TAX COURT OPINION

Case: James L. Wieger
Docket Number: 26767-10S
Judge: Holmes
Opinion Type: bench
Filed: 07/22/2011
Pages: 8

A mrTmnb- \\D\._M55 UNITED STATES TAX COURT WASHINGTON, DC 20217 JAMES L. WIEGER, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) ORDER Docket No. 26767-10S. 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 transcript of Holmes at Aberdeen, South Dakota, on June 7, 2011, containing his oral of trial. fact and opinion rendered after the conclusion the above case before Judge Mark V. the trial of the pages of the findings of In accordance with the oral findings of fact and opinion, a decision for petitioner will be entered. (Signed) Mark V. Holmes Judge Dated: Washington, D.C. July 22, 2011 SERVED JUL 2 5 2011 1 BENCH OPINION BY JUDGE MARK V. HOLMES June 7, 2011 2 Wieger v. Commissioner , Docket No.: 26767-10S 3 THE COURT: In case number 26767-10S, James L. 4 Wieger v. Commissioner, the Court has decided to render 5 6 7 8 9 oral findings of fact and opinion in this case, and the following represents the Court's oral findings of fact and opinion. This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal 10 Revenue Code of 1986, as amended, and Rule 152 of the Tax 11 Court's Rules of Practice and Procedure. 12 13 14 15 16 This case arises from Mr. Wieger's 2007 tax year, in which Mr. Wieger filed an income tax return on time, albeit with an extension until October of 2008, but failed to pay all of the liability reported on that return. He paid about $2,500 with the return and $5,000 17 with his request for an extension of time, but since the 18 19 20 21 22 23 24 25 reported tax was $70,954, he understood that he had problems. He needed to get in touch with the •IRS, and that's precisely what he did. He contacted the IRS in the summer of 2009 after receiving a notice of intent to levy, but he had already, by that time and in addition to the $2,500 that he included with his return, had already paid about $17,000, according to the IRS's own records. That still left a Heritage Reporting Corporation . (202) 628-4888 4 1 2 3 4 5 6 7 8 9 10 11 12 substantial balance due, so he was correct in calling the IRS. He evidently contacted a revenue officer named Ryan Fuller and informed Mr. Fuller that he was selling real estate and that he had a deal in November of 2009 that would produce some money and allow him to refinance enough of his other debt so that he could pay off what he owed on his 2007 tax bill and asked Mr. Fuller, "How much do I need to get?" Mr. Fuller said if he pays 45,000, that would be enough. But there was no offer-in- compromise signed, there was no installment agreement signed, there is no evidence of this in the IRS's own case 13 activity records for Mr. Fuller. All this is extremely, 14 15 very irregular. Remarkably, there is no trace of these contacts 16 within the IRS's own records of the sort that a revenue 17 officer normally would put into the computer system and 18 19 20 enable a court or an appeals officer later on to access; yet I'm absolutely certain that this is exactly what was going on, after all. Mr. Wieger was able to produce Mr. 21 Fuller's business card; he was able to point to the actual 22 23 payment of the $45,000 and of several thousands of dollars in addition to that that add up almost to $70,000. 24 Moreover, and even more bizarrely, fus that there were 25 several instances where the IRS computers spat out Heritage Reporting Corporation (202) 628-4888 5 1 2 3 automated levies against Mr. Wieger's accounts at federal credit unions and at banks which Mr. Fuller then -- and we have this evidence in the record -- manually released. 4 All this is consistent with Mr. Wieger's story. 5 6 Then, in April of 2010, a notice of the filing of Federal tax lien for a little bit more than 7,000 came 7 Out, and Mr. Wieger timely requested a collection due 8 9 10 11 12 13 14 15 16 17 18 process hearing on the ground that he had been told by a revenue officer that he needed to pay only $45,000 to make his problem go away. He also contacted at about the same time the IRS's Taxpayer Advocate Service and was told that. she could help him get a lien release and set up an installment agreement if the penalty was not abated, because most of the remaining $7,000 on his income tax debt can be attributed to that penalty. There's again no doubt that this occurred: it's right there in the notice of determination that led to this case. In that notice of determination, the appeals 19 officer who conducted the hearing said: "You had 20 21 22 23 24 25 previously spoken to a revenue agent and were told the lien would be released and penalties would be abated if you made a 45,000-dollar payment. The settlement officer verified that this payment was made on December 3, 2009. You also stated you had been working with a taxpayer advocate. The settlement officer called the taxpayer Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 advocate, and she stated she would help you to get a lien release and set up an installment agreement if the penalties could not be abated. The determination in Appeals is that compliance has followed all statutory and procedural requirements." Well., this