                      132 T.C. No. 14



                UNITED STATES TAX COURT



           MATTIE MARIE MASON, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 4908-07.                Filed May 6, 2009.



     P is majority owner and principal officer of C,
which failed to pay employment taxes. R mailed a
notice of intent to assess sec. 6672, I.R.C., trust
fund penalties to P at P’s last known address. P did
not receive R’s notice and the penalties were assessed.
R notified P of the intent to file a notice of Federal
tax lien with respect to the penalties. P
administratively appealed and also filed a request to
abate the penalties. After administrative review of
R’s decision to file a lien, R determined to proceed
with the lien filing. P’s abatement request was also
denied. P appealed both decisions to R’s Appeals
Office. During the hearing, an Appeals officer
simultaneously considered R’s intent to file a lien and
denial of P’s abatement request. The Appeals officer
determined that P was not entitled to contest the
penalties as part of the hearing as it related to the
lien filing. During the same hearing the Appeals
officer did consider the merits of the penalties as it
related to review of P’s abatement request.
                            - 2 -

     The questions presented are: (1) Whether
pursuant to sec. 6330(c)(2)(B), I.R.C, a taxpayer
has “otherwise [had] an opportunity to dispute” a
sec. 6672, I.R.C., penalty and therefore is
precluded from challenging the merits of that
penalty at a collection due process hearing where
the taxpayer never received a notice of intent to
assess the penalty; (2) whether at any juncture
during the administrative proceedings P “otherwise
[had] an opportunity to dispute” the sec. 6672,
I.R.C., penalties, thereby precluding P from
challenging the merits of the penalties at P’s
collection due process hearing, and if not,
whether P’s underlying liabilities are before the
Court for de novo review; (3) whether, for
purposes of sec. 6672, I.R.C., the validity of R’s
notice of intent to assess trust fund recovery
penalties depends upon a taxpayer’s receipt of
that notice; (4) whether P is liable for sec.
6672, I.R.C., penalties because P is a
“responsible person” who willfully failed to pay
over C’s employment taxes; and (5) whether R’s
decision to uphold the lien filing was an abuse of
discretion.

     1. Held: A taxpayer must receive a sec.
6672, I.R.C., notice of intent to assess a trust
fund recovery penalty to have “otherwise [had] an
opportunity to dispute” that tax liability under
sec. 6330(c)(2)(B), I.R.C. P did not receive R’s
notice of intent to assess sec. 6672, I.R.C.,
penalties and did not “otherwise have an
opportunity to dispute” the underlying tax
liability.

     2. Held, further, P did not “otherwise have
an opportunity to dispute” P’s underlying tax
liability at any time during the administrative
proceedings. Held, further, P raised P’s
liability for the sec. 6672, I.R.C., penalties at
P’s collection due process hearing. P’s liability
for the trust fund recovery penalties is,
therefore, before this Court for de novo review.

     3. Held, further, a    notice of intent to
assess sec. 6672, I.R.C.,   penalties is valid for
purposes of assessing the   penalties even where a
taxpayer does not receive   the notice.
                               - 3 -

     Consequently, even though P did not receive R’s
     notice, R validly assessed trust fund penalties.

          4. Held, further, P is a “responsible
     person” who willfully failed to pay over C’s
     withholding taxes and P is liable for the trust
     fund penalties.

          5. Held, further, R’s decision to uphold the
     lien filing was not an abuse of discretion.



     Mattie Marie Mason, pro se.

     Susan K. Greene, for respondent.



                              OPINION


     GERBER, Judge:   This case arises from a petition for

judicial review filed in response to a Notice of Determination

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

(notice of determination) issued to petitioner Mattie Marie

Mason.1   The overall question is whether respondent may proceed

with the collection action.   The answer depends upon whether

petitioner is liable for trust fund penalties assessed against

her as a responsible person for failure to collect and pay over

withholding taxes of New Life Perinatal Health Care Services Inc.




     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
                                - 4 -

(New Life), for tax periods ended December 31, 2001, March 31,

June 30, and September 30, 2002, and September 30, 2003.2

                             Background3

     Petitioner resided in Texas at the time her petition was

filed.4   She earned a bachelor of science degree in nursing in

1978 and thereupon commenced a 30-year career as a registered

nurse.    The focus of that career has been on providing services

to pregnant and parenting women, especially teenagers.    In 1989

petitioner incorporated New Life under the laws of the State of

Texas.    Corporate shares of New Life have at all relevant times

been held 75 percent by petitioner and 25 percent by her husband

Phillip Mason (Mr. Mason).    Petitioner served as president and

treasurer of New Life, while Mr. Mason served as vice president

and secretary.   New Life elected to be treated as an S

corporation for Federal tax purposes.

