The Tax Court in Brief – December 19th – December 23rd, 2022
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Tax Litigation: The Week of December 19th, 2022, through December 23rd, 2022
Mamadou v. Comm’r, T.C. Memo. 2022-121 | December 20, 2022 | Lauber, J. | Dkt. No. 9759-21L
Short Summary: This collection due process (“CDP”) case involves whether a taxpayer is entitled to challenge his underlying tax liabilities for unreported income for the 2015 and 2016 tax years after he failed to failed to respond to the IRS’s notice of deficiency, failed to participate in the CDP hearing, and failed to respond to the settlement officer (“SO”) from the IRS Office of Appeals.
The IRS examined taxpayer’s 2015 and 2016 tax returns after receiving third-party reports showing unreported income. The IRS issued taxpayer a notice of deficiency for these amounts and sent it via certified mail to his last known address in Bronx, NY. The Bronx address was used on his 2016 tax return, and was the same address that petition used when he filed his petition in the Tax Court challenging the IRS’s CDP determination. Taxpayer did not file a petition in the Tax Court challenging the notice of deficiency. Accordingly, the IRS assessed the tax liabilities determined in the notice. Taxpayer did not pay the liabilities upon notice and demand. To collect the tax liability, the IRS filed a Notice of Federal Tax Lien and sent taxpayer a Lien Notice to the Bronx address notifying him of his right to a CDP hearing.
Taxpayer timely requested a CDP hearing but instead of proposing a collection alternative stated that he did not have a chance to fight the deficiency determination and wanted to challenge the underlying liability. The IRS SO sent taxpayer a letter scheduling a telephone CDP hearing and noted in the letter that it would be taxpayer’s opportunity to explain why he disagreed with the collection action and to discuss collection alternatives and required taxpayer to complete a Form 433-A, Collection Information Statement.
Taxpayer did not attend the proposed telephone conference, did not ask that it be rescheduled, and did not submit the Form 433-A. The SO sent taxpayer a last chance letter informing him that he had 14 days to call her or send additional information; otherwise she would close the case. Taxpayer did not respond. After the COVID-19 suspension, the SO sent the taxpayer another last chance letter and he failed to respond. The SO reviewed the assessments, and confirmed that the notice of deficiency was sent to taxpayers Bronx address via certified mail and then closed the case. The IRS sent taxpayer a notice of determination sustaining the NFTL filing and noted that because he did not provide any information or participate in the telephone conference it did not consider his dispute regarding the underlying liabilities. Taxpayer filed a petition in the Tax Court seeking to challenge his underlying liabilities.
After several unsuccessful attempts to communicate with the petitioner, respondent filed a Motion to Dismiss for Failure to Properly Prosecute. Petitioner submitted a handwritten response asserting he didn’t receive the notice of deficiency and he attached a copy of an IRS Form 668-Z, Certificate of Release of Federal Tax Lien which indicated that the tax liens were released. Petitioner failed to appear at the calendar call and no appearance was made on petitioner’s behalf. Respondent appeared and explained that the tax liens were released inadvertently. Respondent stated that the IRS could not show timely supervisory approval for the penalty and asked the Service Center to abate the penalties, but instead it erroneously abated the deficiencies as well. This abatement was reversed but not before the Form 668-Z was issued. The Court denied the Motion to Dismiss without prejudice. Respondent subsequently filed a motion for summary judgment and petitioner again failed to respond. The issues for decision were (1) whether petitioner was entitled to challenge his underlying liability and (2) whether the SO abused her discretion in making the determination.
Primary Holdings:
- Petitioner was not entitled to challenge his underlying tax liability because respondent carried his burden of showing that taxpayer actually received the notice of deficiency and petitioner did not present evidence to rebut the presumption.
- The SO did not abuse her discretion because she properly verified the assessments by requesting and reviewing the notice of deficiency and the certified mailing list and she reasonably concluded that petitioner did not qualify for a collection alternative because (1) petitioner did not propose such an alternative and did not submit the required financial information to determine whether he was entitled to one.
Key Points of Law:
- Withdrawal of a Federal tax lien, in and of itself, does not prevent us from exercising jurisdiction over the remaining issues in a case. See First Rock Baptist Church Child Dev. Ctr. v. Commissioner, 148 T.C. 380, 388 (2017); see also Vigon v. Commissioner, 149 T.C. 97, 104, 105–07 (2017).
- The Court may grant a motion for summary judgment when the record reveals that there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965 (7th Cir. 1994).
- Where the validity of a taxpayer’s underlying liability is properly at issue, we review the IRS’s determination de novo. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181–82 (2000). Where the taxpayer’s underlying liability is not properly before us, we review the IRS’s determination for abuse of discretion only. Jones v. Commissioner, 338 F.3d 463, 466 (5th Cir. 2003); Goza, 114 T.C. at 182.
- A taxpayer may challenge his underlying tax liability at a CDP hearing only if he “did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity” to dispute it. § 6330(c)(2)(B).
- A notice of deficiency is presumed to have been received by the taxpayer if it was properly mailed to him at his last known address. See 6212(b)(1); Hoyle v. Commissioner, 131 T.C. 197, 200, 203–04 (2008), supplemented by 136 T.C. 463 (2011). A taxpayer’s last known address is generally the address appearing on his “most recently filed and properly processed Federal tax return.” Treas. Reg. § 301.6212-2(a).
- Respondent bears the burden of proving, by competent and persuasive evidence, the proper mailing of the notice of deficiency. Coleman v. Commissioner, 94 T.C. 82, 90 (1990). Generally, if the IRS establishes that the notice existed and produces a USPS certified mail list showing that the notice was sent to the taxpayer’s last known address, the IRS is entitled to a presumption of proper mailing. See O’Rouke v. U.S., 587 F.3d 537, 540 (2d Cir. 2009).
- To preserve an underlying liability challenge in this Court, a taxpayer must properly raise that challenge at the CDP hearing. Thompson v. Commissioner, 140 T.C. 173, 178 (2013); see Giamelli v. Commissioner, 129 T.C. 107, 113 (2007). “An issue is not properly raised if the taxpayer fails . . . to present to Appeals any evidence with respect to that issue after being given a reasonable opportunity” to do so. Treas. Reg. § 301.6320-1(f)(2), Q&A-F3; see Giamelli, 129 T.C. at 112–16.
Insights: Taxpayers that fail to exercise their remedies or to respond to IRS notices may bear the consequences of that inaction. The taxpayer in this case had many opportunities to challenge his underlying liability and to participate in the CDP hearing to seek a collection alternative but failed to do so. Taxpayer’s argument that he did not receive the notice of deficiency was unsupported by the record and he failed to rebut the presumption that it was properly mailed to him at his last known address. Even if a taxpayer believes that the government has withdrawn a proposed action against the taxpayer, the taxpayer should continue to participate and communicate with the IRS and the court, as applicable, to ensure that the taxpayer is not waiving the opportunity to challenge an underlying liability or to propose a collection alternative.
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