On March 9, 2022, the Tax Court issued a Memorandum Opinion in the case of Cosio v. Commissioner (T.C. Memo. 2022-18). The primary issues presented in Cosio v. Commissioner were whether the taxpayer was entitled to raise his underlying liability in a CDP hearing and whether the settlement officer abused its discretion in denying the petitioner collection alternatives and sustaining collection through levy.
Background to Cosio v. Commissioner
Mr. Cosio—we’ll call him Carl because, as you will see, formalities are not Carl’s strong suit—filed his 2012 Form 1040 on August 1, 2016.
This was, admittedly, a skosh late.
The return reflected a total tax of $1,500 and $400 of withholding. Thus, Carl sent in a check for $1,100 and called it a day. The IRS, however, assessed the reported tax of $1,500 in September 2016, as well as a failure to file penalty under IRC § 6651(a)(1), failure to pay under IRC § 6651(a)(2), and interest.
Carl filed his 2015 Form 1040 in November 2016, or just over a month late (assuming it was on extension, which with Carl’s filing history is questionable). The return reflected a total liability of $34,000 and an unpaid liability of $33,000. Once again, the IRS assessed the tax liability of $34,000, as well as a failure to file penalty under IRC § 6651(a)(1), failure to pay under IRC § 6651(a)(2), and interest.
In April 2017, the IRS issued a Notice of Intent to Levy and Notice of Your Right to a Hearing (notice of levy) with respect to Carl’s unpaid balance for tax year 2015. In May 2017, Carl submitted to the IRS Form 12153, Request for a Collection Due Process or Equivalent Hearing, requesting a CDP hearing for tax years 2006 through 2015. On the Form 12153, he checked the “Installment Agreement,” “Offer in Compromise,” and “I Cannot Pay Balance” boxes as collection alternatives.
Carl did not check the box on Form 12153 indicating he was interested in an equivalent hearing.
Under the “Other” section of the Form 12153, Mr. Cosio stated:
I am not liable for all of these taxes. There were trades completed on my behalf by Rafael Calleja that were not authorized, and the money was stolen from me. I did not see the profit and, as such, should not be responsible for that income. I am willing to pay the taxes for income I received, but not on the profits of trades that I did not realize the income on based on the theft by Calleja.
Damn you Calleja. Damn you to hell.
The Denial of Certain Years’ CDP Hearing Rights
After Carl submitted his CDP request, the IRS sent him several letters in response. One informed him that he was not entitled to a CDP hearing or equivalent hearing for tax years 2006 through 2009 because his request was untimely as to those years. Another informed him that his request for a CDP hearing was untimely with respect to tax years 2010, 2011, and 2012. However, the IRS letter invited Carl to request an equivalent hearing for tax year 2012 by submitting a new Form 12153 within 15 days. Carl sent in a handwritten note, but no new Form 12153.
Nonetheless, the IRS subsequently sent Carl a letter granting him an equivalent hearing for tax year 2012 and forwarded his request to Appeals. The IRS also issued Carl a letter with respect to his unpaid tax liability for tax year 2015. For tax year 2015 the IRS acknowledged timely receipt of Carl’s CDP request and stated that it was forwarding his CDP request to Appeals.
The CDP Hearing and Crickets
Appeals assigned Settlement Officer Josephine Stockli to conduct Carl’s CDP hearing for tax year 2015 and his equivalent hearing for tax year 2012. In July 2017, Stockli mailed Carl a letter scheduling a telephone conference for August 2017. Stockli’s letter also requested that Carl provide a completed Form 656, Offer in Compromise, and Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, at least 14 days before the scheduled August 2017, conference.
To no one’s shock, Carl failed to deliver.
Carl did, however, call Stockli later in July 2017, to discuss his case, and during the call Stockli again requested that he furnish a completed Form 433-A. She also requested any amended returns for the tax years in issue. At the conclusion of the phone call, Carl asked Stockli to contact his representative, Ron Porat.
On the date of the CDP hearing, Stockli called Ron to conduct said hearing. Ron didn’t answer, nor did he return her voicemail. In August 2017, Stockli sent Carl and Ron letters advising that no one showed the hell up or answered their freaking phone, and she asked that they send any documents to her that they wished her to consider.
The Notice of Determination and Sounds of Silence
In September Stockli once again sent letters to Ron and Carl requesting such documentation. Yet, like a Simon and Garfunkel concert, all Stockli heard was the sound of silence…and Mrs. Robinson, but that was pure coincidence.
Neither Carl nor Ron made any further contact with Stockli. In October 2017, Stockli closed Carl’s case conclusively and issued him a Notice of Determination Concerning Collection Action(s) Under IRC § 6320 and/or IRC § 6330 (notice of determination), sustaining the proposed levy action with respect to tax year 2015.
