TAX COURT OPINION

Case: Walter Tyz & Kimberly D. Tyz
Docket Number: 14141-17L
Judge: Goeke
Opinion Type: bench
Filed: 03/29/2018
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 20217 WALTER TYZ & KIMBERLY D. TYZ, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 14141-17 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 petitioners and to respondent a copy of the pages of the transcript of the proceedings in the above case before Judge Joseph Robert Goeke at San Francisco, 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. March 29, 2018 SERVED MAR 3 0 2018 1 2 Bench Opinion by Judge Joseph Robert Goeke March 9, 2018 3 Walter Tyz & Kimberly D. Tyz v. Commissioner of Internal 3 4 5 6 7 8 9 10 11 12 Revenue Docket No. 14141-17L 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 opinion is rendered pursuant to Internal Revenue Code section 7459(b) and Rule 152 of the Tax Court Rules of 13 Practice and Procedure. Section references hereinafter in 14 15 this bench opinion are to the Internal Revenue Code. This case is before the Court based upon 16 Petitioner's request that we review Respondent's 17 18 19 20 21 determination to collect, via levy, income taxes owed by the Petitioner for the years 2009 and 2010 and interest and a failure to pay addition to tax associated with those income tax liabilities. At the time the petition was filed, the 22 Petitioners were residents of California. They filed 23 joint Federal income tax returns for 2009 and 2010. They 24 didn't fully pay the income tax liabilities that were 25 assessed, as reflected on those income tax returns. And (973)406-2250|operationseesertiers.net|www.ascribers.net 4 1 2 3 4 5 6 7 8 9 those liabilities form the basis for the present dispute. However, they have been dramatically reduced from the original amounts that were underpaid. On November 28th, 2016, the Respondent, the Internal Revenue Service, mailed to the Petitioners a notice CP90, "Intent to Seizure Assets and Notice of Your Right to a Hearing". This document triggered the Petitioners' hearing, which they now seek us to revisit. That notice reflects the Government's intent to levy to 10 collect income tax liabilities for 2009 and 2010. The 11 notice reflects tax owed in 2009 of $851.75 and tax owed 12 13 14 15 16 17 for 2010 of $1,070.83. The notice of levy also reflects interest and additional penalty. The additional penalty amount for 2009 is $1,163.70 and, for 2010, $217.02. The additional penalty amount for 2009 and 2010 is not reflected anywhere else in the administrative record in this case based upon the Court's review, 18 Specifically, it is not reflected in the certificate of 19 assessment and payments which was stipulated as part of 20 21 22 the stipulation of facts filed by the parties in this case. This case was submitted to the Court wholly on the basis of the stipulation of facts and the attached 23 exhibits to that stipulation which included the 24 administrative record and the certificate of official 25 record reflecting the Government's assessments and the 73)406-2250|operationseerrbers.net|www.escrbersaet payments made by the Petitioners for the years 2009 and 5 2010. What is noteworthy is that the addition to tax for failure to pay is not summarized or reflected on an ongoing basis in the certificate of assessment and payments. The failure to pay tax for the year 2010 that was assessed on April 15th, 2011 was $5.04, obviously a much smaller amount than the Government now seeks to collect via levy. No other assessment of that failure to pay penalty is reflected in the certificate of assessment and payments that's made a part of the record. Prior to receiving the notice regarding the levy in November 2016, the Petitioners received a letter from the Fresno Service Center dated September 27th, 2016, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 which addressed their request that the failure to pay 16 penalty be excused. The Petitioners were advised in that 17 18 letter as to what they could do if they disagreed with the determination of the service center to sustain the 19 penalty, and.there's no evidence that they actually 20 pursued the disallowance of their request for relief from 21 22 23 the penalty with the settlement officer in the present case. Under such circumstances, the applicable statute 24 which governs the review of this case by the settlement 25 officer, section 6330(c)(2)(B), would have permitted the (973)406-2250|operationseescrbersmet|wwwascrbers.net 6' Petitioners to seek review of 1 the failure to pay penalty 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 in the course of the hearing they had with the settlement officer because they had not previously had an opportunity to have a review of that liability based upon the administrative record before us. However, based upon a careful review of the settlement officer's notes, it appears that the Petitioners didn't articulate the same concerns they had about the penalty with the settlement officer that they had raised with the service center in their brief telephone call with the settlement officer. While we are concerned that the Petitioners may have, in fact, raised the pre-payment letter, at least indirectly, with the settlement officer, we don't have to reach the question of whether they're entitled to a de novo review of that underlying liability at this time because of another section that comes into play relative to the settlement officer's review. Section 6330(c)(1) 18 provides as follows: "Requirement of investigation. The 19 appeals officer shall, at the hearing, obtain verification 20 21 from the Secretary that the requirements of any applicable law or administrative procedure have been met." 22 Generally, that requirement is met if the