                     T.C. Summary Opinion 2011-37



                       UNITED STATES TAX COURT



         LAW OFFICES OF ROBERT A. CUSHMAN, LLC, Petitioner v.
              COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5218-10S.                Filed March 29, 2011.



     Robert A. Cushman, for petitioner.

     Frank W. Louis, for respondent.



     PANUTHOS, Chief Special Trial Judge:    This case was heard

pursuant to the provisions of section 7463 of the Internal

Revenue Code in effect when the petition was filed.1    Pursuant to

section 7463(b), the decision to be entered is not reviewable by



     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as amended. All Rule
references are to the Tax Court Rules of Practice and Procedure.
                                - 2 -

any other court, and this opinion shall not be treated as

precedent for any other case.

     This case is before the Court on petitioner’s2 request for

judicial review of respondent’s determinations to sustain notices

of intent to levy to collect employment taxes and a failure to

deposit penalty.

     Respondent sent petitioner two notices of determination, the

first for the tax period ending December 31, 2005, and the second

for the tax periods ending March 313 and June 30, 2009.4    The

issues for decision are:   (1) Whether respondent correctly

assessed employment taxes for the fourth quarter of 2005; (2)

whether petitioner is liable for a failure to deposit penalty

under section 6656 for the second quarter of 2009; and (3)

whether respondent abused his discretion by conducting

petitioner’s collection due process (CDP) hearing through

correspondence and telephone calls and by denying petitioner’s

request for an installment agreement.



     2
      Petitioner was represented by Robert A. Cushman (Mr.
Cushman). Mr. Cushman signed the petition as a member of the
L.L.C.
     3
      At trial petitioner agreed that it owed the tax, penalty,
and interest for the tax period ending Mar. 31, 2009. The Court
deems that issue conceded, and that tax period will not be
discussed further.
     4
      The only determination for the tax period ending June 30,
2009, was a sec. 6656 failure to deposit penalty.
                                - 3 -

     Some of the facts have been stipulated, and they are so

found.    The stipulation of facts and the attached exhibits are

incorporated herein by this reference.     At the time of filing the

petition, petitioner’s principal place of business was in

Connecticut.    As a matter of convenience, we will combine our

findings and discussion herein.

Applicable Law

     We have jurisdiction under section 6330(d)(1) to review

respondent’s determinations that the notices of intent to levy

were proper and that respondent may proceed to collect by levy.5

The Secretary may not levy upon any property or any right to

property of any taxpayer unless the Secretary has notified such

taxpayer in writing of the right to a hearing before the levy is

made.    Sec. 6330(a).

     If the taxpayer requests a CDP hearing, the hearing will be

held before an impartial officer or employee of the Internal

Revenue Service (IRS) Office of Appeals.     Sec. 6330(b)(1), (3).

At the CDP hearing, the taxpayer may raise any relevant issue,

including challenges to the appropriateness of the collection

action and collection alternatives.     Sec. 6330(c)(2)(A).   The

taxpayer is expected to provide all relevant information


     5
      The Pension Protection Act of 2006, Pub. L. 109-280, sec.
855, 120 Stat. 1019, amended sec. 6330(d) and granted this Court
jurisdiction over all sec. 6330 determinations made after Oct.
16, 2006. Perkins v. Commissioner, 129 T.C. 58, 63 n.7 (2007).
                                - 4 -

requested by the Appeals Office, including financial statements,

for consideration of the facts and issues involved in the CDP

hearing.    Sec. 301.6330-1(e)(1), Proced. & Admin. Regs.   A CDP

hearing may consist of one or more written or oral communications

between an Appeals officer (AO) and the taxpayer.    Sec.

301.6330-1(d)(2), Q&A-D6, Proced. & Admin. Regs.; see Katz v.

Commissioner, 115 T.C. 329 (2000); Dinino v. Commissioner, T.C.

Memo. 2009-284.    The statute requires only that a taxpayer be

given a reasonable chance to be heard before the issuance of a

notice of determination.    Roman v. Commissioner, T.C. Memo. 2004-

20.

       The taxpayer may not dispute the existence or amount of his

underlying tax liability unless he did not receive a notice of

deficiency for the tax in question or did not otherwise have an

opportunity to dispute the tax liability.    Sec. 6330(c)(2)(B);

see Sego v. Commissioner, 114 T.C. 604, 609 (2000).

       If the underlying tax liability is at issue, the Court will

review the AO’s determination de novo.    Sego v. Commissioner,

supra at 610.    Where the validity of the underlying tax liability

is not properly placed at issue, the Court will review the

determination for abuse of discretion.    See Goza v. Commissioner,

114 T.C. 176, 182 (2000); see also Sego v. Commissioner, supra at

610.    Any other administrative determination regarding the

proposed collection action will be reviewed for abuse of
                                - 5 -

discretion.    Sego v. Commissioner, supra at 610; Goza v.

