TAX COURT OPINION

Case: Andrew Joseph Genovese
Docket Number: 6730-16SL
Judge: Leyden
Opinion Type: bench
Filed: 12/29/2016
Pages: 14

UNITED STATES TAX COURT WASHINGTON, DC 20217 ANDREW JOSEPH GENOVESE, Petitioner, v. ) ) ) CZ ) Docket No. 6730-16SL. 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 Diana L. Leyden at San Diego, California, on November 17, 2016, containing her oral findings of fact and opinion rendered at the conclusion of the trial. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Diana L. Leyden Special Trial Judge Dated: Washington, D.C. December 29, 2016 SERVED Dec 29 2016 Capital Reporting Company Bench Opinion by Special Trial Judge Diana L. Leyden 3 November 17, 2016 Andrew Joseph Genovese v. Commissioner Docket No. 6730-16SL I. 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. SEE RULE 152(c), TAX COURT RULES OF PRACTICE AND PROCEDURE. II. This . 6330(d) proceeding was heard as a Small Tax Case pursuant to the provisions of Section .7463 of the Internal Revenue Code of 1986, as amended, and Rules 170 through 175 of the Tax Court Rules of Practice and Procedure. Pursuant to Section 7463(b), the decision entered in this case shall not be treated as precedent for any other case. III. 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 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 Hereinafter in this bench opinion, all section 2 3 numbers refer to the Internal Revenue Code, as amended and in effect for the relevant periods, and 4 all Rule numbers refer to the Tax Court Rule of 5 Practice and Procedure. 6 7 8 IV. The trial of this case was conducted on November 14, 2016, in San Diego, California. 9 Petitioner appeared on his own behalf. Nicole 10 11 12 13 14 Beckley appeared on behalf of respondent. V. Pursuan.t to Sections 6320(c) and 6330(d), peti.tioner seeks review of respondent's determination to proceed with collection by lien of unpaid federal 15 withholding and Federal Insurance Contributions Act 16 17 18 19 20 21 22 23 24 25 (FICA) tax liabilities with respect to the Forms 941, Employer's Quarterly Federal Tax Returns, for the quarters ending March 31, 2008; June 30, 2008; September 30, 2008; and December 31, 2008, and of an unpaid Federal Unemployment Tax Act (FUTA) tax liability with respect to the Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, for the calendar year 2008. These taxes are collectively referred to hereinafter as "employment taxes." The issue for decision is whether the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company Appeals Office abused its discretion in upholding the collection actiön. For the reasons explained herein, we find that the Appeals Office did not abuse its discretion, and we sustain the proposed collection 5 action. VI. The petitioner resided in California at the time he filed the petition in this case. This case arises from the Internal Revenue 1 2 3 4 5 6 7 8 9 10 Service's (IRS) efforts to collect by means of a 11 12 13 federal tax lien the employment taxes in issue. During 2008, petitioner operated the business Ocean in Motion and employed workers. 14 Petitioner did not file the Forms 941 for the 15 16 17 18 19 20 21 quarters at issue. Petitioner also did not file a Form 940 for 2008. The IRS prepared substitutes for returns for the periods and the tax year at issue. The IRS sent a letter on April 24, 2013, to petitioner at his last known address notifying petitioner that the IRS was proposing to assess taxes for each of the quarters and tax year at issue. 22 Petitioner did not respond to the letters to protest 23 24 25 the proposed assessments. The IRS subsequently processed the substitutes for returns, assessed the tax liabilities, and sent notices of demand for 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 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 payment foi gaymcnt for the tax liabilities to petitioner's .last known address. The IRS sent petitioner a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 dated September 15, 2015. Petitioner timely filed a Form 12153, Request for a Collection Due Process or Equivalent Hearing (Form 12152), in response to the IRS filing of the notice of federal tax lien (NFTL) and requested a collection due process hearing. Petitioner stated as the only reason for the request .for a collection due process hearing the following: "I was informed that my 2008 year was 'PAID IN FULL' and that 'NOTHING WAS ASSOCIATED' with either my social security number or the taxpayer identification number assigned." Petitioner did not request any collection alternatives on the Form 12153. Petitioner asked that the lien be withdrawn. The IRS Appeals Office sent petitioner a letter dated December 8, 2015, to his last known address informing him that the settlement officer had scheduled a telephone conference call for January 11, 2016, and that petitioner should call the settlement officer on that date at 12 p.m. CST. In that letter the settlement officer informed petitioner that "You 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 are not able to dispute your liability in your CDP hearing because you had a prior opportunity when the 3 Notice of Intent to Levy was issue[d] on January 21, 4 5 2015 and March 16, 2015." The letter also informed petitioner that he could offer collection alternative 6 methods, including an installment agreement or an 7 8 offer in compromise. Petitioner called the settlement officer on 9 March 1, 2016, and his call went to the settlement 10 officer's voicemail. Petitioner testified that at 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 some point in time, he did have a telephone conversation with the settlement officer. Petitioner and his daughter testified that the settlement officer was rude to petitioner. Petitioner's daughter said her father had the call on speaker phone, and she was in the room and heard the conversation. The IRS issued a notice of determination to petitioner on February 17, 2016, which sustained the IRS's collection action. At the trial of this case, respondent's counsel testified that petitioner had set up an installment agreement but that it covered petitioner's individual income tax liability and did not cover the employment tax liabilities. