Sovrun Sees the Light Too Late

[Red Cedar PM]

Moline v. Commissioner
T.C.
No. 171-07L
T.C. Memo. 2009-110
May 20, 2009
T.C. Memo. 2009-110
UNITED STATES TAX COURT
MARIAN L. MOLINE,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
Docket No. 171-07L.
Filed May 20, 2009.
Marian L. Moline, pro se.
Steven M. Webster, for respondent.
MEMORANDUM OPINION
JACOBS, Judge: This case arises from a petition for judicial review pursuant to section 6330(d) of respondent's determination to proceed with collection of petitioner's unpaid Federal income taxes for 2001 by levy. The sole issue involved is whether respondent's determination constitutes an abuse of discretion. All section references are to the Internal Revenue Code in effect for 2001.
Background
At the time she filed her petition, petitioner resided in Kansas.
Petitioner failed to file Federal income tax returns for 2000 and 2001. As a consequence, respondent prepared substitutes for returns pursuant to authority granted under section 6020(b). On June 4, 2004, separate notices of deficiency for the 2000 and 2001 tax years were mailed to petitioner. Petitioner sent copies of the notices of deficiency for 2000 and 2001 to the Court, each containing a handwritten notation stating: “I hereby refute and invalidate this unsigned presentment, without dishonor. I do not owe this money! All rights reserved, Without Prejudice, UCC 1-207.” The Court received the documents on September 1, 2004, and the matter was assigned docket No. 16198-04.
On September 7, 2004, the Court ordered petitioner to file a proper amended petition and pay the filing fee on or before October 22, 2004. On January 4, 2005, the Court dismissed the case for lack of jurisdiction when no response was received.
On November 7, 2005, respondent sent petitioner written notice that respondent intended to levy on petitioner's assets to collect her unpaid tax liability for 2000. Petitioner did not respond to that notice.
On April 5, 2006, respondent sent petitioner written notice that respondent intended to levy on petitioner's assets to collect her unpaid tax liability for 2001. In response, petitioner timely filed Form 12153, Request for a Collection Due Process Hearing (section 6330 hearing). On this form petitioner wrote:
-This process is not legal according to the highest law of the land!
-You have no legal authority to levy/seizure.
Attached to petitioner's request for a hearing were two printed form documents, one indicating that petitioner was not a resident of the United States, but rather was a resident of one of the 50 republic sovereign States, and the other demanding identification information of respondent's representative who issued the notice of intent to levy, as well as copies of his driver's license, Social Security card, and IRS identification card.
The case was assigned to Settlement Officer Bart Hill of respondent's Appeals Office. On October 12, 2006, Settlement Officer Hill sent petitioner a letter scheduling a telephone section 6330 hearing with petitioner on November 15, 2006, at 1 p.m. central standard time. The letter informed petitioner that the issues she raised “are those that Courts have determined are frivolous or Appeals does not consider.” Respondent advised petitioner she was not entitled to a face-to-face hearing as to the positions set forth in her request for a section 6330 hearing because they were frivolous. However, she was advised that she would be allowed a face-to-face conference with respect to any nonfrivolous issue. Petitioner was informed that she had to set forth the nonfrivolous issue in writing or call Settlement Officer Hill within 14 days from the date of the letter to qualify for a face-to-face conference. Petitioner was also informed that if she wished to discuss collection alternatives to the intended levy, such as an installment agreement or an offer-in-compromise, she had to (1) submit certain documents to Settlement Officer Hill, such as Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, (2) file as yet unfiled Federal income tax returns for 2003, 2004, and 2005, and (3) submit proof that all required estimated tax payments had been fully paid. Finally, petitioner was informed that she was not entitled to a section 6330 hearing regarding the intended levy with respect to tax year 2000 but that she could have a hearing equivalent to a section 6330 hearing with respect to that matter.
Petitioner faxed a 12-page response to Settlement Officer Hill. Petitioner raised numerous frivolous arguments including (1) that she was a resident of a State and not of the United States and (2) that the Supreme Court in Pollock v. Farmers’ Loan & Trust Co., 158 U.S. 601 (1895), held that the income tax was unconstitutional. At trial petitioner disavowed all of the arguments set forth in her fax.
During the November 15, 2006, telephone hearing, petitioner continued to assert frivolous arguments. She did not propose any collection alternatives (i.e., an offer-in-compromise or an installment agreement). On November 30, 2006, respondent's Appeals Office issued a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330. In the notice of determination, respondent sustained the proposed levy and rejected petitioner's arguments. An attachment to the notice of determination (written by Settlement Officer Hill) noted that petitioner did not offer any collection alternatives, that Settlement Officer Hill reviewed the administrative file transcripts and verified that the requirements of all applicable law and administrative procedures were met, and that the proposed levy action with respect to the collection of petitioner's unpaid Federal income tax for 2001 appropriately balanced the need for efficient collection of the taxes with the legitimate concerns of the taxpayer that the collection action be no more intrusive than necessary.
On January 3, 2007, petitioner filed a petition in this Court to review respondent's intended collection action. 1
1 Petitioner also requested the Court to review respondent's determination to proceed with collection of petitioner's unpaid Federal income taxes for 2000 as set forth in respondent's decision letter. The Court's copy of respondent's decision letter is undated. By Order dated Apr. 27, 2007, the Court dismissed tax year 2000 from consideration of this case and struck all references to that year from the petition.
