|The following is a quote
from the IRS web site:
Taxpayers have a right
to be protected under due process. If the IRS finds that a
taxpayer owes tax, it must follow certain guidelines in
determining the tax, notifying the taxpayer of the liability,
and collecting the tax. Before the IRS can begin the
collection process of filing a lien on a taxpayer´s property,
it must assess the liability and send the taxpayer a bill
(Notice and Demand for Payment), which describes what the
taxpayer owes. Only if the taxpayer neglects or refuses to pay
the tax can the IRS begin collection activities.
Taxpayers have a right to Appeals and Judicial Review. If a
taxpayer disagrees with the IRS about the amount of the tax
liability or certain collection actions, he has the right to
ask the Appeals Office to review the case. The Appeals Office
is separate and independent of the office that audits tax
returns or is responsible for collecting what is due. The
taxpayer also has the right to ask a court to review it.
are two relatively new Internal Revenue Code Sections that
provide taxpayers with "Due Process" rights of appeal.
6320 - Notice of Federal Tax Lien Filed
6330 - Notice of Intent to Levy
6320 requires the IRS to notify in writing the taxpayer against
whom a "Notice of Federal Tax Lien" has been filed.
The notice may be given in person, left at the taxpayer's
dwelling or usual place of business, or sent to the taxpayer by
certified or registered mail not more than five business days
after the day the Notice of Federal Tax Lien (NFTL) was filed. The notification must state the amount of unpaid tax, the right
to request a hearing during a 30-day period following the end of
the five-day notification period, the administrative appeals
available to the taxpayer with respect to such lien and
procedures relating to such appeals, and the provisions and
procedures relating to the release of liens.
The taxpayer is entitled to
hearing per tax period before an Appeals officer who has had no
prior involvement with respect to that tax period. (The taxpayer
may waive the requirement that the Appeals officer had no prior
involvement with respect to that tax period.) Hearings with
respect to liens may be held in conjunction with hearings under
Section 6330, involving levies. The period of limitations on
collection with respect to that tax period is suspended while
the hearing and any appeal of it are pending. At the hearing,
the Appeals officer is required to receive verification that all
legal and administrative requirements for filing the lien have
been met. The taxpayer is allowed to raise any relevant issue at
Issues eligible to be raised include
(but are not limited to):
challenges to the
underlying liability as to existence or amount,
appropriate spousal defenses,
challenges to the appropriateness of collection actions, and
collection alternatives, which could include the posting of a
bond, substitution of other assets, an installment agreement or
not raise any issue that was raised and considered at a
previous hearing under section 6330 or in any other
administrative or judicial proceeding if that taxpayer
participated meaningfully in such prior hearing or proceeding.
The taxpayer may appeal the determination of the Appeals officer
in the Tax Court or a U.S. District Court within 30 days
of the date of the determination.
the original CDP request was NOT filed within the 30-day period,
Appeals can give the taxpayers an "Equivalent" hearing that is
essentially the same as the CDP hearing, EXCEPT that
there is no right for the taxpayer to appeal the Notice of
Determination issued by Appeals to the Tax Court. That is
why it is very important that a taxpayer timely file his or her
original CDP request within the 30-day period.
Recent Tax Court Decision that
points out the importance of raising all issues of defense at
administrative determination to proceed with collection of
taxpayer's Code Sec. 6672 penalty assessments, as corrected, was
upheld on summary judgment: taxpayer's bare assertions as to
penalties' prior payment and/or error in IRS's corrected
calculations weren't, absent some supporting evidence,
sufficient to raise material fact question or rebut calculations
that were amply supported by IRS's extensive records and which
had already taken all abatements, corp. payments and other
credits into account. Also, taxpayer wasn't entitled to raise at
trial new arguments not raised or addressed at CDP hearing.
(Moran v. Comm., DC, Northern Dist. of IL)
Tax Court Decision Regarding Challenge in CDP Hearing to
Original Return Tax Liability
Montgomery, (2004) 122 TC No. 1
In a recent Tax Court decision, a
married couple could challenge their reported tax liability in a
collection due process (CDP) hearing because:
they had not received a notice of
had not otherwise had an opportunity to
dispute their tax liability.
Oct. 18, 2001, the Montgomerys filed a joint income tax return
for 2000 reporting total tax of $2,831,360 and tax due of
$196,006. They made no payment with their return. IRS
accepted the return as filed and assessed the tax reported in
it. IRS did not audit the return or issue a notice of
On Mar. 18, 2002,
IRS issued a final notice of intent to levy under Code Sec.
6201(a)(1) . The Montgomerys responded by filing a request for a
collection due process hearing under Code Sec. 6330 . In a July
2002 telephone conversation, their counsel informed IRS's
Appeals officer that the Montgomerys had overstated the total
tax on their original return for 2000 and would submit an
amended return showing a refund due.
