                               T.C. Memo. 2014-13



                         UNITED STATES TAX COURT



              STEVENS TECHNOLOGIES, INC., Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 1996-11L.                          Filed January 27, 2014.



      Sarah Stevens (an officer), for petitioner.

      James R. Rich, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      MORRISON, Judge: Stevens Technologies, Inc. (the “company”),

petitioned the Court under section 6330(d)(1) to review the determination of the

IRS Appeals Office sustaining proposed levies and filings of notices of liens to
                                         -2-

[*2] collect employment-tax liabilities, additions to tax, and penalties assessed

against the company.1 The issues for decision are:2

1.    Can the Court consider the correctness of the amounts of employment taxes

      that the company reported on its Forms 941 (“Employers’ Quarterly Federal

      Tax Return”) for the fourth quarter of 2009, the first quarter of 2010, and

      the second quarter of 2010?

2.    Did the company have reasonable cause for failing to file Forms 941 for a

      number of quarters in the years 2005 through 2008,3 pay employment taxes

      for a number of quarters in the years 2005 through 2010,4 deposit




      1
      Unless otherwise indicated, all references to sections are to the Internal
Revenue Code of 1986, as amended and as in effect at all relevant times.
      2
       On December 3, 2012, the respondent (the IRS) made an oral motion to
impose sanctions on the company for its alleged failure to comply with two orders
of the Court dated March 26, 2012, which had required the company to produce
documents and respond to interrogatories. The motion sought to bar the company
from presenting any evidence. We reserved ruling on the motion until after trial.
We will deny this motion as moot because, as we explain below, the evidence in
the record does not support any ultimate finding of fact in the company’s favor.
      3
     2Q, 3Q, 4Q 2005; 1Q, 2Q, 3Q 2006; 1Q, 2Q, 3Q, 4Q 2007; 3Q, 4Q 2008.
We sometimes use the letter “Q” as an abbreviation for quarter.
      4
      2Q, 3Q, 4Q 2005; 1Q, 2Q, 3Q 2006; 1Q, 2Q, 3Q, 4Q 2007; 3Q, 4Q 2008;
4Q 2009; 1Q, 2Q 2010.
                                           -3-

[*3] employment taxes for a number of quarters in the years 2005 through

      2010,5 pay Federal Unemployment Tax Act (FUTA) tax for the tax

      year 2009, and file Forms W-2 (“Wage and Tax Statement”) for

      2005?

3.    Did the IRS violate section 6330(e) by (a) issuing a summons to Wachovia

      Bank pursuant to its investigation of the company’s president, Sarah

      Stevens, for the trust-fund-recovery penalties and (b) notifying Stevens it

      intended to levy on her assets to collect the liabilities?

4.    Did the Appeals Office abuse its discretion by failing to accept the

      company’s installment-agreement proposal?

                                FINDINGS OF FACT

      The parties entered into a stipulation of facts. We incorporate the

stipulation of facts into our findings of fact. At the time it filed the petition, the

principal place of business of the company (that is, Stevens Technologies, Inc.)

was Charlotte, North Carolina. Therefore, any appeal of our decision in this case

will be resolved by the Court of Appeals for the Fourth Circuit unless the parties

stipulate another circuit. See sec. 7482(b)(1)(B); 28 U.S.C. sec. 41 (2012).


      5
      3Q, 4Q 2005; 2Q, 3Q 2006; 1Q, 2Q, 3Q 2007; 3Q, 4Q 2008; 2Q, 4Q 2009;
1Q, 2Q 2010.
                                       -4-

[*4] In 2004, the company was incorporated by Sarah Stevens (“Stevens”).

From 2005 through 2010, the company was a federal contractor that provided

computer consulting and information-technology services to federal agencies,

including the National Aeronautics and Space Administration and the Tennessee

Valley Authority (“TVA”). During the years 2004 through 2010, Stevens was the

company’s president. The company’s gross receipts, which were shown on its

Forms 1120, U.S. Corporation Income Tax Return, for the years 2004-09, were as

follows:

                         Year                  Gross receipts
                         2004                        -0-
                         2005                     $692,450
                         2006                      309,170
                         2007                      929,940
                         2008                      668,470
                         2009                     1,544,262

The company issued a Form W-2 to Stevens each year. These forms showed the

following information:
                                         -5-

[*5]

                                  Income tax
       Year        Wages           withheld        Social Security     Medicare
       2005        $54,002           $6,818             $3,348            $796
       2006         80,783            9,319              5,199            1,216
       2007        107,195           11,652              6,045            1,736
       2008        106,050            8,908              6,324            1,537
       2009         96,596           11,542              6,621            1,566
       2010         73,720            5,564              4,570            1,068

In 2005 and 2006, Stevens was also employed by Robert Half Corp., a company

for which she performed computer audits. She received $78,270 in wage income

from Robert Half Corp. in 2005 and $10,710 in 2006.

        During all relevant periods, Stevens had the authority to determine which

bills the company would pay at any given time, the authority to determine when

payroll would be paid, and the responsibility for hiring employees.

        In 2005, the company hired an accounting firm, A.F. McGervey & Co.,

LLC, to assist with bookkeeping, financial statements, and payroll. The

accounting firm assigned Paul Impellicceiri, a certified public accountant, to work

on the company’s account. The accounting firm’s staff prepared checks,

electronically, for Stevens’s approval. Stevens was responsible for approving the
                                          -6-

[*6] checks to pay the employment-tax deposits for the company. The accounting

firm’s staff prepared and sent to Stevens the Forms 941 for the company for the

last quarter of 2005 and all quarters in 2006, 2007, 2008, 2009, and 2010, before

the due date for each return.

      The company filed its Forms 941 on the following dates:

                           Due date
                        (unadjusted for
                          Saturdays,
                         Sundays, and                            Was return filed
     Tax period            holidays)            Date filed            late?
      1Q 2005               4/30/05                 12/8/05           Late
                                                    1
      2Q 2005               7/31/05                     2/1/06        Late
      3Q 2005              10/31/05                     2/1/06        Late
      4Q 2005               1/31/06                 9/10/07           Late
      1Q 2006               4/30/06                 9/30/09           Late
      2Q 2006               7/31/06                 9/30/09           Late
      3Q 2006              10/31/06                 9/30/09           Late
      4Q 2006               1/31/07                 6/11/09           Late
      1Q 2007               4/30/07                 9/30/09           Late
      2Q 2007               7/31/07                 9/30/09           Late
      3Q 2007              10/31/07                 9/30/09           Late
      4Q 2007               1/31/08                     8/5/09        Late
                                                2
      1Q 2008               4/30/08                 4/30/08
                                          -7-

          [*7]
      2Q 2008                   7/31/08           9/30/09                Late
      3Q 2008              10/31/08               9/30/09                Late
      4Q 2008                   1/31/09           9/30/09                Late
                                                   3
      1Q 2009                   4/30/09                5/2/09            Late
      2Q 2009                   7/31/09           7/31/09
      3Q 2009              10/31/09              10/31/09
                            4
      4Q 2009                   1/31/10                2/1/10
      1Q 2010                   4/30/10           4/30/10
      2Q 2010                   7/31/10           7/31/10
      3Q 2010              10/31/10              10/31/10
      4Q 2010                   1/31/11           4/28/11                Late

      1
         In its brief, the IRS contends that the return was filed on February 1, 2005,
which would be six months before the due date of the return. This appears to be a
typographical error. Its records show a notation “RETURN FILED” with a
corresponding date of February 1, 2006. Furthermore, the IRS assessed a penalty
for failing to timely file a return for the quarter and the company does not dispute
that it failed to timely file a return.

