Court Opinion

ID: 6318548
Source: CourtListenerOpinion
Date Created: 2022-03-01 20:02:18.49942+00
Date Added: 2024-06-11T09:01:36.982010
License: Public Domain

United States Tax Court

                                T.C. Memo. 2022-13

                             MOHAMMAD A. KAZMI,
                                 Petitioner

                                            v.

               COMMISSIONER OF INTERNAL REVENUE,
                           Respondent

                                      —————

Docket No. 5013-18L.                                            Filed March 1, 2022.

                                      —————

Molly A. Recar, for petitioner.

Jay D. Adams and Sarah E. Sexton Martinez, for respondent.

                           MEMORANDUM OPINION

      PARIS, Judge: This case is before the Court on a Petition for
review of a Notice of Determination Concerning Collection Action(s)
Under Section 6320 and/or 6330, dated February 13, 2018 (notice of
determination). 1 The notice of determination sustained a notice of
federal tax lien (NFTL) filing (NFTL filing) with respect to trust fund
recovery penalties (TFRPs) under section 6672. The TFRPs were
assessed against petitioner for failing to collect and pay over
employment taxes owed by Urgent Care Center, Inc. (Urgent Care), for
taxable quarters ending June 30 and September 30, 2014 (periods at

        1 Unless otherwise indicated, all statutory references are to the Internal

Revenue Code (Code), Title 26 U.S.C., in effect at all relevant times, all regulation
references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all
relevant times, and all Rule references are to the Tax Court Rules of Practice and
Procedure.

                                  Served 03/01/22
                                          2

[*2] issue), resulting in outstanding liabilities of $6,184.23 and
$4,190.77, respectively. 2

       The issues for decision are: (1) whether petitioner is entitled to
challenge the underlying liabilities, and if so, whether he is a
responsible person who willfully failed to pay over employment taxes
under section 6672, and (2) whether the settlement officer in the
Internal Revenue Service (IRS) Office of Appeals (Appeals) abused his
discretion in sustaining the collection action.

       Petitioner argues that he may challenge his underlying liabilities
because a Letter 1153, Proposed Trust Fund Recovery Penalty, does not
constitute a prior opportunity under section 6330(c)(2)(B) since the
Commissioner’s denial of a Letter 1153 appeal does not result in an
opportunity for the taxpayer to seek judicial review before the Tax
Court. Petitioner further argues that he is not a responsible person
liable for TFRPs under section 6672, or—in essence—that the
Commissioner has the wrong person.

       The Commissioner argues that petitioner is prohibited from now
challenging his underlying liabilities because he failed to appeal the
earlier Letter 1153, which constituted an opportunity to dispute them
under section 6330(c)(2)(B). The Commissioner further argues that the
Court should therefore apply an abuse of discretion standard and hold
that the Commissioner did not abuse his discretion.

       The Court will hold for the Commissioner. This Court has
consistently held that a properly served and received Letter 1153
constitutes a prior opportunity to challenge the underlying liability and
therefore a failure to appeal it prohibits the same challenge at a
collection due process hearing (CDP hearing). In addition, the Court will
hold the Commissioner did not abuse his discretion in sustaining the
NFTL filing with respect to the periods at issue.

         2 The notice of determination and pleadings also include a TFRP for the tax

period ending December 31, 2014. Contemporaneous with this collection due process
hearing request, petitioner also pursued relief through Collections. Petitioner
submitted Form 843, Claim for Refund and Request for Abatement, filed September
26, 2016. The case activity record reflects that Form 843 was submitted after the NFTL
filing in July 2016 but before the CDP hearing in January 2018. The administrative
record includes the transcript for December 31, 2014, which reflects that the TFRP
was abated in full December 2, 2016. The tax period ending December 31, 2014, is
therefore moot and was dismissed by separate order.
                                    3

[*3]                           Background

        The parties submitted this case for decision without trial under
Rule 122. Relevant facts have been stipulated or are otherwise included
in the record. See Rule 122(a). Petitioner, Mohammad A. Kazmi, resided
in Illinois when he timely filed his petition.

