Tax Court in Brief | Phillips v. Commissioner | Collection Due Process and No Abuse of Discretion

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The Tax Court in Brief – June 13th – June 17th, 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 June 13th, 2022, through June 17th, 2022

Phillips v. Comm’r, T.C. Memo. 2022-58 | June 13, 2022 | Lauber, J. | Dkt. No. 18553-21L

Short Summary:  Anthony Phillips (Anthony) failed to pay all of his federal tax liabilities and penalties for the tax years 2008, 2012, 2013, 2015, and 2016.  Accordingly, the IRS filed a notice of federal tax lien (NFTL), and Anthony filed a request for a Collection Due Process (CDP) hearing.  In his CDP request, Anthony did not challenge the amount or existence of the taxes and penalties, nor did he challenge the NFTL filing itself.  Rather, Anthony only offered a collection alternative through a proposed offer in compromise (OIC).

The IRS Settlement Officer (SO) rejected the OIC but informed Anthony that he qualified for an installment agreement of $443 per month.  Anthony expressed interest in an installment agreement but communicated to the SO that he could only pay $333 per month.  To resolve this impasse, the SO agreed to accept an installment agreement of $333 per month for the first 12 months with $475 per month for the final 60 months.  Anthony agreed to the terms of the installment agreement and executed a Form 433-D, Installment Agreement.  The Form 433-D specifically indicated that the NFTL would not be withdrawn while the agreement was in effect.

The SO issued a Notice of Determination (NOD), concluding that the NFTL should not be withdrawn because the parties entered into an installment agreement.  However, the NOD incorrectly stated the terms of the installment agreement, indicating that Anthony would be required to pay $650 per month (rather than the $475 per month agreed upon) for the final 60 months of the agreement.

Anthony timely filed a petition with the Tax Court, alleging that the OIC “should have been approved” and that the “outstanding balance is inaccurately high.”  The IRS filed a motion for summary judgment, and Anthony failed to respond.

Key Issues:

Primary Holdings

Key Points of Law:

Insights During a CDP hearing, taxpayers should carefully preserve all issues that they may need to raise in the Tax Court proceedings.  To the extent a taxpayer fails to do so, the decision in Phillips demonstrates that the issue is, in most instances, lost.

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