TAX COURT OPINION

Case: Paul M. Harris & Rosemary Harris
Docket Number: 4519-18L
Judge: Nega
Opinion Type: bench
Filed: 06/14/2019
Pages: 19

SYM UNITED STATES TAX COURT WASHINGTON, DC 20217 PAUL M. HARRIS & ROSEMARY HARRIS, Petitioners, v. ) ) ) ) Docket No. 4519-18 L. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORDER Pursuant to Rule 152(b) of the Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit to petitioners and to respondent a copy of the pages of the transcript of the proceedings in the above case before Judge Joseph W. Nega at Boston, Massachusetts, on April 1, 2019, 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 for respondent. (Signed) Joseph W. Nega Judge Dated: Washington, D.C. June 14, 2019 SERVED Jun 14 2019 RECEIVED 4/17/2019 IN THE UNITED STATES TAX COURT SYM In the Matter of: ) PAUL M. HARRIS & ROSEMARY HARRIS, ) Docket No. 4519-18L Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) Pages: 1 through 17 Place: Boston, Massachusetts Date: April 3, 2019 ) cribers (9733406-2250)operations@errilwrs.net|wwwescribersnet IN THE UNITED STATES TAX COURT In the Matter of: ) PAUL M. HARRIS & ROSEMARY HARRIS, ) Docket No. 4519-18L Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) McCormack Post Office & Cthse. 5 Post Office Square Room 5, 12th Floor Boston, Massachusetts 02109 April 3, 2019 The above-entitled matter came on for bench opinion, pursuant to notice at 9:55 a.m. BEFORE: HONORABLE JOSEPH W. NEGA Judge APPEARANCES: For the Petitioners: No.Appearance For the Respondent: No Appearance 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 cribers $73)406-2250loperationsøescríbers.netlwwwascribers.net. P R O C E E D I N G S 2 (9:55 a.m.) THE CLERK: Recalling from the calendar docket number 4519-18L, Paul M. Harris and Rosemary Harris. THE COURT: This is the bench opinion in that case . (Whereupon, a bench opinion was rendered.) 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 cribers (973}406-2250|operations@escribers.net|www.escribersaet 1 Bench Opinion by Judge Joseph W. Nega 2 April 3, 2019 3 3 4 5 6 7 8 9 Paul M. Harris & Rosemary Harris v. Commissioner of Internal Revenue Docket No. 4519-18L THE COURT: The Court has decided to render oral Findings of Fact and Opinion in this case. The following represents the Court's oral Findings of Fact and Opinion. This bench opinion is made pursuant to section 7459(b) and 10 Rule 152, and shall not be relied on as precedent in any 11 other case. Unless otherwise indicated, all section 12 references are to the Internal Revenue Code (Code) in 13 effect for the year at issue, and all Rule references are 14 15 to the Tax Court Rules of Practice and Procedure. On March 5, 2018, petitioners filed a petition 16 with this Court contesting respondent's Notice of 17 Determination Concerning Collection Action(s) Under 18 19 section 6320 and/or 6330 (notice of determination), dated January 31, 2018. Petitioners seek review of respondent's 20 determination to proceed with the collection by levy of 21 petitioners' unpaid Federal income tax liability, and 22 additions to tax for tax year 2012 (year at issue). The 23 24 25 issues for decision are whether: (1) petitioners are liable for additions to tax under section 6651(a)(2), for failure to timely pay, and section 6654, for failure to cribers (>73)406-2250joperationseescribermetlwwwascribennet pay estimated tax; and (2) respondent's determination to 4 sustain the proposed levy was an abuse of discretion. This case was tried on April 1, 2019, in Boston, Massachusetts. Petitioner Paul M. Harris (Mr. Harris) appeared pro se and represented to the Court that he was authorized to represent the interests of his wife in these proceedings. Michael E. D'Anello appeared on behalf of respondent. FINDINGS OF FACT Some of the facts are stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference. At all relevant times, petitioners were married and resided in 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Massachusetts. 15 16 Petitioners timely filed their Federal income tax return for the year at issue. On that return, 17 petitioners reported that they owed tax, as well as an 18 addition to that tax for a failure to make adequate 19 estimated tax payments, for the year at issue. 