I.     The Corporation

       Urgent Care is an Illinois corporation taxed under federal law as
an S corporation. Urgent Care did not pay the employment taxes
reported on its Forms 941, Employer’s Quarterly Federal Tax Return,
for the periods at issue. The sole owner of Urgent Care is Aref Senno,
M.D. Dr. Senno, who is not a party to this case, was also the sole officer,
director, and manager of Urgent Care.

II.    Petitioner’s Involvement with the Corporation

       Mr. Kazmi was employed by Urgent Care as a part-time hourly
bookkeeper during the periods at issue. He had no ownership interest in
Urgent Care. He was not an officer of Urgent Care. His name was not
on any of Urgent Care’s bank accounts. He did not have check signing
authority for Urgent Care nor any authority to make payments on behalf
of Urgent Care. At all times, he worked under the authority and
direction of Dr. Senno.

       The record includes Form 4180, Report of Interview with
Individual Relative to Trust Fund Recovery Penalty or Personal
Liability for Excise Taxes. The form reflects Mr. Kazmi as the person
interviewed and includes his signature dated October 20, 2015. In
section 1, block 8 of the form, Mr. Kazmi described his job title as
“bookkeeper” and his duties as “to take care of payroll.” In section 2,
block 1 of the form, he indicated that he did not determine financial
policy for Urgent Care, that he did not authorize payments of bills or
creditors, and that he did not authorize payroll. He did indicate that he
was authorized to transmit payroll tax returns and make federal tax
deposits and that he was aware that withheld taxes had not been
remitted.

       The record also includes Form 4183, Recommendation re: Trust
Fund Recovery Penalty Assessment. The form was filled out by the
revenue officer and contains his signature as well as his supervisor’s
signature. Both signatures are dated December 16, 2015. The revenue
officer recommended that Mr. Kazmi be assessed a TFRP because he
                                           4

[*4] was “one of the corporation’s bookkeepers and current [power of
attorney], [who] has been granted the status, duty, authority and power
to direct the collecting, accounting, and paying of trust fund/employment
taxes.” It further states that as power of attorney, he was “responsible
for opening/responding to all IRS correspondence and contacts.” It
describes his duties as “reviewing expenses, bills, and
discussing/arranging payment to creditors along with other
bookkeepers” and that “[t]hese decisions are often made independently
without the involvement of the corporate President.”

       Unable to collect the full tax liability from Urgent Care, the
Commissioner determined that Mr. Kazmi was a jointly and severally
liable3 responsible person and proposed assessing TFRPs against him in
a Letter 1153 dated December 16, 2015. Mr. Kazmi does not dispute
receiving the Letter 1153 or signing the accompanying PS Form 3811,
Domestic Return Receipt. 4 A taxpayer has 60 days to challenge a Letter
1153 by submitting a written appeal, but Mr. Kazmi made no appeal.
The Commissioner then timely assessed TFRPs against Mr. Kazmi on
March 22, 2016.

III.    Collection Due Process

      On July 19, 2016, the Commissioner issued Mr. Kazmi a Letter
3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing
Under I.R.C. sec. 6320. This time, Mr. Kazmi sought to challenge the
NFTL filing by submitting Form 12153, Request for a Collection Due
Process or Equivalent Hearing. The Form 12153 challenged the
underlying liabilities but neither requested collection alternatives nor
made other challenges to the appropriateness of the collection action. 5

        3Dr. Senno was also determined a responsible person. See infra Discussion
Part I and note 10.
        4The Court accepts the parties’ stipulation that Mr. Kazmi received the Letter
1153 on January 8, 2016, despite the certified mail receipt bearing a seemingly
impossible date stamp of January 8, 2015. The Court presumes without deciding that
the discrepancy is attributable to clerical error on the part of the U.S. Postal Service.
        5 The notice of determination states that Mr. Kazmi’s Form 12153 indicated

“[a]batement of the [TFRP] . . . as a collection alternative.” First, Mr. Kazmi did not
check any boxes on his Form 12153 for “Collection Alternative” (those alternatives
being an installment agreement, offer-in-compromise, or inability to pay). Second, it is
not apparent on the face of the Form 12153 that Mr. Kazmi requested abatement.
Ultimately, the confusion is irrelevant since the outcome of this case does not depend
on whether Mr. Kazmi’s Form 12153 requested abatement for the periods at issue. See
infra Discussion Part VI.A.
                                           5

[*5] The Commissioner received Mr. Kazmi’s Form 12153 on August 22,
2016.

