Tax Court in Brief | Middleton v. Commissioner | Trust Fund Recovery Penalty Assessment and Collection Due Process

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The Tax Court in Brief – April 4th- April 8th, 2022

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Tax Litigation:  The Week of April 4th, 2022, through April 8th, 2022

Middleton v. Comm’r, T.C. Memo. 2022-28 | April 4, 2022 |Kerrigan, J. | Dkt. No. 8158-19L

Short Summary: In 2007, Lineation Marketing Co. (Lineation) was a business entity. Luke Middleton was the managing officer and the only bank account signer for Lineation. In 2016, Lineation dissolved. The IRS undertook the collection of employment tax liabilities of Lineation for prior tax years. A Trust Fund Recovery Penalty Assessment (TFRP) was approved and notices of TFRP were sent to Middleton. After years of procedural due process, collections notifications, settlement efforts, and determinations as to the underlying tax liability, an IRS settlement officer verified all requirements of administrative procedures were met, and the Office of Appeals sustained the proposed levy action with respect to the TFRPs in issue. Middleton challenged the determination of his tax liability.

Primary Holdings: 

Key Points of Law:

Insights: A taxpayer in a collection due process case that involves a TFRP dispute must timely and appropriately challenge the “responsible person” status. A challenge to responsible person status is a challenge to the underlying tax liability. If the status as responsible person is not timely challenged, the taxpayer will be precluded from challenging the underlying TFRP tax liability established by the taxpayer’s status as deemed “responsible person.” The term “responsible person” may be broadly applied by the Tax Courts, so taxpayers who receive a notice of TFRP tax liability with respect to an employing entity should be prepared to show that the taxpayer does not have the duties referenced in Section 6672.

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