Michael K. and Rachel H. Byrd v. Commissioner

2011 T.C. Memo. 146

• Court: United States Tax Court
• Decided: June 27, 2011
• Docket: 12885-09L
• Status: Unpublished

Opinion

T.C. Memo. 2011-146

UNITED STATES TAX COURT

MICHAEL K. AND RACHEL H. BYRD, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 12885-09L. Filed June 27, 2011.

Michael K. and Rachel H. Byrd, pro sese.

Beth A. Nunnink, for respondent.

MEMORANDUM OPINION

RUWE, Judge: The petition in this case was filed in

response to a Notice of Determination Concerning Collection

Action Under Section 6320 and/or 6330 (notice of determination).1

The issues for decision are: (1) Whether respondent abused his

1 Unless otherwise indicated, all section references are to the Internal Revenue Code, and all Rule references are to the Tax Court Rules of Practice and Procedure. - 2 -

discretion in determining the propriety of the lien and levy for

purposes of collecting petitioners’ outstanding 2007 tax

liability and (2) whether petitioners are liable for a penalty

under section 6673.

Background

The parties submitted this case fully stipulated pursuant to

Rule 122. The stipulation of facts and the attached exhibits are

incorporated herein by this reference. At the time the petition

was filed, petitioners resided in Tennessee.

On August 28, 2008, petitioners filed a joint Federal

income tax return for 2007,2 in which they reported a tax

liability of $12,466, total withholding payments of $1,793, and

an estimated tax addition to tax of $477. On September 29, 2008,

the Internal Revenue Service (IRS) assessed petitioners’ self-

reported income tax liability, the estimated tax addition to tax

under section 6654, and the currently due failure to pay addition

to tax of $320.19 under section 6651(a)(2) and credited the

withholding payments. On the same date, the IRS also issued

petitioners a statutory notice of balance due on their account.

On October 6, 2008, the IRS applied a $1,200 refundable credit

against petitioners’ outstanding 2007 tax liability and issued

petitioners a statutory notice of balance due on the account.

2 Because of extensions, petitioners’ 2007 return was due Oct. 15, 2008. - 3 -

Petitioners made no payments on their outstanding 2007 tax

liability after filing their return.

On November 12, 2008, respondent sent to petitioners a

Letter 1058A, Final Notice--Notice of Intent to Levy and Notice

of Your Right to a Hearing, relating to petitioners’ 2007 unpaid

tax liability. By letter dated November 14, 2008, petitioners

timely requested a collection due process (CDP) hearing for the

levy. On December 8, 2008, respondent filed a notice of Federal

tax lien for the 2007 tax year. On December 9, 2008, respondent

sent to petitioners a Letter 3172(DO), Notice of Federal Tax Lien

Filing and Your Right to a Hearing Under I.R.C. 6320, for

petitioners’ 2007 income tax liability. By letter dated December

18, 2008, petitioners timely requested a CDP hearing for the

lien. In their CDP hearing requests petitioners made various

arguments, including: (1) “No valid notices of the levies have

been properly served on the taxpayer(s)”; (2) the Secretary did

not provide petitioners with proper notice following the seizure

of property; (3) a substantial portion of the alleged tax due was

outside the period of limitations for collection; (4) the IRS did

not timely assess the taxes, and no “timely notices of

deficiencies were sent to the taxpayer”; (5) petitioners were not

notified within 60 days of the tax assessment; and (6) “that

there are no 4340 Form assessments for tax years [sic] 2007 for

said taxpayer which make up the entire balance due and which are - 4 -

the basis of the levies and liens.” Petitioners also alleged

that respondent violated their due process rights under the Fifth

Amendment and that “the IRS may be attempting a tax collection

scheme, including tax assessments without Forms 4340, and the IRS

may have to falsify and backdate documents against current

taxpayer.” Petitioners’ CDP hearing requests also threatened

suit against a revenue officer, claimed respondent falsified

documents, and claimed that the lien was “illegal” and “bogus”.

Petitioners’ CDP hearing requests contain no specific

allegations regarding the incorrectness of the amount of the

underlying liability. By letter dated March 9, 2009, the

settlement officer requested that petitioners provide a Form

1040X, Amended U.S. Individual Income Tax Return, regarding any

disputes they had with their 2007 tax liability, as well as a

completed collection information statement. Enclosed with the

letter was a Form 4340, Certificate of Assessments, Payments, and

Other Specified Matters, covering the assessment of petitioners’

liability for 2007. In their responses to the settlement

officer, petitioners did not provide a Form 1040X or a completed

collection information statement. Furthermore, in their

responses, petitioners made no specific claims regarding any

adjustments to their self-reported liability and did not provide

any documents to substantiate any changes to it. Petitioners - 5 -

were also asked to provide proof of estimated tax payments for

the 2008 tax year, which they failed to provide.

The only responses petitioners made to the settlement

officer’s requests were that the Form 4340 was invalid, a notice

of deficiency was required in order to file a lien, the notice of

lien was “improperly placed”, and the statutory notice and demand

for payment was required to be made by certified or registered

mail.