       Attached to the Form 12153 and included in the administrative
record is a letter dated August 15, 2016, from Dr. Senno describing the
situation with Mr. Kazmi as follows: Mr. Kazmi, as “a part time
bookkeeper is not responsible for collection or accounting or making
payments for any tax obligation for the corporation. His duty is to
perform whatever task is given to him by me. He is not authorized to
sign any check or documents on behalf of the company. Hence, I request
you to have his name removed as a person for any tax obligation for
Urgent Care Center Inc. By the way, I have an installment payment
agreement of $450.00 per month with IRS for [Urgent Care].”

       Mr. Kazmi’s request for a CDP hearing was assigned to a
settlement officer in Appeals. On December 21, 2017, the settlement
officer sent Mr. Kazmi Letter 4837, Substantive Contact Letter, which
scheduled a CDP hearing for January 23, 2018, and requested that he
provide certain information, including a completed Form 433-A,
Collection Information Statement for Wage Earners and Self-
Employment Individuals.

      Before the CDP hearing, the settlement officer verified that the
requirements of applicable laws and administrative procedure had been
met, including the proper issuance of the Letter 1153, notice and
demand, the NFTL filing, and the notice of a right to a CDP hearing.
The settlement officer further determined that Mr. Kazmi was
prohibited from challenging the underlying liabilities in a CDP hearing
because the Letter 1153 provided him with a prior opportunity to contest
his underlying liabilities of which he failed to take advantage.

       Mr. Kazmi did not answer when the settlement officer telephoned
on January 23, 2018, so the settlement officer sent Letter 4000,
Substantive Contact Letter, giving him 14 days to provide any
additional information for his case. He telephoned the settlement officer
on January 26, 2018. They discussed his underlying liabilities6 (namely,

       6 “A taxpayer’s underlying tax liability includes all ‘amounts a taxpayer owes

pursuant to the tax laws that are subject of the Commissioner’s collection activities.’”
McNeill v. Commissioner, 148 T.C. 481, 488 n.10 (2017) (quoting Callahan v.
Commissioner, 130 T.C. 44, 49 (2008)); see Katz v. Commissioner, 115 T.C. 329, 338–
39 (2000) (“Although the term ‘underlying tax liability’ is defined in neither sections
6320 and 6330 nor the legislative history, Congress’ intent in ensuring due process to
                                           6

[*6] his position that he was neither a responsible person nor willful in
failing to remit payroll taxes). He again stated that he did not wish to
pursue collection alternatives. And he never provided Form 433-A or any
additional financial information relative to a collection alternative or
other challenge to the appropriateness of the collection action.

       The settlement officer sustained the NFTL in the notice of
determination dated February 13, 2018, and Mr. Kazmi timely
petitioned this Court for redetermination.

                                     Discussion

I.      Section 6672 TFRPs

       Employers have a duty to withhold or collect from an employee’s
wages the employee’s share of federal tax 7 and then must pay over the
withheld amounts to the Federal Government. Dixon v. Commissioner,
T.C. Memo. 2019-79, at *16 (citing Jarrett v. Commissioner, T.C. Memo.
2018-73, at *31). Such withheld amounts are known as “trust fund
taxes,” Jarrett, T.C. Memo. 2018-73, at *31 (citing Pollock v.
Commissioner, 132 T.C. 21, 25 n.10 (2009)), because they are “held to be
a special fund in trust for the United States,” § 7501(a).