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company VII. 8 On January 21, 2015, and March 16, 2015, the IRS sent petitioner Notices of Intent to Levy and 1 2 3 4 Right to a Hearing with respect to the same unpaid 5 6 7 8 employment tax liabilities. Petitioner timely requested a collection due process hearing, and the IRS subsequently issued notices of determination sustaining the proposed collection action. 9 Petitioner alleges that he timely filed a petition 10 with the Court challenging those notices of 11 12 13 14 15 16 17 18 19 determination. Recently, the Court located correspondence submitted by petitioner in July 2015 that purported to be a petition. The Court issued an order dated October 28, 2016, permitting petitioner to file an amended petition so as to proceed with a case as to those notices of determination. Respondent filed a motion for continuance in the present case to allow petitioner to consolidate the present case with the new case for 20 which petitioner will be filing an amended petition. 21 22 By order dated October 28, 2016, a hearing was scheduled for November 14, 2016, on respondent's 23 motion for continuance in the present case. The 24 25 hearing was held as scheduled. At the hearing petitioner objected to the motion, and the Court 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 denied respondent's motion for continuance on November 14, 2016. The Court heard the present case on November 14, 2016, following the hearing on the 4 motion for continuance. 5 6 7 8 9 10 11 12 13 14 15 16 17 VIII. If a person liable for a tax fails to pay it after a demand for payment is made by the IRS, see Sec. 6321, a lien arises in favor of the United States upon all property and rights to property belonging to such person for the unpaid amount, including interest, see Sec. 6321. The lien imposed by Section 6321 arises when the tax is assessed pursuant to Section 6201 and continues until the underlying liability is satisfied or becomes unenforceable by reason of lapse of time. Sec. 6322. The lien imposed by Section 6321 is not valid against any purchaser, holder of a security interest, 18 mechanic's lien, or judgment lien creditor, however, 19 until the Secretary files a NFTL as described in 20 21 22 23 24 25 Section 6323(f). See Sec. 6323(a). Section 6320(a) provides that the Secretary shall notify the person described in Section 6321 of the filing of a NFTL under Section 6323 and that such notice shall inform the person of his or her right to request an administrative hearing with the Appeals Office. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 4 5 The Appeals Office is charged with conducting the administrative hearings, called collection due process hearings, under Section 6320 and 6330 and must verify that the requirements of any applicable law and administrative procedure have been 6 met in processing the taxpayer's case. Sec. 7 8 9 10 11 12 13 14 15 16 17 6330(c)(1), (3) (A). The Appeals Office also must consider any issues raised by the taxpayer, including offers of collection alternatives, appropriate spousal defenses, and challenges to the appropriateness of the collection action. Sec. 6330(c) (2) (A), (3) (B). A taxpayer may challenge the existence or amount of his underlying tax liability only if he did not otherwise have an opportunity to dispute such tax liability. Sec. 6330(c)(2) (B); Sego v. Commissioner, 114 T.C. 604, 609 (2000). Finally, the Appeals 18 Office must consider whether the collection action 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), Section 6330(d)(1) grants this Court jurisdiction to review the administrative determination made by the Appeals Office. If the taxpayer's underlying tax is not properly in dispute, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 5 we review respondent's determination for abuse of discretion. Goza v. Commissioner, 114 T.C. 176, 181- 182 (2000). And abuse of discretion occurs if the Appeals Office exercises its discretion "arbitrarily, capriciously, or without sound basis in fact or law." 6 Woodral v. Commissioner, 112 T.C. 19, 23 (1999). 