      2
        The IRS contends that the return was a substitute for return, i.e., a return
filed by the IRS. However, its records for the quarter show a notation “RETURN
FILED”. There is no notation that the return was a substitute for return. We
conclude that the return was not a substitute for return. The IRS also contends that
the return was filed late. However, its records show that return was filed on its
due date. The IRS did not assess a penalty for failing to timely file a return for the
quarter.

      3
        The IRS contends that the return was a substitute for return. However, its
records for the quarter show a notation “RETURN FILED”. There is no notation
that the return was a substitute for return. We conclude that the return was not a
                                          -8-

[*8] substitute for return. The IRS did not assess a penalty for failing to file a
timely return for the quarter.

      4
      This day was a Sunday, so the actual due date was the following day,
February 1, 2010. See sec. 7503.

      The company made the following federal-employment-tax deposits and

payments from 2005 through 2010:6

                                           Tax period to
                                           which deposit
                    Date of deposit or      or payment
      Year              payment               applied                Amount
      2005               4/19/05                1Q 2005            $25,388.52
                        11/14/05                2Q 2005             47,463.04
                        11/14/05                3Q 2005             33,238.20
      2006              10/13/06                1Q 2006               5,000.00
      2007               4/10/07                1Q 2006               8,601.32
                         4/10/07                2Q 2006               3,327.32
                         5/22/07                2Q 2007               7,944.20
                         5/29/07                2Q 2007               7,509.28
                         8/29/07                3Q 2007              11,986.66
      2008                1/7/08                4Q 2007               4,490.66
                          1/7/08                4Q 2007               4,984.16
                          2/5/08                1Q 2008               4,659.53
                         2/21/08                1Q 2008               1,186.32
                         2/21/08                1Q 2008               3,430.19
                         3/17/08                1Q 2008               4,535.23
                         3/26/08                4Q 2005                 362.42
                         3/28/08                1Q 2008               4,472.39
                         4/10/08                1Q 2008               5,124.01


      6
          The table does not include FUTA payments.
                                         -9-

                           [*9]
                        5/21/08                2Q 2008             10,061.11
                        6/18/08                2Q 2008              9,609.24
                         8/1/08                2Q 2008             10,349.61
                        8/29/08                3Q 2008             10,697.64
                       10/29/08                3Q 2008             10,706.10
      2009               6/3/09                1Q 2009              12,244.37
                        7/15/09                1Q 2009              22,435.79
                         8/3/09                2Q 2009              41,198.63
                        9/30/09                2Q 2005              13,225.96
                        9/30/09                3Q 2005              10,239.37
                        9/30/09                4Q 2005              34,478.70
                        9/30/09                3Q 2006              22,150.62
                                                                  1
                        9/30/09                4Q 2006              23,993.44
                        9/30/09                1Q 2007              43,856.02
                        9/30/09                2Q 2007              32,331.69
                        9/30/09                3Q 2007              11,697.98
                        9/30/09                4Q 2007              22,018.36
                        9/30/09                3Q 2008              11,137.88
                        9/30/09                4Q 2008              35,283.90
                        10/2/09                3Q 2009              10,178.31
                        10/2/09                3Q 2009              27,472.03
                        10/2/09                3Q 2009              21,939.78
      2010              3/15/10                4Q 2009              3,308.07
                        10/4/10                4Q 2010              6,825.23
                       10/20/10                4Q 2010              6,378.51
                        11/4/10                4Q 2010              6,277.65
                       11/16/10                3Q 2010             44,465.16
                       11/22/10                4Q 2010              4,274.79
                        12/9/10                4Q 2010                731.71
                       12/23/10                4Q 2010                731.73
                         1/7/11                4Q 2010                731.73

      1
       The parties stipulated that the payment amount was $22,993.44, but the
company’s bank statement shows that the amount is actually $23,993.44. The IRS
did not assess a penalty for failing to timely pay or make deposits for this quarter.
                                         -10-

[*10] Regarding the company’s Form 941 obligations (i.e., its obligations to file

Form 941 and to deposit and pay quarterly employment taxes), the IRS assessed

against the company additions to tax for failing to timely file, additions to tax for

failing to timely pay, and penalties for failing to timely deposit. The amounts of

the assessments are:

                       Failing to timely     Failing to timely     Failing to timely
 Tax period ending            file                  pay                 deposit
     6/30/2005            $10,916.50              $949.26                 -0-
     9/30/2005               6,481.45               166.19             $3,323.82
    12/31/2005               7,757.71             8,576.18              5,171.80
     3/31/2006               3,060.30               666.08                -0-
     6/30/2006                 748.65               149.73                332.73
     9/30/2006               4,983.89             3,876.36              2,215.06
     3/31/2007               9,867.60             6,359.12              4,385.60
     6/30/2007               7,274.63             4,203.12              3,782.99
     9/30/2007               2,632.05             1,345.27              1,973.71
    12/31/2007               4,954.13             2,201.84                -0-
     9/30/2008               2,506.02               612.58              2,892.17
    12/31/2008               7,938.88             1,411.36              3,528.36
     6/30/2009                 -0-                  -0-                 4,119.86
    12/31/2009                 -0-                  330.81              9,924.19
     3/31/2010                 -0-                  176.74              5,302.10
     6/30/2010                 -0-                  250.65              7,519.34
                                        -11-

[*11] In 2005, Stevens began to suffer heart problems. In 2005, after a difficult

pregnancy, Stevens gave birth to a daughter. Because of Stevens’s poor health,

the birth took place in the intensive care unit of the hospital. Her child was born

with a cancerous tumor on her skull. Near the end of 2006, the tumor was

removed.

      At the end of 2006, Stevens’s mother was diagnosed with cancer. Stevens

began caring for her mother at her mother and father’s house in Pennsylvania.

During this time she commuted to Charlotte, where the company was based.

      During 2007, Stevens continued to suffer from heart problems that

eventually required surgery.

