                               T.C. Memo. 2012-229



                         UNITED STATES TAX COURT



                   NIKKIA C. WILSON, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 17554-10L.                        Filed August 7, 2012.



      Suzanne A. Ascher, for petitioner.

      James P.A. Caligure, for respondent.



                           MEMORANDUM OPINION


      GOEKE, Judge: Petitioner seeks review of respondent’s determination to

proceed with a proposed levy to collect income tax liabilities for tax years 2006
                                          -2-

[*2] and 2007.1 The issue for decision is whether respondent abused his discretion

in sustaining the levy action. For the reasons stated herein, we hold that respondent

did not abuse his discretion with respect to petitioner’s income tax liabilities and

section 6651(a)(2)2 and (d)(1) additions to tax. However, we do not sustain

respondent’s collection action for the sections 6651(a)(1) and (3) and 6654

additions to tax.

                                      Background

      The parties submitted this case fully stipulated under Rule 122. Petitioner

resided in New York at the time she filed her petition.

      Petitioner timely filed her 2006 and 2007 individual income tax returns

reporting tax due for both years but failed to have an adequate amount of Federal

tax withheld for either year or otherwise to pay the reported liabilities.




      1
        Respondent also vaguely references the 1999 tax year on the second page of
the notice of determination but does not argue anywhere in the record that petitioner
owes tax for that year. In response, petitioner asserts in the petition that she does
not owe any tax for the 1999 tax year. Accordingly, we find that the 1999 tax year
is not in dispute in this proceeding.
      2
       Unless otherwise indicated, all section references are to the Internal Revenue
Code in effect at all relevant times, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
                                            -3-

[*3] Respondent made an assessment for both years for the unpaid tax, “penalties”,3

and interest (collectively, tax liability) and issued petitioner a

notice and demand for payment on April 21, 2008, for the 2006 tax year and on

May 26, 2008, for the 2007 tax year. After petitioner either refused or neglected to

pay the tax liability, respondent sent petitioner a Letter 1058, Final Notice

of Intent to Levy and Notice of Your Right to a Hearing (final notice of intent to

levy), on April 11, 2009. The final notice of intent to levy stated that petitioner

owed $15,0424 for her 2006 and 2007 tax years: (1) 2006--$9,833 income tax

liability; $1,248 in interest; and $545 in additions to tax; and (2) 2007--$3,009

income tax liability; $135 in interest; and $272 in additions to tax.




       3
        Respondent and petitioner incorrectly refer to additions to tax under secs.
6651 and 6654 as “penalties”. Accordingly, references to “penalties” in various
places in the record should be to additions to tax under secs. 6651 and 6654.
References in this opinion to additions to tax relate to one or more, as appropriate.
Petitioner does not seek abatement of interest.

       Moreover, the record is replete with inconsistent references to the additions
to tax. The final notice of intent to levy indicated that the additions to tax were
assessed pursuant to sec. 6651(a)(2) and (3) and (d)(1). However, respondent’s
account transcript references additions to tax for “not pre-paying tax” and “late
payment of tax”. Furthermore, the notice of determination simply references
“penalties and interest”, and respondent’s brief references additions to tax under
secs. 6651(a)(1) and 6654.
       4
           All amounts are rounded to the nearest dollar.
                                           -4-

[*4] I. Request for Collection Due Process Hearing

      Petitioner requested a collection due process (CDP) hearing by timely filing

Form 12153, Request for a Collection Due Process or Equivalent Hearing.

Respondent’s Appeals officer received petitioner’s CDP hearing request on May 12,

2009. The CDP hearing request sought the abatement of the additions to tax, an

offer-in-compromise, and an installment agreement because: (1) the levy action and

additions to tax are a hardship and burden in this recession; (2) petitioner cannot

fully pay the tax liability; and (3) petitioner has reasonable cause for the abatement

of the additions to tax. Moreover, the CDP request indicated that respondent should

contact petitioner’s representative, Suzanne A. Ascher.

