                  T.C. Summary Opinion 2007-50



                     UNITED STATES TAX COURT



                 FRED A. WINDOVER, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11591-05S.               Filed March 28, 2007.



     Fred A. Windover, pro se.

     Michael R. Fiore, for respondent.



     CARLUZZO, Special Trial Judge:   This section 6330(d)1

case was heard pursuant to the provisions of section 7463.

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




     1
        Unless otherwise indicated, section references are to the
Internal Revenue Code of 1986, as amended, in effect for the
relevant period.
                                - 2 -

reviewable by any other court, and the opinion shall not be

treated as a precedent for any other case.

     In a Notice of Determination Concerning Collection Action(s)

Under Section 6320 and/or 6330, dated May 23, 2005, respondent

determined to proceed with the collection by levy of petitioner’s

1999 Federal income tax liability.

     The issues for decision are:    (1) Whether the amount of

petitioner’s outstanding 1999 Federal income tax liability that

respondent is attempting to collect by levy is overstated because

the proceeds of a check, dishonored when first presented but paid

upon second presentment, were misapplied by respondent to years

other than 1999; if so (2) whether respondent’s failure to take

the misapplication into account in the determination to proceed

with collection by levy of petitioner’s 1999 Federal income tax

liability is an abuse of discretion; and (3) whether petitioner

is liable for the additions to tax included in petitioner’s 1999

Federal income tax liability.

                           Background

     Some of the facts have been stipulated and are so found.    At

all times relevant, petitioner, who is an attorney, was married.

He resided in Worcester, Massachusetts, at the time the petition

was filed.
                                 - 3 -

     From time to time, it appears that petitioner and his spouse

filed untimely joint Federal income tax returns,2 which is what

occurred for 1998 and 1999.   Petitioner’s 1998 return was

received by respondent on May 29, 2003, and “processed” on

June 30, 2003.   Included in the envelope in which that return

was mailed was an $11,074 check, dated May 2003, payable to

respondent and drawn on one of petitioner’s checking accounts

(the 1998 check).   The amount of the 1998 check represented the

amount of tax to be paid with petitioner’s 1998 return; interest,

penalties, or additions to tax were not included in the amount.

The 1998 check was dishonored for insufficient funds the first

time it was presented, but it was paid on June 6, 2003, when

presented for the second time.    Although the 1998 check was at

first dishonored, the payment was credited as of the date

received against petitioner’s 1998 liability.    As of June 2003,

after being given credit for the 1998 check, petitioner’s

outstanding 1998 liability, consisting of interest and additions

to tax, approximated $10,000.




     2
        For convenience, Federal income tax returns for years
relevant here will be identified as petitioner’s returns,
regardless of whether a joint return was filed for that year.
Similarly, relevant Federal income tax liabilities will be
referred to as petitioner’s liabilities even though the liability
for a particular year might be joint and several with
petitioner’s spouse.
                              - 4 -

     On June 2, 2003, petitioner’s 1999 joint return was received

by respondent and “processed” on July 14, 2003.   Included in the

envelope in which that return was mailed was a $13,178 check (the

1999 check), dated May 27, 2003, payable to respondent, and drawn

on the same checking account as the 1998 check.   The 1999 check

was also dishonored for insufficient funds the first time it was

presented for payment on June 5, 2003, but was paid upon

subsequent presentment on June 10, 2003.3   As with the 1998 check,

the amount of the 1999 check represented the amount of tax to be

paid with petitioner’s 1999 return; interest, penalties, or

additions to tax were not included in the amount.   Petitioner’s

Social Security number is notated on the 1999 check, but nothing

of the face of the 1999 check directs or suggests to what year it

should be applied.

     As it turned out, upon payment after being dishonored,

the proceeds of the 1999 check were not entirely applied to

petitioner’s 1999 outstanding tax liability.   Instead the payment

was split between petitioner’s then outstanding income tax

liabilities for 1998, 1999, and 2002, in the amounts of

$10,441.17 (the approximate amount of petitioner’s remaining 1998

liability after the payment made by the 1998 check was taken into




     3
        Upon being notified by his bank that each check was
dishonored for insufficient funds, petitioner transferred funds
between bank accounts and contacted respondent to request that
each check be presented for a second time.
                               - 5 -

account), $1,689.81, and $1,047.02, respectively.    Although the

1999 check was not paid until June 10, 2003, credits for the

applications to 1998, 1999, and 2002 were given as of June 2,

2003, the date respondent received the 1999 check.

