitioner a Final Notice of Intent to Levy and Your 22 Right to a Hearing Under IRC Section 6320 and/or 6330 23 24 25 relating to trust fund recovery penalties of $2,737.40 and $970.37, assessed pursuant to section 6672, for the quarterly periods ending September 30 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 and December 31, 2007, respectively (the periods in issue). Petitioner submitted to the Appeals Office a timely request for an administrative hearing (Form 12153) pursuant to section 6330. Petitioner did not check any of the boxes on Form 12153 for a collection alternative to the proposed levy. Rather, petitioner checked the box for "Other" and included a statement "Taxpayer filed for Chapter 7--cannot be charged for interest and penalties." There is no evidence in the record that respondent has assessed any amount designated as a penalty or addition to tax, other than the trust fund recovery penalties described above. On the other hand, interest on an unpaid section 6672 penalty accrues pursuant to law, see sec. 6601(e) (2), and may be assessed until the penalty is paid in full. See 17 Holland v. United States, 873 F.2d 1321, 1322 (9th 18 Cir. 1989). 19 20 21 22 23 24 25 Petitioner's case was assigned within the Appeals Office to Settlement Officer Alicia Howard (SO Howard). SO Howard and petitioner participated in a telephone conference call on November 17, 2011. SO Howard's notes of the conversation indicate that petitioner asserted that he had paid the amounts due in full. Following the telephone conference, SO 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 Howard ordered transcripts of account and sent them to petitioner for review. After additional discussions, SO Howard concluded that all of 4 petitioner's payments had been properly accounted 5 6 7 8 for, yet amounts remained unpaid for the periods in issue. On February 15, 2012, the Appeals Office issued to petitioner a Notice of Determination 9 Concerning Collection Action sustaining the proposed 10 levy. Petitioner filed a timely petition for review 11 with the Court pursuant to section 6330. The 12 allegations in the petition relate primarily to 13 whether petitioner's payments were properly applied 14 15 16 17 18 19 20 21 22 23 to his accounts. When this case was called for trial, petitioner conceded that all payments had been properly applied to his accounts. Petitioner asserted, however, that as a consequence of his bankruptcy case, he is not liable for additional penalties or interest associated with the trust fund recovery penalties in issue. An employer (such as W2, LLC) is required to withhold FICA tax (e.g., Social Security and 24 Medicare) and income tax from its employees' wages 25 (collectively payroll taxes) and to remit the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 withheld taxes to the Government. See secs. 3102, 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 3402, 3403. The FICA tax and the income tax that the employer withholds from employees' wages are held by the employer in trust for the United States, see sec. 7501(a), and are known as trust fund taxes. To discourage misuse of the trust fund taxes, section 6672(a) imposes "a penalty equal to the total amount of the tax * * * not accounted for and paid over" to the Government. This penalty is imposed on any "person required to collect, truthfully account for, and pay over any" trust fund taxes--referred to in caselaw as a "responsible person"--"who willfully fails to do so". See Slodov v. United States, 436 U.S. 238 (1978). Section 6330(a) provides that no levy may be made on any property or right to property of any person unless the Secretary has notified such person in writing of the right to an administrative hearing before the levy is made. Upon timely request, the person is entitled to an administrative hearing before the Appeals Office. Sec. 6330(b) (1). 22 Petitioner made such a request in this case. 23 24 25 In rendering an administrative determination in a collection review proceeding under section 6330, the Appeals Office must verify that the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 10 11 12 13 requirements of any applicable law and administrative procedure have been met in processing the taxpayer's case. Sec. 6330(c) (1). The Appeals Office also must consider any issues raised by the taxpayer relating to the collection action, including offers of collection alternatives, appropriate spousal defenses, and challenges to the appropriateness of the collection action. Sec. 6330 (c) (2) (A). A taxpayer may challenge the existence or amount of his or her underlying tax liability if the taxpayer did not receive a notice of deficiency or did not otherwise have an opportunity to dispute such tax liability. Sec. 6330 (c) (2) (B). Finally, the Appeals 14 Office must consider whether the collection action 15 16 17 18 19 20 21 22 23 24 25 balances the need for efficient collection against the taxpayer's concern that collection be no more intrusive than necessary. Sec. 6330 (c) (3) (C). Section 6330(d) (1) grants this Court jurisdiction to review the administrative determination made by the Appeals Office. If the taxpayer's underlying tax liability is properly in dispute, the Court will review the determination de novo. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). Otherwise the Court will review the determination for abuse of discretion. Id. An 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 abuse of discretion occurs if the Appeals Office exercises its discretion "arbitrarily, capriciously, or without sound basis in fact or law." Woodral v.Commissioner, 112 T.C. 19, 23 (1999). Although petitioner asserts that the disposition of his bankruptcy case somehow limits his liability for penalties and interest for the periods in issue, he offered no evidence that the bankruptcy court discharged any or all of the liabilities in question. Moreover, any discharge order would affect only petitioner's debts arising before the date of the "order for ,relief", i.e., April 18, 2007, which is the date he filed his petition for relief under chapter 7 of the Bankruptcy Code. See 11 U.S.C. secs. 301, 727 (b) (2006). Petitioner's liabilities for the quarterly periods ending September 30 and December 31, 2007, arose and were due to be paid several months after petitioner filed his bankruptcy petition. It follows that the bankruptcy court's discharge order had no impact on petitioner's liability for the trust fund recovery penalties at issue in this case. The record shows that the Appeals Office verified that the requirements.of any applicable law and administrative procedure have been met in 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 processing petitioner's case. Sec. 6330(c) (1). As previously mentioned, petitioner did not challenge the existence or amount of the underlying liabilities, propose a collection alternative, or challenge the appropriateness of the collection action. Sec. 6330 (c) (2) (A). The Appeals Office also concluded that the collection action balances the need for efficient collection against the taxpayer's concern that collection be no more intrusive than necessary. Sec. 6330 (c) (3) (C). Consistent with the preceding discussion, we conclude that petitioner has failed to show that the Appeals Office abused its discretion in determining to proceed with the proposed levy. 15 Accordingly, an appropriate decision will be entered for respondent. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 2:23 p.m., the above- entitled matter was concluded.) 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com