     New Life was licensed in the State of Texas as a home health

agency.   Through New Life, petitioner engaged in her primary


     2
      The notice of determination reflects zero liability for the
period ended Sept. 30, 2001. Petitioner paid the liability for
this period, and she now seeks a refund. We do not have
jurisdiction to review that period. See Greene-Thapedi v.
Commissioner, 126 T.C. 1, 11 (2006).
     3
      The parties’ stipulation of facts and the attached exhibits
are incorporated herein by this reference.
     4
      At the time this case was petitioned, petitioner had
elected the small tax case procedures. Before the commencement
of the trial, with the agreement of the parties, the Court
removed this case from small tax case status.
                                - 5 -

business activities of providing services to pregnant and

parenting women, especially teenagers.   New Life’s mission

included, among other things, home health care services, case

management services for public and private third-party entities,

health care education and consulting services and programs (e.g.,

programs aimed at prevention of pregnancy, school dropout, and

illicit drug use among at-risk youth).

     Case management programs accounted for the majority of New

Life’s business and revenues.   In conducting that portion of the

business, New Life would enter into contracts with entities such

as school districts or hospitals to administer the provision of

services to targeted high-risk groups.   New Life, in turn, would

hire independent contractors with backgrounds as registered

nurses or social workers to serve as “case managers” providing

care services to the particular patients or “clients” referred

through the entities.   Because the clients were principally high-

risk pregnant and parenting women, especially teenagers, much of

the revenue earned by New Life for their care was obtained

through the Medicaid programs of the Texas Department of Health.

     As New Life grew throughout the 1990s, petitioner assembled

an administrative staff of approximately seven employees to

manage the business and perform clerical support functions.

Petitioner used a team management approach in conducting New

Life’s day-to-day operations.   She delegated substantial
                               - 6 -

authority to staff members so that they could independently

handle their administrative portion of New Life’s operation.

     Key members of that team during the late 1990s to early

2000s included petitioner, Walterene Reed (Ms. Reed), Shelly

Morton (Ms. Morton), and Mabel Hatton (Ms. Hatton).   Petitioner

served as administrator overseeing management and was responsible

for hiring and firing staff and establishing and maintaining

business contracts.   Ms. Reed was employed as New Life’s office

manager to oversee the activities of case managers, the referrals

of patients/clients, and the billing process.   Ms. Morton was a

billing specialist responsible for handling Medicaid claims.

     Ms. Hatton served as New Life’s internal accountant.

Petitioner delegated to her full authority for the financial,

tax, and accounting matters of the business, including oversight

of accounts payable and receivable, payment of bills and

compensation, bank deposits, and preparation and filing of

Federal employment tax returns.   Although petitioner and

Mr. Mason were the sole signatories on New Life’s corporate bank

account, it was petitioner’s practice to sign blank checks for

Ms. Hatton to complete and use in performing her duties.

Petitioner likewise relied on Ms. Hatton’s expertise in handling

financial affairs, and she signed employment tax returns prepared

by Ms. Hatton relying completely on Ms. Hatton’s expertise.
                               - 7 -

     By late 2000 and early 2001 the business of New Life reached

its apex.   With approximately 2,000 clients and 10 case managers,

the corporation income approached $1 million.    During spring 2001

New Life began to experience internal and external problems.      In

particular, New Life experienced difficulties with respect to the

management staff, the independent contractors serving as case

managers, and the receipt of payments from Government agencies

and from other programs.

     During March 2001 Ms. Reed became unable to continue working

for New Life because of a serious illness that resulted in her

death before the end of the year.    A replacement for Ms. Reed was

hired but proved to be incapable of handling the office manager’s

duties.   In addition, other departures of administrative staff

exacerbated New Life’s problems.    The loss of Ms. Reed left a

significant gap in the operations of New Life and led to problems

with, among other things, billing processes.     Mounting unbilled

or incorrectly billed claims in many instances foreclosed

expected payments from Government programs, particularly

Medicaid.   Compounding these problems, some of the case managers

began to use New Life’s client base to start their own

businesses, effectively taking New Life’s clients and

corresponding ability to generate revenue.

     During this period petitioner was consumed with efforts to

save the business; i.e., handling duties formerly covered by Ms.
                                 - 8 -

Reed and personally serving clients on account of the reduced

number of case managers.   Ms. Hatton continued to be responsible

for accounting and financial matters, paying creditors to the

extent funds allowed and filing Federal employment tax returns

without remitting payment.   The failure to pay employment taxes

began with the tax return for the quarter ending September 30,

2001, and continued into the first three quarters of 2002 and

again for the quarter ended September 30, 2003.     It was not until

March 2002 that petitioner became aware that New Life’s Federal

employment taxes were not being paid.

     On July 8, 2002, the collection of New Life’s delinquent

taxes was assigned to Revenue Officer Elvina Davis (RO Davis) of

the Internal Revenue Service (IRS).      RO Davis first contacted New

Life by leaving a telephone message on July 16, 2002.     On August

8, 2002, RO Davis reached Ms. Hatton and told her that she would

need to obtain a power of attorney from petitioner in order for

RO Davis to deal directly with Ms. Hatton.     Near the end of

August RO Davis received the power of attorney and began initial

conversations with Ms. Hatton.    It was not until November of 2002

that petitioner engaged in personal interaction with RO Davis.