On Sept. 28, 2002, before
any amended return was filed, IRS issued a Final Notice of
Determination in which it said that the levy could go forward
because the Montgomerys had not timely submitted an amended
return. On Oct. 11, they filed an amended return showing that
they were due a refund of over $500,000. On Oct. 28, 2002, the
Montgomerys timely filed a Tax Court petition for review of
IRS's determination. Before the Tax Court, IRS moved for summary
judgment on the ground that the Montgomerys couldn't challenge
their tax liability at this point.
Tax could be
challenged. The Tax Court rejected IRS's motion. The Court
concluded that Code Sec. 6330(c)(2)(B) permits the Montgomerys
to challenge the existence or amount of the tax liability
reported on their original tax return because they had not
received a notice of deficiency and had not otherwise had an
opportunity to dispute the tax liability in question.
The Tax Court noted that Code Sec. 6330(c)
prescribes the matters that a person may raise at a CDP hearing.
Code Sec. 6330(c)(2)(A) provides that a person may raise
collection issues such as spousal defenses, the appropriateness
of IRS's intended collection action, and possible alternative
means of collection. It also noted that Code Sec. 6330(c)(2)(B)
establishes the circumstances under which a person may challenge
the existence or amount of his underlying tax liability.
Specifically, Code Sec. 6330(c)(2)(B) provides that the person
may raise challenges to the existence or amount of the
underlying tax liability for any tax period if he did not
receive any statutory notice of deficiency for the tax liability
or did not otherwise have an opportunity to dispute it.
Accordingly, the Court held in favor of the Montgomerys.
Here is another Tax Court case
dealing with Collection Due Process, where the taxpayer raised a
number of meritless arguments.
Tim W. Holliday v. Commissioner, TC Memo
2004-172 , Code Sec(s) 6330; 6502.
TIM W. HOLLIDAY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE,
Case Information: Code Sec(s): 6330; 6502
Docket: Docket No. 13020-02L.
Date Issued: 07/22/2004
Judge: Opinion by GALE
Reference(s): Code Sec. 6330 ; Code Sec. 6502
This case arises from a petition for review under section
6330(d) 1 of respondent's determination to proceed with a
proposed levy to collect petitioner's 1992, 1993, 1994, 1995,
1996, 1997, and 1998 Federal income tax liabilities. The issue
for decision is whether respondent may proceed with the proposed
levy. We hold that he may.
Petitioner was a resident of American Canyon, California, when
his petition was filed.
Petitioner timely filed a 1992 individual Federal income tax
return reporting tax due of $716. After correcting the return
for computational and clerical errors, respondent assessed the
tax due thereon of $1,061 on June 7, 1993.
Petitioner did not timely file a Federal income tax return for
1993 or 1995. On October 6, 1997, respondent prepared a
substitute for return for each year, and on May 18, 1998,
respondent assessed tax of $2,903 for 1993 and $6,138 for 1995.
2 Petitioner filed 1993 and 1995 individual Federal income tax
returns on September 21 and 18, 1998, respectively. Respondent
subsequently abated the assessment for each year to reflect the
tax reported on petitioner's returns after correcting for
computational and clerical errors.
Petitioner filed a 1994 individual Federal income tax return on
September 21, 1998; an assessment of $2,974 was made with
respect to that return.
Petitioner did not timely file a Federal income tax return for
1996. On September 14, 1998, respondent prepared a substitute
for return, and 3 days later petitioner submitted a return that
was filed as an amended return. The return petitioner submitted
reported $5,805 of tax due, which respondent assessed.
Petitioner timely filed 1997 and 1998 individual Federal income
tax returns, reporting tax due of $7,037 and $7,842,
respectively, which respondent assessed.
On September 21, 2000, petitioner filed amended returns for
1993, 1994, 1995, 1996, and 1997 reporting the tax due on each
amended return as zero. Respondent treated these amended returns
as claims for refund and denied them.
On April 9, 2001, respondent issued a Letter 1058, Final Notice,
Notice of Intent to Levy and Notice of Your Right to a Hearing,
to petitioner for the unpaid balances of the aforementioned
assessments for the tax years 1992, 1993, 1994, 1995, 1996,
1997, and 1998. On May 1, 2001, petitioner submitted to
respondent a Form 12153, Request for a Collection Due Process
Hearing. In his request, petitioner advised that he would have a
stenographer present at the hearing.
By letter dated May 3, 2002, the Appeals officer advised
petitioner that neither stenographic nor audio recording of the
hearing would be permitted. A hearing was held on May 22, 2002,
during which petitioner was not permitted to make an audio or
stenographic recording. The Appeals officer also refused to
consider petitioner's arguments related to the underlying tax
liabilities covered by the levy notice.