      In March 2007, Stevens moved from Pennsylvania back to her home in

Charlotte with her mother.7 There, she cared for her mother until about six weeks

before her mother’s death in November 2008 in Pennsylvania. Stevens’s heart

problems (which had began in 2005), her difficult pregnancy (in 2005), her

daughter’s tumor (which was removed at the end of 2006), her mother’s sickness

(which began at the end of 2006 and ended with her death in November 2008),

meant that Stevens could spend only a limited time on the company’s affairs.


      7
      She and her mother spent a week in Raleigh, North Carolina, while her
mother was being treated at Duke University Medical Center.
                                        -12-

[*12] On February 18, 2008, the IRS assessed a $360 penalty against the company

under section 6721 for the annual tax period ending December 31, 2005, for

failure to timely file Form W-2.

       From 2005 through 2008, Stevens posted sporadic comments and advice on

an educational listserv (an electronic bulletin board). She made 12 posts in 2005,

1 post in 2006, 7 posts in 2007, 10 posts in 2008, and 1 post in 2009.

       In 2008, Stevens attended the American Institute of Aeronautics and

Astronautics Space 2008 Conference and Exposition in San Diego, California, and

gave a lecture entitled “Security Considerations for Global Systems of Systems”.

In 2008, Stevens had a speaking engagement in North Dakota.

       After Stevens’s mother died in November 2008, Stevens began to devote

more time to the company. She was able to concentrate on the company’s tax

problems with the assistance of Impellicceiri.

       In 2009, the company contracted to provide services to the TVA. The TVA

failed to schedule some work during the fourth quarter of 2009.

       In September 2009, the company filed some of its overdue Forms 941 and

paid approximately $261,000 toward its overdue federal tax. The company was

able to make the $261,000 payment because it had received payments from the

TVA.
                                        -13-

[*13] On October 13, 2009, Stevens contacted an IRS collection specialist to

ascertain whether the IRS had received the company’s delinquent tax returns.

During the conversation, a collection specialist explained to Stevens that the

company owed the IRS penalties and interest because of late payments. Stevens

asked that the company’s account be assigned to a revenue officer. Stevens also

stated that the company was current with its deposits.

      In 2009, Stevens entered the “Make Mine a Million Dollar Business”

contest, sponsored by Count Me In, Inc., a nonprofit organization whose purpose

was to assist women entrepreneurs with their businesses. Stevens was selected as

a finalist in the contest due to the growth of the company’s revenue from $668,470

in 2008 to $1,544,262 in 2009 and her creation of jobs.

      In January 2010, the National Science Foundation (“NSF”) told the

company that it was one of three final contenders for a large contract. There were

delays in the NSF’s awarding the contract, and by the time the contract was

awarded in September 2011 the company had already gone out of business.

      On February 1, 2010, the company timely filed its Form 940 (“Employer’s

Annual Federal Unemployment (FUTA) Tax Return”), for the 2009 year.
                                       -14-

[*14] On February 22, 2010, the IRS made the following assessments related to

the Form 940 for 2009: tax of $1,124.88, a failure-to-timely-pay addition to tax of

$5.62, and interest of $2.72.

      In February 2010, the company signed another contract with the TVA to

provide services to it. This contract was for the period ending January 31, 2011,

and for a sum not to exceed $1.5 million. From February to May 2010, the

company performed work for the TVA pursuant to this contract. From April

through August 20, 2010, the TVA made payments with respect to the contract.

      In March 2010 Count Me In, Inc., and cosponsor American Express, Inc.,

announced that Stevens had won the contest grand prize of $100,000 because of

her efforts in growing the company’s business. As a result of winning the contest,

in March 2010 Stevens appeared on the “Today Show”, a national television

program. During her “Today Show” interview, Stevens explained that she and her

husband had continued to run the company while her mother was sick and living

with them.

      In March 2010, the TVA and the company agreed to a schedule under which

the company would perform inspections of seven TVA facilities on various dates

from May through September 2010. These inspections were part of the work to be

performed under the second contract between the TVA and the company. The
                                       -15-

[*15] inspections did not occur because the TVA did not permit the company

access to its facilities.

       On July 14, 2010, Stevens sent an email to the TVA complaining that the

inspections had not been allowed as scheduled, that this had cost the company

$175,000, and that the work for the upcoming week had been postponed until

August. The same day, the TVA emailed Stevens back to ask whether the

company could perform inspections of four TVA facilities on specific dates in July

and August. The record does not reveal whether these inspections occurred.

       The IRS assessed employment taxes for the fourth quarter of 2009 and the

first and second quarters of 2010 in the respective amounts of $66,161.47,

$35,347.65, and $50,129.25. The amounts assessed were the same amounts shown

by the company on its Forms 941 as tax for these quarters.

       On August 2, 2010, Stevens contacted IRS collection personnel to ask for

the contact information for the revenue officer assigned to the company’s case.

       On August 12, 20, and 23, 2010, the IRS mailed notices of lien filings and

notices of intent to levy to the company. (There were two lien-filing notices and

three levy notices. The two lien-filing notices were mailed on August 12, 2010.

Two of the three levy notices were mailed on August 20, 2010. The third levy

notice was mailed on August 23, 2012). The notices advised the company that it
                                                         -16-

[*16] had the right to request a collection-review hearing with the IRS Appeals

Office. The notices showed amounts of tax liabilities that the IRS had assessed by

form number (or type of tax, i.e., section 6721) and by taxable period. The dates

of the notices, type of notices (i.e., lien-filing or levy), form number (or type of

tax), and assessed amount, are listed below:

   Tax form                         1st 8/12/10       2d 8/12/10
  (or type of                        lien-filing      lien-filing      1st 8/20/10       2d 8/20/10      8/23/10 levy
      tax)           Period            notice           notice         levy notice 1    levy notice 1       notice

      941           2Q 2005           $3,596.40           ---              ---              ---              ---

      941           3Q 2005            2,748.37           ---              ---              ---              ---

      941           4Q 2005           28,527.07           ---          $28,527.07       $28,527.07           ---

      941           1Q 2006            5,501.63           ---            5,501.63          5,501.63          ---

      941           2Q 2006            1,628.62           ---            1,628.62          1,628.62          ---

      941           3Q 2006           16,658.93           ---           16,658.93        16,658.93           ---

      941           1Q 2007           29,140.55           ---           29,140.55        29,140.55           ---

      941           2Q 2007           20,629.09           ---           20,629.09        20,629.09           ---

      941           3Q 2007            7,567.53           ---            7,567.53          7,567.53          ---

      941           4Q 2007            9,663.06           ---            9,663.06          9,663.06          ---

      941           3Q 2008            6,615.03           ---            6,615.03          6,615.03          ---

      941           4Q 2008           14,152.25           ---           14,152.25        14,152.25           ---

      941           2Q 2009            4,119.86           ---            4,119.86          4,119.86          ---

      941           4Q 2009           76,576.17           ---           76,576.17        76,576.17           ---

      941           1Q 2010             ---           $40,919.58        40,919.58           ---              ---

      941           2Q 2010             ---               ---              ---              ---          $55,952.75

      940               2009            ---              1,133.22        1,133.22          1,133.22          ---