She also completed and provided RO Davis with a Form 4180, Report

of Interview with Individual Relative to Trust Fund Recovery

Penalty or Personal Liability for Excise Tax, signed and
                                - 9 -

dated November 5, 2002.   Form 4180 contained details of

petitioner’s relationship to and oversight of New Life.

     Throughout the fall of 2002 and during 2003 investigation

and collection activities continued in the form of conversations,

meetings, requests for records, lien filing, etc.   On February

12, 2003, RO Davis advised petitioner about options to settle New

Life’s debt and the potential for assessment of trust fund

penalties against petitioner personally.

     During September 2003, the State of Texas instituted massive

changes to the case management program and concomitant Medicaid

payment processes, which caused a substantial reduction of New

Life’s revenue stream.    In response, petitioner laid off the New

Life administrative staff and worked with volunteers to keep the

business afloat and restructure for the new environment.   In

addition to those reductions, petitioner returned to work as a

nurse in a local hospital to generate funds.

     On January 23, 2004, petitioner submitted an offer-in-

compromise for New Life’s employment tax liabilities.   That

offer, however, could not be processed because New Life was not

in compliance with return filing and payment obligations at that

time.   RO Davis contacted petitioner on that date to so inform

her, and the two discussed how to proceed.   RO Davis calculated

an arrangement under which New Life could pay $1,150 per month

through an installment agreement until an offer-in-compromise
                             - 10 -

could be processed, to which petitioner agreed.   In addition, RO

Davis advised petitioner that if she signed a waiver extending

the period of limitations for assessment of trust fund penalties,

made timely payments under the installment agreement, filed

timely Federal tax returns, and made timely tax deposits,

then the IRS would forbear from assessing trust fund penalties

against petitioner.

     Early in March 2004 an installment agreement was approved

for the liabilities of New Life that provided for payments of

$1,150 on the 28th of each month.    The installment agreement was

assigned to Revenue Officer Avis Smith (RO Smith), a case

processor who monitors accounts and payments for respondent.

Petitioner made installment payments under the agreement on April

27, 2004 ($1,150), May 28, 2004 ($1,150), September 10, 2004

($1,150), November 19, 2004 ($1,100), December 28, 2004 ($1,150),

January 28, 2005 ($1,150), March 4, 2005 ($550), March 10, 2005

($600), and May 25, 2005 ($1,150), after which payments ceased.

Payments made under the agreement were personally delivered by

petitioner to respondent’s office.

     Throughout the entire period, petitioner, on repeated

occasions, communicated with RO Smith and/or RO Davis regarding

financial problems and difficulty in making payments.   Petitioner

also raised the possibility of decreasing the monthly payment to

$500, but she did not formally pursue a reduction, opting instead
                              - 11 -

to proceed with preparation of a second offer-in-compromise.    On

December 17, 2004, petitioner submitted the second offer-in-

compromise.   However, like the first offer, the second was not

processed because an employment tax return for New Life had not

been filed.   Petitioner, however, continued her effort to perfect

an offer.

      Sometime during March 2005 the installment agreement was

deemed in default on account of missed payments.   On April 14,

2005, petitioner contacted RO Smith in an attempt to perfect an

offer-in-compromise.   During that conversation, although

petitioner was advised of the installment agreement default, she

did not fully comprehend what was being explained.   Accordingly,

the default was again explained to petitioner when she spoke to

respondent’s personnel in June.   New Life did not receive formal,

written notification of the default, apparently because of

confusion regarding a change of the corporation’s address.   After

the April 14, 2005, conversation with RO Smith, New Life’s case

was transferred to RO Davis on account of the default, but

petitioner did not learn of the case transfer until some time

later.   Sometime during June 2005 petitioner’s frustrations in

her attempts to deal with various IRS personnel led her to

contact the Taxpayer Advocate Service, thereby adding an

additional layer of complexity to petitioner’s involvement and

communications with respondent.
                               - 12 -

     On August 8, 2005, petitioner hand-delivered a third offer-

in-compromise of New Life’s tax debt, along with a $150 filing

fee, to RO Davis.    RO Davis forwarded the offer materials, first

to her manager for approval and then, on August 15, 2005, to the

IRS Service Center in Memphis, Tennessee, responsible for

processing offers.   Thereafter, the offer materials were returned

to petitioner, absent the $150 cashier’s check, with a form

letter dated September 12, 2005, advising, without further

explanation, that the “offer is closed”.   The return of the

offer-in-compromise was caused by an error on the part of the IRS

when it misapplied the $150 filing fee to payment of outstanding

New Life liabilities.   Petitioner at that juncture began to make

inquiries regarding what had transpired with regard to the offer,

and on September 21, 2005, she faxed a copy of the $150 cashier’s

check to the Memphis Service Center.

