On August 31, 2021, the Tax Court issued a Memorandum Opinion in the case of Webb v. Commissioner (T.C. Memo. 2021-105). The primary issue presented in Webb was whether Appeals abused its discretion when it declined to place the petitioner in currently not collectible (CNC) status.
Background to Webb v. Commissioner
On March 4, 2019, the IRS issued to the petitioner a Notice of Intent to Levy and Notice of Your Right to a Hearing (CDP levy notice) advising her that the IRS intended to levy to collect her outstanding tax for the tax year 2017. The petitioner’s representative timely requested a collection due process (CDP) hearing in response to the CDP levy notice, in which the petitioner sought to be placed in CNC status.
The petitioner’s representative submitted a completed Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals), and copies of bank statements, pay stubs, and bills. The petitioner’s representative did not submit Form 656 (Offer in Compromise) or documentation with respect to a reasonable cause basis for penalty abatement. The petitioner’s representative sought to have Ms. Rego place the petitioner’s account into CNC status and did not propose a monthly installment amount on the basis of her financial circumstances.
After reviewing the submitted material, Ms. Rego concluded that petitioner could pay $56 per month. Ms. Rego informed the petitioner’s representative that she needed information about the petitioner’s bankruptcy filing, information about a lawsuit in which the petitioner was a plaintiff, and confirmation of monthly taxes, along with a revised Form 433-A.
In January 2020, Ms. Rego received a facsimile from the petitioner’s representative withdrawing the power of attorney for his firm at petitioner’s request. Ms. Rego then sought the requested information directly from the petitioner. The petitioner provided nothing to Ms. Rego, and she closed the case in February 2020, issuing a notice of determination sustaining the levy in March 2020.
Suspension of collection activity is a collection alternative that a taxpayer may propose, and Appeals must consider. See IRC § 6330(c)(2)(A)(iii), (3)(B). To justify an account’s being placed into CNC status, the taxpayer must supply all relevant information requested by Appeals, including financial statements for consideration of the facts and issues involved in the hearing. See Treas. Reg. § 301.6330-1(e)(1).
Generally, CNC status may be available when a taxpayer has no ability to make payments. See IRM pt. 18.104.22.168. The Tax Court has previously ruled that an Appeals officer does not abuse his or her discretion in denying CNC status where the taxpayer has not submitted the financial information necessary for the officer to make such a determination. See Chadwick v. Commissioner, 154 T.C. 84, 95 (2020).
No Abuse of Discretion
The only issue petitioner now raises is whether her account should have been placed into CNC status by Appeals. However, even after specific requests from Ms. Rego petitioner did not provide the supporting documentation Ms. Rego needed to be able to grant such a collection alternative. Furthermore, petitioner conceded that she still contributes to an IRC § 401(k) account.
Ms. Rego adhered to the IRM in determining that contributions to voluntary retirement plans (including IRC § 401(k) accounts) are not necessary expenses for purposes of CNC status based on financial hardship. See IRM pt. 22.214.171.124(2). Accordingly, the Tax Court was compelled to determine that Ms. Rego did not abuse her discretion as to her consideration of the CNC issue petitioner raised. See Chadwick, 154 T.C. at 95.
Further, Ms. Rego performed a balancing test, concluding that the proposed levy did balance the needs of collection with the concerns of petitioner. On the basis of its review, the Tax Court held that Ms. Rego did not abuse her discretion. See Pough v. Commissioner, 135 T.C. 344, 352 (2010).Add to favorites