II. Offer-in-Compromise

      On January 14, 2010, the Appeals officer received petitioner’s offer-in-

compromise (OIC). Petitioner stated two reasons for the OIC: (1) doubt as to

collectibility--petitioner has insufficient assets and income to pay the tax liability;

and alternatively (2) effective tax administration--petitioner has sufficient assets to

pay the tax liability amount, but because of exceptional circumstances, requiring full

payment would cause economic hardship or would be unfair and inequitable. In

support of petitioner’s assertions, she submitted a Form 433A, Collection
                                              -5-

[*5] Information Statement for Wage Earners and Self-Employed Individuals (CIS).5

Petitioner reported, inter alia, the following information on her CIS: (1) monthly

income of $5,540;6 (2) two dependents;7 (3) $240 per month for child and

dependent care expenses;8 and (4) a $440 monthly loan payment9 for a Chevy

Trailblazer. Petitioner offered to pay $1,000 in compromise of the tax liability.

Moreover, the OIC indicates that the $1,000 offer is also in compromise for tax

liabilities relating to petitioner’s 2003, 2004, and 2005 tax years.10 Petitioner did

not submit a deposit payment with the OIC.




         5
        While respondent’s OIC case history listing makes several references to
information provided in petitioner’s Form 433A, the form is not included in the
record.
         6
       Petitioner provided pay stubs in support of her claimed monthly income. The
pay stubs also indicate that petitioner had a section 401(k) plan with Verizon.
         7
      Petitioner’s 2006, 2007, and 2008, income tax returns report only one
exemption.
         8
        The child and dependent care expenses were supported by a statement from
a third party claiming that she receives $60 per week from petitioner for caring for
petitioner’s child.
         9
       In another section of the CIS, petitioner claimed the monthly payment on the
loan for the Chevy Trailblazer is $550. Petitioner did not provide support for the
monthly loan payment or the associated loan balance with the CIS.
         10
              There is no information in the record explaining petitioner’s 2003-05 tax
years.
                                           -6-

[*6] III. Appeals Officer’s Calculations

      In response to petitioner’s CIS, the Appeals officer made two sets of

calculations on the basis of different assumptions to determine whether to accept or

reject the OIC. One calculation considered all of the expense information petitioner

provided (favorable calculation), and the other calculation (less favorable

calculation) disallowed some of petitioner’s claims for lack of supporting

documentation. Moreover, the Appeals officer determined that petitioner’s gross

monthly income was $6,914 and used that figure in both calculations.

      The favorable calculation assumed, among other things, a two-person

household, $120 per month for medical expenses, $240 per month for child care

expenses, and $440 per month for transportation. The less favorable calculation

disallowed petitioner’s unsupported claims--it assumed only a one-person household

and it did not consider child care expenses or transportation expenses. Under both

calculations the Appeals officer determined that petitioner could fully pay the tax

liability without economic hardship. Moreover, because petitioner failed to support

certain claims on her CIS, the Appeals officer provided petitioner with a calculation

worksheet showing how she arrived at the less favorable calculation.
                                          -7-

[*7] As a result of the less favorable calculation, the Appeals officer determined

that petitioner had net equity in assets of $27,793, net monthly income of $1,741,

and a reasonable collection potential of $172,322. Around March 22, 2010, the

Appeals officer recommended rejection of petitioner’s OIC because petitioner failed

to demonstrate that paying the tax liability in full would cause her economic

hardship.

IV. The Settlement Officer

      A settlement officer was then assigned to petitioner’s CDP hearing. The

settlement officer sent petitioner a letter dated April 30, 2010, regarding petitioner’s

OIC for the 2003 through 2007 tax years. The letter indicated that petitioner’s tax

liability as of May 15, 2010, was $54,450.11 Moreover, the letter indicated that the

settlement officer: (1) reviewed petitioner’s file and agreed with the Appeals

officer’s decision to reject petitioner’s OIC; and (2) determined on the basis of

petitioner’s last filed income tax return that petitioner’s monthly income was

$7,077.