     It was not until December 2005 that New Life finally

received respondent’s written notification concerning the earlier

return of the August 8, 2005, offer-in-compromise.   A brief form

letter advised that a Form 433-A, Collection Information

Statement for Wage Earners and Self-Employed Individuals, had not

been included and that the $150 application fee had not been

paid.

     Meanwhile in early September 2005 a determination was made

by the IRS to commence proceedings against petitioner personally
                              - 13 -

with respect to New Life’s employment tax liabilities.   RO Davis

prepared a Letter 1153, Trust Funds Recovery Penalty Letter,

proposing assessment of section 6672 trust fund penalties against

petitioner as a person required to collect, account for, and pay

over withheld taxes of the business for the unpaid liabilities.

That letter further informed petitioner that if she did not

agree, she could contact the individual identified therein (RO

Davis) within 10 days of the date of the letter or could submit a

written appeal within 60 days.

     The Letter 1153 was mailed on September 2, 2005, hand-

addressed to petitioner at what was then her address of record.

Although a certified mail label and return receipt were affixed

to the envelope, postage was placed thereon with a private

postage meter and the letter was posted without being presented

to a U.S. Postal Service (USPS) employee.   As a result, no USPS

postmark was date-stamped on the envelope, nor was the item

number on the certified label entered into the USPS certified

mail tracking system.   Notations made on the envelope by the USPS

indicate that delivery was attempted and notice was left for

petitioner on September 3, 2005; that a second notice was left on

September 8, 2005; and that the document was returned to the IRS

marked “UNCLAIMED” on September 18, 2005.   The unopened envelope,

return receipt still attached, was received by the IRS on
                               - 14 -

September 29, 2005.   Petitioner did not receive the Letter 1153

or notification of its attempted delivery.

     On December 19, 2005, trust fund penalties were assessed

against petitioner for the trust fund portion of New Life’s

outstanding employment tax liabilities, and notices of balance

due were issued to her.    Petitioner, surprised by the turn of

events, began to investigate by contacting various individuals at

the IRS.   Her inquiries also led to internal inquiries by several

of respondent’s offices.    It was discovered that the $150 filing

fee petitioner submitted with the August 8, 2005, offer-in-

compromise had been misapplied as a payment toward New Life’s

taxes for the period ended September 30, 2001.

     A meeting was held on February 16, 2006, among, inter alia,

petitioner, RO Davis, and RO Davis’s supervisor.    The

participants discussed the mailing of the Letter 1153 and

assessment of the trust fund penalties, petitioner’s desire to

appeal the assessments, and the procedures for such an appeal and

for the continued pursuit of an offer-in-compromise.      Shortly

thereafter, RO Davis faxed to petitioner a copy of the envelope

in which the Letter 1153 had been returned to the IRS.

Petitioner took that information to the post office and spoke to

USPS employees in an attempt to track the item as a certified

letter.    Such efforts, however, were unsuccessful on account of
                               - 15 -

the mailing procedures that had been used by respondent’s

personnel.

     During the period March to May 2006, in addition to

continuing work to perfect an offer-in-compromise, petitioner

submitted various forms and letters in an attempt to forestall

the filing of a Federal tax lien against her.    To address the

assessment of the trust fund penalties, petitioner needed to file

a Form 843, Claim for Refund and Request for Abatement,

disputing that she was a responsible person within the meaning of

the employment tax statutes.   Her early attempts to file could

not be processed.   For example, in March she sent a letter of

appeal to RO Davis, rather than submitting a Form 843.     Later,

her initial Form 843, submitted in April and assigned to Revenue

Officer Advisor Ken McNeil (ROA McNeil) in the IRS Technical

Services Advisory, was returned to petitioner for failure to

submit the requisite payment therewith of the amount of tax

attributable to one individual for each tax period included in

the claim; i.e., $2,927.

     Meanwhile, on April 12, 2006, petitioner was given notice

that the IRS was proposing and preparing to file liens against

her for the assessed trust fund tax penalties.    Petitioner was

also advised that in order to dispute that proposal, she needed

to file with the IRS a Form 9423, Collection Appeal Request.      On

April 13, 2006, petitioner submitted a Form 9423, thereby
                              - 16 -

initiating her participation in the IRS Collection Appeal Program

(CAP) for prefiling challenge of the lien proposal.

     The CAP appeal was assigned to Settlement Officer Liana

White (SO White) of the IRS Office of Appeals.   SO White held a

face-to-face conference with petitioner on April 26, 2006.

During that conference and followup telephone calls, petitioner

alleged that she had never received the Letter 1153 proposing

assessment of the trust fund penalties, and she argued that if

the installment agreement for New Life had been renegotiated to

an affordable amount, then assessment of the penalties would not

have been necessary and no filing of a notice of lien would be

needed.   SO White explained the distinction between the corporate

and individual proceedings and that the trust fund penalties can

be assessed and liens filed regardless of whether the underlying

corporation is under an installment agreement.   SO White also

communicated with ROA McNeil regarding the Form 843 abatement

request and its rejection for lack of payment, and further

explained those issues, and the steps to perfect the Form 843

claim, to petitioner.