       When net wages are paid to an employee and the employer does
not pay over the withheld funds, the Commissioner has no recourse
against the employee. Cashaw v. Commissioner, T.C. Memo. 2021-123,
at *9 (citing Mazo v. United States, 591 F.2d 1151, 1154 (5th Cir. 1979)).
For this reason, section 6672 provides a collection tool allowing the
Commissioner to impose a TFRP on certain persons who fail to withhold
and pay over trust fund taxes. See Newsome v. United States, 431 F.2d
742, 745 (5th Cir. 1970). The TFRP under this section is equal to the
total amount of the tax not paid over. Mazo, 591 F.2d at 1154. The TFRP
must be paid upon notice and demand by the Commissioner and shall
be assessed and collected in the same manner as taxes. § 6671(a). The
TFRP is known as an “assessable penalty” because the Commissioner

taxpayers when the Commissioner seeks to collect taxes by liens or levies suggests that
the term includes any amounts owed that are the subject of the Commissioner’s
collection activities.” (quoting H.R. Rep. No. 105-599, at 263–67 (1998) (Conf. Rep.))).
        7 These include the employee’s share of (1) Social Security tax, see §§ 3101(a),

3102(a), (2) Medicare tax, see §§ 3101(b), 3102(a), and (3) federal income tax, see
§§ 3402(a)(1), 3403.
                                           7

[*7] can assess 8 the TFRP against a taxpayer without first having to
issue the taxpayer a notice of deficiency. See generally Smith v.
Commissioner, 133 T.C. 424, 428–30 (2009) (providing an overview of
assessable penalties); Williams v. Commissioner, 131 T.C. 54, 58 n.4
(2008) (noting that assessable penalties fall outside of the deficiency
notice regime of sections 6212 to 6214 and thus fall outside this Court’s
deficiency jurisdiction). The assessable penalty was approved on
December 16, 2015, by the group manager on Form 4183. See Blackburn
v. Commissioner, 150 T.C. 218, 223 (2018).

        Section 6672(a) imposes the TFRP on (1) “[a]ny person required
to collect, truthfully account for, and pay over any tax imposed by this
title” who (2) “willfully fails to collect such tax, or truthfully account for
and pay over such tax, or willfully attempts in any manner to evade or
defeat any such tax or the payment thereof.”

      The term “person” includes an officer or employee of a corporation
who is under a duty to collect, account for, and pay over the tax.
§ 6671(b). Such persons are referred to as “responsible,” 9 and the term
may be applied broadly. Mason v. Commissioner, 132 T.C. 301, 321
(2009) (citing Logal v. United States, 195 F.3d 229, 232 (5th Cir. 1999),
and Barnett v. IRS, 988 F.2d 1449, 1454 (5th Cir. 1993)). Whether
someone is a responsible person is “a matter of status, duty and
authority, not knowledge.” Mazo, 591 F.2d at 1156.

       The U.S. Court of Appeals for the Seventh Circuit, the court to
which an appeal of this case would presumably lie absent a stipulation
to the contrary, see § 7482(b); Golsen v. Commissioner, 54 T.C. 742, 757

       8  An “assessment” is “the formal recording of a taxpayer’s tax liability” in the
IRS’s records. Baltic v. Commissioner, 129 T.C. 178, 183 (2007); see also Hibbs v. Winn,
542 U.S. 88, 100 (2004) (“An assessment is made ‘by recording the liability of the
taxpayer in the office of the Secretary in accordance with rules or regulations
prescribed by the Secretary.’” (quoting section 6203)); Treas. Reg. § 301.6203-1. It is
“essentially a bookkeeping notation.” Laing v. United States, 423 U.S. 161, 170 n.13
(1976) (“The ‘assessment,’ essentially a bookkeeping notation, is made when the
Secretary or his delegate establishes an account against the taxpayer on the tax
rolls.”).
        9 The IRS collects the trust fund liability only once. Consequently, the IRS

cross-references payments against the trust fund liability of the employer and
payments against the TFRPs of responsible persons. See Weber v. Commissioner, 138
T.C. 348, 358 (2012). In addition, for circumstances in which there is more than one
responsible person, a taxpayer who paid the TFRP may bring a separate suit against
the other responsible person(s) claiming a right of contribution. § 6672(d); see Weber,
138 T.C. at 358 n.8.
                                     8

[*8] (1970), aff’d, 445 F.2d 985 (10th Cir. 1971), considers the following
to be indicia of “responsible person” status: (1) holding corporate office,
(2) owning stock in the company, (3) serving on the board of directors,
(4) having authority to sign checks, and (5) having control over corporate
financial affairs, United States v. Kim, 111 F.3d 1351, 1362–63 (7th Cir.
1997).