  Sec. 6721             2005            ---                     360              360        ---              ---

         1
        The lien-filing notices listed an “amount on lien” for each tax form (or type of tax) and period. The
amounts were not given in further detail, e.g., the notices did not specify whether the amounts were for tax, penalty,
                                                         -17-

[*17] or interest.    The levy notices listed, for each tax form (or type of tax) and period, the following information:
“unpaid amount from prior notices”, “additional penalty”, and “additional interest”. For lien-filing notices, the
“amount on lien” is shown in the table. For levy notices, the amounts in the table include only “unpaid amount from
prior notices”, not “additional penalty” or “additional interest”.
         The first 8/20/10 levy notice listed the following amounts as “additional penalty”: $2,315.64 for the 4Q
2009 liability, $706.94 for the 1Q 2010 liability, and $39.37 for the 2009 Form 940 liability. Amounts were listed as
“additional interest” for all categories of liabilities for which an amount is listed as “unpaid amount from prior
notices” except the 2Q 2009 liability and the sec. 6721 liability. Also, an amount for “additional interest” was listed
for the 3Q 2005 liability. (No amount is listed for that quarter for “unpaid amount from prior notices.”)
         The second 8/20/10 levy notice listed the following amounts as “additional penalty”: $2,315.64 for the 4Q
2009 liability and $39.37 for the 2009 Form 940 liability. Amounts were listed as “additional interest” for all
categories of liabilities for which an amount is listed as “unpaid amount from prior notices”. Also, an amount for
“additional interest” was listed for the 3Q 2005 liability. (No amount is listed for that quarter for “unpaid amount
from prior notices.”).
         The 8/23/10 levy notice listed $250.64 as “additional penalty” and $182.82 as “additional interest” for the
2Q 2010 liability.


         On August 20, 2010, Stevens met with an IRS revenue officer to resolve the

company’s outstanding tax liabilities. Stevens told the revenue officer that the

company “could not secure Government contracts” until it could demonstrate that

it had established an agreement with the IRS to pay the liabilities. The revenue

officer informed Stevens that because the company was not in compliance with its

deposit requirements as the date of the meeting,8 he would issue a notice of intent

to levy.9 The revenue officer informed Stevens that to avoid other collection

action it would need to prospectively comply with its deposit requirements. The



         8
      We observe that the IRS’s records show that the company reported
$50,129.25 of employment taxes on its Form 941 filed July 31, 2010, but that it
made no deposits or payments of this amount.
         9
       It is unclear whether this refers to the first levy notice issued on August 20,
2010, the second levy notice issued on August 20, 2010, or the levy notice issued
on August 23, 2010.
                                        -18-

[*18] revenue officer also requested that Stevens submit a completed Form 433-B,

“Collection Information Statement for Businesses”, within 30 days. The revenue

officer and Stevens agreed to meet again on August 31, 2010, along with

Impellicceiri.

      On August 30, 2010, the company delinquently filed Forms 940 for the

2005, 2006, 2007, and 2008 years.10

      On August 30, 2010, the company submitted a request for a collection-

review hearing to the IRS Appeals Office. The request for the hearing stated that

the basis for the request was “Filed Notice of Federal Tax Lien” and “Proposed

Levy or Actual Levy”. In its request for a hearing the company proposed that the

IRS withdraw its lien filings and enter into an installment agreement with the

company. The request did not challenge the amounts of tax assessed, such as the

employment taxes assessed for the fourth quarter of 2009 and the first two quarters

of 2010.11


      10
        The company contends that it filed the returns on time. However, the
IRS’s records show that the returns were filed on August 30, 2010. There is no
evidence to the contrary.
      11
        The company contends that its request did challenge the amounts of
employment taxes for the fourth quarter of 2009 and the first two quarters of 2010,
but the request, which is in the record, stated only that “We request for fast track
mediation to review lien and also company is a government contractor whose
                                                                        (continued...)
                                       -19-

[*19] On August 31, 2010, Stevens and Impellicceiri met with the revenue officer

as previously arranged. At the meeting they requested abatement of additions to

tax and penalties for reasonable cause. On the same day, the revenue officer

reviewed the company’s request for a collection-review hearing and referred the

request to the Appeals Office. A settlement officer at the Appeals Office was

assigned to handle the hearing.

      By letter dated October 4, 2010, the Appeals Office acknowledged receipt

of the company’s request for a collection-review hearing and scheduled a

telephone hearing for October 19, 2010. The letter stated that the IRS could

consider whether the company owed the amounts due only if the company had not

had a prior opportunity to dispute the amounts with the Appeals Office or had not

received a statutory notice of deficiency. The telephone hearing was rescheduled

for October 20, 2010.

      On October 20, 2010, about one-half hour before the telephone hearing was

scheduled to begin, Stevens faxed to the Appeals Office information for it to

consider at the hearing. The information included the following summary:

      11
        (...continued)
award of future contracts was being limited. Extenuating financial circumstances
has caused the company to fall behind on payment of employment tax liability.”
This statement does not challenge the amounts of taxes. The company does not
contend that its request challenged any other amounts of employment taxes.
                                        -20-

[*20] Information to be presented at STI IRS Collection Due Process Hearing

      Section 1: Evidence that taxpayer suffered severe emotional and
      physical distress that prevented capacity to think clearly and make
      appropriate financial decisions for the firm for the periods of June 30,
      2005 - June 30, 2009.

      Section 2: Evidence that taxpayer did comply voluntarily and paid all
      taxes due for these periods as soon as monies were available to do so.

      Section 3: Evidence that collection activity has continued to persist
      after request for collection due process hearing.

            1)     Filing of Federal Tax Lien on 09/21/2010 (Appeal Letter
                   stated that appeal was timely and no collection action
                   could be taken until after a decision was made in the
                   case).
            2)     Request for Trust Fund Recovery Penalty
                   Assessment while the case was under Appeal.
                   Note: Taxpayer is making these notations because of
                   rights under the IRS tax code, and because taxpayer
                   needs the determination of the hearing in order to
                   determine how to proceed. Taxpayer understands the
                   importance of this hearing and the assessments and takes
                   this VERY seriously. For this reason, the taxpayer did
                   meet with the collection agent about the Trust Fund
                   Recovery Penalty.

      Section 4: Evidence that government has delayed contracting activity
      that has placed a tremendous burden on the taxpayer’s business for
      the periods of December 2009 - June 30, 2010.