     Needless to say, because the majority of the proceeds of the

1999 check were applied to his 1998 tax liability, petitioner’s

1999 liability went largely unpaid.    On or about January 12,

2004, petitioner was notified by respondent that his then 1999

income tax liability, including interest and additions to tax,

totaled $17,504.   Up until that time, petitioner considered his

1999 liability to have been paid by the 1999 check.    In response

to his inquiry regarding his 1999 liability, petitioner was

advised in respondent’s letter dated March 15, 2004, as to how

the proceeds of the 1999 check were applied.

     Following receipt of respondent’s explanation, in a letter

dated April 9, 2004, petitioner requested that respondent abate,

fully or partially, “penalties”4 to tax applicable for 1998, 1999,

and 2002 because he “paid the full amount of all taxes owed and

interest due for those years before making this request.”    In

that letter petitioner also referenced, without providing any

detail, “significant personal financial problems”.    By letter




     4
        Various references to “penalties” that occur in various
places in the record actually are to additions to tax under sec.
6651(a)(1) and (2). References in this opinion to “additions to
tax” relate to one, or the other, or both additions, as
appropriate.
                               - 6 -

dated June 2, 2004, respondent notified petitioner that he had

received petitioner’s abatement request and requested further

information, regarding petitioner’s personal and financial

difficulties. Petitioner did not respond to respondent’s letter

or submit any additional information.

     By letter dated June 26, 2004, respondent notified

petitioner of his intent to levy with respect to petitioner’s

then outstanding 1999 tax liability.    That letter also advised

petitioner of his right to request an administrative hearing

with regard to respondent’s proposed levy.    According to the

letter, petitioner’s outstanding 1999 tax liability, including

interest and additions to tax, totaled $18,097.61.    Petitioner,

on July 20, 2004, made a timely request for an administrative

hearing.   See sec. 6330(a) and (b).

     Before an administrative hearing was conducted (or even

scheduled), respondent caused a Notice of Federal Tax Lien (NFTL)

to be filed on August 12, 2004, and duly notified petitioner of

the event by certified mail on August 19, 2004.    Like the

proposed levy, the NFTL related to petitioner’s then outstanding

1999 tax liability.   In response to respondent’s August 19, 2004,

letter notifying him about the NFTL, petitioner timely requested

an administrative hearing.   See id.
                               - 7 -

     Ultimately, through correspondence over several months and a

telephone conference on or about April 6, 2005, petitioner’s

administrative hearing was conducted.    In essence, petitioner’s

positions at the administrative hearing can be summarized as

follows:   (1) The NFTL for 1999 should not have been filed until

an administrative hearing was conducted with respect to

respondent’s notice of intent to levy; (2) the proceeds of the

1999 check were misapplied to liabilities for years other than

1999;5 and (3) petitioner’s request for abatement of additions to

tax was not properly considered.

     In response to petitioner’s second point, respondent

explained his actions by pointing out to petitioner that the 1999

check was not designated to be applied to any particular year.

In response to this explanation, in correspondence that predated

the telephone conference, petitioner noted, “in fact * * * [the

1999 check] was sent with my 1999 return and was for the exact

amount shown as due on that return.    I believe almost anyone

would consider a check sent with a particular year (1999) in the




     5
        Petitioner also submitted an offer-in-compromise (doubt
as to liability) during the administrative hearing as an
alternative to the proposed collection devices. The offer was
rejected. Several times during petitioner’s presentation at
trial he expressly stated that he does not rely upon the denial
as a ground in support of his position that respondent’s
determination to proceed with collection of his 1999 tax
liability is an abuse of discretion.
                               - 8 -

exact amount shown as due on that return, as a clear designation

as a payment for 1999”.

     None of petitioner’s positions persuaded respondent to forgo

collection of petitioner’s 1999 tax liability.   As noted above,

in a Notice of Determination Concerning Collection Action(s)

Under Section 6320 and/or 6330, dated May 23, 2005, respondent

determined to proceed with the collection by levy of petitioner’s

1999 Federal income tax liability.6

                            Discussion

     The parties are not at odds regarding the technical

provisions of sections 6320 and 6330.    Furthermore, petitioner

does not claim that respondent failed to satisfy any of the

mechanical or procedural obligations contemplated by those

statutes.   Consequently, we see little point in a detailed

discussion regarding those requirements.    Instead, we turn our

attention immediately to petitioner’s complaints and begin with

his position regarding the timing of the filing of the NFTL.