       A responsible person will be held liable for a TFRP only where the
failure to pay the withholding tax was willful. § 6672. “Willful” for this
purpose does not mean the responsible person must have a “criminal or
other bad motive . . . , but simply a voluntary, conscious and intentional
failure to collect, truthfully account for, and pay over the taxes withheld
from the employees.” Newsome, 431 F.2d at 745. To establish
willfulness, there is no requirement that the responsible person
intended to deprive the Federal Government of the withholding tax. Id.
at 747. Willfulness can exist where the “responsible person acts with a
reckless disregard of a known or obvious risk that trust funds may not
be remitted to the [Federal] Government.” Mazo, 591 F.2d at 1155.
Willfulness is typically proven by evidence that a responsible person
paid other creditors when withholding taxes were due to the Federal
Government. Gustin v. United States, 876 F.2d 485, 492 (5th Cir. 1989).

       Mr. Kazmi contends that he is not liable for a TFRP because he
was not a responsible person who willfully failed to pay over the
withheld taxes for any of the periods at issue. Because the underlying
tax liability of a TFRP is the penalty itself, the Court must first decide
whether Mr. Kazmi is entitled to challenge his underlying liabilities
before reaching the merits of his contention. See cases cited supra note 6.

II.   Section 6320

       Before imposing a TFRP under section 6672, the IRS must
properly notify the responsible person and properly assess the penalty
against that person. In order to properly assess, the Commissioner must
generally notify the taxpayer in writing by mail to the taxpayer’s last
known address advising that the person will be subject to an assessment
of the TFRP. §§ 6672(b)(1), 6212(b); Mason, 132 T.C. at 322. Letter 1153
satisfies this preliminary notice requirement. See Mason, 132 T.C.
at 317–18, 322.

       The Commissioner may not assess a TFRP for at least 90 days
after providing the notice (in this case, Letter 1153). § 6672(b)(3). Within
                                    9

[*9] those 90 days, the taxpayer may challenge the notice by requesting
an administrative hearing before Appeals. § 6672(b)(3)(A).

        If the responsible person fails to pay the TFRP after notice and
demand, the amount becomes a lien in favor of the United States upon
that person’s property and rights to property. § 6321. The IRS may then
file an NFTL to protect the priority of the lien against certain third
parties. § 6323. Once the IRS files an NFTL, it must notify the person of
the filing and of the person’s right to a CDP hearing to appeal the NFTL
filing. § 6320(a) and (b).

III.   Jurisdiction and Burden of Proof

       Sections 6320(c) and 6330(d)(1) grant this Court jurisdiction to
review the Commissioner’s determination that a proposed collection
action was proper. Williams, 131 T.C. at 58 n.4; Callahan, 130 T.C.
at 48. Taxpayers who challenge their underlying tax liabilities in cases
arising under section 6320 or 6330 bear the burden of proof regarding
their correct tax liabilities. See Rule 142(a); Thompson v. Commissioner,
140 T.C. 173, 178 (2013).

IV.    Standard of Review

       In general, a taxpayer must raise an issue at a CDP hearing to
preserve it for this Court’s review. Perkins v. Commissioner, 129 T.C. 58,
63 (2007); Magana v. Commissioner, 118 T.C. 488, 493 (2002); Treas.
Reg. § 301.6330-1(f)(2), Q&A-F3. In reviewing a determination under
section 6330(c)(2), the Court considers only issues that the taxpayer
properly raised during the CDP hearing. Treas. Reg. §§ 301.6320-1(f)(2),
Q&A-F3, 301.6330-1(f)(2), Q&A-F3; see Giamelli v. Commissioner, 129
T.C. 107, 115 (2007). Therefore, “[a] taxpayer is precluded from
disputing the underlying liability [in this Court] if it was not properly
raised in the CDP hearing.” Thompson, 140 T.C. at 178. A taxpayer
during a CDP hearing does not properly raise an issue, including an
issue concerning his underlying tax liability, if he “fails to present to
Appeals any evidence with respect to that issue after being given a
reasonable opportunity to present such evidence.” Treas. Reg.
§ 301.6320-1(f)(2), Q&A-F3; see Pough v. Commissioner, 135 T.C. 344,
349 (2010). The taxpayer must also raise the issue in his petition to this
Court. Rule 331(b)(4) (“Any issue not raised in the assignments of error
shall be deemed to be conceded.”).