      Section 5: Evidence to support withdrawal of Federal Tax Lien, as
      per Publication 594, to allow us to pay our debt more quickly.
                                        -21-

[*21] None of the material in the letter constituted a request for the IRS to

consider whether the company owed the amounts of tax due.

      Stevens and Impellicceiri participated in the telephone hearing on October

20, 2008, with the Appeals Office. Stevens requested abatement of the additions

to tax and penalties assessed against the company on the basis of reasonable cause.

She did not challenge the amounts of tax due. She proposed that, in lieu of the

lien filings and proposed levies, the IRS would enter into an installment agreement

with the company whereby the company would pay the IRS $5,000 per month.

      On October 25, 2010, Stevens faxed a six-page document to the Appeals

Office explaining further the company’s argument that the IRS should abate the

additions to tax and penalties.

      In October 2010, Stevens laid off all the company’s employees.

      In November 2010, the company ceased operations. Stevens became

employed as information-security manager for Shared Health, Inc.

      On November 30, 2010, the IRS issued an administrative summons to

Wachovia Bank seeking the bank records of the company for the period October 1,

2009 to 2010. The summons was issued as part of the IRS’s investigation of

Stevens for trust-fund-recovery-penalty liabilities. The summons stated that it
                                        -22-

[*22] concerned the “matter of Sarah E Stevens, President, Stevens Technologies

Inc.” and “Forms 941” for the quarters 4Q 2009, 1Q 2010, and 2Q 2010.

      On December 22, 2010, the Appeals Office issued a determination

regarding the collection-review hearing. The determination stated that the lien

filings and the proposed levies were appropriate. In a section headed “Challenges

to the Existence of Amount of Liability”,12 the notice stated that the company had

challenged “late filing and deposit penalties and requested penalty abatement due

to reasonable cause.”13 It stated that abatement of failure-to-timely-deposit

additions to tax and failure-to-timely-file additions to tax was not warranted. As a

consequence, the notice determined that the following assessed amounts of

additions to tax and penalties were correct:




      12
         The company argues that the wording of the section heading indicates that
the Appeals Office viewed the company as having challenged the amounts of its
tax liabilities at the hearing. We disagree. The body of the section in the notice
indicates that the company’s challenges to the underlying liabilities consisted of
challenges only to the amounts of additions to tax and penalties, not taxes.
      13
        The notice did not specifically refer to the failure-to-timely-pay additions
to tax even though the company challenged these additions. It appears that the
notice referred to the failure-to-timely-pay additions to tax and the failure-to-
timely-deposit additions to tax collectively as “deposit penalties”.
                                                      -23-

[*23]

                                                                           Failure to
  Tax period         Form number        Failure to            Failure to    timely
   ending            or type of tax     timely file          timely pay     deposit     Misc. penalty
  6/30/2005                 941         $10,916.50            $949.26         n/a            n/a
  9/30/2005                 941           6,481.45             166.19      $3,323.82         n/a
 12/31/2005                 941           7,757.71           8,576.18       5,171.80         n/a
                        1
 12/31/2005                 W-2            n/a                  n/a           n/a           $360
  3/31/2006                 941           3,060.30             666.08         n/a            n/a
  6/30/2006                 941             748.65             149.73        332.73          n/a
  9/30/2006                 941           4,983.89           3,876.36       2,215.06        n/a
  3/31/2007                 941           9,867.60           6,359.12       4,385.60         n/a
  6/30/2007                 941           7,274.63           4,203.12       3,782.99        n/a
  9/30/2007                 941           2,632.05           1,345.27       1,973.71         n/a
 12/31/2007                 941           4,954.13           2,201.84         n/a           n/a
  9/30/2008                 941           2,506.02             612.58       2,892.17         n/a
 12/31/2008                 941           7,938.88           1,411.36       3,528.36        n/a

  6/30/2009                 941            n/a                  n/a         4,119.86        n/a

 12/31/2009                 941            n/a                 330.81       9,924.19        n/a
 12/31/2009                 940            n/a                    5.62        n/a           n/a
  3/31/2010                 941            n/a                 176.74       5,302.10         n/a
  6/30/2010                 941            n/a                 250.65       7,519.34         n/a
Total                                    69,121.81       31,280.91         54,471.73         360

        1
            Failure to file Form W-2.
                                         -24-

[*24] The notice also stated that the company had proposed that the lien filings

and proposed levies be withdrawn in exchange for a $5,000-per-month installment

agreement. The notice stated:

       Taxpayer’s history of failing to make tax deposits is protracted and
       egregious and weighs against support [sic] granting an installment
       agreement. * * *. Its history does not convince the Settlement
       Officer that it would comply with an installment payment in addition
       to a tax deposit, especially since it has expressed that it experiences
       delays in payments from its clients.

It also stated:

       An installment agreement does not provide the Government with the
       same advantages and protections as a filed lien to be a viable lien
       alternative. A lien withdrawal under I.R.C. § 6323(j) is not
       appropriate.

       On January 24, 2011, the company filed a timely Tax Court petition for

review of the determination of the Appeals Office.

       On November 26, 2012, the IRS sent Stevens notices that it intended to levy

on her property in order to collect trust-fund-recovery penalties imposed against

her for the fourth quarter of 2009 and the first two quarters of 2010.
                                           -25-

[*25]                                  OPINION

1.      Can the Court consider the correctness of the amounts of employment taxes
        that the company reported on its Forms 941 for the fourth quarter of 2009,
        the first quarter of 2010, and the second quarter of 2010?

        When the IRS seeks to collect a tax liability of a taxpayer through the means

of either (1) a levy or (2) the filing of a lien,14 the taxpayer is entitled to a hearing

before the IRS Appeals Office. Secs. 6320(b)(1) (requiring hearing, if requested

by taxpayer, after the filing of lien), 6330(b)(1) (requiring hearing, if requested by

taxpayer, before levy). At the hearing the taxpayer is entitled to challenge the

amount of the taxpayer’s underlying tax liability that the IRS is seeking to collect,

provided that the taxpayer did not already have a chance to challenge the

underlying tax liability. Sec. 6330(c)(2)(B); see Katz v. Commissioner, 115 T.C.

329, 339 (2000). The underlying tax liability is any amount owed by a taxpayer,

including the tax, additions to tax, penalties, and underpayment interest. See Katz

v. Commissioner, 115 T.C. at 338-339. If the taxpayer does not challenge the

amount of the underlying tax liability with the Appeals Office, the Court cannot


        14
        For convenience, we refer to the filing of a notice of lien as the filing of a
lien. See, e.g., Katz v. Commissioner, 115 T.C. 329, 333 (2000). A lien for
federal tax arises automatically when the IRS assesses the tax. Sec. 6321. The
IRS secures the lien against various types of third parties through the filing of a
notice of the lien with the local recorder of deeds or similar office. Sec. 6323(a),
(f).
                                         -26-

[*26] consider the amount of the liability when reviewing the determination of the

Appeals Office. Giamelli v. Commissioner, 129 T.C. 107, 112-116 (2007).