On July 11, 2002, a notice of determination concerning
collection action(s) under section 6320 and/or 6330 was mailed
to petitioner in which the Appeals officer recommended
proceeding with the levy. On August 12, 2002, petitioner timely
petitioned this Court for review of the determination.
Section 6331(a) provides that, if any person liable to pay any
tax neglects or refuses to pay such tax within 10 days after
notice and demand for payment, the Secretary is authorized to
collect such tax by levy upon property belonging to the
taxpayer. Section 6331(d) provides that the Secretary is obliged
to provide the taxpayer with notice, including notice of the
administrative appeals available to the taxpayer, before
proceeding with collection by levy.
Section 6330 generally provides that the Secretary cannot
proceed with the collection of taxes by way of a levy on a
taxpayer's property until the taxpayer has been given notice of,
and the opportunity for, an administrative review of the matter
(in the form of an Appeals Office hearing) and, if dissatisfied,
with judicial review of the administrative determination. See
Davis v. Commissioner, 115 T.C. 35, 37 (2000); Goza v.
Commissioner, 114 T.C. 176, 179-180 (2000). Section 6330(c)(2)
specifies issues that the taxpayer may raise at the hearing. The
taxpayer may raise “any relevant issue relating to the unpaid
tax or the proposed levy” including spousal defenses, challenges
to the appropriateness of collection actions, and alternatives
to collection. Sec. 6330(c)(2)(A). The taxpayer also may
challenge the underlying tax liability if the taxpayer did not
receive a statutory notice of deficiency or did not otherwise
have an opportunity to dispute the tax liability. Sec.
6330(c)(2)(B). Section 6330(c)(3) provides that the
determination of the Appeals officer shall take into
consideration, inter alia, the issues raised by the taxpayer. We
review the determination de novo when the underlying tax
liability is in dispute, Goza v. Commissioner, supra at 181-182,
and under an abuse of discretion standard when it is not, Sego
v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner,
supra at 182.
Two of the principal arguments petitioner raises are that he did
not receive the hearing to which he was entitled under section
6330 because he was not permitted to record the hearing and that
the Appeals officer refused to consider arguments pertaining to
the underlying tax liabilities (because petitioner reported
those liabilities as due on his returns). The hearing in this
case was conducted, and the determination issued, before our
Opinions in Keene v. Commissioner, 121 T.C. 8 (2003), and
Montgomery v. Commissioner, 122 T.C. 1 (2004), in which we held,
respectively, that a taxpayer in a section 6330 hearing is
entitled to make an audio recording thereof, and to dispute the
underlying tax liability even where the taxpayer reported the
liability as due on his return. 3 At trial, we afforded
petitioner the opportunity to raise any issue he considered
relevant to the proposed levy or the underlying tax liabilities.
4 We consider those arguments below.
Petitioner argues that the notice of determination was invalid,
and we therefore lack jurisdiction, because the hearing he
received was defective in several respects. We disagree. The
defects in the hearing alleged by petitioner do not invalidate
the notice and deprive us of jurisdiction. See Lunsford v.
Commissioner, 117 T.C. 159, 164 (2001).
Petitioner next argues that his hearing was invalid and
collection may not proceed because the Appeals officer refused
to provide him with verification, and did not verify at the
hearing, that the requirements of any applicable law or
administrative procedure were met, as required under section
6330(c)(1). Petitioner admitted in his petition and at trial
that, at the hearing, the Appeals officer would not allow
petitioner to see the Appeals officer's copies of the
transcripts of account. On the basis of the foregoing, we are
satisfied that the Appeals officer obtained verification at the
hearing; he was not required to provide any such verification to
petitioner. See Nestor v. Commissioner, 118 T.C. 162, 166-167
Petitioner next claims that he did not receive notice and demand
for payment (as required by section 6303(a)) with respect to the
liabilities for any of the taxable years in question, and that
the Appeals officer did not consider his contentions in this
regard. Petitioner's claim of nonreceipt is belied by the
certified copies of Forms 4340, Certificate of Assessments,
Payments and Other Specified Matters, in evidence for each year,
which show that statutory notices of balance due were issued for
each year. Absent some showing of irregularity in the Forms
4340, which petitioner has not made, those records serve as
presumptive evidence that notice and demand pursuant to section
6303(a) was mailed to petitioner. See Hansen v. United States, 7
F.3d 137, 138 (9th Cir. 1993); United States v. Chila, 871 F.2d
1015, 1019 (11th Cir. 1989); Craig v. Commissioner, 119 T.C.
