Court Opinion

ID: 9930839
Source: CourtListenerOpinion
Date Created: 2024-02-07 20:03:57.902737+00
Date Added: 2024-06-11T11:44:29.901814
License: Public Domain

United States Tax Court

                               T.C. Memo. 2024-19

                          CHRISTOPHER CRUMEDY,
                                 Petitioner

                                           v.

               COMMISSIONER OF INTERNAL REVENUE,
                           Respondent

                                     __________

Docket No. 14725-21L.                                      Filed February 7, 2024.

                                     __________

Christopher Crumedy, pro se.

Ryan A. Ault, Ashley M. Bender, Corey R. Clapper, and Olivia H.
Rembach, for respondent.

         MEMORANDUM FINDINGS OF FACT AND OPINION

       ASHFORD, Judge: In this collection due process (CDP) case
petitioner seeks review pursuant to section 6330(d)(1) 1 of the
supplemental determination by the Internal Revenue Service (IRS)
Independent Office of Appeals (Appeals) to uphold a proposed levy. The
proposed levy seeks to collect civil penalties under section 6702(a) that
were assessed against petitioner for having filed frivolous federal
income tax returns for the 2017 taxable year. The issues before the
Court are whether (1) petitioner’s underlying liability for those penalties
is properly at issue in this proceeding and (2) Appeals erred in
sustaining the proposed collection action.

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

Code, Title 26 U.S.C., in effect at all relevant times, and regulation references are to
the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times.
Some monetary amounts are rounded to the nearest dollar.

                                 Served 02/07/24
                                        2

[*2]                        FINDINGS OF FACT

       Some of the facts have been stipulated and are so found. The
Stipulation of Facts and the attached Exhibits are incorporated herein
by this reference. Petitioner resided in North Carolina when he timely
filed his Petition with the Court.

I.     Petitioner’s Underlying Liability for 2017

      During 2017 petitioner was employed at the Veteran’s
Administration (VA) and Pitt County Memorial Hospital (Memorial
Hospital). For 2017, as reported on Forms W–2, Wage and Tax
Statement, petitioner received income from the VA and Memorial
Hospital of $38,849 and $11,361, respectively. Petitioner also had his
own business in 2017.

        On July 23, 2018, the IRS received two Forms 1040,
U.S. Individual Income Tax Return, for 2017 from petitioner. 2 On the
first return petitioner reported no income from “[w]ages, salaries, tips,
etc.”; instead, he reported “[o]ther income” from “State Farm” of $245
(which he also reported as his total income and his adjusted gross
income, but he reported no amount as taxable income). He reported
payments (for federal income tax withheld) of $244. Petitioner signed
this return, dating it July 18, 2018. He attached to this return two
Forms 1040–V, Payment Voucher—one for $139 and another for $105,
and a payment coupon from State Farm with an amount due of $105
from petitioner. Transposed over the payment coupon were the
following words: “MONEY ORDER,” “PAY TO THE ORDER: UNITED
STATES TREASURY,” “CHARGE THE SUM: $105.18,” “TO: STATE
FARM,” and “MIRROR ACCOUNT: CHRISTOPHER CRUMEDY.”

      On the second return petitioner reported no income from
“[w]ages, salaries, tips, etc.”; instead, he reported “[o]ther income” from
“NC Dept. of Revenue” of $139 (which he also reported as his total
income and his adjusted gross income, but he reported no amount as
taxable income). He reported payments (for federal income tax
withheld) of $139. Petitioner signed this return, dating it July 18, 2018.
He attached to this return the same two Forms 1040–V and State Farm
payment coupon that he attached to the first return. Additionally, he
attached to the second return a July 11, 2018, garnishment letter
addressed to Memorial Hospital from the State of North Carolina

       2 It appears that the IRS treated these returns as duplicate returns because

the IRS’s records show a 2017 “[t]ax return filed” for petitioner on June 18, 2018.
                                    3

[*3] Department of Revenue; the letter indicates a payment due of $139.
Transposed over the garnishment letter were the following words:
“MONEY ORDER,” “PAY TO THE ORDER: UNITED STATES
TREASURY,” “CHARGE THE SUM: $138.92,” “TO: NORTH
CAROLINA DEPARTMENT OF REVENUE,” and “MIRROR
ACCOUNT: CHRISTOPHER CRUMEDY.”

