Short Summary: Taxpayer filed federal tax returns for tax years 2015 through 2018 but did not pay the taxes owed. The IRS issued a Notice of Intent to Levy, and taxpayer requested a Collection Due Process hearing. During the hearing process, taxpayer failed to provide the financial information and documentation necessary for Appeals to consider collection alternatives. Taxpayer argued that an overpayment credit from tax year 2013 should be applied to his outstanding balances. Petitioner’s claim for a 2013 overpayment credit was adjudicated by both the Tax Court and the First Circuit, in two separate cases, both finding no such credit was available. The settlement officer sustained the proposed levy in October 2023.
Key Issue: Whether the IRS abused its discretion in sustaining the proposed levy for tax years 2015, 2016, 2017, and 2018.
Primary Holdings: The Tax Court held that the settlement officer did not abuse her discretion in sustaining the proposed levy. Taxpayer did not provide any of the requested information. Further, taxpayer did not properly raise any challenge to his underlying tax liabilities for 2015–2018 during the CDP hearing; instead, he focused on an already-adjudicated 2013 credit argument. The Tax Court sustained the Notice of Determination issued October 25, 2023.
Key Points of Law:
CDP Hearing
- The IRS must notify a taxpayer of a proposed levy and provide the right to a CDP hearing before collecting. I.R.C. §§ 6331(d)(1), 6330(a)(1).
- A taxpayer may challenge the underlying liability at the hearing only if he did not previously have an opportunity to dispute it. I.R.C. § 6330(c)(2)(B).
- The Court will only consider a liability challenge if it was properly raised during the CDP hearing. Giamelli v. Commissioner, 129 T.C. 107, 115 (2007).
Standard of Review
- The Court reviews the settlement officer’s determination for abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000).
- Abuse of discretion occurs when Appeals acts arbitrarily, capriciously, or without sound basis in fact or law. Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
Insights: Taxpayers who receive a Notice of Intent to Levy should actively participate in the CDP process and submit all requested documentation. Failing to participate meaningfully in the CDP process and provide the requested financial information can prevent Appeals from considering collection alternatives and may limit issues that can be raised before the Tax Court. Arguments already decided by a court will not be reconsidered in a CDP proceeding.
