Tax Court in Brief | Percy Squire Co. LLC v. Comm’r | Unpaid Employment Taxes, an Unfiled Offer in Compromise, and Section 6673

Percy Squire Co. LLC v. Commissioner, T.C. Memo. 2026-72 | August 19, 2026 | Ashford, J. | Dkt. No. 16141-23L

Short Summary

Percy Squire Co. LLC is an Ohio law practice owned by attorney Percy Squire. It accumulated unpaid federal employment tax liabilities — Form 940 federal unemployment tax for 2009 and 2013 through 2019, Form 941 quarterly liabilities across various periods from 2014 through 2021, and a section 6721 information return penalty for 2019. The balance stood at $221,246.10 as of February 2023.

The IRS issued a levy notice and filed a Notice of Federal Tax Lien. The firm requested collection due process hearings, discussed offers in compromise with the Appeals officer, and was given until August 22, 2023 — nearly seven weeks — to submit a completed offer. It never submitted one. A later offer came back as not processable because another offer was already pending.

The Court sustained both collection actions and imposed a $10,000 penalty under section 6673, with a warning that the $25,000 ceiling remains available.

Key Issues

Whether the Appeals officer abused her discretion in sustaining a proposed levy and a Notice of Federal Tax Lien filing where the taxpayer raised the possibility of a collection alternative but never submitted a completed offer; and whether to impose a section 6673 penalty.

Primary Holdings

Appeals did not abuse its discretion. The officer determined that the requirements of applicable law and administrative procedure had been met, considered the issues raised, and performed the balancing the statute requires.

Where a taxpayer proposes no collection alternative, it is not an abuse of discretion for an Appeals officer to sustain the collection action without considering one. Discussing an offer is not proposing an offer.

There is no requirement that the Commissioner wait a set period before determining that a proposed levy may proceed.

A $10,000 section 6673 penalty was imposed, supported by seven petitions filed within fifteen years, prior warnings about using offers in compromise to delay, a prior $5,000 sanction, and continued reliance on irrelevant arguments by a taxpayer represented by its attorney owner.

Key Points of Law

Sections 6320 and 6330 supply parallel collection due process rights for lien filings and levies. The Appeals officer must determine whether the completed or proposed collection actions are appropriate, considering whether the requirements of applicable law and administrative procedure have been met, all relevant issues the taxpayer raised, and whether the proposed action balances efficient collection against the taxpayer’s legitimate concern that collection be no more intrusive than necessary. Goza v. Commissioner, 114 T.C. 176 (2000); Lunsford v. Commissioner, 117 T.C. 183 (2001).

Section 7122 and its regulations require a processable offer — the completed form, the required financial statements, the application fee and initial payment where applicable, and current filing and deposit compliance. An incomplete submission is not an offer, and a second offer submitted while one is pending is returned rather than considered. The rule the Court applied here is the natural consequence: an officer who was never given a collection alternative can’t have abused her discretion in failing to weigh one.

Section 6673(a)(1) allows a penalty of up to $25,000. 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. Rader v. Commissioner, 143 T.C. 376 (2014); Pierson v. Commissioner, 115 T.C. 576 (2000).

Sections 6321 through 6323 create and perfect the federal tax lien, and section 6331 supplies the levy authority. Neither depends on the taxpayer’s satisfaction with the pace of the process.

Insight

The employment tax posture is what makes this case worth reading alongside the individual companion opinion. Forms 940 and 941 liabilities stretching from 2009 to 2021 are not a cash flow problem, they’re a structural one, and the trust fund portion of them carries personal exposure for whoever was responsible and willful. Section 6672. A practice that has been running unpaid payroll taxes for a decade is generating an individual liability in parallel with the entity’s, and the individual side doesn’t go away if the entity closes.

That’s the counseling conversation to have early. Our overview of the trust fund recovery penalty and our discussion of trust fund penalty liability set out the responsibility and willfulness elements, and our brief in Middleton covers the assessment and collection due process interaction.

The procedural takeaway is blunter. A collection due process hearing is not a holding pattern. If the plan is a collection alternative, the completed package goes in during the window the officer gives, and nearly seven weeks is a generous window. If the package can’t be assembled in time, ask for an extension on the record and document the reason. What doesn’t work is describing an offer, letting the deadline pass, and then litigating the officer’s failure to consider it.

And the sanction history matters more than any single filing. The Court cited a prior warning and a prior $5,000 penalty, which is what converted this proceeding from an unsuccessful one into a sanctionable one. Once a taxpayer has been warned under section 6673, every subsequent petition is being read against that record — a point worth making plainly to a client who wants to file again. Our discussion of IRS collections defense covers the alternatives that actually move a case of this size.

The full opinion is posted at CourtListener. The individual companion case is covered in our brief of Squire v. Commissioner. More weekly briefs are collected in The Tax Court in Brief archive.

This article is for general information only and is not legal advice. Reading it does not create an attorney-client relationship. Tax outcomes turn on specific facts, and the law changes. Consult qualified counsel about your own situation.