      Furthermore, the settlement officer requested that petitioner provide the

following documentation: (1) her 2009 Form W-2, Wage and Tax Statement; (2)


      11
        It is unclear from the record whether the $54,450 tax liability includes
petitioner’s 2003-05 tax years or relates only to petitioner’s 2006-07 tax years.
                                         -8-

[*8] support for $550 of monthly transportation expenses; (3) support for a loan

balance on her section 401(k) plan account with Verizon; and (4) support for $240

of monthly child and dependent care expenses. The settlement officer’s letter

concludes: “If you wish to continue with the appeals process and have additional

information that you would like to be considered, contact me by 05/17/2010. If I do

not hear from you or receive any additional information I will make my final

determination based on the current contents of your file.”

      On May 17, 2010, Ms. Ascher responded to the settlement officer’s request

by faxing the following: (1) a cover letter explaining petitioner’s request for an

OIC; (2) petitioner’s 2009 Form W-2 reporting $82,780 of wages for Federal

income tax purposes; (3) petitioner’s 2010 pay stub from Verizon reporting $26,457

of wages earned as of May 1, 2010; (4) a billing statement from GMAC Financial

Services supporting monthly automobile payments of $435; (5) a signed letter from

Mary Holmes stating that petitioner pays Ms. Holmes $60 per week for childcare

services; and (6) a Fidelity statement supporting petitioner’s section 401(k) plan

loan balance of $5,341.

      The cover letter requests that the settlement officer reconsider petitioner’s

OIC and the abatement of the additions to tax because requiring full payment of the

tax liability would cause petitioner economic hardship as she is a single mother
                                         -9-

[*9] in New York City with no means of support beyond her Verizon salary and the

economy is in recession. Moreover, the cover letter suggests that petitioner’s 2010

pay stub should be used to calculate her gross monthly income essentially because

of poor economic conditions which, to Ms. Ascher’s understanding, have led to

cutbacks and job layoffs at Verizon. Finally, the cover letter requests an installment

agreement if the OIC is not granted.

      On May 19, 2010, the settlement officer reviewed the faxed information and

determined that petitioner’s gross monthly income was $7,050, net equity in assets

was $6,432, and net monthly income was $1,718. He concluded that petitioner

could fully pay the tax liability and therefore determined that petitioner’s OIC

should be denied. Moreover, the settlement officer found that petitioner’s status as

a single mother did not meet the criteria for “penalty” abatement or efficient tax

administration. Thereafter, the settlement officer left a voicemail with Ms. Ascher

reporting his findings and offering an installment agreement requiring $1,000

monthly payments over 5 years.

      The following day Ms. Ascher left a voicemail with the settlement officer

stating that she wanted petitioner’s additions to tax abated and that the settlement

officer should correct his findings by adjusting the national standard expenses and

health insurance expenses for two people. The settlement officer recalculated
                                         - 10 -

[*10] petitioner’s asset equity table and income-expense table and decided to deny

petitioner’s OIC as a collection alternative on June 1, 2010. He secured approval

to close the CDP hearing on June 8, 2010.

V. The Notice of Determination

      On July 1, 2010, respondent’s Appeals Office issued petitioner a Notice of

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

(notice of determination) for tax years 2006 and 2007. The notice of

determination indicated, inter alia, that petitioner’s reasonable collection potential

was $124,935 and that “with the best information available, the requirements of

various applicable law or administrative procedure have been met.” Petitioner

timely petitioned this Court for review of the notice of determination.

                                      Discussion

I. Introduction

      Section 6330(a) requires that written notice be given to a person upon

whose property the Secretary intends to levy to collect an unpaid tax (taxpayer)

advising him of the amount of the unpaid tax and of his right to a hearing. At a

CDP hearing a taxpayer may raise any relevant issue relating to the collection

action including challenges to the appropriateness of the collection action and

possible collection alternatives. Sec. 6330(c)(2)(A). The taxpayer may also
                                            - 11 -

[*11] challenge the existence or amount of the underlying tax liability at the hearing

if the taxpayer did not receive a statutory notice of deficiency for such liability or

did not otherwise have an opportunity to dispute the liability. Sec. 6330(c)(2)(B).