       Sometime between July 23, 2018, and April 30, 2019, the IRS
identified the returns as potentially frivolous tax returns. On May 10,
2019, the IRS sent petitioner a letter informing him that his July 23,
2018, “claim[s] for credit” for 2017 could not be allowed because they
were based on a frivolous position not supported by law. The letter
further advised petitioner that federal courts have consistently ruled
against those arguments and may impose substantial fines for taking a
frivolous position, but that he nevertheless could file suit to recover the
credit amount with the U.S. District Court that has jurisdiction or with
the U.S. Court of Federal Claims.

       Ultimately, an IRS employee (Ms. Koegal) determined that the
returns were frivolous and therefore petitioner should be liable for
section 6702(a) penalties. On May 27 and June 3, 2019, the IRS
assessed two penalties (one for each return) of $5,000 pursuant to
section 6702(a), and assessment notices were sent to petitioner on the
same dates. The record includes a completed Form 8278, Assessment
and Abatement of Miscellaneous Civil Penalties, for the two section
6702(a) penalties. The form was prepared by Ms. Koegal on April 30,
2019, and includes the signature of Adam R. Fisher, Ms. Koegal’s
immediate supervisor, dated May 1, 2019, approving the penalties.

II.   IRS’s Collection Action

      On February 25, 2020, the IRS sent petitioner Notice LT11,
Intent to Levy and Notice of Your Right to a Hearing (levy notice), with
respect to the assessed section 6702(a) penalties. The levy notice
advised petitioner that the IRS intended to levy to collect the
outstanding balance for the section 6702(a) penalties, which through the
date of the levy notice totaled $8,094, consisting of an “[a]mount . . .
owed” of $7,760 and “[a]dditional interest charges” of $333, and that he
had the right to a hearing to appeal the proposed collection action. The
levy notice also advised petitioner that the IRS might file a notice of
federal tax lien at any time to protect its interest.
                                     4

[*4] In response to the levy notice petitioner timely submitted Form
12153, Request for a Collection Due Process or Equivalent Hearing
(CDP hearing request). As the reason for his disagreement with the levy
notice petitioner referenced a March 5, 2020, letter he wrote to the IRS
and “Exhibits A-F,” all of which he attached to his CDP hearing request.
In his March 5, 2020, letter, petitioner suggested, citing “IRC section
6702[(b)](3),” 3 that he could withdraw the 2017 returns that the IRS had
received on July 23, 2018. He also stated in his letter that three
different IRS representatives had informed him that he was to receive a
refund of $372 for 2017 and thus he was requesting that refund. The
“Exhibits A-F” were copies of (1) various IRS correspondence sent to
petitioner from June 18, 2018, to July 26, 2019 (including the two
assessment notices on which petitioner had added a typed statement
requesting withdrawal of each return the IRS had received on July 23,
2018), and (2) certified mailing receipts for correspondence he had sent
to the IRS on June 18, 2019. In his CDP hearing request petitioner did
not request any collection alternatives, but he did check the box for lien
withdrawal (despite no such lien having been filed).

      An IRS representative acknowledged receipt of petitioner’s CDP
hearing request by letter to petitioner dated October 26, 2020, and
ultimately the request was forwarded to Appeals and assigned to an
Appeals officer (AO Town).

       On January 13, 2021, AO Town sent petitioner a letter in which
he scheduled a telephone CDP hearing for February 19, 2021. He also
indicated that the scheduled hearing was petitioner’s opportunity to
discuss with him the reasons petitioner disagreed with the proposed
collection action or to discuss collection alternatives. In the letter
AO Town outlined the issues he had to consider during the hearing.
Finally, AO Town informed petitioner that if he preferred to reschedule
the hearing or have another type of conference (i.e., correspondence or
in-person), he should let him know by January 27, 2021.