     SO White concluded the CAP process by means of a closing

letter dated May 1, 2006.   Because petitioner’s Form 843 could

not be processed at that time, SO White sustained the proposed

lien filing but recommended that the filing be delayed until

petitioner had been afforded an opportunity to perfect a Form 843
                               - 17 -

and then, if perfected, until a decision on the claim, including

any attendant appeals, was made by the IRS.    Because she was

considering only petitioner’s challenge to the proposed lien

filing, SO White was willing to postpone her recommendations

pending the outcome of ROA McNeil’s investigation into

petitioner’s liability for the trust fund penalties.     Petitioner

was given until May 24, 2006, to perfect the claim for abatement

of the penalties by providing ROA McNeil with a proper Form 843

accompanied by a payment.    If that was not done, the closing

letter directed that the IRS compliance function would file the

notice of tax lien.   Upon closure of the CAP process with the

issuance of the May 1, 2006, letter, petitioner’s case was

returned to RO Davis for monitoring, and the letter advised that

petitioner should contact RO Davis with any questions.

     In late May 2006 petitioner telephoned ROA McNeil concerning

financial hardship she was encountering in securing payment to

perfect her Form 843 claim.    She indicated that she could remit

payment by June 1, 2006.    ROA McNeil responded that petitioner

could resubmit the Form 843 abatement request with payment at any

time and that there existed no deadline for submission of such a

claim.   Petitioner believed that ROA McNeil spoke for

respondent’s organization and that the CAP recommendations would

be extended as well, even though ROA McNeil advised she should

also speak with other of respondent’s employees, because she
                              - 18 -

believed that respondent coordinated all activities concerning

New Life’s and her trust fund tax liabilities.   Petitioner did

contact SO White who, because the CAP matter had been closed,

informed petitioner that she needed to speak to RO Davis.

Petitioner, in her confusion over who had authority over her

case, did not do so.

     On May 30, 2006, RO Davis inquired of ROA McNeil whether

petitioner had submitted a perfected Form 843 claim.   ROA McNeil

answered in the negative.   On June 1, 2006, RO Davis, acting on

the CAP recommendations and without further inquiry of

petitioner, prepared and filed notices of Federal tax lien

against petitioner for the unpaid trust fund   penalties.   Also on

that date, petitioner called ROA McNeil again and told him that

she was sending the completed Form 843 and payment.    That claim

and payment were received by the IRS on June 2, 2006, and handled

by ROA McNeil.   After receiving petitioner’s Form 843 abatement

request, ROA McNeil reviewed it, along with information

petitioner supplied when she completed the Form 4180, New Life’s

employment tax returns for the periods at issue, and canceled

checks she had signed on behalf of New Life.   On June 22, 2006,

ROA McNeil issued his decision on petitioner’s claim and

disallowed petitioner’s request for abatement of the trust fund

penalties.   He also informed her of her right to appeal his
                              - 19 -

determination with the IRS Office of Appeals or file suit in

either a U.S. District Court or the U.S. Court of Federal Claims.

     While petitioner’s Form 843 abatement request was being

reviewed and ultimately denied by ROA McNeil, the IRS, on June 7,

2006, mailed petitioner a Letter 3172, Notice of Federal Tax Lien

Filing and Your Right to a Hearing under IRC 6320, informing her

that notices of Federal tax liens were filed for the unpaid trust

fund penalties assessed against her for the tax periods ended

September 30 and December 31, 2001, March 31, June 30, and

September 30, 2002, and September 30, 2003.   The Letter 3172

informed petitioner of her right to appeal the lien filing by

submitting a Form 12153, Request for a Collection Due Process

Hearing.   On July 10, 2006, respondent received petitioner’s

completed Form 12153 disputing the lien filing.   Her collection

due process (CDP) lien appeal was assigned to Settlement Officer

Bart A. Hill (SO Hill) in the IRS Office of Appeals.

     On July 20, 2006, respondent received a letter from

petitioner stating she did not agree with ROA McNeil’s decision

to disallow her Form 843 abatement request for the trust fund

penalties and requesting review by IRS Office of Appeals.    Her

trust fund penalty abatement appeal was also assigned to SO Hill.

In a letter dated November 1, 2006, petitioner was instructed

that at her CDP hearing she could raise collection alternatives,

challenge the appropriateness of the lien filing, challenge the
                             - 20 -

underlying tax liability if she had not otherwise had a prior

opportunity to do so, and raise spousal defenses.   She was also

informed in that letter that SO Hill was responsible for

considering her appeal of her denied Form 843 abatement request.

