TAX COURT OPINION

Case: David Miller
Docket Number: 12565-16SL
Judge: Guy
Opinion Type: bench
Filed: 04/24/2017
Pages: 12

31 UNITED STATES TAX COURT WASHINGTON, DC 20217 DRC DAVID MILLER, Petitioner, v. ) ) ) ) Docket No. 12565-16SL. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) 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 Special Trial Judge Daniel A. Guy, Jr. at Cheyenne, Wyoming, 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. April 24, 2017 SERVED Apr 24 2017 Capital Reporting Company 3 1 2 Bench Opinion by Special Trial Judge Daniel A. Guy, Jr. 3 April 6, 2017 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 David Miller v. Commissioner Docket No. 12565-16SL 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 . 20 Revenue Code of 1986, as amended, and Rule 152 of the 21 Tax Court Rules of Practice and Procedure. 22 Hereinafter in this bench opinion, section references 23 24 25 are to the Internal Revenue Code of 1986, as amended,' in effect for 2013, and Rule references are to the Tax Court Rules of Practice and Procedure. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 Petitioner resided in the State of Wyoming at the time the petition was filed, and he appeared at trial pro se. Gretchen W. Altenburger and Michael T. Garrett appeared on behalf of respondent. Some of the facts have been stipulated and are so found. The stipulation of facts and the accompanying exhibits are incorporated herein by this reference. On April 15, 2014, petitioner submitted to the Internal Revenue Service (IRS) a request for an extension to file his Federal income tax return for 2013 accompanied by a personal check apparently in the amount of $42,000. When the IRS attempted to negotiate the check, however, it was dishonored. Ong )6 June 2, 2014, the IRS assessed a dishonored check penalty of $840 (2% of $42,000) under section 6657. On October 20, 2014, petitioner and his spouse, Wendy Miller, filed a joint Federal income tax return for 2013 and reported tax due of $42,556.75. On February 23, 2015, the IRS assessed the tax that petitioner had reported on his return, an estimated tax penalty of $637.22, a penalty for failure to timely pay tax due of $2,162.38, and statutory interest of $1,131.13. Petitioner did not remit any payment with his tax return. 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.Capita1ReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 On February 23, 2015, and March 30, 2015, the IRS sent to petitioner notices of balance due for 2013. Petitioner did not immediately remit the tax due. Petitioner was credited with the following payments on the dates indicated in respect of his unpaid tax for the taxable year 2013: (1) on 8 April 15, 2015, the IRS applied petitioner's 9 overpayment of $4,356 for the taxable year 2014; (2) 10 11 12 13 14 15 16 on July 27, 2015, petitioner's wife submitted a payment of $24,000; (3) on May 23, 2016, petitioner submitted a payment of $15,331.74 (purportedly representing the balance of the tax due for 2013 and interest of $1,131.13); and (4) on July 6, 2016, petitioner was credited with a payment of $32.33. In the meantime, on August 7, 2015, the IRS 17 mailed to petitioner a Notice of Intent to Levy and 18 19 20 21 22 23 Your Right to a Hearing in respect of his unpaid tax for 2013. Petitioner submitted to the IRS Office of Appeals (Appeals Office) a timely Form 12153, Request for a Collection Due Process or Equivalent Hearing, indicating that he would like to enter into an installment agreement or make an offer in compromise. 24 Petitioner's case was assigned within the Appeals 25 Office to Settlement Officer Sherrie Levine (SO 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 Levine). On December 8, 2015, SO Levine held a telephone conference call with petitioner. On December 22, 2015, petitioner wrote a letter to SO Levine suggesting that some payments had not been properly applied to his account for 2013, that he was receiving conflicting information from the IRS about his outstanding balance for that year, and that he 9 would like to pay any amount due but asked that any 10 11 12 13 14 15 penalties be waived. SO Levine held a further conference call with petitioner on December 22, 2015. On February 17, 2016, the Appeals Office issued a notice of determination to petitioner sustaining the proposed levy action. Petitioner invoked the Court's jurisdiction by filing a timely 16 petition for review of the collection action with the 17 Court. . 18 19 20 21 22 23 24 25 At trial, respondent conceded the $840 penalty assessed against petitioner pursuant to section 6657. The issues remaining for decision are whether petitioner is liable for the additions to tax assessed against him under sections 6651(a)(2) and 6654. If any person liable to pay any tax neglects or refuses to pay such tax within 10 days 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 after notice and demand for payment, the Commissioner is authorized to collect such tax by levy upon the person's property. At least 30 days before enforcing collection by way of a levy on the person's property, the Commissioner is obliged to provide a final notice of intent to levy, including notice of available administrative appeals. Sec. 6331(d). Generally speaking, the Commissioner cannot proceed with collection by levy until (1) the person has been given notice and the opportunity for an administrative review of the matter (in the form of an Appeals Office hearing), and, if the person is dissatisfied, (2) judicial review of the administrative determination is final. Sec. 6330; see Davis v. Commissioner, 115 T.C. 35, 37 (2000); Goza v. Commissioner, 114 T.C. 176, 179 (2000). The Appeals Office is responsible for conducting administrative hearings in collection 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 matters. Sec. 6330(b)(1). In particular, the 20 21 22 23 24 25 Appeals Office must verify that the requirements of any applicable law or administrative procedure have been met in processing the case. Sec. 6330(c)(1), (3) (A). The Appeals Office also must consider any issues raised by the person relating to the unpaid tax or proposed levy, including offers of collection 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 alternatives, appropriate spousal defenses, and challenges to the appropriateness of the collection action. Sec. 6330(c)(2) (A), (3)(B). A person may challenge the existence or amount of his underlying tax liability if the person 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 Office must consider whether the collection action balances the need for efficient collection against the person's concern that collection be no more intrusive than necessary. Sec. 6330(c)(3)(c). The Tax Court has jurisdiction to review the administrative determination made by the Appeals 15 