The “underlying tax liability” refers to the tax imposed under the internal revenue

laws, including additions to tax, penalties, and statutory interest. See Urbano v.

Commissioner, 122 T.C. 384, 392-393 (2004); Katz v. Commissioner, 115 T.C.

329, 339 (2000); Watchman v. Commissioner, T.C. Memo. 2012-113.

         At the conclusion of the hearing, the Appeals officer must determine whether

and how to proceed with collection and shall take into account: (1) whether the

requirements of applicable law and administrative procedure have been met; (2) any

issues the taxpayer raised; and (3) whether the collection action balances the need

for efficient collection of tax with the taxpayer’s legitimate concern that any

collection action be no more intrusive than necessary. Sec. 6330(c)(3). Once the

Appeals Office has issued a notice of determination regarding the disputed

collection action, section 6330(d) allows the taxpayer to seek review in the Tax

Court.

         Where the validity of the underlying tax liability is properly at issue, the

Court will review the matter de novo. Goza v. Commissioner, 114 T.C. 176, 181-
                                         - 12 -

[*12] 182 (2000). However, where the validity of the underlying tax liability is

not properly at issue, the Court will review the Commissioner’s administrative

determination for abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610

(2000). In reviewing for abuse of discretion under section 6330(d)(1), generally

we consider only arguments, issues, and other matters that were raised at the

section 6330 hearing or otherwise brought to the attention of Appeals. Magana v.

Commissioner, 118 T.C. 488, 493 (2002); see also sec. 301.6330-1(f)(2), Q&A-

F3, Proced. & Admin. Regs. An abuse of discretion occurs when the Appeals

officer’s determination is arbitrary, capricious, or without sound basis in fact or

law. Murphy v. Commissioner, 125 T.C. 301, 308 (2005), aff’d, 469 F.3d 27 (1st

Cir. 2006).

II. Petitioner’s Contentions

      Petitioner argues that: (1) respondent abused his discretion because he did

not give fair consideration to all of the financial information provided to him in

attempts to establish an OIC, installment agreement, and abatement of the

additions to tax; and (2) respondent abused his discretion by prematurely

concluding the CDP hearing.12 As discussed infra, petitioner has provided

      12
        Petitioner also argues that respondent abused his discretion by not providing
petitioner with an asset equity table and income-expense table. Petitioner does not
                                                                        (continued...)
                                        - 13 -

[*13] minimal support for her assertions and has failed to make any credible

arguments; however, we do not sustain respondent’s collection action with regard to

the assessments of additions to tax under sections 6651(a)(3) and 6654.

III. Additions to Tax

      We review the Commissioner’s determination of additions to tax de novo.

Sego v. Commissioner, 114 T.C. at 610; Goza v. Commissioner, 114 T.C. at 181-

182. The Commissioner has the burden of production with respect to a taxpayer’s

liability for any addition to tax. Sec. 7491(c). To meet that burden, the

Commissioner must come forward with sufficient evidence indicating that it is

appropriate to impose the addition to tax. See Higbee v. Commissioner, 116 T.C.

438, 446 (2001). Once the Commissioner has satisfied his initial burden, the burden

then shifts to the taxpayer to produce evidence to show that the IRS determination is

incorrect or that reasonable cause or good faith should excuse the addition to tax.

Sec. 6651(a)(1), (2), and (3); see also Rule 142(a); Higbee v. Commissioner, 116

T.C. at 446-447.