In the notice of determination Stockli concluded that although Carl requested the collection alternatives of an installment agreement or an offer-in-compromise, he failed to provide any of the appropriate paperwork she requested for either collection alternative to be considered. Importantly, Stockli further concluded that Carl does not challenge his underlying liability for tax year 2015.
Stockli sustained the notice of levy, indicating that because neither Carl nor Ron responded to requests for information, the proposed levy balances the efficient collection of taxes with Carl’s legitimate concern that the collection action be no more intrusive than necessary.
Carl timely filed his petition in this case within 30 days of the date of the notice of determination. In his petition Carl argues that he was not given proper notice with respect to his CDP hearing for tax year 2015 and that his July 2017 telephone conversation with Stockli “led [him] to believe that [he] would receive further communication regarding the [CDP] hearing.”
The Underlying Liability Issue
Where the taxpayer’s underlying tax liability is properly at issue in an administrative hearing, the Tax Court reviews the liability determination de novo.[1] The taxpayer may challenge the validity of his or her tax liability in a CDP hearing only if he or she did not receive a notice of deficiency or otherwise have a prior opportunity to contest the liability.[2]
If the validity of the underlying tax liability is not properly at issue, the Court will review the IRS’s administrative determination for abuse of discretion.[3] Abuse of discretion exists when the determination was arbitrary, capricious, or without sound basis in fact or law.[4]
The Adequacy of a CDP Hearing
Relevant regulations state that “[a] CDP hearing may, but is not required to, consist of a face-to-face meeting, one or more written or oral communications between an Appeals officer or employee and the taxpayer or the taxpayer’s representative, or some combination thereof.”[5] Additionally, the Tax Court has previously determined that it is not an abuse of discretion for Appeals to move ahead with its final determination after an Appeals officer gives a taxpayer an adequate timeframe to submit requested items and the taxpayer fails to submit these items.[6]
Conceptually, this makes a modicum of sense, as the Settlement Officer would just be spitballing any remedy.
Classic pro se petitioner (read: dumbass) move.
Review of Appeals’ Determination
In reviewing a determination under IRC § 6330(c)(2), including challenges to the underlying tax liability, we consider only issues that the taxpayer properly raised during the CDP hearing.[7] The taxpayer does not properly raise an issue, including the underlying tax liability, during the CDP hearing if he “fails to present to Appeals any evidence with respect to that issue after being given a reasonable opportunity to present such evidence.”[8]
Or, you know, even freaking show up or answer his phone…
Carl did not receive a notice of deficiency, and therefore he was entitled to challenge his underlying tax liability in his CDP hearing. Initially Carl requested consideration of his underlying tax liability in his CDP hearing request. However, requesting consideration of an issue during a CDP proceeding is not enough to preserve the issue for judicial review.
The taxpayer must also present Appeals with “evidence with respect to that issue after being given a reasonable opportunity” to do so.[9] Carl failed to clear this threshold hurdle even though Stockli was terribly accommodating.
Holding in Cosio v. Commissioner
Since Carl never properly raised a challenge to his underlying tax liability at the CDP hearing, it was not part of the Appeals officer’s determination and therefore it should not be part of the Tax Court’s review.[10]
Because Stockli (1) verified that the requirements of applicable law and administrative procedure have been met; (2) considered all relevant issues raised by the taxpayer, including offers of collection alternatives such as an offer-in-compromise; and (3) determined whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that collection be no more intrusive than necessary, as required by IRC § 6330(c)(3), the Tax Court upheld Stockli’s decision to deny the deadbeat his collection alternative(s).
(T.C. Memo. 2022-18) Cosio v. Commissioner
Footnotes:
- Goza v. Commissioner, 114 T.C. 176, 181–82 (2000). ↑
- See I.R.C. § 6330(c)(2)(B); see also Sego v. Commissioner, 114 T.C. 604, 609 (2000). ↑
- See Goza, 114 T.C. at 182. ↑
- See Murphy v. Commissioner, 469 F.3d 27 (1st Cir. 2006), aff’g 125 T.C. 301, 308, 320 (2005); Sego, 114 T.C. at 610. ↑
- Treas. Reg. § 301.6330-1(d)(2), Q&A-D6. ↑
- See Pough v. Commissioner, 135 T.C. 344, 351 (2010). ↑
- See Giamelli v. Commissioner, 129 T.C. 107, 115 (2007); Treas. Reg. § 301.6330-1(f)(2), Q&A-F3. ↑
- Treas. Reg. § 301.6330-1(f)(2), Q&A-F3. ↑
- Id. ↑
- See Giamelli, 129 T.C. at 113; see also Pough, 135 T.C. at 349. ↑
Add to favorites