Commissioner, supra at 181-182.    An abuse of discretion occurs

when the exercise of discretion is without sound basis in fact or

law.    Murphy v. Commissioner, 125 T.C. 301, 308 (2005), affd. 469

F.3d 27 (1st Cir. 2006).

       Respondent’s determinations concern Federal employment taxes

reported on Form 941, Employer’s Quarterly Federal Tax Return,

and a failure to deposit penalty pursuant to section 6656.

Petitioner did not receive a notice of deficiency or otherwise

have an opportunity to dispute the tax liability before the CDP

hearing; thus we review the determinations de novo.

       In making a determination following a CDP hearing, the AO

must consider:    (1) Whether the requirements of any applicable

law or administrative procedure have been met, (2) any relevant

issues raised by the taxpayer, and (3) whether the proposed

collection action balances the need for efficient collection with

legitimate concerns that the collection action be no more

intrusive than necessary.    Sec. 6330(c)(3).

Fourth Quarter of 2005

       The amount at issue for the tax period ending December 31,

2005, is the unpaid employment tax liability from the first

quarter of 2005 that was assessed for the fourth quarter of 2005

under combined annual wage reporting (CAWR).    CAWR adjustments

are appropriate when there is a discrepancy between an employer’s
                               - 6 -

Form 941 returns and the amount of wages reported to the Social

Security Administration at the end of the year.    In re Howard

Indus., Inc., 225 Bankr. 388, 392 (Bankr. S.D. Ohio 1997).

Petitioner received a letter from respondent dated August 28,

2007, explaining that there was a discrepancy between the Forms

941 filed with the IRS and the amount of wages reported to the

Social Security Administration for 2005.

     Petitioner’s only argument for the tax period ending

December 31, 2005, is that it paid the tax liability in 2007 and

that this issue was previously resolved by the Court in docket

No. 27333-07S.6

     Although petitioner disputes respondent’s assertion that the

L.L.C. has not paid the tax liability due for the first quarter

of 2005, Mr. Cushman testified that he had no record of filing a

tax return or remitting a payment on petitioner’s behalf for the

first quarter of 2005.   Respondent submitted into evidence Form

4340, Certificate of Assessments, Payments, and Other Specified

Matters, for the first quarter of 2005.    Attached to Form 4340 is

Form 3050, Certification of Lack of Record, certifying that

respondent did not receive from petitioner a Form 941 for the

first quarter of 2005.   Respondent may rely on Form 4340 for


     6
      Although the tax period at issue in the 2007 Tax Court case
included the fourth quarter of 2005, the first quarter of 2005
was not at issue in that case.
                                 - 7 -

verification purposes.    See Nestor v. Commissioner, 118 T.C. 162

(2002).    Respondent also presented into evidence a Form 4340 for

the fourth quarter of 2005.    The form shows that an additional

tax was assessed on December 31, 2007, after petitioner settled

the issues in the aforementioned docketed case.    The amount

assessed, $4,762,7 is the amount that respondent determined

petitioner owes for the first quarter of 2005.    After submission

into evidence of the Forms 4340, petitioner reiterated that it

already paid the tax liability for the fourth quarter of 2005 and

asserted that the first quarter of 2005 is not at issue in this

proceeding.

     The assessment of the tax owed for the first quarter of 2005

in the fourth quarter of 2005 was proper.    See In re Howard

Indus., Inc., supra.     Petitioner has offered no viable argument

that might suggest the assessment is improper.    Therefore, we

sustain respondent’s determination with respect to the fourth

quarter of 2005.

Second Quarter of 2009

     A penalty will be imposed upon any taxpayer who fails to

deposit (as required by title 26, the Internal Revenue Code) any

amount of tax imposed by that title unless it is shown that such

failure is due to reasonable cause and not due to willful

neglect.   Sec. 6656(a); see Charlotte’s Office Boutique, Inc. v.


     7
      All amounts are rounded to the nearest dollar.
                                - 8 -

Commissioner, 121 T.C. 89, 109 (2003), affd. 425 F.3d 1203 (9th

Cir. 2005).   A taxpayer can establish reasonable cause by showing

that ordinary business care and prudence were exercised.       Sec.

301.6651-1(c)(1) and (2), Proced. & Admin. Regs.8    Willful

neglect results from a conscious decision or from reckless

indifference.   United States v. Boyle, 469 U.S. 241, 245 (1985).

The taxpayer has the burden of proving reasonable cause and the

absence of willful neglect.    Rule 142; Higbee v. Commissioner,

116 T.C. 438, 447 (2001).

     The applicable percentage of the penalty will be 10 percent

of the underpayment if the failure is for more than 15 days.