      12
         (...continued)
cite any authority for this assertion, nor have we found any law requiring respondent
to unilaterally produce these documents. Moreover, petitioner did not request either
of these documents throughout the hearing. Accordingly, we fail to see the merit in
this argument.
                                             - 14 -

[*14] A. Section 6651(a)(1)

         Respondent asserts that petitioner is liable for section 6651(a)(1) additions to

tax. Section 6651(a)(1) provides for additions to tax for failure to file any return on

the date described therefor unless such failure is due to reasonable cause and not

willful neglect. The parties stipulated that petitioner’s 2006 and 2007 tax returns

were timely filed. Moreover, section 6651(a)(1) additions to tax were not assessed,

nor were they mentioned in the notice of intent to levy or the notice of

determination.13 For the foregoing reasons, we hold that section 6651(a)(1) addition

to tax is not applicable in this case.

         B. Section 6651(a)(2) and (d)(1)

         Section 6651(a)(2) imposes an addition to tax for failure to pay the amount of

tax shown on the return on or before the date prescribed unless the taxpayer can

establish that the failure is due to reasonable cause and not due to willful neglect.

The addition to tax under section 6651(a)(2) applies only if an amount of tax is

shown on a return. Wheeler v. Commissioner, 127 T.C. 200, 208 (2006), aff’d, 521

F.3d 1289 (10th Cir. 2008). Section 6651(d)(1) increases the rate at which




         13
              The sec. 6651(a)(1) additions to tax were first mentioned in respondent’s
brief.
                                            - 15 -

[*15] additions to tax are imposed under section 6651(a)(2) from 0.5% to 1.0%

after the expiration of the period prescribed under section 6651(d)(2).

          Petitioner concedes that she did not pay the tax due shown on her 2006 and

2007 tax returns on or before the prescribed dates. Therefore, respondent satisfied

his burden of production with respect to the section 6651(a)(2) and (d)(1) additions

to tax.

          Petitioner has failed to show reasonable cause for her failure to pay the tax

due. A failure to pay will be considered due to reasonable cause if the taxpayer

makes a satisfactory showing that she exercised ordinary business care and

prudence in providing for payment of her tax liability but nevertheless either was

unable to pay the tax or would suffer undue hardship if she paid on the due date.

Sec. 301.6651-1(c)(1), Proced. & Admin. Regs. Petitioner asserts that she is a

single mother living in New York in tough economic times. Without more, this

assertion is insufficient to support a finding that petitioner was unable to pay the

2006 or 2007 tax or that paying the tax would have caused economic hardship.

Consequently, petitioner has not met her burden of persuasion, and respondent’ s

determinations are sustained with regard to the section 6651(a)(2) and (d)(1)

additions to tax.
                                         - 16 -

[*16] C. Section 6651(a)(3)

      Section 6651(a)(3) imposes an addition to tax for failure to pay any amount

not shown but required to be shown on a return (including an assessment made

pursuant to section 6213(b)) within 21 days of notice and demand. According to the

account transcripts, petitioner reported tax due of $10,744 and $13,143 on her 2006

and 2007 tax returns, respectively. There is no indication in the record that

petitioner was required to report any additional tax on either return. Therefore,

respondent has not met his burden of production with regard to the section

6651(a)(3) additions to tax. Accordingly, we do not sustain respondent’s collection

action with respect to the section 6651(a)(3) additions to tax.

      D. Section 6654

      Section 6654(a) imposes an addition to tax for underpayment of estimated

income tax by an individual taxpayer. The addition to tax is calculated with

reference to four required installment payments of the taxpayer’s estimated tax

liability. Sec. 6654(c)(1). The total required annual payment is generally equal to

the lesser of 90% of the tax shown for the subject taxable year or 100% of the tax

shown on the taxpayer’s return for the preceding year. Sec. 6654(d)(1)(B)(I) and

(ii). Furthermore, the section 6654 addition to tax is not applicable if the

individual’s tax for the preceding taxable year was zero. Sec. 6654(e)(2).
                                         - 17 -

[*17] In order to satisfy his burden of production, respondent, at a minimum, must

establish that petitioner was required to make an annual payment. See secs.

7491(c), 6654(d)(1)(B); Wheeler v. Commissioner, 127 T.C. at 211. Respondent

introduced evidence that petitioner had income tax liabilities of $10,744 and

$13,143 for 2006 and 2007, respectively. This evidence is sufficient to permit this

Court to make the analysis required by section 6654(d)(1)(B)(I) for both 2006 and

2007.