      A taxpayer cannot challenge an underlying liability in a CDP
hearing, and this Court cannot review that liability, if the taxpayer had
                                          10

[*10] an earlier opportunity to dispute the assessment of that liability.
§ 6330(c)(2)(B); Mason, 132 T.C. at 317.

       Where a taxpayer’s underlying tax liability is properly at issue
before this Court, the Court reviews the Commissioner’s determination
regarding the underlying liability de novo. Sego v. Commissioner, 114
T.C. 604, 610 (2000). The Court reviews any other administrative
determination regarding proposed collection actions for abuse of
discretion. Id.; Goza v. Commissioner, 114 T.C. 176, 182 (2000). An
abuse of discretion is any action that is arbitrary, capricious, or without
sound basis in law or fact. Woodral v. Commissioner, 112 T.C. 19, 23
(1999).

V.      Underlying Liabilities

      The liabilities in this case involve TFRPs. Before TFRPs can be
assessed, the Commissioner must generally notify the taxpayer in
writing by mail to the taxpayer’s last known address advising that
TFRPs will be assessed. § 6672(b)(1); Mason, 132 T.C. at 322. Letter
1153 satisfies this preliminary notice requirement. See Mason, 132 T.C.
at 317–18, 322.

       The Commissioner issued Mr. Kazmi a Letter 1153. Mr. Kazmi
does not dispute receiving Letter 1153 or signing the accompanying PS
Form 3811, Domestic Return Receipt. 10 The Letter 1153 satisfied the
notice requirement of section 6672. See id. The assessment of the TFRPs
against Mr. Kazmi was thus valid. The Court may therefore consider the
merits of that assessment—i.e., the underlying liabilities—provided
that Mr. Kazmi was not statutorily precluded from raising them during
his CDP hearing.

      A Letter 1153 also provides a taxpayer with an administrative
means for protesting a proposed assessment of TFRPs. In the specific
context of CDP cases involving TFRPs, this Court has held that, for
purposes of section 6330(c)(2)(B), a taxpayer has an “opportunity” to
dispute his underlying tax liability for a TFRP when he receives Letter
1153. See Mason, 132 T.C. at 317–18. Thus, if the taxpayer receives
Letter 1153 but fails to challenge the underlying tax liability at the
Appeals conference, then the taxpayer is precluded by section
6330(c)(2)(B) from challenging the underlying tax liability in a

        10 A Letter 1153 that is neither received nor deliberately refused by a taxpayer

does not constitute an opportunity to dispute the taxpayer’s liability. See Mason, 132
T.C. at 318; Fitzpatrick v. Commissioner, T.C. Memo. 2016-199, at *18.
                                   11

[*11] subsequent CDP hearing. This is the circumstance in which Mr.
Kazmi now finds himself.

       Mr. Kazmi does not dispute that he failed to challenge the Letter
1153. Instead, he asks this Court to overturn its previous holdings that
Letter 1153 constitutes a prior opportunity. His argument is that
Letter 1153 does not provide a prior opportunity under section
6330(c)(2)(B) because the Commissioner’s denial of a Letter 1153 appeal
does not result in an opportunity for the taxpayer to seek judicial review
before the Tax Court.

       Mr. Kazmi is correct to the extent that, if a taxpayer appeals
Letter 1153 and the Commissioner denies the appeal, the taxpayer
cannot at that stage challenge the denial of the appeal in the Tax Court.
This is so because the Tax Court is a Court of limited jurisdiction. See
§ 7442; Burns, Stix Friedman & Co. v. Commissioner, 57 T.C. 392, 396
(1971). It has only the jurisdiction which is conferred on it by statute.
Burns, Stix Friedman & Co., 57 T.C. at 396; see also § 7442. But the Tax
Court’s lack of jurisdiction does not necessarily mean that a taxpayer
lacks any opportunity for judicial review.