20 Petitioners, however, failed to remit timely payment for 21 22 23 24 25 those balances due, because they had insufficient cash on hand to pay those amounts in full, when due. Accordingly, respondent timely assessed those balances due as reported on that return, and another addition to tax for failure to timely pay that balance due (collectively, 'unpaid balance cribers (9733406-2250 l opentioris@erribersmet j www.escribetspot 5 1 2 3 4 5 6 7 8 9 10 11 for the year at issue). On May 24, 2017, respondent issued a notice to petitioners, informing them of his intent to levy on petitioners' property for the purpose of collecting their unpaid balance for the year at issue. In response, petitioners timely requested a Collection Due Process (CDP) hearing, to be considered for a collection alternative, and the abatement of the additions to tax on the basis of reasonable cause. Petitioners' CDP hearing request was assigned to a settlement officer (SO) from respondent's Office of 12 Appeals (Appeals Office). On September 14, 2017, the 50 13 14 15 and petitioner, Mr. Harris, participated in a telephone CDP hearing. During that hearing, the 50 and Mr. Harris discussed the petitioners' request for reasonable cause 16 abatement of the additions to tax. The 50 informed Mr. 17 Harris that, based on the rationale he provided, 18 petitioners' failure to timely pay and to otherwise make 19 estimated tax payments did not amount to reasonable cause. 20 The SO and Mr. Harris also discussed petitioners' concern 21 with respect to the proposed levy, and what was required 22 of petitioners in order to qualify for a collection 23 alternative and avoid collection actions. On that latter 24 Point, the SO and Mr. Harris worked together over the two 25 months that followed the hearing to ensure that } ||icdbers 1973)406-2250{operitton5@escribersmet{www.escribersnet 6 petitioners qualified for, and to develop the preliminary terms of, an installment agreement with respect to Petitioners' unpaid balance for the year at issue. On December 6, 2017, the SO mailed a letter to petitioners with respect to their installment agreement request. This letter included a pair of forms: Form 433-D, Installment Agreement (Form 433), and Form 12257, Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, 1 2 3 4 5 6 7 8 9 10 Waiver of Suspension of Levy Action, and Waiver of Periods 11 12 of Limitation in Section 6330(e)(1) (Form 12257). On those forms, the SO detailed the terms of the installment 13 agreement that she had developed with Mr. Harris. In the 14 15 letter, the 50 informed petitioners that they would need to sign and return both forms in order to facilitate her 16 finalization of petitioners' installment agreement. 17 Additionally, the 50 informed petitioners that there would 18 19 20 21 be a one-time user fee of $225 for the processing of their installment agreement. By fax dated December 28, 2017, petitioners returned only the Form 12257. Through that fax 22 petitioners indicated that they agreed with the substance 23 of the detailed installment agreement, with the exception 24 25 of the user fee term which petitioners had stricken from the text of Form 12257. Petitioners did not sign or cribers 1973)406-2250loperationsøescribers.net|www.esenbers.net 7 1 2 3 4 5 6 7 8 9 10 11 return a copy of Form 433 to the SO. On January 26, 2018, the SO and Mr. Harris discussed that fax, in particular petitioners' decision to strike the user fee terms from the text of Form 12257. The SO informed Mr. Harris that, as relevant here, she would not enter into an installment agreement without the required user fee terms. Mr. Harris informed the SO that Petitioners would not agree to pay that user fee. In response, the SO informed Mr. Harr.is that she would then need to close petitioners' case and sustain the proposed levy. Accordingly, on January 31, 2018, the 50 mailed a 12 notice of determination to petitioners that sustained the 13 proposed levy to collect petitioners' unpaid balance for 14 15 16 17 the year at issue. I. Collection Review Procedure OPINION Section 6331(a) authorizes the Secretary to levy 18 against property and property rights when a taxpayer 19 liable for taxes fails to pay those taxes within 10 days 20 after a notice and demand for payment. Section 6331(d) 21 requires the Secretary