7 8 9 10 11 12 13 14 15 16 17 18 19 20 IX. Petitioner argues that the IRS abused its discretion in not releasing or withdrawing the lien because he was told by the IRS that there were not any liabilities for 2008 and the settlement officer should have considered his dispute of underlying tax liabilities in this case. Petitioner testified how frustrated he was that the settlement officer did not confirm his understanding that he did not owe any taxes for 2008. While we recognize petitioner's frustration, for reasons we discuss, we determine that petitioner was not entitled to dispute the underlying tax liabilities in the collection due process hearing in this matter and that the Appeals 21 Office did not abuse its discretion in sustaining the 22 23 24 25 collection action of the lien filing. Petitioner did not specifically allege that there was a flaw in the IRS's assessment procedures nor did he allege that he did not receive the letters 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 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 assessing the underlying employment tax liabilities or the notices of demand for payment with respect to the employment taxes. He testified that his address was the same as the address that the IRS had on file. The settlement officer verified that the requirements of any applicable law and administrative procedure had been met. The records reviewed by the settlement officer, which were submitted into evidence at trial, confirmed petitioner was notified of the underlying tax liabilities, the notice of federal tax lien filing, and the notice of the right to a collection due process hearing. The settlement officer also verified that an assessment was properly made for each tax period and was properly listed in the collection due process notice, that the letters informing petitioner of the assessment of the underlying employment tax liabilities were mailed to the last known address of petitioner, and that there was a balance due when the notice of federal tax lien filing was issued. The settlement officer had no prior involvement in the case regarding the specific tax quarters or tax year. The settlement officer reviewed the administrative file, the IRS records, and the information petitioner provided as 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 demonstrated by the evidence in the record or trial and the notice of determination issued to petitioner. The settlement officer's review confirmed that the IRS had followed all legal and procedural requirements and that the actions taken or proposed were appropriate under the circumstances. The underlying tax liabilities are not properly at issue in this.collection due process case under Section 6330(c)(2)(B) because petitioner had a prior opportunity when he requested a collection due process hearing with respect to the prior notices of intent to levy. See L.G. Kendrick, LLC v. Commissioner, 146 T.C. 17 (2016). The Appeals Officer sent what is called a "last chance letter" informing petitioner of his last chance to provide information. Aside from petitioner's assertion that the underlying tax liabilities were paid, he did not present any evidence to the settlement officer to support an adjustment to the underlying tax liabilities nor has he provided any records to support an adjustment to the underlying liabilities. Further, with respect to the current collection action, the Appeals Officer informed petitioner in the notice of determination, from which 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 14 1 2 3 4 petitioner petitioned in this case, that he may be able to challenge the underlying employment tax liabilities by submitting an audit reconsideration. Therefore, the Court reviews the settlement 5 officer's determination regarding the proposed 6 1 8 9 collection action for abuse of discretion, because the underlying liabilities are not properly at issue. Goza v. Commissioner, 114 T.C. 176, 182 (2000). The burden of showing that the settlement 10 officer's determination was arbitrary or capricious 11 12 13 14 15 16 17 18 rests with petitioner. Pacific First Federal Savings v. Commissioner, 101 T.C. 117, 121 (1993). X. On the Form 12153 that petitioner filed in response to the NFTL, petitioner did not request a collection alternative such as an installment agreement or offer in compromise. Rather, the only relief that petitioner requested was that the lien be 19 withdrawn. The IRS may withdraw a lien if: (1) the 20 21 22 23 24 25 filing of such notice is premature or otherwise not in accordance with administrative procedures; (2) the taxpayer has entered into an agreement under Section 6159 to satisfy the tax liability for which the lien was imposed by means of installment payments, unless such agreement provides otherwise; (3) the withdrawal 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 15 1 2 3 of such notice would facilitate the collection of the tax liability; or (4) with the consent of the taxpayer or the National Taxpayer Advocate, the 4 withdrawal of such notice would be in the best 5 interest of the taxpayer (as determined by the 6 National Taxpayer Advocate) and the United States. 7 8 9 Sec. 6323(j)(1). Petitioner did not provide any evidence to support why the IRS should exercise its discretion in 10 withdrawing the lien under any of these four 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 categories. The record supports the conclusion that petitioner has failed to show that he satisfied any of the conditions for withdrawal. of the lien under Section 6323(j)(1). See, e.g., Crisan v. Commissioner, T.C. Memo. 2007-67, 2007 Tax Ct. Memo 68, at *8. In sum, we conclude that the Appeals Office did not abuse its discretion in this case, and we sustain the notice of determination upon which this case is based. XI. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 10:10 a.m., the above- entitled matter was concluded.) 866.488.DEPO www.CapitalReportingCompany.com