On May 18, 2020, the Tax Court issued a Memorandum Opinion in the case of Nesbitt v. Commissioner (T.C. Memo. 2020-61). The basic issue before the court in Nesbitt v. Commissioner was whether the IRS abused its discretion in sustaining a proposed levy and rejecting a proposed collection alternative on the grounds that the petitioners failed to provide sufficient information, which information was requested multiple times by the IRS.
Procedural Background to Nesbitt v. Commissioner
Petitioners received a Notice of Intent to Levy (and Right to CDP Hearing) and requested a CDP hearing using a Form 12153 (Request for CDP Hearing). The petitioners indicated that they were interested in an installment agreement (IA) as a collection alternative. In advance of the CDP hearing, the IRS advised petitioners that, to consider an IA, they needed to provide (1) a completed Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals), and (2) copies of signed income tax returns for 2015 and 2016, which IRS records indicated they had not filed.
Petitioners submitted a Form 433-F (Collection Information Statement), which, although calling for information similar to that required by Form 433-A, cannot be used to support an offer in compromise (OIC). See IRM 5.15.1.2. Notwithstanding the incorrect form itself, the Form 433-F omitted petitioner-husband’s income and supporting financial documentation. The IRS attempted to hold the (telephonic) CDP hearing, but the IRS was unable to reach the petitioners.
The IRS sent a “last chance” letter, “inviting” the petitioners to submit (within 14 days) any information that they wished to be considered by the IRS. Petitioners did not respond to the “last chance” letter or otherwise communicate the IRS, who, accordingly, decided to close the case, noting also that the petitioners had not yet filed a tax return for 2015 or 2016. The IRS issued a notice of determination sustaining the proposed levy, and petitioners filed the present petition.
Swift Justice
Judge Lauber wastes no time in the Nesbitt opinion. Apparently, he was hungry, and the leftover meatloaf that he had packed for lunch was not going to reheat itself. The Tax Court notes that, although the petitioners were entitled to request a collection alternative, such as an offer in compromise or an installment agreement, the petitioners made no concrete proposal for a collection alternative.
The IRS is not required to propose a collection alternative; thus, if a taxpayer fails to present a “concrete proposal” for a collection alternative, the general proposal for one can be summarily rejected without the IRS abusing its discretion to do so. See Gentile v. Commissioner, T.C. Memo. 2013-175, aff’d, 592 F. App’x 824 (11th Cir. 2014); Veneziano v. Commissioner, T.C. Memo. 2011-160; Cavazos v. Commissioner, T.C. Memo. 2008-257.
Even if the petitioners had adequately proposed a collection alternative, the request was still dead on arrival, because the petitioners failed to submit the required documentation. Thus, the Tax Court found that it was not an abuse of discretion for the IRS to reject collection alternatives and sustain collection action where the taxpayer failed to supply the necessary documents after being given sufficient opportunities to do so. See, e.g., Solny v. Commissioner, T.C. Memo. 2018-71, at *10; Gentile, 106 T.C. Memo. 2013-175.
In any event, the petitioners failed to establish compliance with their ongoing tax obligations by filing returns for 2015 and 2016. The IRS could properly have rejected any proposed collection alternative on that ground alone. See Chadwick v. Commissioner, 154 T.C. No. 5, *19 (Jan. 21, 2020); Cox v. Commissioner, 126 T.C. 237, 258 (2006), rev’d on other grounds, 514 F.3d 1119 (10th Cir. 2008); Hull v. Commissioner, T.C. Memo. 2015-86.
(T.C. Memo. 2020-61) Nesbitt v. Commissioner
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