On May 6, 2009, respondent’s Appeals Office sent to

petitioners a notice of determination in which it determined that

the levy could go forward because petitioners had failed to

provide the requested financial information and become current on

their deposit requirements for consideration of collection

alternatives. The notice further sustained the filing of the

notice of Federal tax lien, which was filed on December 8, 2008.

On May 27, 2009, petitioners timely filed their petition with

this Court.

Respondent filed an amendment to answer requesting that the

Court impose a penalty against petitioners under section 6673.

Discussion

The Tax Court has jurisdiction to review the Appeals

Office’s determination to sustain the lien and proposed levy to

collect petitioners’ unpaid 2007 income tax liability. See sec.

6330(d)(1). Where the existence and amount of the underlying tax - 6 -

liability is not properly at issue, we review the Commissioner’s

administrative determination for abuse of discretion. Sego v.

Commissioner, 114 T.C. 604, 610 (2000).

Petitioners timely filed their 2007 return, and respondent

assessed the liability petitioners reported. The Appeals Officer

requested that petitioners provide an amended return for 2007

regarding any disputes they had with the underlying liability.

Petitioners never filed an amended return and have not

specifically identified any adjustments to be made or provided

any documents regarding changes to their underlying liability.

Therefore, the underlying liability is not properly at issue, and

we will review the Appeals officer’s determination for abuse of

discretion. See Lunsford v. Commissioner, 117 T.C. 183, 185

(2001); Nicklaus v. Commissioner, 117 T.C. 117, 120 (2001).

I. Abuse of Discretion

The determination of an Appeals officer must take into

consideration: (1) The verification that the requirements of

applicable law and administrative procedure have been met; (2)

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 person that any

collection be no more intrusive than necessary. Sec. 6330(c)(3);

Lunsford v. Commissioner, supra at 184. - 7 -

Respondent’s Appeals officer reviewed petitioners’ 2007

return, transcripts, and the information provided by petitioners

to respondent. The Appeals officer also requested and received a

Form 4340 for 2007. On the basis of that review, the Appeals

officer determined that the requirements of applicable law and

administrative procedures have been met, and the actions taken

were appropriate.

Throughout the administrative process petitioners did not

specifically contest the amount of the underlying liability or

raise any collection alternatives. Instead, petitioners made

unfounded assertions regarding respondent’s procedures and

inaccurate statements of the law.

Petitioners failed to offer any collection alternative and

made wholly unsupported arguments regarding the assessment and

collection of their 2007 tax liability. We find that the

settlement officer’s determination that the tax lien should not

be withdrawn and that the lien and levy are no more intrusive

than necessary was appropriate given a consideration of the

circumstances.

On the basis of the foregoing, we hold that the Appeals

officer did not abuse his discretion in upholding both the lien

and the levy. - 8 -

II. Section 6673 Penalty

Respondent requests that we impose on petitioners a penalty

pursuant to section 6673. Section 6673(a)(1) authorizes the Tax

Court to require a taxpayer to pay to the United States a penalty

not in excess of $25,000 whenever it appears to the Court

that the taxpayer instituted or maintained proceedings

primarily for delay, or that the taxpayer’s position in the

proceeding is frivolous or groundless. Section 6673(a)(1)

applies to collection due process proceedings. Pierson v.

Commissioner, 115 T.C. 576, 580-581 (2000); Hoffman v.

Commissioner, T.C. Memo. 2000-198. In the amendment to answer

and on brief, respondent contends that petitioners instituted

this proceeding primarily for delay and that petitioners’

position is frivolous. Consequently, respondent requests that

the Court impose a penalty on petitioners. A taxpayer’s position

is frivolous if it is “contrary to established law and

unsupported by a reasoned, colorable argument for change in the

law.” Williams v. Commissioner, 114 T.C. 136, 144 (2000); see

Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986).

On the basis of the record before us, we find that

petitioners’ arguments are frivolous. For example, in their

petition, petitioners claim that they did not receive appropriate

written notice before respondent issued the notice of intent to

levy. However, the record indicates that respondent issued two - 9 -

notices of balance due and sent them to petitioners’ correct

mailing address at least 10 days before the issuance of the

notice of intent to levy, as required under section 6331.

Petitioners also claim that the “IRS has not followed their

required procedures concerning income tax collection involving

[the] Notice of Deficiency” before filing the notice of

lien/levy, even though the assessment is based solely on their

self-reported liability. Furthermore, petitioners have made a

completely unfounded claim that respondent has disregarded their

Fifth Amendment “due process rights”. Petitioners have offered

no support for this baseless claim and have threatened to file

suit against a revenue officer personally for her purported

interference with their aforementioned due process rights. We

find that petitioners advanced frivolous arguments primarily for

the purpose of delay, thereby causing this Court to waste its

limited resources. Therefore, pursuant to section 6673(a)(1) we

will require petitioners to pay to the United States a penalty of

$2,000.

In reaching our holding, we have considered all arguments

made, and to the extent not mentioned, we conclude that they are

moot, irrelevant, or without merit.3 Accordingly, we sustain

3 The parties were ordered to file briefs. Petitioners did not comply with our order. - 10 -

respondent’s determination with respect to petitioners’ 2007

taxable year.

To reflect the foregoing,

Decision will be entered

for respondent.