     After filing her appeals requests, on August 22, 2006,

petitioner filed an amended offer-in-compromise on behalf of New

Life for its unpaid employment tax liabilities.   The corporation

offered to pay $33,660 at a rate of $330 a month over 102 months,

which was the period remaining by statute for the IRS to collect.

On or around September 20, 2006, the IRS accepted New Life’s

August 22, 2006, offer-in-compromise.   However, respondent also

informed petitioner that she was still personally responsible for

the trust fund penalties that had been assessed against her.

     On December 5, 2006, SO Hill held a telephone conference

with petitioner to discuss the appeal of the lien filing.     SO

Hill notified her that she was not permitted to discuss her

liability for the trust fund penalties at her CDP hearing.

However, during the CDP conference, petitioner asserted that the

trust fund penalty assessment was invalid.   She raised other

concerns pertaining to the lien filing with SO Hill, specifically

that she had reached an agreement with ROA McNeil to extend the

time for perfecting her Form 843, and more generally that the IRS

did not follow proper procedures when it failed to send New Life

a formal default letter and when it improperly returned New
                               - 21 -

Life’s August 8, 2005, offer-in-compromise.   Finally, she made a

general claim that the notice of Federal tax lien for the trust

fund penalties should be released.

     At the same time, SO Hill also held, concurrent with

petitioner’s CDP hearing, a conference with petitioner to discuss

her Form 843 abatement request appeal.   During the conference SO

Hill considered the validity of petitioner’s liability for the

assessed trust fund penalties.   His consideration consisted of a

full review of her status as a responsible person who willfully

failed to pay over employment taxes.

     On January 30, 2007, SO Hill issued his determination

sustaining the denial of petitioner’s Form 843 abatement request

for trust fund penalties.   He based his determination upon a

finding that petitioner was a responsible person who willfully

failed to pay over trust fund taxes.

     On February 2, 2007, SO Hill issued his determination in

which the filing of the Federal tax liens for the trust fund

penalties was sustained.    Finding that petitioner had had a prior

opportunity to dispute her underlying liability for the trust

fund penalties, SO Hill declined to consider petitioner’s

underlying liability as part of that determination.   His finding

that she had had a prior opportunity to dispute the liability was

based on the IRS’s attempted delivery of the Letter 1153 and his

consideration of her Form 843 Appeal.    He also determined through
                              - 22 -

discussions with SO White and ROA McNeil that neither had granted

petitioner an extension of the May 24, 2006, deadline to perfect

her Form 843 abatement request.    In that regard, petitioner

provided SO Hill with permission to conduct ex parte

communications with ROA McNeil and SO White.    SO Hill did not

consider petitioner’s concerns with the IRS’s mishandling of New

Life’s offer-in-compromise or respondent’s failure to provide

formal notice when New Life defaulted on its installment

agreement, citing his lack of jurisdiction over matters

pertaining to the corporation.    Instead, he noted that after

accepting a long-term payment offer from the corporation it was

appropriate for respondent to file trust fund recovery penalty

liens because respondent needed to “protect the government’s

interest in the taxpayer’s assets in case the corporate offer

defaults.”   SO Hill also considered whether any reason existed to

release the lien but found no reason to do so and recommended

against release.

     Finally, SO Hill noted that petitioner had neither supplied

him with a collection information statement nor proposed any

collection alternatives for her trust fund penalties.    He

reviewed the procedures followed to file the notice of lien and

concluded they were proper.   He determined that the notice of

lien filing “balances the need for efficient collection of taxes
                                - 23 -

with the taxpayer’s legitimate concern the action is no more

intrusive than necessary.”

     In response to the notice of determination, petitioner

timely filed a petition with this Court challenging the decision

to sustain the notice of tax lien filing and the denial of her

refund claim.

                             Discussion5

     Petitioner’s corporation incurred an employment tax

liability.   Petitioner, an educated and intelligent person, had

great difficulty navigating the administrative process to arrange

for payment.    While she was in the process of dealing with the

corporate liability, an assessment was made against her for trust

fund tax.    Notices of lien were filed with respect to the trust

fund assessment, though she argues an agreement to delay had been

made.    One major reason for petitioner’s difficulty was that she

had to deal with a different person for each type of procedure

concerning the employment tax liability.   At one point in the

process she was dealing with as many as five of respondent’s

representatives regarding different aspects of the same

underlying tax liability; i.e., offers, installment payments,

claim for refund, etc.   Respondent’s balkanized approach to

collection procedures was also detrimental to respondent, because



     5
      Neither party has raised any question concerning the burden
or proof or burden of production in this case. See sec. 7491.
                               - 24 -

important dates and events were not being internally coordinated.

For petitioner, it presented Kafkaesque circumstances and

confusion.    The administrative record in this case is complex and

convoluted.    Ultimately, we have sorted out the underlying

circumstances and we must decide whether petitioner is entitled

to relief from the Appeals officer’s determination.

