Tax Court in Brief | Norberg v. Commissioner | Currently Not Collectible

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

Norberg v. Comm’r, | April 5, 2022 | Lauber, A. | Dkt. No. 12638-20L


Short Summary: Robert and Debra Norberg (the Norbergs) filed their 2016 tax return in 2019 and did not pay the balance due reported on the return. In time, the IRS mailed the Norbergs a CDP levy notice. During the hearing, the Norbergs raised only one issue, that payment of their unpaid tax would cause financial hardship. They wanted their 2016 tax account to be designated as currently not collectible (CNC). In support of their request, they submitted a collection information statement (Form 433-A). Based on income and expenses reported on the form, the appeals settlement officer (SO) determined that the Norbergs could pay the IRS $62 a month and did not qualify for hardship relief. In calculating the amount the Norbergs could afford, e.g., the excess of their monthly income over their allowable monthly expenses, the SO reduced the Norbergs’ claimed expenses to conform to the expenses allowable for their county of residence. The Norbergs made no effort to show why the prevailing “local standards” should not apply. The SO offered them a partial pay installment agreement (PPIA) with payments of $62 a month, which they declined. After verifying that the IRS had met all legal and administrative requirements, Appeals issued a notice of determination sustaining the proposed levy, and the Norbergs petitioned. In the petition, they alleged that their costs of living exceeded their income and a levy would cause a financial hardship. Shortly after filing the petition, the Norbergs filed for bankruptcy, resulting in a discharge. The discharge did not cover the Norbergs’ 2016 tax liability (except for additions to tax) because they had filed their 2016 return late and  within two years of the date they filed for bankruptcy. After the bankruptcy stay was lifted, the Commissioner (IRS) filed a motion for summary judgment. Granting the motion, the Court observed that the Norbergs were free to pursue another collection alternative (outside of CDP), such as an installment agreement or offer-in-compromise.

Primary Holdings:

Key Points of Law:

Insights:  The key take-away here is – don’t look a gift horse in the mouth. By accepting the SO’s PPIA offer, the Nordbergs would have avoided a levy and reduced their 2016 tax liability in exchange for paying $62 a month for a certain number of months. Had the Tax Court cooperated and the Nordbergs achieved their goal, CNC status, they would still owe the amount of tax shown on their return, plus interest and penalties; albeit, collection efforts would have been deferred. As Judge Lauber observed, the Nordbergs remain free to pursue alternatives to enforced collection. But there are no guarantees the taxpayers will get the same good deal, so to speak.