       On February 19, 2021, petitioner did not call AO Town for the
scheduled hearing as directed. On the same day AO Town sent
petitioner a followup letter requesting that petitioner contact him by
March 5, 2021. He also advised petitioner that after March 5, 2021, he
would make a determination by reviewing the IRS Office of Collections

       3 In his CDP hearing request, as well as before this Court, petitioner

erroneously refers to section 6702(b)(3) as section 6702(3).
                                    5

[*5] administrative file and whatever information petitioner had
provided. Petitioner did not contact AO Town.

       Appeals issued a notice of determination dated March 24, 2021,
to petitioner, sustaining the proposed levy and detailing the basis for
the determination in an attached summary.

III.   Tax Court Proceedings

       Petitioner timely filed a Petition with this Court for review of the
notice of determination. On October 13, 2022, respondent filed a Motion
to Remand, requesting that the Court remand petitioner’s case to
Appeals for further consideration because it was not clear whether
(given some perceived discrepancies in petitioner’s mailing address)
petitioner had been afforded an opportunity for a CDP hearing to
address his disagreement with the proposed collection action. On
October 31, 2022, the Court granted the Motion, remanding the case to
Appeals so that a settlement officer could conduct a CDP hearing,
address petitioner’s arguments, and consider collection alternatives.

       On December 12, 2022, AO Town sent petitioner a letter
scheduling a telephone CDP hearing for January 4, 2023. As in his
January 13, 2021, letter, AO Town outlined the purpose of the hearing
and what he was required to consider during the hearing, and he offered
petitioner the opportunity to reschedule the hearing or to have the
hearing in a different format.

       On January 4, 2023, petitioner did not call AO Town for the
scheduled hearing as directed. On the same day AO Town sent
petitioner a letter that was identical in all respects to the December 12,
2022, letter, except that it (1) scheduled a telephone CDP hearing for
January 25, 2023, and (2) was addressed to petitioner in care of an
address in North Carolina different from the address (also in North
Carolina) on the December 12, 2022, letter.

       On January 25, 2023, petitioner did not call AO Town for the
rescheduled hearing as directed. On the same day AO Town sent
petitioner a followup letter requesting that petitioner contact him by
February 8, 2023. Similar to AO Town’s February 19, 2021, letter, this
followup letter also advised petitioner that after February 8, 2023,
AO Town would make a determination by reviewing the IRS Office of
Collections administrative file and whatever information petitioner had
provided. This letter was sent to petitioner in care of the same address
to which the January 4, 2023, letter was sent. On January 27 and
                                   6

[*6] February 10, 2023, petitioner faxed to AO Town copies of
(1) AO Town’s January 4, 2023, letter and (2) various IRS
correspondence sent to petitioner from October 22, 2018, to November 4,
2020. Petitioner provided no explanation for faxing these documents to
AO Town.

      Appeals issued a supplemental notice of determination dated
March 28, 2023, to petitioner; the supplemental notice of determination
affirmed the initial determination to sustain the proposed levy.
A summary detailing the matters considered by Appeals and its
conclusions was attached to the supplemental notice of determination
and included the following explanations:

      Legal and Procedural Requirements
      I, [AO] Town, verified [that] the requirements of any
      applicable law or administrative procedure were met. IRS
      records confirmed the proper issuance of the notice and
      demand, Notice of Intent to Levy and/or Notice of Federal
      Tax Lien (NFTL) filing, and notice of a right to a Collection
      Due Process (CDP) hearing. An assessment was properly
      made for each tax and period listed on the CDP notice.

      Notice and demand for payment was mailed to your last
      known address.

      There was a balance due when the Notice of Intent to Levy
      was issued or when the NFTL filing was requested. I had
      no prior involvement with respect to the specific tax
      periods either in Appeals or Compliance.

      I reviewed the Collection file, IRS records and information
      you provided. My review confirmed that the IRS followed
      all legal and procedural requirements, and the actions
      taken or proposed were appropriate under the
      circumstances.

      Collection statute verification:
      The collection statute has been suspended; the collection
      period allowed by statute to collect these taxes has been
      suspended by the appropriate computer codes for the tax
      periods at issue.
                                     7

[*7]   Issues on the Unpaid Liability
       Collection Alternatives Requested
       You offered no alternatives to collection.