     Respondent filed notices of Federal tax lien with respect to

petitioner’s trust fund tax assessments.    See secs. 6321, 6322,

and 6323.    Section 6320 provides that the Secretary shall furnish

taxpayers with written notice of the filing of a notice of lien

under section 6323.    This notice must be provided not more than

5 business days after the date the notice of lien is filed and

must advise the taxpayer of the opportunity for administrative

review in the form of a hearing.    Sec. 6320(a)(2) and (3).

Petitioner has not shown or asserted any omission in the

procedures with respect to the filing, or notice with respect to

the filing, and none is disclosed in the record.

     Section 6320(b) provides taxpayers with the right to request

a “Fair Hearing” before an “Impartial” Appeals officer.    The

hearing generally shall be conducted consistent with the

procedures set forth in section 6330(c), (d), and (e).    Sec.

6320(c).    Section 6330(c)(1) requires the Appeals officer to

obtain verification that the requirements of any applicable law

or administrative procedure have been met.    Under section
                              - 25 -

6330(c)(2)(A) a taxpayer may raise any relevant issue at the

hearing including challenges to “the appropriateness of

collection actions” and may make “offers of collection

alternatives, which may include the posting of a bond, the

substitution of other assets, an installment agreement, or an

offer-in-compromise.”   The taxpayer may also challenge the

existence and amount of the underlying tax liability if no notice

of deficiency was received or the taxpayer did not otherwise have

an opportunity to dispute such tax liability.    Sec.

6330(c)(2)(B).

     Section 6330(c)(3) provides that a determination of the

Appeals officer shall take into consideration the verification

under section 6330(c)(1), the issues raised by the taxpayer, and

whether the 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.   Section 6330(d)(1) allows the taxpayer to appeal a

determination to the Tax Court.

     Where the underlying tax liability is properly at issue in

the hearing, we review that issue on a de novo basis.       Goza v.

Commissioner, 114 T.C. 176, 181-182 (2000).     However, where the

underlying tax liability is not at issue, we review the

determination for an abuse of discretion.     Nicklaus v.

Commissioner, 117 T.C. 117, 120 (2001).
                               - 26 -

I.   Scope and Standard of Review

      The Tax Court recently acquired exclusive jurisdiction to

review appeals from the Commissioner’s lien and levy

determinations made after October 16, 2006, irrespective of the

type of tax making up the underlying liability.   See Ginsberg v.

Commissioner, 130 T.C. 88 (2008); Callahan v. Commissioner, 130

T.C. 44 (2008); McClure v. Commissioner, T.C. Memo. 2008-136.      A

taxpayer’s “underlying tax liability” includes all “amounts a

taxpayer owes pursuant to the tax laws that are the subject of

the Commissioner’s collection activities.”    Callahan v.

Commissioner, supra at 49.    Because respondent’s determination

sustaining the filing of notices of Federal tax lien for unpaid

trust fund penalties was issued on February 2, 2007, we are

authorized to review the trust fund penalties assessed against

petitioner unless precluded by section 6330(c)(2)(B).

      Generally, a taxpayer must raise an issue at a collection

due process hearing to preserve it for this Court’s

consideration.   Perkins v. Commissioner, 129 T.C. 58, 63 (2007)

(de novo review); Magana v. Commissioner, 118 T.C. 488, 493

(2002) (abuse of discretion review); sec. 301.6330-1(f)(2), Q&A-

F5, Proced. & Admin. Regs.6   At her hearing, held in conjunction



      6
      We recently held that a matter the Appeals officer should
have considered under sec. 6330(c)(1) was before us for review
regardless of whether the taxpayer raised it with the Appeals
officer. Hoyle v. Commissioner, 131 T.C.     (2008).
                               - 27 -

with the conference concerning the trust fund penalties,

petitioner disputed that she received the Letter 1153 and also

contended that she did not willfully fail to pay over the trust

fund taxes.7   The Appeals officer testified that these

conferences were held simultaneously and that petitioner

contested her liability for the penalties.   In these

circumstances there is no reason to draw an invisible curtain

between issues that have been administratively merged by

respondent.    As far as petitioner was concerned, her CDP hearing

and Form 843 abatement request were being addressed by the same

Appeals officer within one proceeding.   Moreover, the Appeals

officer’s explanation of the hearing at trial reflects that he

handled both of petitioner’s claims concurrently.8   Petitioner

challenged her liability for the trust fund penalties at her

hearing.   Accordingly, we may consider the merits of that




     7
      In Giamelli v. Commissioner, 129 T.C. 107, 114 n.5 (2007),
we noted that we need not address “whether a taxpayer, having
raised one issue with respect to his or her underlying liability
in a collection review hearing, may then raise new and different
issues with respect to the underlying liability for the first
time on appeal of respondent’s determination before this Court.”
Because we have found that petitioner raised all the issues
before us at her CDP hearing, we need not address this issue.
     8
      At trial SO Hill attempted to explain how he addressed
petitioner’s claims simultaneously, yet separately. At best, his
testimony was confused and convoluted as to how he denied
petitioner the opportunity to raise her underlying liability
while, at the same time, reviewing her challenge to the trust
fund penalty assessments.
                               - 28 -

assessment provided she was not statutorily precluded from

raising it during her CDP appeal.