Sec. 6656(b)(1)(A)(iii).    With respect to employment taxes, if

the total amount due for a tax period is less than $2,500 the tax

is considered de minimis and timely deposited if remitted with a

timely filed return.   Sec. 31.6302-1T(f)(4)(i), Temporary

Employment Tax Regs., 73 Fed. Reg. 79360 (Dec. 29, 2008).

     Respondent submitted into evidence a Form 4340 for the

second quarter of 2009.    Petitioner filed Form 941 and remitted

tax due of $2,591 on July 31, 2009.     Respondent assessed a

failure to deposit penalty of $259 on August 3, 2009.     Petitioner

argues that the amount that exceeds the de minimis limit is, in


     8
      The regulations pertaining to a failure to deposit do not
provide a definition of reasonable cause; however, courts have
used the reasonable cause definition for additions to tax in
failure to deposit penalty cases. See, e.g., Univ. of Chi. v.
United States, 547 F.3d 773, 785 (7th Cir. 2008).
                                - 9 -

itself, de minimis and that it did not willfully neglect to make

deposits.    Mr. Cushman testified that he assumed that the firm’s

paralegal would not work sufficient hours in the second quarter

for the L.L.C. to be required to make deposits of employment

taxes.

     Although petitioner’s Form 941 was timely filed, the tax due

was more than $2,500; therefore, the de minimis exception does

not apply.   See sec. 31.6302-1T(f)(4)(i), Temporary Employment

Tax Regs., supra.    Mr. Cushman’s assumption about how many hours

the firm’s paralegal would work does not show ordinary business

care and prudence and does not rise to reasonable cause.

Petitioner was liable for $2,596 of employment taxes for the

first quarter of 2009, and ordinary business care and prudence

would dictate planning for its second quarter tax liabilities

from the outcome of the first quarter.    Petitioner has not shown

reasonable cause for the failure to timely deposit employment

taxes for the second quarter of 2009.    Therefore, we sustain

respondent’s determination for the second quarter of 2009.

Petitioner’s CDP Hearing and Installment Agreement

     Petitioner argues that it did not receive a CDP hearing and

that a request for an installment agreement was denied without

consideration.   Petitioner’s CDP hearing was held through

telephone calls and correspondence.     See Katz v. Commissioner,

115 T.C. 329 (2000); Dinino v. Commissioner, T.C. Memo. 2009-284;
                                - 10 -

sec. 301.6330-1(d)(2), Q&A-D6, Proced. & Admin. Regs.      Most of

the correspondence that is part of the CDP hearing record

pertains to the tax period ending December 31, 2005.     During a

telephone call on January 26, 2010, the tax period ending June

30, 2009, was also discussed.    Petitioner was afforded a

reasonable opportunity to be heard for each of the tax periods at

issue.    See Roman v. Commissioner, T.C. Memo. 2004-20.

         The IRS is authorized to enter into written agreements with

taxpayers for installment payments for any tax due if the IRS

determines that such agreements will facilitate full or partial

collection of such liabilities.    Sec. 6159(a).    It is within the

AO’s discretion to decide that petitioner’s tax debt can more

readily be eliminated by levy than by an installment agreement.

See Orum v. Commissioner, 412 F.3d 819, 821 (7th Cir. 2005),

affg. 123 T.C. 1 (2004); sec. 301.6159-1(c)(1)(i), Proced. &

Admin. Regs.

     Petitioner requested an installment agreement, and the AO

informed petitioner that an installment agreement was not an

option because petitioner had not timely filed Forms 941 and

there was doubt as to petitioner’s ability to timely file and pay

employment taxes in the future.    When asked what amount of its

past due liabilities the L.L.C. would be able to pay monthly, Mr.

Cushman responded that he did not know because the firm was

experiencing a decline in business.      The record does not include
                               - 11 -

a Form 433-B, Collection Information Statement for Businesses.

Petitioner did not offer any other collection alternatives.

Therefore, respondent did not abuse his discretion in denying

petitioner’s request for an installment agreement.    See Goza v.

Commissioner, 114 T.C. at 181-182; see also Sego v. Commissioner,

114 T.C. at 610.

Conclusion

     On the basis of our findings stated above, we sustain

respondent’s determinations for the tax periods ending December

31, 2005, and June 30, 2009.   We also find that there was no

abuse of discretion in conducting petitioner’s CDP hearing

through correspondence and telephone calls and no abuse of

discretion in denying petitioner an installment agreement.

     We have considered the parties’ arguments and, to the extent

not discussed herein, we conclude the arguments to be irrelevant,

moot, or without merit.

     To reflect the foregoing,


                                         Decision will be entered

                                    for respondent.