       Challenges to the Liability
       You did not dispute your liability.

       You raised no other issues.

       Remand
       In an order dated 10/13/2022, the U.S. Tax Court returned
       your case to the Independent Office of Appeals for a
       supplemental collection due process (CDP) hearing. You
       requested reconsideration of the determination to uphold
       issuance of the Notice of Intent to Levy. You did not
       respond to multiple attempts at contact other than to
       provide documents unrelated to the issues in your initial
       appeal. Nor did you submit anything to explain the context
       of your submissions. As a result, your request cannot be
       further considered.

       Balancing Efficient Tax Collection with Concern
       Regarding Intrusiveness
       It is Appeals determination to sustain the Notice of Intent
       to Levy. The requirements of all applicable laws and
       administrative procedures have been met. You received
       your required notices.

       Your request for withdrawal of the Notice of Federal Tax
       Lien cannot be considered because no lien has been filed on
       the appealed periods. Your petition to the Court cannot be
       considered because you did not respond to multiple
       attempts at contact by the Settlement Officer other than to
       provide documents which were not requested or needed.
       You did not request any other collection alternative or
       respond to attempts at contact. You are not in current
       compliance with filing of returns. Given your lack of
       cooperation, the government took proper action in issuing
       a Notice of Intent to Levy. Lacking your cooperation, the
       Notice of Intent to Levy balances the need for efficient
       collection with your legitimate concern that any collection
       action be no more intrusive than necessary.
                                    8

[*8]                           OPINION

I.     General Legal Principles

       A.    CDP Review Procedure for a Proposed Levy

       Under section 6331(a), if any person liable to pay any tax
(including additions to tax, interest, additional amounts, or assessable
penalties) neglects or refuses to do so after notice and demand, the
Commissioner is authorized to collect the unpaid amount by way of a
levy upon all property and rights to property belonging to such person
or upon which there is a lien. Pursuant to section 6330(a), the
Commissioner must provide the person with written notice of an
opportunity for an administrative hearing to review the proposed levy.

       If an administrative hearing is requested in a levy case, the
hearing is to be conducted by Appeals. § 6330(b)(1). At the hearing the
Appeals officer conducting it must obtain verification that the
requirements of applicable law and administrative procedure have been
met. § 6330(c)(1). The taxpayer may raise at the hearing any relevant
issue relating to the unpaid tax or the proposed collection action,
including spousal defenses, challenges to the appropriateness of the
proposed collection action, and collection alternatives. § 6330(c)(2)(A).
Additionally, the taxpayer may challenge the existence or amount of his
underlying tax liability if he did not receive a notice of deficiency with
respect to the liability or did not otherwise have an earlier opportunity
to dispute the liability. § 6330(c)(2)(B); Sego v. Commissioner, 114 T.C.
604, 609 (2000); Goza v. Commissioner, 114 T.C. 176, 180–81 (2000). As
relevant here, “underlying tax liability” includes a taxpayer’s liability
for section 6702 penalties. Callahan v. Commissioner, 130 T.C. 44, 49
(2008).

       Following the hearing the Appeals officer must determine among
other things whether the proposed collection action is appropriate. In
reaching the determination the Appeals officer must take into
consideration: (1) whether the requirements of applicable law and
administrative procedure have been met; (2) all relevant issues raised
by the taxpayer; and (3) whether any proposed collection action balances
the need for the efficient collection of taxes with the legitimate concern
of the taxpayer that collection be no more intrusive than necessary.
§ 6330(c)(3); see also Lunsford v. Commissioner, 117 T.C. 183, 184
(2001); Ragsdale v. Commissioner, T.C. Memo. 2019-33, at *19; Levin v.
                                     9

[*9] Commissioner, T.C. Memo. 2018-172, at *24–25, aff’d, 804 F.
App’x 833 (9th Cir. 2020).

