TAX COURT OPINION

Case: Steven Ness & Tobie Ness
Docket Number: 7945-23L
Judge: Buch
Opinion Type: bench
Filed: 05/07/2025
Pages: 9

(Signed) Ronald L. Buch Judge Served 05/07/25 S T E V E N N E S S & T O B I E N E S S , P e t i t i o n e r s v . C O M M I S S I O N E R O F I N T E R N A L R E V E N U E , R e s p o n d e n t D o c k e t N o . 7 9 4 5 - 2 3 L U n i t e d S t a t e s T a x C o u r t W a s h i n g t o n , D C 2 0 2 1 7 O R D E R P u r s u a n t t o R u l e 1 5 2 ( b ) , T a x C o u r t R u l e s o f P r a c t i c e a n d P r o c e d u r e , i t i s O R D E R E D t h a t t h e C l e r k o f t h e C o u r t s h a l l t r a n s m i t w i t h t h i s o r d e r t o p e t i t i o n e r a n d r e s p o n d e n t a c o p y o f t h e p a g e s o f t h e t r a n s c r i p t o f t h e t r i a l i n t h i s c a s e b e f o r e J u d g e R o n a l d L . B u c h a t A l b u q u e r q u e , N e w M e x i c o , c o n t a i n i n g h i s o r a l ﬁ n d i n g s o f f a c t a n d o p i n i o n r e n d e r e d a t t h e t r i a l s e s s i o n a t w h i c h t h e c a s e w a s h e a r d . I n a c c o r d a n c e w i t h t h e o r a l ﬁ n d i n g s o f f a c t a n d o p i n i o n , a d e c i s i o n w i l l b e e n t e r e d f o r t h e C o m m i s s i o n e r . 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 3 Bench Opinion by Judge Ronald L. Buch April 8, 2025 Steven Ness & Tobie Ness v. Commissioner of Internal Revenue Docket No. 7945-23L 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. These oral findings of fact and opinion may not be relied upon as precedent in any other case. They are made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code and Tax Court Rule 152. Rule references in this opinion are to the Tax Court Rules of Practice and Procedure, and section references are to the Internal Revenue Code, in effect at all relevant times. This is a collection case brought pursuant to section 6330 challenging a notice of intent to levy issued to Mr. and Mrs. Ness. As part of this case, they challenge their underlying liabilities. The Nesses have outstanding tax liabilities for 2015 through 2018. The Commissioner issued a notice of intent to levy with respect to those liabilities, and the Nesses requested a collection hearing. In their request, the Nesses challenged the underlying liabilities, but they failed to provide the Commissioner or the Court any evidence to 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 dispute those liabilities. Accordingly, we sustain the 4 levy. FINDINGS OF FACT Mr. and Mrs. Ness's account transcripts with the Internal Revenue Service show that for 2015 through 2018, they filed untimely returns showing balances due. On August 16, 2021, the Commissioner sent Mr. and Mrs. Ness a notice of intent to levy. That notice showed a total outstanding liabilities in excess of $650,000 for 2015 through 2018, and additions to tax for 2016 through 2018. That notice also informed the Nesses that they could appeal the proposed collection action by submitting a Form 12153, Request for a Collection Due Process or Equivalent Hearing. The Nesses completed and submitted a Form 12153. Their request disputed their underlying liabilities, stated their returns were erroneous, and stated "If at the end of the hearing it is found that we owe the tax, we would like to discuss all available collection alternatives available to us." A hearing was conducted on March 9, 2023, where Mr. Ness and his accountant were present. The settlement officer informed Mr. Ness that he and his wife were ineligible for collection alternatives for at least two reasons; they were not in filing compliance for 2019 through 2021, and they did not provide any documentation 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 to support any collection alternatives. Mr. Ness also did 5 not provide any documents or information in dispute of the Nesses' underlying liabilities for 2015 through 2018. The Commissioner issued to Mr. and Mrs. Ness a Notice of Determination dated April 4, 2023, sustaining the Notice of Intent to Levy. The appeals officer confirmed in the notice that all requirements of applicable law and administrative procedure were satisfied. Mr. and Mrs. Ness filed a petition with the Court. The Nesses challenged the existence of their own tax returns for 2015 through 2018, challenged their underlying liabilities, and argued that the IRS did not follow proper administrative procedures. Because it was not clear that the administrative record was complete, the Commissioner filed a Motion to Remand requesting that the Court remand this case to the Office of Appeals. We granted that Motion. While on remand, Mr. Ness communicated with a second appeals officer over the course of several months. He participated in a hearing held on July 17, 2024. During that hearing, Mr. Ness confirmed that he did not have any evidence that the tax returns filed for 2015 through 2018 were not those of he and his wife. He also confirmed that he and his wife did not prepare amended 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 returns and that they did not have additional documents to 6 provide to the appeals officer. The appeals officer provided Mr. and Mrs. Ness with wage and income transcripts, account transcripts, and copies of their 2016 through 2018 returns after the hearing. The appeals officer spoke with Mr. Ness by telephone on September 11, 2024, and Mr. Ness confirmed that he still had not filed amended returns. Mr. Ness raised the question of whether penalties and interest were calculated correctly, but provided no information to indicate that they were calculated incorrectly. After that call, Mr. Ness still did not provide any amended returns or any evidence