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Biggs-Owens v. Commissioner (T.C. Memo. 2020-113)

On July 30, 2020, the Tax Court issued a Memorandum Opinion in the case of Biggs-Owens v. Commissioner (T.C. Memo. 2020-113). The issue before the court in Biggs-Owens was whether the IRS abused its discretion in sustaining the filing of an NFTL by rejecting a collection alternative prior to giving the petitioner a meaningful chance to bring herself into compliance with outstanding estimated tax obligations.

The CDP Proceeding

In December 2014, the petitioner entered into an installment agreement (IA) with the IRS. This agreement proved short-lived, with the IRS terminating it just six months later. Two years later, the IRS got around to issuing a notice informing her of the filing of an NFTL with respect to those years and apprising her of her right to request a CDP hearing.

The petitioner timely filed a Form 12153 (Request for a Collection Due Process or Equivalent Hearing), on which she checked the box for “Installment Agreement.” She did not identify any other issues on the form. The IRS issued a letter to the petitioner informing her that she was required to file her 2015 Federal income tax return before an installment agreement could be considered. She did not take any action in response to the letter.

The case was assigned to a settlement officer (SO) in Appeals, who scheduled the petitioner’s CDP hearing by means of a Letter 4837. Among other things, the settlement officer requested that the petitioner submit within 14 days: (1) copies of her filed tax returns for 2015 and 2016, (2) proof of her estimated tax payments, (3) a completed Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) and/or Form 433-B (Collection Information Statement for Businesses), and (4) supporting financial documentation for the last three months.

The SO was clear that no collection alternative would be considered without such documentation. The petitioner did not submit anything, or otherwise communicate with the SO before the hearing date. The CDP hearing was held, and at the end, the SO warned the petitioner that if the SO did not receive the financial information within 14 days, she would sustain the NFTL filing.

The petitioner finally submitted financials, but they were unavailing, and the SO sustained the NFTL filing. The collection alternatives were rejected because the petitioner was not in compliance with her estimated tax obligations and that the taxes withheld on her wages were insufficient.

Review of Proposed Collection Alternatives by Tax Court

Simply proposing collection alternatives is not enough, as the petitioner found in Biggs-Owens. The Tax Court notes that although the petitioner “generally discussed an IA with the SO” and “subsequently provided some of the financial documentation” needed to evaluate the collection alternative, the petitioner failed to “propose any concrete terms” with respect to the IA. It is not an abuse of discretion by Appels to reject a collection alternative where the taxpayer does not propose any terms for a specific collection alternative. James A. Walker, P.A. v. Commissioner, T.C. Memo. 2014-187, *10; see also Busche v. Commissioner, T.C. Memo. 2011-285.

Further, as the SO pointed out, Appeals may reject a collection alternative for a taxpayer who fails to comply with current estimated tax obligations. See Giamelli v. Commissioner, 129 T.C. 107, 111-112 (2007); Cox v. Commissioner, 126 T.C. 237, 257-258 (2006), rev’d on other grounds, 514 F.3d 1119 (10th Cir. 2008); Ransom v. Commissioner, T.C. Memo. 2018-211, at *9-*10, aff’d, 784 F. App’x 800 (D.C. Cir. 2019). As the Tax Court has previously held in a number of cases, the requirement of current compliance with estimated tax liabilities as a prerequisite for a collection alternative ensures that current taxes are being paid and avoids the risk of pyramiding liabilities. See, e.g., Ransom, T.C. Memo. 2018-211, *9-*10; see also Orum v. Commissioner, 412 F.3d 819 (7th Cir. 2005), aff’g 123 T.C. 1 (2004). Thus, the petitioner’s non-compliance with her filing requirements would, by itself, be enough to disqualify her.

The petitioner argued that the SO “shut the door” on her case by not providing the petitioner enough time to fix her estimated tax issues, filing issues, and propose an actual collection alternative. In the end, the Tax Court found that the SO’s two-month extension was sufficient and observed that the SO “was not obligated to hold the door open for Ms. Biggs-Owens indefinitely. See Northside Carting, Inc. v. Commissioner, T.C. Memo. 2020-18, *17. Indeed, there is no requirement that the IRS wait a certain amount of time before making a determination as to a proposed levy. See Gazi v. Commissioner, T.C. Memo. 2007-342; see also Treas. Reg. § 301.6320-1(e)(3), Q&A-E9.

(T.C. Memo. 2020-113) Biggs-Owens v. Commissioner

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