Discussion
A. Standard of Review
This case involves a review of respondent's determination to proceed with collection of petitioner's unpaid Federal income tax, penalties, and interest for 2001 by way of levy. Section 6330 hearings concerning levies are conducted in accordance with section 6330(c). After the Commissioner issues his notice of determination following an administrative hearing, a taxpayer has the right to petition this Court for judicial review of the Commissioner's determination. Sec. 6330(d)(1). Our review of the Commissioner's determination is subject to the provisions of section 6330.
A taxpayer is precluded from contesting the existence or amount of the underlying tax liability if he/she received a notice of deficiency for the tax year in question or otherwise had an opportunity to dispute the underlying tax liability. Sec. 6330(c)(2)(B). In such a case, we review the Commissioner's determination for abuse of discretion. See Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176 (2000). An abuse of discretion is defined as any action that is unreasonable, arbitrary or capricious, clearly unlawful, or lacking sound basis in fact or law. Thor Power Tool Co. v. Commissioner, 439 U.S. 522, 532-533 (1979); Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
Petitioner was issued a notice of deficiency for 2001, which she received. She did not file a proper petition in this Court and did not pay the required filing fee. Petitioner was given an opportunity to file a proper amended petition and pay the required filing fee, but she failed to do so and her suit at docket No. 16198-04 was dismissed. Petitioner is therefore not entitled to raise her underlying tax liability for 2001, and we review respondent's proposed collection action for abuse of discretion.
B. Petitioner's Request for a Face-to-Face Section 6330 Hearing
Petitioner's main argument is that her section 6330 hearing was invalid and unlawful because it was held by way of a teleconference and not a face-to-face conference.
Although a section 6330 hearing may consist of a face-to-face conference, a proper hearing may also occur by telephone or by correspondence under certain circumstances. See Katz v. Commissioner, 115 T.C. 329, 337-338 (2000); sec. 301.6330-1(d)(2), Q&A-D6, Proced. & Admin. Regs. Section 6330 hearings have historically been informal. Davis v. Commissioner, 115 T.C. 35, 41 (2000). We have held that it is not an abuse of discretion if an Appeals officer denies a taxpayer's request for a face-to-face section 6330 hearing after determining that the hearing would not be productive because of the taxpayer's frivolous or groundless arguments. See Summers v. Commissioner, T.C. Memo. 2006-219; Ho v. Commissioner, T.C. Memo. 2006-41. Moreover, we have held it is not an abuse of discretion to proceed with collection where the taxpayer has not filed all required tax returns for prior years. See Summers v. Commissioner, supra; Collier v. Commissioner, T.C. Memo. 2004-171.
The record demonstrates that a face-to-face conference would not have been productive. Petitioner's meeting request contained only arguments challenging the legality of the tax law itself, arguments that we have long considered frivolous. Respondent granted petitioner a telephone conference and informed her that she could still qualify for a face-to-face conference if she would first identify any relevant nonfrivolous matter she intended to discuss. Despite being given this second opportunity, petitioner presented no such matter. Instead, petitioner replied with arguments regarding how she was not subject to Federal income tax and that the income tax was unconstitutional. Furthermore, petitioner did not file her unfiled income tax returns for 2003-05. Under these circumstances, it was not an abuse of discretion for Settlement Officer Hill to conclude that a face-to-face meeting would not have been productive. Thus, Settlement Officer Hill was not required to offer petitioner a face-to-face conference. See Clark v. Commissioner, T.C. Memo. 2008-155; Summers v. Commissioner, supra; see also Lunsford v. Commissioner, 117 T.C. 183 (2001).
On December 27, 2006, nearly 1 month after respondent issued the notice of determination, petitioner wrote Settlement Officer Hill stating: “If any of my correspondence contains frivolous arguments, I now withdraw them.” Petitioner submitted a new Form 12153 to respondent and requested a face-to-face section 6330 hearing. Petitioner maintains that on the basis of her submission of this second Form 12153, respondent's notice of determination is no longer material and/or relevant. Consequently, petitioner posits that (1) the notice of determination, dated November 30, 2006, should be considered nullified, (2) she be given an opportunity for a face-to-face section 6330 hearing, and (3) a new notice of determination should be issued.
Petitioner cannot undo that which has occurred. Her position change, assuming there truly is a position change, is too late to alter the disposition of this case. When making his determination, respondent could only review the existing facts and those arguments advanced. On the basis of petitioner's submissions during the hearing provided by section 6330, we hold that respondent did not abuse his discretion in (1) refusing to offer petitioner a face-to-face hearing, and (2) sustaining the proposed levy collection.
C. Other Matters Petitioner Raised
Petitioner argues that the tax liability respondent determined for 2001 is grossly overstated, and she requests that we redetermine the amount she owes. We cannot accede to petitioner's request. See sec. 6330(c)(2)(B); see also Sego v. Commissioner, 114 T.C. at 610. Petitioner received a notice of deficiency for 2001, and she had an opportunity to contest respondent's determination before this Court. Petitioner failed to properly do so.
We have considered all of petitioner's arguments and to the extent not discussed herein, we find them to be groundless and/or without merit.
To reflect the foregoing,
Decision will be entered for respondent.

