Tax Court in Brief | Golditch v. Commissioner | Collection Due Process and Frivolous Arguments
The Tax Court in Brief – March 28th – April 1st, 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.
Tax Litigation: The Week of March 28, 2022, through April 1, 2022
- Addis v. Comm’r, T.C. Memo. 2022-24 | March 28, 2022 |Urda, J. | Dkt. No. 12140-20L
- Porter v. Comm’r, T.C. Memo. 2022-25 | March 28, 2022 |Greaves, J. | Dkt. No. 3544-21
- Villanueva v. Comm’r, T.C. Memo. 2022-27 | March 31, 2022 |Goeke, J. | Dkt. No. 19781-18
Short Summary: Jason Golditch—a “serial non-filer”—challenged collection for deficiencies determined by the IRS through “substitute for returns” prepared by the IRS for tax years 2011 and 2012. Based on the tax liability thereby determined, the IRS sent various notices of federal tax liens and rights to a hearing. In response, Golditch did not request a hearing, and he did not petition the Tax Court for regress. Years later (2019), the IRS sent a levy notice, and Golditch requested a collection due process (CDP) hearing, claiming that he did not receive earlier notices of deficiency. Golditch then failed to provide any of the forms requested by the IRS and he did not call in to the telephone conference as scheduled. A “last chance” letter was sent to Golditch, and he did nothing in response. A notice of determination upholding the levy notice was issued, and Golditch petitioned the Tax Court, claiming that he did not receive prior notices and challenging the underlying tax liability.
- Golditch is not entitled to challenge his underlying liability because (1) he received (or deliberately refused to accept) notices of deficiency that were mailed to his last known address—and Golditch’s unsupported statement that he “did not recall receiving notice” was insufficient; (2) the IRS later sent, and Golditch admitted receiving a lien notice, and he did not file a CDP hearing request at that time; and (3) Golditch failed to submit any evidence to dispute his underlying liabilities at the CDP hearing. No abuse of discretion existed.
- And, because Golditch’s arguments of “non-receipt of notices” were frivolous, an additional penalty of $2,000 was imposed.
Key Points of Law:
- A taxpayer may dispute liability for a frivolous return penalty under section 6702 at a CDP hearing and on review of the CDP determination in the Tax Court, in the absence of any other opportunity to contest it. In that instance, the section 6702 penalty is the underlying liability, and the taxpayer is entitled to de novo review of the penalty so long as the taxpayer has raised a meaningful challenge to the penalty at the CDP hearing. But, if the taxpayer fails to make a meaningful challenge to the penalty, the Tax Court reviews for abuse of discretion.
- To determine whether the IRS settlement officer abused his or her discretion, the Tax Court evaluates whether the officer (1) properly verified that the requirements of applicable law or administrative procedure have been met, (2) considered any relevant issues the taxpayer raised, and (3) considered whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary. 26 U.S.C. § 6330(c)(3).
- A notice of deficiency is sufficient if mailed to the taxpayer at his or her last known address, which is generally the address appearing on the taxpayer’s most recently filed and properly processed federal tax return. See 26 U.S.C. § 6212(b)(1); Treas. Reg. § 301.6212-2(a); Hoyle v. Comm’r, 131 T.C. 197, 200, 203–04 (2008), supplemented by 136 T.C. 463 (2011).
- “If [a] taxpayer previously received a CDP Notice . . . with respect to the same tax and tax period and did not request a CDP hearing with respect to that earlier CDP Notice, the taxpayer had a prior opportunity to dispute the existence or amount of the underlying tax liability.” Treas. Reg. § 301.6330-1(e)(3), Q&A-E7.
- A taxpayer may dispute an underlying tax liability in a CDP case only if the taxpayer properly raised that issue at the CDP hearing. Giamelli v. Comm’r, 129 T.C. 107, 113 (2007). “An issue is not properly raised if the taxpayer fails . . . to present to Appeals any evidence with respect to that issue after being given a reasonable opportunity.” Treas. Reg. § 301.6330- 1(f)(2), Q&A-F3
- A “CDP hearing may, but is not required to, consist of a face-to-face meeting.” Treas. Reg. § 301.6330- 1(d)(2), Q&A-D6.
- A substitute for return is not invalid simply because the Secretary of the Treasury does not sign it in person. Section 7701(a)(11)(B) defines the term “Secretary,” as used in the Internal Revenue Code, to mean “the Secretary of the Treasury or his delegate.” Arguing otherwise is a frivolous argument.
- Section 6673(a)(1) gives the Tax Court discretion to require a taxpayer to pay the Government a penalty of up to $25,000 when the taxpayer, among other things, takes a frivolous or groundless position, or a position primarily for delay in proceedings before the Court.
Insights: This is a case that demonstrates the age-old mantra: The law helps those who help themselves–the vigilant, rarely the sleeping, and never the acquiescent. Ignoring IRS notices is not an advisable course of action. And, taxpayers should refrain from taking frivolous positions in CDP proceedings. What is “frivolous” might be in the eyes of the beholder, based on the facts and circumstances of the case. However, the IRS has issued—and taxpayers should be aware of—notices on positions that the IRS deems are frivolous. See I.R.S. Notice 2010-33, 2010-17 I.R.B. 609. By taking a frivolous position, the taxpayer then sets himself or herself up for additional penalty of up to $25,000, which is determined by the discretion of the Tax Court. It is also advisable to avoid that.