to send to the taxpayer written 22 notice of the Secretary's intent to levy, and section 23 6330(a) requires the Secretary to send the taxpayer 24 written notice of the taxpayer's right to request a 25 section 6330 CDP hearing before a levy is made. 9733406-2250loperatiom@ewribers.net|wwwasafbersnet If a CDP hearing is requested, the hearing is 8 conducted by respondent's Appeals Office. At the hearing, the taxpayer may raise any relevant issue relating to the collection of the unpaid tax. Sec. 6330(c)(2)(A). The taxpayer may not, however, dispute the existence or amount of the underlying liability if the taxpayer otherwise had a prior opportunity to dispute such liability. Sec. 6330(c)(2) (B). Independent of any other issues raised by the taxpayer, the Appeals Office must also verify that respondent complied with the requirements of all applicable law and administrative procedure. Sec. 6330(b)(1) and (c)(1); Murphy v. Commissioner, 125 T.C. 301, 307 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006). 1 2 3 4 5 6 7 8 9 10 11 12 13 14 After considering all these issues, the Appeals Office 15 will issue a notice of determination. 16 17 Our review of the Appeals Office's determination is limited to those issues properly raised by the taxpayer 18 at his or her CDP hearing, with the exception that we must 19 20 review whether the Appeals Office verified that the requirements of any applicable law or administrative 21 Procedure have been met. See Hayle v. Com:n±.sc:aner, 131 22 23 24 25 T.C. 197, 202-203 (2008); Giamelli v. Commissioner, 129 T.C. 107, 111 (2007). When the taxpayer's underlying liability was properly at issue in the CDP hearing, we review that aspect of the determination de novo. Sego_v. cribers Commissioner, 114 T.C. 604, 610 (2000). Otherwise, we 9 review all other issues for an abuse of discretion. Goza v. Commissioner, 114 T.C. 176, 182 (2000). II. Petitioners' Underlying Liabilities for Additions to Tax We recognize that petitioners have not had a prior opportunity to dispute their underlying liability with respect to the additions to tax assessed under sections 6651(a)(2) and 6654. Montgomery v. Commissioner, 1 2 3 4 5 6 7 8 9 10 122 T.C. 1 (2004). Further, we recognize that petitioners 11 Properly raised the issue of this liability in their CDP 12 hearing. Consequently, and to that extent, petitioners' 13 underlying liability is properly at issue. Accordingly, 14 we review these liabilities de novo. Sego v. 15 Commissioner, 114 T.C. at 610. 16 17 18 19 Respondent bears the burden of producing evidence sufficient establish that it is appropriate to impose these additions to tax. Higbee v. Commissioner, 116 T.C. 438, 446 (2001). Once respondent has done so, 20 Petitioners bear the burden of proving otherwise. McLaine 21 22 v. Commissioner, 138 T.C. 228, 245-249 (2012). Respondent has met his burden of production by 23 producing certified account transcripts showing that 24 petitioners failed to make adequate estimated tax 25 payments, or otherwise timely pay their tax due for the Cdbers 73)406-2250loperationseesaïbersnet{www.egnbers.net year at 10 issue. Petitioners argue that they should not be liable for the additions to tax assessed under sections 6651(a)(2) and 6654. Petitioners allege that they had insufficient cash at hand to remit timely payments of their tax for the year at issue, and that this circumstance amounts to reasonable cause for their failure to do so. This Court gives consideration to all the facts and circumstances in determining whether a taxpayer's 1 2 3 4 5 6 7 8 9 10 failures were attributable to reasonable cause. See 11 United States v. Boyle, 469 U.S. 241, 249 n.8 (1985). 