252, 261-262 (2002). Respondent also relies on the notice of
intent to levy issued in this case as satisfying section
6303(a). See Hughes v. United States, 953 F.2d 531, 536 (9th
Cir. 1992); Standifird v. Commissioner, T.C. Memo. 2002-245,
affd. 72 Fed. Appx. 729 (9th Cir. 2003). In light of the Appeals
officer's review of the transcripts of account, we are satisfied
that he obtained sufficient verification that the requirements
of applicable laws and procedures had been met.
Petitioner also advanced a claim at trial that the period of
limitations for collection of his 1992 liability had expired.
The period for collection following assessment is 10 years. Sec.
6502(a). If a hearing is requested under section 6330(a)(3)(B),
the running of the period of limitations for collection is
suspended for the period during which the hearing, and appeals
therein, are pending. Sec. 6330(e)(1); Boyd v. Commissioner, 117
T.C. 127, 130-131 (2001). Further, the period for collection
shall not expire before the 90th day after the day on which
there is a final determination in the hearing. Sec. 6330(e)(1).
Petitioner's 1992 liability was assessed on June 7, 1993, and
petitioner requested a hearing under section 6330(a)(3)(B) on
May 1, 2001; i.e., within the 10-year period following the June
7, 1993, assessment. Accordingly, the period of limitations for
collection of petitioner's 1992 liability is suspended and has
Further, with respect to the underlying tax liabilities,
petitioner contends that he asked the Appeals officer to tell
him which Internal Revenue Code section makes him liable for tax
and whether that section is within subtitle A. Petitioner
further claims that he inquired as to what “legislative
regulation” makes him liable for interest. In both instances,
the Appeals officer apparently refused to consider these
inquiries. These are frivolous issues that the Appeals officer
might have responded to but was certainly not required to
consider. Suffice it to say that petitioner reported wage income
for each of the years in question and such income is taxable
pursuant to sections 1(a)-
See also United States v. Romero, 640 (c), 61(a)(1), and 62.
F.2d 1014, 1016 (9th Cir. 1981). As to petitioner's interest
liability, section 6601 provides for the imposition of interest
on unpaid tax liabilities, and section 6601(g) provides for the
assessment and collection of that interest. See also sec.
301.6601-1, Proced. & Admin. Regs. In sum, the challenges to the
existence or amount of the underlying tax liabilities that
petitioner advanced either at his hearing or in the instant
proceeding are meritless.
Finally, petitioner raised a frivolous argument to the effect
that there had been no delegation of authority from the
Secretary to issue the notice concerning his hearing under
section 6330 or to conduct it, and accordingly his hearing was
null and void for want of notice from, or its conduct by, the
Secretary himself. For the purposes presented here, the
Secretary has delegated the authority to issue a final notice of
intent to levy to certain IRS employees. See Delegation Order
191 (Rev. 3), effective June 11, 2001, Internal Revenue Manual,
sec. 188.8.131.52.3; see also Craig v. Commissioner, 119 T.C. 252,
263 (2002). The statute itself provides that the hearing is to
be conducted by an officer or employee of the IRS Office of
Appeals, not the Secretary. Sec. 6330(b)(1), (3).
Having considered all of petitioner's arguments and found them
meritless, we conclude that the Appeals officer's failure to
permit petitioner to make an audio or other recording of his
hearing was harmless error. Similarly, since petitioner has
raised only meritless arguments with respect to the underlying
tax liabilities, the Appeals officer's refusal to consider
arguments concerning the underlying tax liabilities was also
harmless error. In these circumstances, we do not believe it is
“either necessary or productive” to remand this case for a
recorded hearing where an Appeals officer might consider
petitioner's meritless arguments concerning his underlying tax
liabilities. See Lunsford v. Commissioner, 117 T.C. at 183, 189;
see also Keene v. Commissioner, 121 T.C. at 19-20; Kemper v.
Commissioner, T.C. Memo. 2003-195. As petitioner has not raised
a spousal defense, challenged the appropriateness of collection
actions, or offered collection alternatives, and the arguments
he has raised are meritless, we sustain respondent's
determination to proceed with the levy at issue. To reflect the
Decision will be entered for respondent.
Unless otherwise noted, section references are to the Internal
Revenue Code as amended.
Respondent concedes that notices of deficiency for these years
were not received by petitioner.
Certain portions of the underlying tax liabilities were
attributable to adjustments respondent made pursuant to sec.
6213(b)(1). However, we do not consider whether, pursuant to
sec. 6213(b)(2), petitioner previously had an “opportunity to
dispute” these portions within the meaning of sec. 6330(c)(2)(B)
because in this proceeding petitioner has, in any event, raised
only meritless arguments with respect to his underlying tax
In light of the fact that petitioner sought, but was denied,
recordation of the hearing, we resolve all doubts in
petitioner's favor, treating any issue or argument he raised at
trial or in any written submission as having been raised at his