Office. Sec. 6330(d) (1). If the taxpayer's 16 17 18 19 20 21 22 23 24 25 underlying tax liability is in dispute, as is the case here, we review the Appeals Office's administrative decision on a de novo basis. Goza v. Commissioner, 114 T.C. at 181-182. Section 6651(a)(2) provides an addition to tax in the case of a failure to pay the amount show as tax on any return on or before the date prescribed for payment, unless it is shown that such failure is due to reasonable cause and not due to willful neglect. A taxpayer may demonstrate reasonable cause 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 4 5 6 7 8 9 for late payment by showing that he exercised ordinary business care and prudence in providing for payment of his tax liability and was nevertheless either unable to pay the tax or would suffer an undue hardship as described in section 1.6161-1(b), Income Tax Regs., if he paid on the due date. Sec. 301.6651-1(c)(1), Proced. & Admin. Regs. To avoid the addition to tax, the taxpayer must establish both (1) that the failure to pay was due to reasonable 10 cause, and (2) that the failure did not result from 11 willful neglect. Sec. 6651(a); United States v. 12 13 14 15 16 17 18 19 Boyle, 469 U.S. 241, 245 (1985). There is no dispute that the check that petitioner sent to the IRS with his request to extend the time to file his tax return for 2013 was dishonored. Petitioner did not produce a copy of the dishonored check and could only speculate that when he wrote the check he made an error in either the numerical entry of the amount of the check or the 20 written statement of the amount of the check. 21 Petitioner testified that he did not know that the 22 23 check had not been paid until he received the notice of intent to levy from the IRS in August 2015. 24 Petitioner acknowledged at trial, however, that his 25 wife was aware that the check had not been paid but 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 4 5 6 7 8 she did not share this information with him. On this record, we are not persuaded that petitioner has shown that his failure to pay the tax reported on his tax return was due to reasonable cause. We conclude that a reasonably prudent person in petitioner's position would have monitored his checking account balance to confirm that the tax due in excess of $42,000 had actually been paid. 9 Moreover, without additional evidence, we presume 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that the check in question was not paid due to an error on petitioner's part. Section 6654 provides for an addition to tax in the event of an underpayment of a required installment of individual estimated tax. Sec. 6654(a) and (b). As relevant to this case, each required installment of estimated tax is equal to 25 percent of the "required annual payment", which in turn is equal to the lesser of (1) 90 percent of the tax shown on the individual's return for that year (or, if no return is filed, 90 percent of his or her tax for such year), or (2) if the individual filed a return for the immediately preceding taxable year, 100 percent of the tax shown on that return. Sec. 6654(d) (1) (A), (B)(i) and (ii). The due dates of the required installments for a calendar taxable year are 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 April 15, June 15, and September 15 of that year and 2 3 4 5 6 7 8 9 10 11 12 January 15 of the following year. Sec. 6654(c)(2). Section 6654(e) (3) (A) provides that no addition to tax shall be imposed to the extent the Secretary determines that by reason of casualty, disaster, or other unusual circumstances the imposition of the penalty would be against equity and good conscience. Section 6654(e)(3) (B) provides that no addition to tax shall be imposed if the Secretary determines that the taxpayer retired after having attained age 62 or became disabled in the taxable year for which estimated payments were required to be 13 made,an'in the taxable year preceding such taxable 14 15 16 17 18 19 year and such underpayment was due to reasonable cause and not to willful neglect. Otherwise, section 6654 provides no exception for reasonable cause or lack of willful neglect. There are two mechanical exceptions to the applicability of section 6654 addition to tax. 20 First, the addition is not applicable if the tax 21 22 23 24 25 shown on the individual's return for the year in question (or, if no return is filed, the individual's tax for that year), reduced for these purposes by any allowable credit for wage withholding, is less than $1,000. Sec. 6654(e)(1). Second, the addition is 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 1 2 3 4 5 not applicable if the individual's tax for the preceding taxable year was zero. Sec. 6654(e)(2). Although petitioner owed in excess of $42,000 when he filed his tax return for 2013, he did not remit any estimated tax payments to the IRS. 6 Notably, his tax bill for 2012 was $30,405. It 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 follows that petitioner was not eligible for either of the mechanical exceptions to the applicability of section 6654. Petitioner testified that he was 60 years old in 2013 and there is no indication that he retired that year or that he was disabled. Although he testified that the income tax that he owed for 2013 was attributable to an unexpected business transaction that arose in the second half of the taxable year, he did not provide any objective evidence in support of his testimony. The record also shows that petitioner was assessed an addition to tax under section 6654 for the taxable years 2011 and 2012. On this record, we see no justification for relieving petitioner of the addition to tax assessed under section 6654. Petitioner did not offer a valid collection alternative (such as an offer in compromise or an installment agreement). Under the circumstances, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 1 with no collection alternative to consider, the 2 3 4 5 6 7 8 Appeals Office did not abuse its discretion in concluding the administrative process by issuing the notice of determination underlying this action. Sec. 6330(c) (2) (A), (3) (B). Finally, the Appeals Office determination to proceed with the proposed levy action balances the need for efficient collection against petitioner's concern that collection be no 9 more intrusive than necessary. Sec. 6330(c) (3) (C). In sum, taking into account respondent's concession that petitioner is not liable for $840 penalty assessed under section 6657 (and any interest related thereto), respondent's determination to proceed with the proposed levy action is sustained. This concludes the Court's oral findings of fact and opinion. (Whereupon, at 2:48 p.m., the above- entitled matter was concluded.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO . www.CapitalReportingCompany.com