12 13 14 15 16 17 A. Section 6651(a)(2) Addition to Tax for Failure to Timely Pay Section 6651(a)(2) imposes an addition to tax for failure to timely pay the amount of tax due shown on the taxpayer's Federal income tax return, A taxpayer may avoid this addition to tax, however, when he or she can 18 establish that this failure was due to reasonable cause, 19 20 21 22 23 24 25 rather than willful neglect. Sec. 6651(a) (2). Whether a taxpayer's failure can be attributed to reasonable cause dePends on whether the taxpayer exercised ordinary business care and prudence in providing for payment of his or her tax liability, but was nevertheless either unable to pay the tax or would suffer undue hardship had he or she timely paid that tax. Sec. 301.6651-1(c)(1), Proced. ) héribers (973)406-2250}operationssexribers.net|wwweasenbermet & Admin. Regs. A taxpayer attempting to establish undue 11 hardship must show that timely payment of his or her tax would have placed him in substantial financial peril; thus, to establish undue hardship requires a showing of "more than an inconvenience to the taxpayer". Sec. 301.6651-1(c)(1), Proced. and Admin. Regs; sec. 1.6161-1(b), Income Tax Regs. With respect to the year at issue, petitioners dealt with a number of significant personal expenses and inconsistent cash flow. The record in this respect, however, does not support a determination that timely 1 2 3 4 5 6 7 8 9 10 11 12 Payment of their tax bill stood to impose an undue 13 14 15 16 17 18 19 20 21 22 23 financial hardship upon petitioners. Further, the record does not suggest that petitioners exercised ordinary business care and prudence in providing for payment of their tax liability. Petitioners did not make estimated tax payments, or otherwise set aside and account for their tax bill for the year at issue. Rather, the record suggests that petitioners made a decision to administer their personal finances in a manner which came at the expense of their taxes for the year at issue. On that record, we conclude that petitioners did not have reasonable cause for their failure to timely pay, and that 24 petitioners are liable for the addition to tax under 25 section 6651(a)(2) for the year at issue. cribers (973)406-2250loperationsgesaibersmet|www.escibersnet 12 Section 6654 Addition to Tax for Failure to Pay B. Estimated Tax Section 6654 imposes an addition to tax for an underpayment of estimated Federal income taxes. This addition is mandatory unless the taxpayer proves that he or she falls within one of the narrow exceptions provided by statute. Sec. 6654(e); see Lukovsky v. Commissioner, T.C. Memo. 2010-117. As relevant here, to the extent reasonable cause might except a taxpayer from this 1 2 3 4 5 6 7 8 9 10 addition to tax, a taxpayer also must have, either: (1) 11 12 13 become disabled, or (2) retired after having attained the age of 62 during that, or the preceding taxable year. As discussed above, the record does not support 14 petitioners' argument that their failures were grounded in 15 16 17 18 19 20 21 22 reasonable cause. Further, the record lacks any evidence suggesting that petitioners otherwise meet the age and retirement, or disability requirements to qualify for exception under this section. On that record, we conclude that petitioners are liable for the addition to tax under section 6654 for the year at issue. III. Remaining Collection Due Process Issues The record establishes, and petitioners do not 23 dispute, that the SO confirmed respondent's compliance 24 with all legal, administrative and procedural requirements 25 in assessing and initiating an action to collect CrÍbers 1973)406-2250toperations®escribers.net|wwwæsaibersmet 13 1 2 3 4 5 6 7 8 9 Petitioners' unpaid balance for the year at issue. Instead, petitioners argue that the SO abused her discretion by sustaining respondent's proposed levy, rather than continuing to negotiate the terms of the installment agreement, or otherwise waiving the $225 user fee. Accordingly, we review this issue under an abuse of discretion standard. An abuse of discretion is shown only when the action of the Appeals Office was arbitrary, capricious, or without sound basis in fact or law. See 10 Giamelli v. Commissioner, 129 T.C. 107, 111 (2007). Our 11 12 review, in this respect, is limited to the administrative record. Murphy v. Commissioner, 125 T.C. 301 (2005), 13 aff'd, 469 F.3d 27, 31 (1st Cir. 2006). 14 15 16 17 18 19 20 During a CDP hearing, a taxpayer may request to be considered for a collection alternative, such as an installment agreement. See sec. 6330(c)(2). Section 6159 authorizes the Commissioner to enter into a written installment agreement if he determines that it will facilitate the full or partial collection of a taxpayer's unpaid liability. Sec. 6159; sec. 301.6159-1, Proced. & 21 Admin. Regs. An installment agreement does not exist 22 until the Commissioner accepts the terms thereof in 23 writing, and informs the taxpayer of as much. Sec. 24 25 301.6159-1(c) (1)(I) and (c)(2), Proced. & Admin. Regs. In this respect, the Commissioner's decision to accept an cribers 1973)406-2250|operationsøerribetspiet|www.escribeniet installment agreement is, generally, at his discretion. 