      This Court addressed an argument similar to Mr. Kazmi’s in
Bishay v. Commissioner, T.C. Memo. 2015-105, aff’d without published
opinion, 2017 WL 11453028 (1st Cir. 2017). In that case, the Court noted
that

      [t]he lack of opportunity for judicial review after the Letter
      1153 proceeding does not severely prejudice the taxpayer
      because, as we have previously noted, “the section 6672
      penalty is divisible, so that a taxpayer may litigate the
      penalty after having paid an amount corresponding to the
      tax withheld from a single employee”. See Weber v.
      Commissioner, 138 T.C. 348, 363 n.12 (2012) (citing Davis
      v. United States, 961 F.2d 867, 870 n.2 (9th Cir. 1992), and
      Bland v. Commissioner, T.C. Memo. 2012-84). Thus, the
      taxpayer whose liability is upheld in the Letter 1153
      proceeding can make a small “token” payment towards the
      section 6672 penalty, file a refund claim with the IRS, and,
      if the refund claim is denied, file a refund suit in the
      Federal District Court or the Court of Federal Claims.

Bishay, T.C. Memo. 2015-105, at *17 n.9.
                                        12

[*12] At this time, the Court declines to overturn its previous holdings
that a properly mailed and received Letter 1153 constitutes a prior
opportunity. Mr. Kazmi’s failure to challenge the Letter 1153 thus
precluded him from challenging his underlying liabilities in the CDP
hearing, and the Court will review for abuse of discretion the
Commissioner’s determination to sustain the NFTL filing.

VI.    Abuse of Discretion

       A.      In General

       In reviewing for abuse of discretion the Court must uphold the
settlement officer’s determination unless it is arbitrary, capricious, or
without sound basis in law or fact. See Murphy v. Commissioner, 125
T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006); see also Keller v.
Commissioner, 568 F.3d 710, 716–18 (9th Cir. 2009), aff’g in part T.C.
Memo. 2006-166, and aff’g in part, vacating in part decisions in related
cases. The Court does not conduct an independent review or substitute
its own judgment for that of the settlement officer. Murphy, 125 T.C.
at 320.

      At the agency-level CDP hearing, the settlement officer must
determine whether the proposed collection action may proceed. The
procedures for the agency-level hearing regarding an NFTL are similar
to those set forth in section 6330(c) for a notice of intent to levy.
§ 6320(c).

       First, the settlement officer must verify that the requirements of
any applicable law and administrative procedure have been met by IRS
personnel. § 6330(c)(3)(A). The attachment to the notice of
determination summarized the settlement officer’s compliance with
these requirements. 11 However, the Court construes Mr. Kazmi’s
contention that the Commissioner has the wrong person as an argument
that not all requirements of applicable law were met and addresses it
infra Discussion Part VI.B.

       Second, the taxpayer may “raise at the hearing any relevant issue
relating to the unpaid tax or the [collection action], including” challenges

        11 Mr. Kazmi has not raised whether the settlement officer failed to obtain

verification of compliance with the supervisory approval requirement under section
6751(b). In any event the Form 4183 in the administrative record reflects the
settlement officer’s verification of supervisory approval. See Blackburn, 150 T.C.
at 223.
                                        13

[*13] to the appropriateness of the collection action and collection
alternatives such as an installment agreement or an offer-in-
compromise. 12 § 6330(c)(2)(A). Mr. Kazmi declined to propose any
collection alternatives before or during his CDP hearing. It is not an
abuse of discretion for a settlement officer to sustain a collection action
and not consider collection alternatives where the taxpayer has
proposed none. See McLaine v. Commissioner, 138 T.C. 228, 242–43
(2012); Kendricks v. Commissioner, 124 T.C. 69, 79 (2005); see also
Treas. Reg. § 301.7122-1(d)(1) (requiring that offers to compromise a tax
liability must be made in writing and include all the information
prescribed or requested by the IRS).