     According to petitioner, the NFTL should not have been filed

while his request for an administrative hearing with respect to




     6
        Respondent’s correspondence to petitioner during
administrative consideration references both the notice of intent
to levy and the NFTL. Proceeding with one administrative hearing
in response to both collection devices is certainly contemplated
under the statutory scheme. See sec. 6320(b)(4). Nevertheless,
for reasons not explained, the notice of determination upon which
this case is based references only respondent’s intention to
levy.
                                   - 9 -

respondent’s proposed levy was pending.       Other than noting his

general objection to the situation, petitioner provides no basis

for his complaint.       His position suggests that the NFTL is not

valid, but given the focus of the above-referenced notice of

determination, the validity of the NFTL as a collection device

is not before us.       Even if it were, it is obvious that

simultaneously proceeding with both collection devices

invalidates neither.       The timing of the filing of the NFTL is

consistent with the provisions of section 6320 as well as section

6321,7 and does not violate any of the provisions of section

6330.8       To the extent that petitioner, if only by implication,

suggests the contrary, the fact that the NFTL was filed when it

was filed provides no basis for finding that respondent’s

determination to proceed with collection by levy of petitioner’s

1999 tax liability is an abuse of discretion.




         7
        Sec. 6321 provides: “If any person liable to pay any tax
neglects or refuses to pay the same after demand, the amount
(including any interest, additional amount, addition to tax, or
assessable penalty, together with any costs that may accrue in
addition thereto) shall be a lien in favor of the United States
upon all property and rights to property, whether real or
personal, belonging to such person.”
         8
        Upon a timely request for an administrative hearing in
response to a notice of intent to levy, only the levy actions
that are the subject of the requested hearing are suspended. See
also sec. 301.6330-1(g)(2), Q&A-G3, Proced. & Admin. Regs., which
provides that respondent may file notices of Federal tax lien for
tax periods and taxes, whether or not covered by a previously
issued notice of intent to levy for the same periods and taxes.
                                  - 10 -

     Next, we consider petitioner’s claim that respondent

misapplied the proceeds of the 1999 check to years other than

1999.       According to petitioner, had the proceeds of the 1999

check been properly applied to his 1999 liability, he would owe

less than respondent is attempting to collect.       All things

considered, we cannot help but note that, had the proceeds of the

1999 check been applied entirely to his 1999 tax liability,

petitioner’s 1998 tax liability would now closely approximate the

amount that respondent claims he now owes for 1999.9      Petitioner,

who is a practicing attorney, refused to acknowledge this point

during trial.

     Nevertheless, ignoring the practical infirmities of

petitioner’s position, we address, on a technical basis,

respondent’s decision to apply the proceeds of the 1999 check to

years other than 1999.

     As noted in correspondence with petitioner, respondent

justifies the manner in which the proceeds of the 1999 check

were applied upon the ground that petitioner did not, in writing,

designate the year(s) to which the proceeds of the 1999 check

should be applied.       We have examined the 1999 check and,

consistent with respondent’s position, nothing on the face of the



        9
        By June 2, 2003, the date the 1999 check was received,
petitioner’s 1998 liability for the sec. 6651(a)(2) addition to
tax had reached the maximum amount allowable under the statute,
but that addition to tax for 1999 would continue to accrue at the
rate of .5 percent per month for 9 more months.
                              - 11 -

check directs to what year the payment should be applied.10    On

the other hand, as noted in his letter to respondent, petitioner

“believe[s] almost anyone would consider a check sent with a

[return for a] particular year * * * in the exact amount shown as

due on that return, as a clear designation as a payment for * * *

[that year]”.   The common sense attractiveness of petitioner’s

observation obscures, to some extent, the reality that respondent

is most certainly not “almost anyone”.

     Furthermore, respondent’s application of the proceeds of

the 1999 check, if not entirely consistent with common sense,

complied completely with the procedures contemplated in Rev.

