Tax Court in Brief | Wolfson v. Commissioner | Collection Due Process and Review of Settlement Officer Performance of Duty

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The Tax Court in Brief – May 2nd – May 6th, 2022

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Tax Litigation:  The Week of May 2nd, 2022, through May 6th, 2022

Wolfson v. Comm’r, T.C. Memo. 2022-46 | May 5, 2022 | Lauber, Judge | Docket No. 21343-21L

Summary: A taxpayer sought review pro se under IRC sections 6320(c) and 6330(d)(1) of an IRS determination to uphold a collection action following a Collections Due Process (CDP) hearing with a Settlement Officer (SO). Upon motion of the IRS, the Court granted summary judgment. The court presumed the taxpayer wanted to challenge underlying penalties as he sought waiver of trust fund recovery penalties (TRFPs) because the phrase “underlying tax liability” includes TFRPs. However, the taxpayer had not challenged the underlying liability at the CDP hearing. Consequently, the underlying liability was not reviewable de novo and the Court applied an abuse of discretion standard to the CDP determination.

The taxpayer had failed to pay employment taxes (Form 941), in the first three quarters of 2012. In 2020, the IRS sent a notice of filing of Federal tax lien (NFTL) to collect assessed TFRP liabilities. In the CDP hearing request, taxpayer indicated he sought to discharge the lien and checked the boxes for “Filed NFTL,” “Installment Agreement,” “Offer in Compromise,” and “I Cannot Pay Balance.” IRS Appeals assigned an SO who verified the assessment complied with legal requirements and procedures. Thirty days before a conference, the SO notified the taxpayer he must file: (i) Form 433-A (financial information for collections); (ii) Form 656 (to make an offer in compromise); and an Application for Certificate of Discharge of Property form Federal Tax Lien (Form 12153), as a condition to any discharge. The taxpayer did not submit these documents. The petitioner requested to reschedule the hearing on the conference date. At the rescheduling conference approximately 3 weeks later, a representative of the taxpayer again requested a deferral of the conference. The SO declined, closed the case, and Appeals issued a notice of determination.

Key Holdings:

Key Points of Law:

Insights:  When seeking an offer in compromise or waive of penalties, the taxpayer must substantially follow all substantive and procedural requirements, or the IRS and the Tax Court will refuse any relief requested. In reviewing a CDP determination, the Tax Court will consider only the record before the officer that conducted the hearing, documents furnished to other IRS officials before or after the hearing are not relevant.

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