                              T.C. Memo. 2016-134



                        UNITED STATES TAX COURT



                  MARK ALVA WEST, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 7648-15L.                        Filed July 19, 2016.



      Mark Alva West, pro se.

      Karen Lynne Baker, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      KERRIGAN, Judge: This collection due process (CDP) case was

commenced in response to a Notice of Determination Concerning Collection

Action(s) under Section 6320 and/or 6330 of the Internal Revenue Code dated

February 19, 2015, upholding a proposed collection action regarding petitioner’s
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[*2] unpaid tax liability for tax year 2012. We must consider whether

respondent’s determination to proceed with the collection action was proper.

      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. All monetary amounts are rounded to the

nearest dollar.

                              FINDINGS OF FACT

      Petitioner resided in Texas when the petition was filed. Petitioner worked

as an engineer for many years. For tax year 2012 petitioner received wages of

$148,507.

      Petitioner and his wife requested an extension of time to file their 2012

Form 1040, U.S. Individual Income Tax Return. Petitioner did not pay timely

estimated tax for tax year 2012. On April 15, 2013, petitioner and his wife made a

payment of $10,000 and applied withholding credits of $7,922 to their income tax

for tax year 2012. They made another payment of $10,972 on October 26, 2013,

for a total of $28,894. Their 2012 tax return showing tax due of $28,540 was

marked as received by respondent on October 25, 2013. Their tax return was

signed on October 15, 2013.
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[*3] On December 9, 2013, respondent assessed against petitioner and his wife

the following for tax year 2012: $28,540 (Form 1040 tax); $354 (estimated tax

addition to tax); $478 (late filing addition to tax); $372 (late payment addition to

tax); and $171 (interest). The assessment totaled $29,914. The payments made by

petitioner and his wife on April 15 and October 26, 2013, satisfied the Form 1040

tax and the estimated tax addition to tax. The current unpaid liability is for the late

filing addition to tax, the late payment addition to tax, and the interest.1

      On July 31, 2014, respondent sent petitioner a Letter 1058, Final Notice of

Intent to Levy and Your Right to Hearing, for petitioner’s late filing addition to

tax, late payment addition to tax, and interest for 2012. Petitioner submitted a

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

August 19, 2014, and included a letter which raises concerns about the additions

to tax and interest. Petitioner had a telephone CDP hearing on January 7, 2015.

At the hearing petitioner neither provided the settlement officer with any




      1
        The Tax Court is a court of limited jurisdiction, in that this Court possesses
only adjudicatory powers that Congress has conferred upon it. Naftel v.
Commissioner, 85 T.C. 527, 529 (1985). That adjudicatory power encompasses
the redetermination of deficiencies and the determination of overpayments. Secs.
6214(a), 6512(a). We do not have jurisdiction over either the Form 1040 tax or
the estimated tax addition to tax since they both have been paid. See secs.
6211(a), 6213(a).
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[*4] collection alternatives nor entered into an installment agreement or an offer-

in-compromise.

      Respondent sent petitioner the Notice of Determination Concerning

Collection Action(s) under Section 6320 and/or 6330 on February 19, 2015,

sustaining the proposed levy. In his timely filed petition, petitioner contends that

there was no failure to timely file his income tax return despite filing after the

deadline because he filed as expediently as possible and that he has overpaid his

tax for previous years.

                                      OPINION

      Section 6330 requires the Secretary to furnish a person notice and

opportunity for a hearing before an impartial officer or employee of the Internal

Revenue Service (IRS) Appeals Office (Appeals) before making a levy on the

person’s property. At the hearing the person may raise any relevant issue relating

to the unpaid tax or the proposed levy, including spousal defenses, challenges to

the appropriateness of the collection action, and offers of collection alternatives.

Sec. 6330(c)(2). The person may challenge the existence or the amount of the

underlying tax liability for any period only if the person did not receive a notice of

deficiency or did not otherwise have an opportunity to dispute the liability. Sec.

6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000).
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[*5] I.       Standard of Review

          Once Appeals issues a notice of determination, the person may seek review

in this Court. Sec. 6330(d)(1). Where the validity of the underlying tax liability is

properly at issue, we review the determination de novo. Sego v. Commissioner,

114 T.C. at 610; Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). The

taxpayer has the burden of proof regarding his or her underlying tax liability. See

Rule 142(a). A taxpayer may not challenge an underlying tax liability during a

CDP hearing unless the taxpayer did not receive a statutory notice of deficiency

for the liability or did not otherwise have the opportunity to dispute the liability.

Sec. 6330(c)(2)(B); see also Montgomery v. Commissioner, 122 T.C. 1, 9 (2004).

The term “underlying tax liability” in section 6330(d)(1) includes any amount

owed by a taxpayer pursuant to the tax laws, including additions to tax and

interest. Katz v. Commissioner, 115 T.C. 329, 339 (2000).