I think it is unfortunate that nothing can be done for this person, but it just goes to show how making these arguments can really screw ya. I understand the court and government's position that they have to be able to make their assessment within a reasonable amount of time and they need to have the proper information from the taxpayer available to do so. A very good example why it is a good idea to file a tax return and claim the deductions and credits you are entitled to.

[Quixote]

I think it is unfortunate that nothing can be done for this person, ...

If, in fact, nothing can be done for her, it is due solely to her current refusal to work with the IRS. Nothing she has done before precludes a reasonable outcome. The settlement officer asked her to file returns for several years and to provide a completed Form 433-F, Collection Financial Statement, i.e., a list of her monthly income and expenses. She could provide those today and an Automated Collections System employee could set her up on an installment agreement and release the wage levy.

[LPC]

I think it is unfortunate that nothing can be done for this person, ...

If, in fact, nothing can be done for her, it is due solely to her current refusal to work with the IRS. Nothing she has done before precludes a reasonable outcome. The settlement officer asked her to file returns for several years and to provide a completed Form 433-F, Collection Financial Statement, i.e., a list of her monthly income and expenses. She could provide those today and an Automated Collections System employee could set her up on an installment agreement and release the wage levy.

Thanks for pointing this out.

The Tax Court opinion merely states that there is no longer any judicial remedy. The taxpayer no longer has a legal right to a collection due process hearing, and no longer has a legal right to contest the IRS collection actions. But that does not mean that the IRS is not still open to collection alternatives. The taxpayer can still propose installment plans or offers in compromise and the IRS will still consider them.

[Red Cedar PM]

I think it is unfortunate that nothing can be done for this person, ...

If, in fact, nothing can be done for her, it is due solely to her current refusal to work with the IRS. Nothing she has done before precludes a reasonable outcome. The settlement officer asked her to file returns for several years and to provide a completed Form 433-F, Collection Financial Statement, i.e., a list of her monthly income and expenses. She could provide those today and an Automated Collections System employee could set her up on an installment agreement and release the wage levy.