      B.     Standard of Review

       Section 6330(d)(1) grants this Court jurisdiction to review the
determination made by Appeals in a levy case. Furthermore, when (as
is the case here) this Court remands a case to Appeals and on remand a
supplemental determination is issued, the Court reviews the
supplemental determination. See Hoyle v. Commissioner, 136 T.C. 463,
467–68 (2011), supplementing 131 T.C. 197 (2008).              Where the
taxpayer’s underlying tax liability is properly at issue before this Court,
the Court reviews the liability determination de novo. Goza, 114 T.C.
at 181–82. Where the taxpayer’s liability is not properly at issue before
this Court, the Court reviews Appeals’ determination for abuse of
discretion; that is, whether the determination was arbitrary, capricious,
or without sound basis in fact or law. Murphy v. Commissioner, 125 T.C.
301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006); Sego, 114 T.C. at 610;
Goza, 114 T.C. at 181–82.

        A taxpayer’s underlying tax liability is properly at issue before
this Court (thus warranting de novo review of Appeals’ liability
determination) if the taxpayer has properly raised it during the CDP
administrative proceedings. See Giamelli v. Commissioner, 129 T.C.
107, 115 (2007); Treas. Reg. § 301.6330-1(f)(2), Q&A-F3. In a case such
as the instant case where the underlying tax liability involves the
collection of section 6702(a) penalties, during the CDP administrative
proceedings the taxpayer must make a meaningful challenge to the
penalty itself—e.g., by plausibly contending that his return “contain[s]
[sufficient] information on which the substantial correctness of the self-
assessment may be judged,” § 6702(a)(1)(A), or that his position is not
one “which the [IRS] has identified as frivolous,” § 6702(a)(2)(A); see also
Pohl v. Commissioner, T.C. Memo. 2013-291, at *8. The Treasury
regulations also explicitly state that an issue is not properly raised if the
taxpayer “fails to present to Appeals any evidence with respect to that
issue after being given a reasonable opportunity to present such
evidence.” Treas. Reg. § 301.6330-1(f)(2), Q&A-F3.

II.   Analysis

      Having set forth the applicable legal principles, we first address
what is the standard of our review in this case.
                                    10

[*10] As a threshold matter, we conclude that petitioner is not
precluded from challenging his liability for the section 6702(a) penalties
by section 6330(c)(2)(B). Petitioner did not receive a notice of deficiency
before assessment of the penalties because the deficiency procedures do
not apply with respect to the assessment or collection of section 6702(a)
penalties, see § 6703(b), and the record before us shows that petitioner
has not had an earlier opportunity to dispute his liability, see Callahan,
130 T.C. at 50.

       However, we also conclude that petitioner did not properly raise
an underlying liability challenge during the CDP administrative
proceedings. The record before us unmistakably shows that petitioner
made no meaningful challenge to the section 6702(a) penalties during
the CDP administrative proceedings. He never engaged whatsoever
with AO Town, except to fax AO Town (without providing any
explanation) copies of IRS correspondence that had been sent to him.
Indeed, petitioner cannot plausibly contend that the 2017 returns that
the IRS received on July 23, 2018, contained sufficient information on
which the substantial correctness of his self-assessment could be judged.
Those returns were so-called zero returns; they reported no taxable
income, seemingly attempted to correct the third-party reporting of his
two employers, and “contain[ed] information [i.e., payment information]
that on its face indicate[d] that the self-assessment [was] substantially
incorrect.” § 6702(a)(1)(B); see also Grunsted v. Commissioner, 136 T.C.
455, 460 (2011) (“This Court and others have repeatedly characterized
returns reflecting zero income and zero tax as frivolous.”). Additionally,
petitioner cannot plausibly contend that his position as reflected on
those 2017 returns had not been identified by the IRS as frivolous. The
IRS formally notified petitioner by letter on May 10, 2019, that his
“claim[s] for credit” as reflected on those 2017 returns could not be
allowed because they were based on a frivolous position not supported
by law. Because we conclude that petitioner did not meaningfully
challenge his underlying liability for the section 6702(a) penalties, we
will apply an abuse of discretion standard in our review of Appeals’
determination in this case.