14 Id. Through 31 U.S.C. 9701, Congress authorized the Secretary to prescribe regulations imposing fees for services rendered by the Commissioner, in order to defray the costs incurred by the Government in providing those services. Pursuant to that grant of authority, the Secretary promulgated regulations that impose a user fee on taxpayers that, as relevant here, enter into 1 2 | 3 4 5 6 7 8 9 10 installment agreements. Secs. 300.0(b)(1) and 300.1(c), 11 User Fee Regs. These fees and the amounts charged 12 therefor are mandatory unless a taxpayer meets certain 13 Poverty-based criteria not at issue here. See sec. 14 15 300.103)(3), User Fee Regs.; see also sec. 6159(f) (2). After months of working with petitioners, the SO 16 Provided the petitioners with a set of forms detailing, in 17 writing, the acceptable terms of an installment agreement 18 with respect to petitioners' unpaid balance for the year 19 20 21 22 23 24 at issue. The SO included among those terms a provision requiring petitioners to pay the $225 user fee mandated by the regulations. Petitioners rejected this installment agreement, exclusively on the basis of their refusal to pay the user fee. The SO explained to petitioners that the user fee was required, and she could not offer 25 petitioners an installment agreement absent that fee. cribers 1973)406-2250loperatiom@escribertnetíwww.escribersnet Petitioners refused. Accordingly, the 50 determined she had addressed all issues raised by the petitioners, and 15 determined that sustaining the proposed levy presented the most efficient and least intrusive means for the Government to collect petitioners' unpaid balance. Petitioners did not advance a colorable argument with respect to why they believe the SO abused her discretion in declining to waive the user fee, or accept their functional counter-offer. For instance, petitioners 1 2 3 4 5 6 7 8 9 10 did not argue nor allege -- there, or at trial -- that 11 12 13 14 15 16 17 they were eligible for any poverty-based waiver of, or reduction in, the fee for an installment agreement. Instead, petitioners argument centers on their refusal to pay the user fee as a matter of principle, or, rather, as an expression of their frustration with the administrative state. While petitioners' frustration is palpable, their argument does little to change our view of the character 18 of the SO's actions. Regulations require taxpayers to pay 19 a user fee when they enter into an installment agreement. 20 Accordingly, the SO's actions -- inclusion of this fee in the terms of the agreement, and refusal to accept an installment agreement lacking that fee -- were actions rooted in applicable law. For that reason, we hold that the SO did not abuse her discretion. 21 22 23 24 25 Cribers 73)406-7250loperations©escribermet[wwwsscrbermet IV. Conclusion 16 Accordingly, a decision will be entered for respondent. This concludes the Court's oral findings of fact and opinion in this case. In reaching our holdings herein, we have considered all arguments made, and, to the extent not mentioned above, we conclude they are moot, irrelevant, or without merit. (Whereupon, at 10:11 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 cribers (973)406-2250|operationsapescribersmet|wwwascibersmet CERTIFICATE OF TRANSCRIBER AND PROOFREADER 17 CASE NAME: Paul M. Harris & Rosemary Harris v. Commissioner DOCKET NO : 4519-18L We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 17 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Elaine LaRosee on April 3, 2019 before the United States Tax 1 2 3 4 5 6 7 8 9 10 Court at its session in Boston, MA, in accordance with the 11 applicable provlslons of the current verbatim reporting 12 13 14 15 16 18 19 20 21 22 24 25 contract of the Court and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording. Carrie Clouse, CDLT-143 Transcriber Jessica Hernandez Proofreader BEEE (973)406-225G(opentions4es:·ribersnetlwwwescribenmet .. 4/12/19 Date 4/12/19 Date