Tax Court in Brief | Estate of Kazmi v. Commissioner | Trust Fund Penalties and CDP Hearings

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The Tax Court in Brief – February 28, 2022  – March 4, 2022

Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.

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Tax Litigation:  The Week of February 28, 2022, through March 4, 2022

Estate of Kazmi v. Comm’r, T.C. Memo. 2022-13| March 1, 2022 | Paris, E. | Dkt. No. 5013-18L

Short Summary: In this collection due process (CDP) case, the Tax Court sustained a notice of determination approving a notice of federal tax lien (NFTL) filed with respect to trust fund recovery penalties (TFRPs) assessed against petitioner Mohammad Kazmi. In his request for a CDP hearing and in his petition seeking review of the notice of determination, Kazmi made only one claim: that he was not liable for the TFRPs at issue because he was not a responsible person who willfully failed to pay over withholding taxes pursuant to IRC § 6672. Applying IRC § 6330(c)(2)(B), the appeals settlement officer determined that Kazmi was precluded from raising this liability issue during the CDP hearing because Kazmi received a properly mailed Letter 1153 providing him with a pre-assessment opportunity to dispute the merits of the proposed TFRPs at an Appeals conference. The Court agreed that the Letter 1153 gave Kazmi a “prior opportunity” for purposes of section 6330(c)(2)(B) and sustained the notice of determination for the NFTL filing without considering the merits of Kazmi’s liability claim.

Primary Holdings:

Key Points of Law:

Insights:  This case reminds us that the Tax Court is not a court of equity. In previous CDP cases involving a TFRP dispute, the Tax Court reached a similar result. Generally, the Court will follow precedent, even when it leads to a seemingly harsh result. Kazmi was a sympathetic taxpayer. He was a part-time bookkeeper for a company that failed to pay over employment taxes. He was not an officer of the company; he had no check writing authority and no authority to make payments on behalf of his employer. His employer Kazmi made a strong argument that he was not a responsible person who willfully failed to pay over withheld taxes. However, noting that the Tax Court is a court of limited jurisdiction, the Court did not reach that issue.

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