      Third, the taxpayer may contest the existence and amount of the
underlying liability, but only if he did not receive a notice of deficiency
or otherwise have an opportunity to dispute the tax liability.
§ 6330(c)(2)(B). As the Court discussed supra, Mr. Kazmi could not
contest his underlying liabilities in the CDP hearing because he received
but did not challenge the Letter 1153, which provided him with a prior
opportunity. In such a case the primary purpose of the CDP hearing was
for Mr. Kazmi and the settlement officer to discuss collection
alternatives. See Bishay, T.C. Memo. 2015-105, at *17.

       Fourth, the settlement officer must determine “whether any
proposed collection action balances the need for the efficient collection
of taxes with the legitimate concern of the person that any collection
action be no more intrusive than necessary.” § 6330(c)(3)(C). Mr. Kazmi
does not argue this point. Moreover, the actions sustained by the
settlement officer’s determination—i.e., the filing of an NFTL, rather
than issuing a notice of intent to levy—was among the less intrusive
collection methods available to the IRS. The IRS was only preserving its
place in Mr. Kazmi’s line of creditors. The IRS chose the least intrusive
collection method and did not abuse its discretion in doing so.

       B.      Verification of Responsible Person

      To Mr. Kazmi, it seems clear that the Commissioner has the
wrong person because he was merely a part-time bookkeeper. He was
not an officer or director of the company. He had no ownership stake in
the company. He had no authority to sign checks. As Urgent Care’s sole

        12 For a review of various grounds for compromise, see Treasury Regulation

§ 301.7122-1(b) and T.D. 9007, 2002-2 C.B. 250. For an overview of the legislative
history surrounding compromises, see generally H.R. Rep. No. 105-599, at 289 (1998)
(Conf. Rep.), and T.D. 8829, 1999-2 C.B. 235.
                                    14

[*14] owner wrote, Mr. Kazmi’s sole duty was “to perform whatever task
is given to him.”

       The Court construes Mr. Kazmi’s contention that he is not a
responsible person to whom the TFRP should be applied as an argument
that the law requires the Commissioner to determine whether someone
is a responsible person to whom the TFRP applies as a condition
precedent to the issuance of a Letter 1153, that Mr. Kazmi met none of
the indicia of responsible person status, and that the settlement officer
must have acted arbitrarily when he verified that the requirements of
applicable law had been met.

       The term “responsible person” is derived from the mandate in
section 6672(a) that “[a]ny person required to collect, truthfully account
for, and pay over any tax imposed by this title” shall be liable for the
TFRP. Congress added section 6672(b)(1) to the Code in 1996 as part of
The Taxpayer Bill of Rights 2, Pub. L. No. 104-168, § 901, 110 Stat. 1452,
1465. That section requires that “[n]o [TFRP] shall be imposed . . . unless
the Secretary notifies the taxpayer in writing . . . that the taxpayer shall
be subject to an assessment of such penalty.” § 6672(b)(1). In other
words, it requires that once the Commissioner determines someone is a
responsible person subject to the TFRP, he must provide that person
with notice (i.e., Letter 1153) before assessing the TFRP.

       The record indicates that the settlement officer complied with
procedural requirements and gave due consideration to Mr. Kazmi’s
case. Before the issuance of the Letter 1153, the settlement officer
verified that a determination had been made that Mr. Kazmi was a
responsible person to whom the TFRP applied and that the penalty had
received supervisory approval. See Blackburn, 150 T.C. at 223. The
settlement officer also verified that the Letter 1153 was sent by certified
mail and received by Mr. Kazmi. As the Court stated supra p. 12, in
reviewing for abuse of discretion, it does not substitute its own judgment
for that of the settlement officer. A difference of reasonable minds does
not rise to the level of arbitrariness required for finding an abuse of
discretion.

VII.   Conclusion

      In view of the foregoing, the Court sustains the notice of
determination for the NFTL filing for taxable quarters ending June 30
and September 30, 2014.
                                  15

[*15] The Court has considered all arguments by the parties and, to the
extent not specifically mentioned above, concludes that they are moot,
irrelevant, or without merit.

      To reflect the foregoing,

      An appropriate decision will be entered.