      Among the liabilities that the IRS seeks to collect from the company are the

employment taxes reflected on the company’s Forms 941 for the last quarter of

2009 and the first two quarters of 2010. The company seeks to have the Court

redetermine these liabilities. The company was entitled to challenge the amounts

of these liabilities with the Appeals Office.15 However, it did not make such a

challenge, either in its request for a hearing, at the telephone conference with the

Appeals Office, or in its submission to the Appeals Office after the hearing. The

company contested only the portions of the underlying tax liabilities consisting of

penalties and additions to tax. Because the company did not challenge the

amounts of its employment taxes with the Appeals Office, the Court cannot

consider the amounts of these liabilities. See id.




      15
         The IRS concedes that the company did not have an opportunity to
challenge its liability for taxes before the hearing with the Appeals Office. See
Montgomery v. Commissioner, 122 T.C. 1, 8-10 (2004) (taxpayer who reported
tax liability on return could later claim at collection-review hearing that amount
was overreported).
                                         -27-

[*27]

2.      Did the company have reasonable cause for failing to file Forms 941 for a
        number of quarters in the years 2005 through 2008,16 pay employment taxes
        for a number of quarters in the years 2005 through 2010,17 deposit
        employment taxes for a number of quarters in the years 2005 through
        2010,18 pay FUTA tax for the tax year 2009, and file Form W-2 for 2005?

        A Federal Insurance Contributions Act (or FICA) tax is imposed on

employers with respect to wages paid to employees, sec. 3111(a) and (b), and on

employees with respect to wages received, sec. 3101(a) and (b). Employers must

withhold the employees’ shares of FICA from wages paid and pay over the

withheld amounts to the IRS. Sec. 3102(a) (the employee share of FICA must be

collected by the employer by deducting and withholding the amount of tax from

wages as paid) and (b) (every employer required to deduct the employee share of

FICA is liable for payment of the employee share of FICA). Moreover, an

employer is obligated to withhold from wages amounts for the income tax owed

by its employees and must pay the withheld amounts to the IRS. Secs. 3402(a)(1)

(“every employer making payment of wages shall deduct and withhold upon such


        16
             2Q, 3Q, 4Q 2005; 1Q, 2Q, 3Q 2006; 1Q, 2Q, 3Q, 4Q 2007; 3Q, 4Q 2008.
        17
      2Q, 3Q, 4Q 2005; 1Q, 2Q, 3Q 2006; 1Q, 2Q, 3Q, 4Q 2007; 3Q, 4Q 2008;
4Q 2009; 1Q, 2Q 2010.
        18
       3Q, 4Q 2005; 2Q, 3Q 2006; 1Q, 2Q, 3Q 2007; 3Q, 4Q 2008; 2Q, 4Q 2009;
1Q, 2Q 2010.
                                        -28-

[*28] wages a tax determined in accordance with tables or computational

procedures prescribed by the Secretary [of the Treasury]”), 3403 (every employer

that is required to deduct and withhold income tax is liable for payment of the

deducted amount). Once net wages are paid to the employee, the IRS credits the

employee with the FICA taxes and income tax withheld, even if the employer does

not pay over the withheld amounts to the IRS. See Slodov v. United States, 436

U.S. 238, 243 (1978).

      The term “employment taxes”, as used here, includes all three of the

employer’s obligations that we have just discussed: (1) employer share of FICA,

(2) employee FICA withholding, and (3) employee income-tax withholding. The

term also includes the FUTA tax, which is discussed later.

      Each calendar quarter, an employer must file a Form 941 reporting its FICA

obligations and income-tax withholding obligations for the quarter. Secs.

31.6011(a)-4(a)(1) (income-tax withholding), 31.6011(a)-1 (FICA), Employment

Tax Regs. With some exceptions that are not applicable here, the Form 941 is due

one month after the end of the quarter. Sec. 31.6071(a)-1(a)(1), Employment Tax

Regs. The taxes reportable on the Form 941 must be paid on or before the date the

Form 941 is to be filed. See sec. 6151(a) (a taxpayer who is required to file a tax
                                         -29-

[*29] return must pay the tax at the time and place fixed for filing the return).

Thus, the taxes are due one month after the end of the quarter.

      Another federal tax on wages is the tax imposed by the Federal

Unemployment Tax (“FUTA tax”). See sec. 3301(1). This is a 6.2% excise tax

imposed on each employer with respect to the first $7,000 paid to each employee

each year. Id. sec. 3306(b)(1). The employer must report its FUTA tax liability on

a Form 940. Sec. 31.6011(a)-3(a), Employment Tax Regs. The Form 940 is

generally due a month after the end of the calendar year. Sec. 31.6071(a)-1(c),

Employment Tax Regs.

      In addition to its obligation to pay quarterly employment taxes (i.e., its

FICA obligations and income-tax withholdings, but not its FUTA tax) a month

after the quarter has ended, an employer must make quarterly deposits of

employment taxes throughout the quarter. Sec. 31.6302-1(a), (e)(1), Employment

Tax Regs. The deposits must be made either monthly or semiweekly, as

determined by regulation. Sec. 31.6302-1(a), (b), and (c)(1) and (2), Employment

Tax Regs. The company was required to make semiweekly deposits. A deposit of

a tax is treated as a payment of a tax made on the due date of the relevant tax

return, determined without regard to extensions, or, if the deposit is made later, the

date the deposit was made. Sec. 31.6302-1(h)(9), Employment Tax Regs. Thus,
                                        -30-

[*30] an employer’s deposit of employment taxes during the quarter is deemed to

be a payment of employment taxes on the due date of the Form 941.

      Where a taxpayer fails to timely file a return, including a Form 941 and a

Form 940, section 6651(a)(1) imposes an “addition” to tax equal to 5% of the

amount required to be shown as tax for each month the return is late, not to exceed

25% in the aggregate. Where a taxpayer fails to timely pay tax shown on a return,

including a Form 941 or Form 940, section 6651(a)(2) imposes an “addition” to

tax equal to 0.5% of the amount shown as tax for each month the failure continues,

not to exceed 25% in the aggregate. Where a taxpayer fails to make a federal tax

deposit by the date prescribed, section 6656(a) imposes a “penalty” of up to 10%

of the undeposited amount. See also sec. 6656(b). Additions to tax under section

6651(a)(1) and (2) and penalties under section 6656 may be abated if a taxpayer

proves that the failure was due to reasonable cause and not willful neglect. See

secs. 6651(a)(1), (2), 6656(a); see also sec. 301.6651-1(c)(1), Proced. & Admin.