        However, in order to permit this Court to make the analysis required by

section 6654(d)(1)(B)(ii) and to conclude that respondent has met his burden of

producing evidence that petitioner had a required annual payment for 2006,

respondent also had to introduce evidence showing the amount of tax due for the

2005 tax year. See Wheeler v. Commissioner, 127 T.C. at 212. Respondent did

not do so. Accordingly, respondent has not met his burden of production for the

section 6654 addition to tax for the 2006 tax year. Conversely, because

respondent introduced evidence of petitioner’s 2006 and 2007 tax liabilities,

respondent has met his burden of production with regard to the section 6654

addition to tax for petitioner’s 2007 tax year.

        Notwithstanding our findings with regard to the burden of production, we

do not sustain respondent’s collection action with regard to the section 6654
                                         - 18 -

[*18] additions to tax for 2006 and 2007 because respondent failed to provide

petitioner with adequate notice of the section 6654 assessments.

      A clear record of relevant transactions is very important in a section 6330

court proceeding. See Wright v. Commissioner, 381 F.3d 41 (2d Cir. 2004),

vacating and remanding T.C. Memo. 2002-312; Barnes v. Commissioner, T.C.

Memo. 2010-30. Many documents in the stipulated record of petitioner’s account

are full of abbreviations, alphanumeric codes, dates, and digits that are

indecipherable and unintelligible without additional explanation.

      The notice of intent to levy states that “penalties” were assessed for late

payment under section 6651(a)(2) and (3) and (d)(1)--it does not mention any

additions to tax under section 6654. The notice of determination states that

respondent assessed “penalty and interest” for the 2006 and 2007 tax years. The

only document in the record ostensibly indicating the assessment of section 6654

additions to tax is referenced in the account transcripts as a “penalty for not

prepaying tax”, which was not provided to petitioner until after she petitioned this

Court. Consequently, it appears that petitioner was not afforded the opportunity to

dispute the assessment of the section 6654 additions to tax throughout the entire

CDP hearing.
                                         - 19 -

[*19] Furthermore, petitioner bears the burden of persuading us that respondent’s

determination of an addition to tax is incorrect. See Higbee v. Commissioner, 116

T.C. at 447. We do not believe petitioner was afforded the opportunity to do so in

the circumstances before us. Petitioner was put on notice of the assessments of

additions to tax under section 6651(a)(2) and (3) and (d)(1) in the notice of intent to

levy. After she filed her petition, respondent provided petitioner with her account

transcript that would presumably provide information about respondent’s

assessments of additions to tax listed in the notice of intent to levy. Instead, the

account transcript arguably made things worse--it is littered with numeric codes with

no corresponding explanation, refers to a multitude of account transactions, and

does not provide statutory support for any of the assessments. The only mention of

section 6654 was in respondent’s brief--merely asserting that petitioner “failed to

offer any evidence of reasonable cause for the abatement of * * * [section] 6654

penalties for the tax years 2006 and 2007.”14

      In these circumstances, we hold that respondent failed to provide petitioner

with adequate notice of the section 6654 additions to tax. Accordingly, we do not



      14
        Respondent also appears to have had difficulty deciphering the record--he
implies in his brief that “penalties” were assessed under secs. 6651(a)(1) and 6654.
As discussed supra, sec. 6651(a)(1) is not relevant in this proceeding.
                                          - 20 -

[*20] sustain respondent’s collection action for the 2006 and 2007 section 6654

additions to tax.

IV. The OIC

       Section 7122(a) authorizes the Secretary to compromise any civil or criminal

case arising under the internal revenue laws. Regulations implementing section

7122 set forth three grounds for the compromise of a liability: (1) doubt as to

liability; (2) doubt as to collectibility; and (3) promotion of effective tax

administration. Sec. 301.7122-1(b), Proced. & Admin. Regs. Doubt as to liability

is not at issue in this case.