Proc. 2002-26, 2002-1 C.B. 746.   Rev. Proc. 2002-26, sec. 3.02,

provides that if the taxpayer does not include specific written

instructions with a voluntarily submitted payment of tax, then

“the Service will apply the payment to periods in the order of

priority that the Service determines will serve its best

interest.   The payment will be applied to satisfy the liability

for successive periods in descending order of priority until the

payment is absorbed.”   Because petitioner did not, in writing,

specifically instruct respondent as to how he intended the

proceeds of the 1999 check to be applied, respondent was entitled



     10
        It is unknown whether a Form 1040-V, Payment Voucher, is
included with petitioner’s 1999 return because, although it would
seem to be a good idea to have placed a copy of that return in
the record, neither party did so. Then again, the procedural
history of this case is filled with the absence of good ideas.
                               - 12 -

to apply those proceeds in a manner consistent with the

provisions of the above-referenced revenue procedure, which is

precisely what occurred in this case.

     That being so, petitioner’s claim that the proceeds of

the 1999 were misapplied by respondent must be rejected, which

in turn requires the rejection of his claim regarding the

consequences of the alleged misapplication.

     Lastly, we turn to petitioner’s claim that respondent

improperly refused to grant his request for abatement of the

additions to tax.   We construe petitioner’s position in this

regard to be that he should not be held liable for the additions

to tax.    We have the jurisdiction in this case to determine, on

the basis of a de novo review, his liability for those additions

to tax for 1999.    Downing v. Commissioner, 118 T.C. 22 (2002).

     As relevant here, in general, section 6651(a)(1) provides

for an addition to tax (commonly referred to as the late filing

penalty) that can amount to 25 percent of the tax (net amount),

required to be shown on the return if the return is filed more

than 4 months after the due date of the return.    See sec.

6651(b).

     Section 6651(a)(2), in general, provides for an addition to

tax (commonly referred to as the late payment penalty) that can

amount to 25 percent of the unpaid portion of the tax shown on a

return if the unpaid portion remains unpaid for more than 49
                               - 13 -

months after the tax is due to be paid.11   A taxpayer can be

absolved of liability from either addition to tax if the taxpayer

demonstrates that the failure to file, or the failure to pay, as

appropriate, is due to reasonable cause and not due to willful

neglect.   Sec. 6651(a); Higbee v. Commissioner, 116 T.C. 438

(2001).

     Petitioner’s 1999 return was filed more than 4 months late.

Petitioner has offered no reason why that return was filed when

it was.    Consequently, he is liable for the section 6651(a)(1)

addition to tax for his failure to file a timely 1999 Federal

income tax return.

     As of June 2, 2003, the date that respondent received

petitioner’s 1999 return and 1999 check, the section 6651(a)(2)

addition to tax had just about reached its maximum amount.      Had

respondent applied the 1999 check to the liability shown on

petitioner’s 1999 return, further accrual of the addition to tax

would have been prevented, but the portion of the section

6651(a)(2) addition to tax that had accrued up until that date

would be applicable because petitioner had not shown (and has not




     11
        The sec. 6651(a)(1) addition to tax accrues at the rate
of 5 percent per month for as long as the failure to file
continues until the maximum 25 percent is reached; the sec.
6651(a)(2) addition to tax accrues more slowly at the rate of
.5 percent per month until the maximum 25 percent is reached.
For those months that both additions to tax apply, the amount of
the sec. 6651(a)(2) addition to tax offsets the amount of the
sec. 6651(a)(1) addition to tax.
                              - 14 -

shown here) reasonable cause for his failure timely to pay the

tax shown on that return.

     If petitioner had paid his 1999 liability upon being

notified in March 2005 as to how the proceeds of the 1999 check

had been applied, then we might be receptive to an argument that

the amount of the section 6651(a)(2) addition to tax should not

exceed the amount that accrued up until the date the 1999 check

was received.   But he did not pay that tax when so notified, and

as best can be determined from the record, as of the date of

trial in this case, the tax shown on petitioner’s 1999 return

remained largely, if not entirely, unpaid.   Consequently, more

than enough time has elapsed to allow for the imposition of the

maximum amount of penalty, as petitioner has not shown reasonable

cause for his continued failure to pay after March 2005.

Consequently, petitioner is liable for the entire amount of the

section 6651(a)(2) addition to tax for 1999.

     In all other respects, we are satisfied that respondent

has complied with the provisions of section 6330 and petitioner

does not suggest otherwise.   It follows that respondent’s

determination to proceed with collection of petitioner’s 1999 tax

liability in accordance with the Notice of Determination

Concerning Collection Action(s) Under Section 6320 and/or 6330,

dated May 23, 2005, is sustained.
                        - 15 -

To reflect the foregoing,



                                 Decision will be

                             entered for respondent.