Regs. The company claims that the additions to tax for failing to timely file Forms

941, the additions to tax for failing to timely pay quarterly employment tax, and

the penalties for failing to timely make deposits of employment tax, should be
                                         -31-

[*31] abated for reasonable cause.19 In reviewing the company’s entitlement to an

abatement of penalties and additions to tax determined by the IRS, the Court

employs a de novo standard of review. See Staff IT, Inc. v. United States, 482

F.3d 792, 797-798 (5th Cir. 2007).20 The company bears the burden of proving

that it is not liable for additions to tax and penalties. See Tax Ct. R. Pract. & Proc.

142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933). The parties agree that

the company failed to timely file returns, make timely tax payments, and make

timely deposits. We hold that the company has not satisfied its burden of proving

that the failures were due to reasonable cause. The reasons are given below.

      Reasonable cause for failing to timely file returns exists if the taxpayer can

establish that it “exercised ordinary business care and prudence and was

nevertheless unable to file the return within the prescribed time”. Sec. 301.6651-

1(c)(1), Proced. & Admin. Regs. Reasonable cause for failing to pay employment


      19
         Another penalty assessed against the company was the penalty, under sec.
6721, for failing to file an information return. The penalty applies to the failure to
file Form W-2. Sec. 6051(a). Sec. 6724(a) contains a reasonable-cause waiver.
       In its brief the company did not argue that it had reasonable cause for failing
to pay the 2009 FUTA tax or file Form W-2 for 2009. It has therefore abandoned
any challenge regarding its liabilities for the addition to tax for failing to timely
pay the 2009 FUTA tax and the penalties for failing to file the Form W-2 for 2009.
      20
       The record does not establish, and the IRS does not contend, that the
company had a prior opportunity to dispute the additions to tax or penalties, i.e.,
an opportunity before the hearing with the Appeals Office.
                                         -32-

[*32] taxes exists if the taxpayer can establish that it “exercised ordinary business

care and prudence in providing for payment of * * * [its] tax liability and was

nevertheless either unable to pay the tax or would suffer an undue hardship * * * if

* * * [it] paid on the due date.” Id. Courts have also relied on this ordinary-

business-care-and-prudence standard to determine whether a taxpayer has

reasonable cause for failing to timely make deposits. See, e.g., Diamond Plating

Co. v. United States, 390 F.3d 1035, 1038 (7th Cir. 2004); Van Camp & Bennion

v. United States, 251 F.3d 862, 866, 868 (9th Cir. 2001); East Wind Indus., Inc. v.

United States, 196 F.3d 499, 508 (3d Cir. 1999); Fran Corp. v. United States, 164

F.3d 814, 816-819 (2d Cir. 1999); Brewery, Inc. v. United States, 33 F.3d 589,

592 (6th Cir. 1994); see also Custom Stairs & Trim, Ltd. v. Commissioner, T.C.

Memo. 2011-155, 102 T.C.M. (CCH) 1, 5 (2011). The determination of whether a

taxpayer exercised ordinary business care and prudence in providing for payment

of the tax liability is based on “all the facts and circumstances of the taxpayer’s

financial situation, including the amount and nature of the taxpayer’s expenditures

in light of the income (or other amounts) * * * [the taxpayer] could, at the time of

such expenditures, reasonably expect to receive prior to the date prescribed for the

payment of the tax.” Sec. 301.6651-1(c)(1), Proced. & Admin. Regs. Death or

serious illness can constitute reasonable cause. See Van Camp & Bennion v.
                                        -33-

[*33] United States, 251 F.3d 862, 867 (9th Cir. 2001). The majority of Courts of

Appeals (that have considered the issue) recognize that financial difficulties can

constitute reasonable cause, even for the failure to pay and deposit employment

taxes. Diamond Plating Co. v. United States, 390 F.3d 1035, 1038 (7th Cir. 2004);

Van Camp & Bennion v. United States, 251 F.3d 862, 868 (9th Cir. 2001); East

Wind Indus., Inc. v. United States, 196 F.3d 499, 507-08 (3d Cir. 1999); Fran

Corp. v. United States, 164 F.3d 814, 819 (2d Cir. 1999); see also Custom Stairs &

Trim, Ltd. v. Commissioner, 102 T.C.M. (CCH), at 5. But see Brewery, Inc. v.

United States, 33 F.3d 589, 592-593 (6th Cir. 1994).21

      The company advances two arguments in support of its reasonable-cause

defense. First, it argues that the problems Stevens and her family faced prevented

her from timely filing the Forms 941 and depositing and paying the taxes shown

on those forms. This argument primarily pertains to the period from 2005 until

Stevens’s mother died in November 2008.22 During this period the company did

not timely file its Forms 941; it was also delinquent in its payments and deposits



      21
         The Court of Appeals for the Fourth Circuit, the court that would decide
an appeal of this case, has not considered the issue. Babcock Ctr., Inc. v. United
States, 2013-1 U.S. Tax Cas. (CCH) para. 50,314, at 84,099 n.12 (D.S.C. 2013).
      22
        The company also claims that reasonable cause exists for its failure to
meet its federal tax obligations for the second quarter of 2009.
                                         -34-

[*34] of its quarterly employment taxes. Second, it argues that the TVA’s failure

to pay the company prevented it from paying and depositing its quarterly

employment taxes for the last quarter of 2009 and the first two quarters of 2010.

(In September 2009, the company paid down a large portion of its past-due

federal-employment-tax liabilities (but not its penalties and additions to tax), filed

its past-due Forms 941, and began filing its Forms 941 on time. For the last

quarter of 2009 and the first two quarters of 2010, however, it failed to timely pay

and deposit its quarterly employment-tax liabilities.)

      Although we recognize that Stevens--an officer of the company--had

significant health and family problems, they are not reasonable cause for the

company’s failure to timely file its tax returns, pay its employment taxes, and

make its deposits. During the period 2005 through 2009, the period during which

it claims it was unable to comply with its federal tax obligations, the company was

able to continue its operations, market its services to clients and potential clients,

increase its workforce, and hire an accounting firm to prepare its Forms 941. The

failure of the company to file its quarterly employment-tax returns, and to make

the required payments and deposits, was the result of the company’s deliberate
                                        -35-

[*35] choice to focus on business matters rather than on tax compliance. There

was no reasonable cause for the company to disregard its federal tax obligations.23