       Doubt as to collectibility exists in any case where the taxpayer’s assets and

income are less than the full amount of the liability. Sec. 301.7122-1(b)(2), Proced.

& Admin. Regs. Generally, under the Secretary’s administrative pronouncements,

an offer to compromise based on doubt as to collectibility will be acceptable only if

the offer reflects the reasonable collection potential of the case (i.e., that amount,

less than the full liability, that the IRS could collect through means such as

administrative and judicial collection remedies). Rev. Proc.       2003-71, sec. 4.02(2),

2003-2 C.B. 517, 517.

       Where, because the reasonable collection potential of the case exceeds the

taxpayer’s liability, doubt as to collectibility is not a ground for compromise, the
                                         - 21 -

[*21] Secretary may enter into a compromise on the ground of effective tax

administration. Sec. 301.7122-1(b)(3), Proced. & Admin. Regs. Before the

Secretary will enter into a compromise on the ground of effective tax

administration, the taxpayer must show, among other things, that collection in full

would cause him economic hardship or, if he cannot, that compelling public policy

or equity considerations justify such a compromise. Id.

      We do not conduct an independent review of what would be an acceptable

OIC. Murphy v. Commissioner, 125 T.C. at 320 (citing Fowler v. Commissioner,

T.C. Memo. 2004-163). The extent of our review is to determine whether the

Appeals officer’s decision to reject the OIC actually submitted by the taxpayer was

arbitrary, capricious, or without sound basis in fact or law. Skrizowski v.

Commissioner, T.C. Memo. 2004-229; Fowler v. Commissioner, T.C. Memo.

2004-163.

      Petitioner requested her OIC based on doubt as to collectibility and effective

tax administration and asserts respondent abused his discretion by failing to give

fair consideration to all of the financial information she provided. However,

petitioner does not point to anything in the record to support her assertion that

respondent failed to consider any financial information. Conversely, the record is

replete with instances in which the Appeals officer and the settlement officer made
                                         - 22 -

[*22] calculations on the basis of documentation petitioner provided. Moreover,

both the Appeals officer and the settlement officer made additional calculations on

the basis of assumptions favorable to petitioner but still concluded that petitioner’s

OIC should be rejected.

      In the May 17, 2010, cover letter petitioner suggests that her 2010 pay stub

for the period ending May 1, 2010, should be used to calculate her gross monthly

wages, rather than her 2009 Form W-2. Petitioner supports her argument by stating

that she understands that there have been some layoffs at Verizon due to the poor

economy. The settlement officer determined that the 2009 Form W-2 provided a

better indication of petitioner’s gross monthly income than the partial- year pay stub.

Petitioner’s “understanding” that there had been layoffs at Verizon is insufficient to

support a finding that the settlement officer abused his discretion in calculating

petitioner’s gross monthly income.

      Petitioner offered $1,000 in compromise of the tax liability. Moreover,

petitioner’s reasonable collection potential was determined to be $124,935--well in

excess of the tax liability. The $1,000 OIC does not reflect the reasonable

collection potential. Moreover, doubt as to collectibility is not grounds for a

compromise because the reasonable collection potential exceeds the tax liability.
                                          - 23 -

[*23] Furthermore, the settlement officer determined that collection in full would

not cause economic hardship that would justify a compromise on the basis of

effective tax administration. Petitioner argues that she is a single mother living in

New York in tough economic times. The settlement officer took note of this in the

record, but after making numerous calculations, determined that collection in full

would not cause economic hardship. He determined that petitioner’s net monthly

income was $1,718 and offered an installment agreement requiring monthly

payments of $1,000 for five years. The settlement officer’s calculations were

reasonable. Accordingly, we conclude that respondent did not abuse his discretion

in rejecting petitioner’s OIC.