      Turning to the propriety of Appeals’ determination to uphold a
proposed levy to collect petitioner’s section 6702(a) penalties, as we
previously noted, see supra p. 8, we review the record before us to
determine whether AO Town (1) properly verified that the requirements
of applicable law or administrative procedure had been met;
(2) considered any relevant issues petitioner raised, including spousal
defenses, challenges to the appropriateness of the proposed collection
                                          11

[*11] action, and collection alternatives; and (3) considered whether any
proposed collection action balances the need for the efficient collection
of taxes with the legitimate concern of petitioner that any collection
action be no more intrusive than necessary.

       During the CDP administrative proceedings, petitioner raised no
colorable issues about the section 6702(a) penalties or the proposed levy,
and he offered no collection alternatives. Additionally, as Appeals’
determination correctly points out, although petitioner in his CDP
hearing request checked the box for lien withdrawal, no lien had been
filed with respect to petitioner’s 2017 taxable year and thus that issue
could not be considered.

       It is clear from our review of the record before us that AO Town
considered all of the requisite factors under section 6330(c)(3).
Petitioner seems to question only whether the IRS made a lawful
assessment of the section 6702(a) penalties because in his view he was
entitled to withdraw the 2017 returns that the IRS received on July 23,
2018, and in fact had attempted to do so. 4 In support of his position,
petitioner relies on section 6702(b)(3) and the two exhibits attached to
his CDP hearing request, which were copies of the two assessment
notices on which he had added a typed statement requesting withdrawal
of each return the IRS had received on July 23, 2018.

       Petitioner’s position is unfounded, and we reject it. In Kestin v.
Commissioner, 153 T.C. 14, 21–22 (2019), we made clear that (1) section
6702(b) imposes a penalty when a frivolous position is asserted in
“specified    frivolous    submissions,”   which    are     defined    in
section 6702(b)(2)(B) as CDP hearing requests and applications under
section 6159 (relating to written installment payment agreements),
section 7122 (relating to compromises), and section 7811 (relating to
taxpayer assistance orders); and (2) section 6702(b)(3) provides a
circumstance, i.e., allowing a taxpayer to withdraw his “specified
frivolous submission,” which results in the section 6702(b) penalty not
applying with respect to that submission. The penalties against
petitioner were not assessed under section 6702(b) but rather under

        4 At trial petitioner sought to probe respondent’s sole witness, Mr. Fisher, the

immediate supervisor of Ms. Koegal, who initially determined that the returns were
frivolous and therefore petitioner should be liable for section 6702(a) penalties, on the
depth and comprehensiveness of his approval of that initial determination for purposes
of complying with section 6751(b)(1). The Court sustained respondent’s objection to
petitioner’s attempted line of questioning. It is apparent from the record before us that
the IRS has complied with section 6751(b)(1).
                                           12

[*12] section 6702(a) for having filed frivolous tax returns for 2017.
Petitioner never made a “specified frivolous submission” as that term is
defined in section 6702(b)(2)(B). Thus, the withdrawal mechanism of
section 6702(b)(3) has no application here. Section 6330(c)(1) required
AO Town “at the hearing [to] obtain verification from the [IRS] that the
requirements of any applicable law or administrative procedure have
been met.” A determination of lawful assessment is a component of the
section 6330(c)(1) requirement. See Ron Lykins, Inc. v. Commissioner,
133 T.C. 87, 96–97 (2009). The administrative record in this case clearly
shows that AO Town verified that valid assessments of the
section 6702(a) penalties had been made.

       In the light of the above, we conclude that there was no abuse of
discretion, and we sustain Appeals’ determination to uphold the
proposed levy. 5

       We have considered all of the arguments made by the parties and,
to the extent they are not addressed herein, we find them to be moot,
irrelevant, or without merit.

        To reflect the foregoing,

        Decision will be entered for respondent.

        5 Petitioner is of course free to continue to negotiate with the IRS concerning

his outstanding liability for the section 6702(a) penalties, but he is entitled to only one
CDP hearing and Tax Court proceeding with respect to the proposed levy. See Perrin
v. Commissioner, T.C. Memo. 2012-22, slip op. at 8.