administrative 23 24 record contains evidence of a proper assessment of the amounts for which the Government seeks collection. In 25 this case, it is clear that the certificates of assessment }Em (973) 406-2250| operationseescrbersnet t wwwasabetsmet 7 1 2 3 4 5 6 7 8 9 10 11 and payments for the years 2009 and 2010 have the exact tax liability net of payments that is sought in the Government's notice of levy. What is unclear is whether the Government correctly computed the addition to tax for failure to pay. While this is generally a computational amount, the long history of payments by the Petitioners pursuant to a payment plan they entered into in 2013 makes it somewhat complex what is the precise amount of the pre- payment penalties they might owe. And the failure of the administrative record to reflect a review of the computation of those penalties, 12 which is reflected in the notice of levy, causes us to 13 think that there is a lack of evidence that the settlement 14 officer properly verified the pre-payment penalties. 15 Therefore, we will not sustain the collection of those 16 penalties without reaching the question as to whether the 17 Petitioner has a defense to those penalties given the 18 19 ambiguity of the question of whether Petitioners properly raised the underlying liability as to the payment 20 penalties with the settlement officer. 21 22 23 24 In summary, we conclude that there is a lack of evidence of verification under section (c)(1)(2) of section 6330 and that, therefore, it is inappropriate to sustain the current collection action for the payment 25 penalty amounts reflected in the notice of levy. However, } Em (973)406-2250|operationsgescrbersnet|www.escribers.net 8 1 2 3 4 5 6 7 8 9 10 11 12 the evidence is clear that the tax amounts which were sought remained outstanding based upon the Government's certificates of assessment and collection and that it was appropriate for the settlement officer to verify a collection of those amounts via levy. In the interest computations, generally being computer driven, we believe that the settlement officer, in verifying the tax liabilities, was correct to assume that the interest was correctly computed. However, given the complexities of the payment penalty based upon the number of payments that the Petitioners made and the years over which they made them, it is possible that the payment 13 penalty was improperly computed because of the fact that 14 15 16 17 18 19 20 21 22 the payments may not have been properly allocated among the three years for which the Petitioners were making payments, which raises another question in this case which is framed by Respondent's motion to dismiss for lack of jurisdiction. The Petitioners sought review with the settlement officer of three years: 2009, 2010, and 2011. The settlement officer reviewed only 2009 and 2010 and issued a notice of determination only for those two years 23 because those are the two years that are reflected in the 24 notice of levy. 2011 also involves a liability and was 25 also involved in the Petitioners' installment agreement, h cribers (973)406-2250loperationseerrbers.net|umrw.escrbers.net 9 1 2 3 4 5 6 7 8 9 which was entered into in 2013. So the fact that 2011 was involved in the payments that the Petitioner made further complicates the question of whether the payment penalty was correctly determined for the years 2009 and 2010. This is made further questionable because of the fact that the 2009 payment penalty exceeds the tax liability that Respondent wishes to collect, and without any discussion or computation as to why that amount is higher than the tax liability, we believe it is inappropriate to assume 10 that the settlement officer properly verified the payment 11 penalty based upon the administrative record before us. 12 In conclusion, Petitioners do not dispute the 13 underlying income tax liability, and the administrative 14 15 16 17 18 19 record included in the certificate of assessment and payments supports the liability for which the Government seeks collection via levy. However, that is not true of the payment penalty, and we will enter a decision that sustains the collection only with respect to the tax liabilities for 2009 and 2010 and the interest amounts and 20 specifically state that we do not sustain the levy based 21 upon the addition to tax amounts reflected in the levy, 22 which amounts are $1,380.72 for 2009 and 2010 combined, as 23 reflected in the notice of levy which was sent to the 24 Petitioners on November 28th, 2016. 25 Accordingly, we will sustain the proposed levy (973)406-2250|operationseestrbarmet|www.escribers.net 10 1 2 3 4 5 6 7 8 9 action only for the difference between $4,743.98 and $1,380.72. And this will be reflected in the decision document we enter in this case. Given the fact that the Petitioners have given us no other basis to find an abuse of discretion and our determination that, in general, the levy was properly sustained by the settlement officer based upon a balancing of the Government's need to collect and the imposition of inconvenience and hardship on the Petitioners, we will 10 sustain the collection by levy of the amount less the 11 addition to tax for failure to pay for the two years 2009 and 2010. 12 13 Finally, we have 3 f granted the Government's 14 motion to dismiss for lack of jurisdiction as to the year 15 2011 because there's no evidence that a notice of 16 determination was made by the Respondent for the year 2011 17 relative to collection and that such notice is a 18 prerequisite to our jurisdiction under section 6330. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 3:03 p.m., the above-entitled matter was concluded.) 19 20 21 22 23 24 25 (973)406-2250{operationseescrhersnet|www.escrbersnet