      The company’s difficulties with the TVA are not reasonable cause for the

company’s failure to pay employment taxes and make deposits during the last

quarter of 2009 and the first two quarters of 2010. During the last quarter of 2009

the company seems to have first encountered some disruptions in its revenues

from the TVA. The record is murky regarding the company’s first contract with

the TVA, which was the one in effect at the time. The contract itself is not in the

record. We do not know how much work the contract required the TVA to give

the company, the schedule on which the work was to be done by the company, or

the schedule on which payments were to be made by the TVA. Given the scarcity




      23
        Stevens’s health and family problems are not the only reasons the
company asserts as reasonable cause for its failures during this period. The
company also contends that Stevens could not sign the Forms 941 prepared for the
company by the accounting firm because she was not sure they were correct. The
uncertainty was supposedly due to the company’s unorthodox practice of making
payments to Stevens that Stevens would immediately repay to the company.
According to Stevens, this practice allowed the company to qualify as a woman-
owned business and receive favorable treatment in procuring government
contracts. We do not agree that the uncertainty in reporting the back-to-back
payments exonerates the company from failing to file its Forms 941. Having
chosen to engage in these back-to-back payments, the company should have
realized it would need to figure out how to report the payments for federal
employment-tax purposes.
                                        -36-

[*36] of details, we are not convinced that the disruptions are reasonable cause for

the company’s failure to make the required payments and deposits.24

      Despite the problems with its first contract with the TVA, the company

signed a second contract with the TVA in February 2010. The company claims

that it thought it would receive $1.5 million of work from the TVA under the

second contract. However, the second contract did not require the TVA to give

the company $1.5 million of work; rather, it provided that the cost of the work

could not exceed $1.5 million. Also, the company had a history of failing to make

deposits, extending back to 2005. Given this history, by 2009 the company should

have done more to ensure that it had the funds to pay its taxes and make its

deposits. It did not. We conclude that the company did not have reasonable cause

for failing to pay its employment taxes and make its deposits for the last quarter of

2009 and the first half of 2010.25


      24
        Although Stevens testified that the company counted on the revenues it
would earn from a prospective contract with the National Science Foundation, we
are not convinced that the failure of the company to win the contract is reasonable
cause for the company’s failure to make the required payments and deposits.
Nothing in the record suggests it would have been reasonable for the company to
assume it would be awarded the contract before it was actually awarded.
      25
       We do not fault the company for doing business with the TVA and
maintaining its business relationship with the TVA. These decisions could have
been sound. We evaluate only whether the company exercised ordinary business
                                                                    (continued...)
                                         -37-

[*37] We hold that the company is liable for the additions to tax and penalties.

3.      Did the IRS violate section 6330(e) by (a) issuing a summons to Wachovia
        Bank pursuant to its investigation of the company’s president, Sarah
        Stevens, for the trust-fund-recovery penalties and (b) notifying Stevens it
        intended to levy on her assets to collect the liabilities?

        The trust-fund-recovery penalty is imposed on an officer of an employer if

the officer is responsible for withholding and collecting trust-fund tax such as

income tax and the employees’ share of FICA taxes, and willfully fails to withhold

them and pay them over to the IRS. See sec. 6672. As detailed in the findings of

fact:

        •     On August 12, 20, and 23, 2010, the IRS notified the company that it

              had filed liens and proposed to levy to collect employment taxes from

              the company for 16 calendar quarters, including the first quarter of

              2009, the first quarter of 2010, and the second quarter of 2010.

        •     On August 30, 2010, the company requested a collection-review

              hearing with the Appeals Office.

        •     On November 30, 2010, the IRS issued an administrative summons

              pursuant to its investigation of Stevens for the trust-fund-recovery-


        25
        (...continued)
care in attempting to provide for the payment and deposit of its federal
employment taxes. We find that it did not.
                                         -38-

             [*38] penalty for the fourth quarter of 2009 and the first two quarters

             of 2010.

      •      On December 22, 2010, the Appeals Office issued a notice of

             determination regarding the company’s hearing.

      •      On January 24, 2011, the company filed a petition for review of the

             determination of the Appeals Office.

      •      On November 26, 2012, the IRS sent Stevens notices that it intended

             to levy on her personal property in order to collect trust-fund-

             recovery penalties from her for the fourth quarter of 2009 and the first

             two quarters of 2010.

      Section 6330(a)(1) provides that, in general, the IRS can make no levy on

any taxpayer’s property unless it notifies the taxpayer of the right to a collection-

review hearing. Section 6330(e)(1) provides that if the taxpayer requests a hearing

“the levy actions which are the subject of the requested hearing” are suspended

until the hearing and the appeal from the hearing are completed. The company

requested a hearing to consider levy actions to collect (among other things) the

company’s employment-tax liabilities for the fourth quarter of 2009, the first

quarter of 2010, and the second quarter of 2010. Section 6330(e) suspends any

levy action to collect these liabilities from the company. Stevens argues that
                                         -39-

[*39] section 6330(e) prohibited the IRS from issuing the November 26, 2012

letter and the summons because the company’s appeal of the determination of the

Appeals Office was pending when those documents were issued. However, the

levy mentioned in the November 26, 2012 letter, and the summons, pertained to

Stevens’s liability for the trust-fund-recovery penalty. This liability is different

from the company’s liability for employment taxes. See United States v.

Pomponio, 635 F.2d 293, 298 (4th Cir. 1980), cited in Freeman v. Commissioner,

101 T.C.M. (CCH) 1173, 1174 (2011). Therefore, section 6330(e) does not limit

the IRS’s ability to levy to collect the trust-fund-recovery penalties from Stevens.

4.    Did the Appeals Office abuse its discretion by failing to accept the
      company’s installment-agreement proposal?

      At the telephone hearing with the Appeals Office, the company proposed to

pay its liabilities in monthly installments of $5,000. In exchange for the

installment-payment plan, the company proposed that the IRS would withdraw its

lien filings and withdraw its proposal to levy. The Appeals Office determined that

these proposals would not improve the IRS’s prospects for collecting the

company’s liabilities.

      The IRS is authorized to enter into a written agreement allowing a taxpayer

to pay tax in installment payments if the IRS determines that the “agreement will
                                         -40-

[*40] facilitate full or partial collection of such liability.” Sec. 6159(a). The

decision to accept or reject a proposed installment agreement is committed to the

IRS’s discretion. Sec. 301.6159-1(c)(1)(i), Proced. & Admin. Regs. The IRS is

authorized to withdraw a lien filing under various circumstances, including (1) if

the taxpayer has entered into an installment agreement or (2) if the IRS has

determined that withdrawal of the lien filing would facilitate the collection of the

liability. See sec. 6323(j)(1)(B) and (C). The decision to withdraw a lien filing is

committed to the IRS’s discretion.26 The Appeals Office determined that the

company’s history of failing to pay its tax liabilities weighed against accepting the

installment agreement and forgoing the substantial rights that were secured by the

filing of a lien. We are unable to conclude that the Appeals Office abused its

discretion in sustaining the lien filings and proposal to levy.

      The determination of the Appeals Office is sustained.

      To reflect the foregoing,


                                                      An order denying respondent’s

                                                motion and decision for respondent

                                                will be entered.

      26
        Sec. 6323(j)(1) provides that “The [Treasury] Secretary may withdraw a
notice of a lien filed under this section”. (Emphasis added.)
