On March 5, 2020, the Tax Court issued a Memorandum Opinion in the case of Wong v. Commissioner (T.C. Memo. 2020-32). The single issue presented in Wong v. Commissioner was whether Wong was right, which is to say, whether the IRS’s determination to sustain the collection action against the petitioner was proper as a matter of law.
Background to Wong v. Commissioner
Petitioner, Do Wong, filed a timely Federal income tax return for 2013, reporting a tax liability of $10,395. Because his tax payments for 2013 exceeded that amount, he reported an overpayment on his 2013 return and elected to have the overpayment applied to his tax liability for 2014. The IRS selected petitioner’s 2013 return for examination. Finding that Do Wong, in fact, did wrong, the IRS made numerous adjustments to his return, including the disallowance (for lack of substantiation) of deductions for several hundred thousand dollars of business expenses reported on his Schedule C (Profit or Loss from Business).
The IRS sent a 30-day letter to the petitioner proposing a deficiency of nearly $160,000 and an accuracy related penalty of $31,000. The petitioner failed to respond, and the IRS sent him a timely statutory notice of deficiency (SNOD) via certified mail to his last known address.
The petitioner failed to challenge the adjustments by timely filing a petition with the Tax Court pursuant to IRC § 6213(a). Proving that two Wongs don’t make a right, the IRS assessed the deficiency and accuracy related penalty along with additional interest. The petitioner failed to pay this liability upon notice and demand for payment. And no, I’m not even a little sorry for that pun.
The IRS filed a notice of Federal tax lien (NFTL) in February 2018 and timely sent the petitioner a Notice of Federal Tax Lien and Right to Hearing. The petitioner timely requested a CDP hearing, arguing that he had filed his 2013 return and that he did not owe any tax. A CDP hearing was scheduled, and it was explained to the petitioner that the IRS would consider collection alternatives during the hearing.
Failure to Attend CDP Hearing or Heed Warnings of IRS
The letter scheduling the CDP hearing cautioned that in order for the IRS to consider a collection alternative, the petitioner needed to provide: (1) a completed Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals); (2) copies of signed income tax returns for 2014-2017 (which IRS records showed that he had not filed); and (3) proof that he was current with estimated tax payments. The letter further explained that petitioner’s receipt of a notice of deficiency for 2013 would preclude him from disputing his tax liability for 2013 but that he could request “audit reconsideration” as an alternative.
Do Wong did wrong again, failing to submit a Form 433-A or copies of tax returns for 2014-2017; further, he failed to otherwise communicate with the IRS before the scheduled hearing. The petitioner, similarly, failed to attend the CDP hearing. The IRS sent the petitioner a “last chance” letter noting that he had missed the conference and inviting him to send the IRS, within 14 days, any information that he wanted the IRS to consider. Petitioner asked for more time to provide information, but that time came and passed. The IRS attempted to reach the petitioner, but upon multiple unsuccessful attempts, it ultimately closed the case and issued Do Wong a notice of determination.
“Help Me to Help You” – Ignoring IRS and Tax Court Unavailing Strategy
Petitioner filed a timely petition in which he contended that he was not given “a chance to provide substantiation records.” Citing the infamous, and sneakily successful, argument that petitioner was a bald-faced liar, the IRS moved for summary judgment. The petitioner, despite being warned about the consequences did not respond.
The Tax Court, citing uncertainty as to whether the IRS had received proper supervisory approval for the accuracy-related penalty pursuant to IRC § 6751(b)(2), denied the uncontested motion. This was a blow to the IRS’s large administrative ego, but they refiled the motion with a declaration that supervisory approval was timely received. Again, the Tax Court urged the petitioner to respond, and again, he failed to respond once more and for the last time.
The Tax Court goes through the motions of reciting the summary judgment standard, the Tax Court’s standard of review, and an analysis of abuse of discretion. Ultimately, however, the IRS bent over backwards for the petitioner, and the Court gave him multiple opportunities. Having failed to avail himself of the government’s magnanimity, summary judgment was granted against the petitioner.
(T.C. Memo. 2020-32) Wong v. Commissioner
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