I was referring to the original assessment, not the collection of the tax. Because she was/is an idiot and did not file returns for those years, and did not properly contest the original assessment made in the SFR's (instead choosing to spout TP nonsense), she cannot go back and claim any deductions and credits she was entitled to. Therefore the total amount that she owes is probably much higher than if she would have just filed her returns properly, not even counting interest and penalties. I'm not saying she should be able to go back either. I was just opining that it's a crappy situation all-around if she really did see the light and wants to try and take it back now.

[Quixote]

Because she was/is an idiot and did not file returns for those years, and did not properly contest the original assessment made in the SFR's (instead choosing to spout TP nonsense), she cannot go back and claim any deductions and credits she was entitled to.

Sure she can. She can file a 1040 or a 1040X. Either way, the IRS will treat the return as a request for an audit reconsideration. If she can document the deductions and credits to the tax examiner's satisfaction, the IRS will adjust the assessment. I've seen returns filed after an SFR assessment accepted as filed without an audit.

[jkeeb]

Requests for reconsideration happen all the time and are granted quite often. I don't know how often they are allowed for someone who has litigated the issue into tax court or another court--I would suspect that except for extreme cases, not much.

IRS generally does not want the taxpayer to suffer an unfair outcome. This can happen when a taxpayer does not respond to examinations and as a result lose legitimate deductions. I've seen a lot of SFR's that resulted in huge tax bills because of stock trades, when there must be significant bases in those trades. Same can happen when someone can get a large 1099 that includes expenses. It happens in the immigrant community when the poor sucker with the real SS card gets the 1099, but paid his buddies out of the amount he was paid.

[ASITStands]

I've seen many SFR assessments reconsidered once the taxpayer files an original return.

In fact, it's part of the definition of Audit Reconsideration found at IRM 4.13.1.2:

An Audit Reconsideration is the process the IRS uses to reevaluate the results of a prior audit where additional tax was assessed and remains unpaid, or a tax credit was reversed. If the taxpayer disagrees with the original determination he/she must provide information that was not previously considered during the original examination. It is also the process the IRS uses when the taxpayer contests a Substitute for Return (SFR) determination by filing an original delinquent return.

Emphasis added.

However, once the matter has been litigated in tax court, and become final pursuant to IRC § 6215, the request for Audit Reconsideration is not accepted, as discussed at IRM 4.13.1.8.

1. A request for reconsideration will not be considered if:

A. The taxpayer has already been afforded a reconsideration request and did not provide any additional information with his current request that would change the audit results.

B. The assessment was made as a result of a closing agreement entered into under IRC section 7121, using Form 906 and "Closing Agreements on Final Determination Covering Specific Matters" or Form 866 "Agreement as to Final Determination of Tax Liability" , or some combination of the two forms.

C. The assessment was made as a result of a compromise under IRC Section 7122. These agreements are final and conclusive. Identify a final compromise determination on IDRS by the posting of a TC 788.

D. The assessment was made as the result of final TEFRA administrative proceedings.

E. The assessment was made as a result of the taxpayer entering into an agreement on Form 870-AD, "Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax" .

F. The United States Tax Court has entered a decision that has become final, or a district court or the United States Court of Federal Claims has rendered a judgment on the merits that has become final.

Note:

Once a case is docketed in Tax Court, Counsel has broad settlement authority. If a suit is filed in district court or the Court of Federal Claims, the Department of Justice represents the interests of the Commissioner and has settlement authority. In each of these cases, any request for reconsideration should be forwarded to the office of the Associate Area Counsel for forwarding to the docket attorney.


When the Tax Court dismisses a case for lack of jurisdiction, it does not enter a decision and the case is not dismissed on the merits. See IRC section 7459(d). Likewise, when a district court or the United States Court of Federal Claims dismisses a case for lack of jurisdiction, the case has not been dismissed on the merits.

Emphasis added.

So, once the deficiency is litigated in tax court, it becomes res judicata.

I've seen one case where the amount was redetermined later under Audit Reconsideration (so, a taxpayer should always try). It was part of a request for an offer in compromise.

Audit Reconsideration not statutorily enacted. It's part of the policy of the IRS. Most of the case law in regard to its use involves bankruptcy, as late as 9 years after assessment.