          Petitioner did not receive a notice of deficiency and did not otherwise have

a prior opportunity to contest his underlying tax liability. At his CDP hearing

petitioner argued that despite being filed after the deadline his income tax return

should be considered on time because he filed as expediently as possible given his

circumstances and that he should not owe the additions to tax and interest because

it is unfair to have to estimate tax and that he has previously overpaid. Petitioner
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[*6] properly raised his underlying tax liability, and therefore we will review

respondent’s determination de novo.

II.   Underlying Liability

      A.     Late Filing and Late Payment Additions to Tax

      Under section 7491(c), the Commissioner bears the burden of producing

evidence with respect to the liability of the taxpayer for any addition to tax. See

Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001). Section 6651(a)(1)

imposes an addition to tax if a taxpayer fails to file his Form 1040 by the due date.

The parties do not dispute that respondent received petitioner’s return on Friday,

October 25, 2013, and that it was due on October 15, 2013. Respondent has met

his burden of production.

      Section 6651(a)(2) imposes an addition to tax if a taxpayer fails to pay his

Form 1040 tax by the due date. The section 6651(a)(2) addition to tax applies

only when an amount of tax is shown on a return filed by the taxpayer or prepared

by the Secretary. Sec. 6651(a)(2), (g)(2); Cabirac v. Commissioner, 120 T.C. 163,

170 (2003), aff’d without published opinion, 94 A.F.T.R. 2d (RIA) 2004-5490 (3d

Cir. 2004). Respondent has shown that petitioner did not pay his tax by the due

date. Respondent has met his burden of production.
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[*7] The additions to tax under section 6651(a)(1) and (2) apply once the

Commissioner has met his burden of production unless the failure to comply was

due to reasonable cause and not due to willful neglect. The taxpayer bears the

burden of establishing reasonable cause. Higbee v. Commissioner, 116 T.C. at

446-447. Petitioner argues that the complexity of the tax law coupled with his

advanced age caused him to be unable to comply with timely filing and payment

requirements but that he filed as expediently as he could. Petitioner gave no other

explanation of why his tax return was late. Petitioner testified that he had no

documents showing when the return was mailed. Most of his arguments were

related to the estimated tax addition to tax, which is not before the Court.

Petitioner contended that he had overpaid his tax for previous years. Petitioner did

not establish that he had reasonable cause for failing to timely file his return and

pay the tax due for 2012.

      B.     Interest

      Under section 6404(e)(1), the Commissioner may abate interest on a tax

payment if the delay in payment was attributable to an IRS employee’s “being

erroneous or dilatory in performing a ministerial or managerial act”. Petitioner

does not claim that any IRS employee behaved in such a manner. Rather,

petitioner claims that he should not be liable for interest because the IRS does not
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[*8] pay taxpayers interest when it refunds amounts the taxpayers have overpaid.

The interest due for 2012 will not be abated.

III.   Abuse of Discretion

       We review the settlement officer’s administrative determinations regarding

nonliability issues for abuse of discretion. Hoyle v. Commissioner, 131 T.C. 197,

200 (2008). Abuse of discretion exists when a determination is arbitrary,

capricious, or without sound basis in fact or law. See Murphy v. Commissioner,

125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006). In deciding whether

the settlement officer abused his discretion in sustaining the notice of levy filing,

we consider whether he: (1) properly verified that the requirements of any

applicable law or administrative procedure have been met; (2) considered any

relevant issues petitioner raised; and (3) determined whether “any proposed

collection action balances the need for the efficient collection of taxes with the

legitimate concern of the person that any collection action be no more intrusive

than necessary.” See sec. 6330(c)(3). Our review of the record reveals that the

settlement officer conducted a thorough review of petitioner’s account, determined

that the additions to tax and interest had been properly assessed, and verified that

other requirements of applicable law and administrative procedure were followed.
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[*9] Petitioner has not advanced arguments or presented evidence allowing us to

conclude that the determination to sustain the proposed collection action was

arbitrary, capricious, or without sound basis in fact or otherwise an abuse of

discretion. See Giamelli v. Commissioner, 129 T.C. 107, 115 (2007). Petitioner

neither provided the settlement officer with any collection alternatives nor entered

into an installment agreement or an offer-in-compromise. It is not an abuse of

discretion for a settlement officer to decline to consider a collection alternative

where the taxpayer does not place a specific proposal on the table. See McLaine

v. Commissioner, 138 T.C. 228, 243 (2012); Kendricks v. Commissioner, 124 T.C.

69, 79 (2005). We therefore conclude that respondent’s determination to proceed

with the proposed collection action was not an abuse of discretion.

      Any contentions we have not addressed are irrelevant, moot, or meritless.


                                               Decision will be entered

                                        for respondent.