that penalties and interest were not calculated correctly. The appeals officer sustained the levy and issued a Supplemental Notice of Determination on December 10, 2024. OPINION We review the Commissioner's collection determinations for an abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000). If a taxpayer's underlying liability is properly at issue, we determine the liability de novo. Id. This case involves both a review of collection activity and a review of the Nesses' underlying liabilities, thus we apply each standard in 24 turn. 25 I. Collection Alternatives 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 The appeals officers did not abuse their 7 discretion in denying collection alternatives. Mr. and Mrs. Ness did not propose any collection alternatives. Thus, the appeals officer cannot be considered to have denied relief; none was requested. Further, it is not an abuse of discretion for an appeals officer to refuse to consider collection alternatives if the taxpayer does not submit the requested financial information. Schwersensky v. Commissioner, T.C. Memo. 2006-178, 92 T.C.M. (CCH) 177, 179 (2006). The Nesses did not provide any financial information in support of collection alternatives. Accordingly, the appeals officers could not have considered collection alternatives and did not abuse their discretion by not considering collection alternatives that were never requested. Even if Mr. and Mrs. Ness had requested collection alternatives and provided financial information, the appeals officers would not have abused their discretion in denying collection alternatives. Appeals officers do not abuse their discretion in denying collection alternatives if they find that the taxpayer is not in current compliance with tax laws. See Balsamo v. Commissioner, T.C. Memo. 2012-109, at *4; Prater v. Commissioner, T.C. Memo. 2007-241, at *2. The Nesses were not in filing compliance. On that basis alone it would 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 have been sufficient for the appeals officer to deny 8 collection alternatives. In addition to considering issues raised by the taxpayer, an appeals officer must verify that the requirements of any applicable law or administrative procedure have been met. I.R.C. § 6330(c)(1), (3). The appeals officer verified the requirements of applicable law and administrative procedure were met. In sum, the appeals officer did not abuse her discretion in denying collection alternatives. II. Underlying Liabilities In a collection case, a taxpayer may challenge the existence or amount of an underlying tax liability if the taxpayer did not have a prior opportunity to dispute that liability. I.R.C. § 6330(c)(2)(B). We have held that, when a liability arises from a return filed by the taxpayer and not as a result of an adjustment that provides appeal or litigation rights, the taxpayer is considered not to have had a prior opportunity to dispute the underlying liability. Montgomery v. Commissioner, 122 T.C. 1, 8-10 (2004). Thus, because the Nesses' liabilities arise from amounts they reported on their returns, they may challenge their underlying liabilities. This Court considers a challenge to the underlying liability in a collection case only if the 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 taxpayer properly raised a challenge in the collection 9 proceeding. See Giamelli v. Commissioner, 129 T.C. 107, 115 (2007); Treas. Reg. § 301.6330-1(f)(2); Q&A-F3. A taxpayer does not properly raise an issue during the collection hearing, including the underlying liability, if they "fail[] to present to Appeals any evidence with respect to that issue after being given a reasonable opportunity to present such evidence." Treas. Reg. § 301.6330-1(f)(2), Q&A-F3. The Nesses failed to provide any evidence to dispute their underlying liabilities. Accordingly, they cannot challenge their underlying liabilities in this proceeding. Even if they were permitted to challenge their underlying liabilities, they offered no evidence at trial in dispute of those liabilities. They did not present any evidence tending to show that their returns were not their returns; they did not present any evidence tending to show that their returns were incorrect. More broadly, they did not present any evidence, period. Thus, even if they were permitted to challenge their underlying liabilities, their challenge would fail for want of proof. III. Failure to Timely Pay Addition to Tax Section 6651(a)(2) imposes an addition to tax for the failure to timely pay the amount shown as tax due on a return. The addition applies at a rate equal to 0.5 percent of the amount shown as due on the return for each 10 month the failure to pay persists, up to a maximum of 25 percent. The Commissioner bears the burden of production with respect to additions to tax. I.R.C. § 7491(c). The Commissioner submitted account transcripts for Mr. and Mrs. Ness for 2015 through 2018, which satisfies her burden. And as with the underlying taxes, the Nesses did not offer any evidence or argument to dispute their liability for additions to tax. CONCLUSION Mr. and Mrs. Ness did not offer evidence to dispute their underlying liabilities. The Commissioner verified that all proper administrative steps were taken. The Commissioner did not consider collection alternatives because none were offered by the Nesses and none were available because the Nesses were not in tax compliance. Accordingly, we will sustain the Commissioner's supplemental notice of determination. To reflect the foregoing, an appropriate decision will be entered. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 9:07 a.m., the above-entitled matter was concluded.) 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