V. Installment Agreement

      Section 6159(a) gives the Secretary discretionary authority “to enter into

written agreements with any taxpayer under which such taxpayer is allowed to make

payment on any tax in installment payments if the Secretary determines that such

agreement will facilitate full or partial collection of such liability.” The

Commissioner has the discretion to accept or reject any proposed installment

agreement. See sec. 301.6159-1(c)(1)(I), Proced. & Admin. Regs. We review the

Commissioner’s rejection of an installment agreement for abuse of discretion. See

Orum v. Commissioner, 123 T.C. 1, 12-13 (2004), aff’d, 412 F.3d 819 (7th Cir.
                                        - 24 -

[*24] 2005). We do not conduct an independent review of what would be an

acceptable collection alternative, nor do we substitute our judgment for that of the

Appeals Office. See Murphy v. Commissioner, 125 T.C. at 320; McCall v.

Commissioner, T.C. Memo. 2009-75.

      After deciding to reject petitioner’s OIC, the settlement officer offered an

installment agreement requiring $1,000 monthly payments for five years. He

determined that petitioner could make $1,000 monthly payments because he

calculated her net monthly income to be $1,718. Instead of attempting to further

negotiate or offer an installment agreement of her own, Ms. Ascher merely left a

voice message with the settlement officer demanding the abatement of additions to

tax and stating that his expense calculations need to be adjusted for two people.

She made no further attempt to contact the settlement officer, nor did she offer any

new information supporting her assertions. The settlement officer recalculated

petitioner’s income-expense table and asset equity table and again found that his

original installment agreement was appropriate. Accordingly, we conclude that

respondent did not abuse his discretion with regard to the proposed installment

agreement.
                                        - 25 -

[*25] VI. The Determination To Conclude the CDP Hearing

      Petitioner argues that the settlement officer prematurely closed the CDP

hearing by failing to return Ms. Ascher’s May 20, 2010, phone message when Ms.

Ascher was trying to establish a collection alternative and the abatement of

additions to tax. We note that there is no requirement that the Appeals Office wait a

certain amount of time before issuing a notice of determination. Clawson v.

Commissioner, T.C. Memo. 2004-106 (no abuse of discretion where fewer than

three months had passed between the taxpayer’s filing a CDP hearing request and

an adverse determination by the Appeals officer). To the contrary, the Appeals

Office shall “attempt to conduct a * * * [section 6330] hearing and issue a Notice of

Determination as expeditiously as possible under the circumstances.” Sec.

301.6330-1(e)(3), Q&A-E9, Proced. & Admin. Regs.

      We again note that Ms. Ascher’s voicemail was not an attempt to establish a

collection alternative or the abatement of additions to tax--she merely reiterated

assertions included in her May 17, 2010, cover letter. She did not offer an

installment agreement of her own, nor did she make another attempt to contact the

settlement officer after leaving a voice message.

      The Appeals Office issued the notice of determination approximately 13

months after petitioner filed her CDP request--one year longer than the period
                                        - 26 -

[*26] upheld in Clawson. In the interim, the Appeals officer and the settlement

officer corresponded with petitioner and considered evidence and arguments she

submitted. If Ms. Ascher was genuinely trying to negotiate a collection alternative,

she would not have responded to an offer for an installment agreement by reiterating

prior assertions in a voice message and then waiting for a response. Accordingly,

the record does not reflect that respondent issued the notice of determination

prematurely.

VII. Conclusion

      We conclude that the settlement officer did not abuse his discretion, and we

sustain respondent’s collection action, with regard to the 2006 and 2007 income tax

liabilities and the section 6651(a)(2) and (d)(1) additions to tax. However, we do

not sustain respondent’s collection action for the 2006 and 2007 section 6651(a)(1)

and (3) and section 6654 additions to tax.
                                       - 27 -

[*27] In reaching our holding herein, we have considered all arguments made by

the parties, and, to the extent not mentioned above, we conclude they are moot,

irrelevant, or without merit.

      To reflect the foregoing,


                                                          Decision will be entered for

                                                respondent regarding the income

                                                tax liabilities and section 6651(a)(2)

                                                and (d)(1) additions to tax and for

                                                petitioner regarding the sections

                                                6651(a)(1) and (3) and 6654 additions

                                                to tax.