is odd. What should have happened at this hearing? What should have happened at this hearing is that the appeals 9 officer should have reviewed to see if all the 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 requirements for the imposition of a Federal tax lien had been followed. I review her decision under section 6320; I review it de novo, meaning I look at all the evidence presented on questions of liability; and I review it for abuse of discretion on those questions that are not questions of the underlying tax liability. What the appeals officer should have been looking for is described in 26 CFR 301.6320-1(e) (1): "Prior to issuance of a determination, Appeals is required to obtain verification from the IRS office collecting the tax that the requirements of any applicable law or administrative procedure with respect to the NFTL have been met. The taxpayer also may raise challenges to the existence or amount of the underlying liability, including a liability reported on a self-filed return, for any tax. Heritage Reporting Corporation (202) 628-4888 7 1 2 3 4 5 6 7 8 9 10 11 12 period specified on a CDP Notice if the taxpayer did not receive a statutory notice of deficiency for that tax liability or did not otherwise have an opportunity to dispute the tax liability." This does not seem to have been done at all. Instead, the appeals officer seems to have metaphorically thrown up her hands at the mess that Mr. Wieger found himself in. Specifically, it seems she made no consideration of whether to even grant a penalty abatement for these delays that quite reasonably Mr. Wieger attributes to the IRS itself. Moreover, she appears to have reasoned that consideration by the taxpayer advocate 13 meant that she did not have to do so, even though, as she 14 15 16 17 18 19 acknowledged in her own case activity report, the taxpayer advocate had concluded that the revenue officer had seriously misrepresented his authority and what was going on within the IRS Vis-à-vis Mr. Wieger's 2007 taxes. From this, I make a few conclusions. First, the notice of intent to levy that seems to have sparked Mr. 20 Wieger's first contact with the IRS was ordinarily 21 something that would preclude him from even getting to Tax 22 Court on this, because, as section 26 CFR ·section • 23 24 25 301.6330-1(a) (3) Question A6 says, "Pursuant to section 6330(a) (3), a pre-levy CDP Notice must include, in simple and nontechnical terms, the amount of the unpaid tax, Heritage Reporting Corporation (202) 628-4888 8 1 notification of the right to request a CDP hearing, and a 2 statement that the IRS intends to levy." Normally, that 3 would preclude somebody from then challenging'a later 4 5 6 7 8 9 10 11 filed NFTL. But, again, it appears that these requirements that the IRS imposes on itself in a notice of intent to levy simply weren't done. There is no mention in the notice of determination that came from the appeals office that there even was a notice of intent to levy back in 2009, and the Court will not supply reasons that the appeals officer herself did not give. Moreover, there is just no indication that the requirements for including 12 within a notice of intent to levy a statement and 13 application for CDP hearing were even met. I believe Mr. 14 Wieger on this point as well. Moreover, again, the 15 16 17 18 19 appeals officer made no investigation of this point herself to confirm that the IRS had followed proper administrative procedures. Nevertheless, I am not saying that Mr. Wieger or any taxpayer can rely on the oral promises of a revenue 20 officer or enter into informal offers-in-compromise other 21 22 than through proper channels. Nevertheless, I conclude that the appeals 23 officer's finding that the IRS followed proper procedure 24 25 is clearly erroneous in this case. And it's not harmless error, given the credit trouble that the wrong amount Heritage Reporting Corporation (202) 628-4888 1 2 being given to Mr. Wieger has caused him. So, there being substantial error, and it being not harmless to Mr. 3 Wieger, I have to conclude that the refusal to consider at 9 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 least the abatement of penalties is an abuse of discretion. Mr. Wieger had never previously had the chance to contest this part of his underlying liability, and there was no notice of deficiency and no mention in the notice of determination of where he could possibly have done this. Instead, the appeals officer simply seemed to be handing the ball off to the taxpayer advocate in this case, and as a matter of law, that's a failure to exercise discretion, which itself is an abuse of discretion. My conclusion therefore is that the IRS may not proceed with collection via a lien as described in the notice of determination concerning collection actions under section 6320 in the letter dated November 5, 2010, regarding Mr. Wieger's 2007 taxes. This concludes the Court's oral findings of fact and opinion in this case. Congratulations, Mr. Wieger. MR. WIEGER: Thank you. (Whereupon, at 9:16 a.m., the bench opinion in the above-entitled matter was concluded.) // Heritage Reporting Corporation (202) 628-4888