     A taxpayer cannot challenge an underlying liability in a CDP

hearing, and therefore this Court cannot review that liability,

if the taxpayer received a notice of deficiency or otherwise had

an opportunity to dispute the underlying liability.     Sec.

6330(c)(2)(B).   Because the assessments against petitioner were

trust fund penalties, respondent would not have issued and mailed

a notice of deficiency.   See sec. 6212(a).    The question is

whether petitioner “otherwise [had] an opportunity to dispute”

the trust fund penalty assessments.     The Appeals officer

concluded that petitioner had such an opportunity when respondent

mailed a Letter 1153 to her.   Similarly, respondent argues that

the Letter 1153 was sent by certified mail to petitioner’s last

known address and that petitioner did not avail herself of her

opportunity to contest the proposed assessment within the time

prescribed by the letter.   On these facts, respondent asserts

that petitioner was barred from challenging her underlying

liability before the Appeals officer.

     A section 6672(b)(1) notice provides a taxpayer with the

means for protesting a proposed trust fund penalty assessment

administratively with the Commissioner.     It follows that where a

taxpayer has not received a section 6672(b)(1) notice, then that

taxpayer has missed an opportunity to dispute the underlying tax
                               - 29 -

liability.9    Documentary evidence of mailing may suffice as proof

that a notice of deficiency was properly mailed to a taxpayer.

Coleman v. Commissioner, 94 T.C. 82, 90-91 (1990).    When a Letter

1153 is mailed, the Commissioner must follow the same mailing

procedures that are provided for notices of deficiency in section

6212(b).   Sec. 6672(b)(1).   It follows that the same evidence

that establishes that the Commissioner mailed a notice of

deficiency to a taxpayer’s last known address should be

sufficient to establish that the Commissioner properly sent a

Letter 1153.    See Hickey v. Commissioner, T.C. Memo. 2009-2.

Respondent has established that a Letter 1153 was mailed, by

certified mail, to petitioner’s last known address, as required

by section 6672(b)(1).10




     9
      This result is compatible with the law involving notices of
deficiency. To be effective, a notice of deficiency need not be
received by a taxpayer; instead, it must be shown that the
Commissioner sent it to a taxpayer’s last known address. Sec.
6212(a) and (b); Weber v. Commissioner, 122 T.C. 258, 263 (2004);
Pietanza v. Commissioner, 92 T.C. 729, 735-736 (1989), affd.
without published opinion 935 F.2d 1282 (3d Cir. 1991). In
contrast, when Congress enacted the collection due process
statute, it determined that a higher standard should apply and
that taxpayers had to receive a notice of deficiency before they
would be precluded from raising their underlying liability at
their CDP hearing. Sec. 6330(c)(2)(B). Therefore, our
conclusion that a taxpayer must receive a Letter 1153 fits within
the intent of Congress’s collection due process laws.
     10
      While respondent did not present a U.S. Postal Service
Form 3877, there is sufficient evidence in the record that
respondent sent a Letter 1153 by certified mail to petitioner’s
last known address.
                                - 30 -

     The record also reflects that the letter was returned to

respondent undelivered and marked “unclaimed”.   Petitioner’s

circumstances are therefore distinguishable from those of the

taxpayers in McClure v. Commissioner, T.C. Memo. 2008-136, and

Pelliccio v. United States, 253 F. Supp. 2d 258 (D. Conn. 2003).

The taxpayer in McClure received a Letter 1153 and contested his

liability in response.   This Court held that that was his

opportunity to dispute the trust fund penalty assessment.

Likewise, in Pelliccio the taxpayer received a Letter 1153 before

each assessment, and the District Court concluded that the

taxpayer had the requisite opportunity.   We conclude that a

section 6672(b)(1) notice that was not received, but not

deliberately refused, by a taxpayer does not constitute an

opportunity to dispute that taxpayer’s liability.

     We note that during the prolonged course of her dealings

with respondent, petitioner received numerous notices and

documents from respondent, some by certified mail.   She not only

received them, but unlike the taxpayer in Sego v. Commissioner,

114 T.C. 604 (2000), she responded or took other appropriate

action in response to them.11   The Letter 1153 was the sole

instance where petitioner made no response nor took other action.



     11
      For instance, petitioner hand-delivered payments to
respondent. In her dealings with respondent she attended
meetings that either she or respondent scheduled. She never
raised frivolous arguments or employed tactics solely for delay.
                               - 31 -

Further, respondent has neither argued nor presented any evidence

that petitioner refused delivery of the Letter 1153.

     We recently addressed what it means to “otherwise have an

opportunity to dispute” a tax liability in the context of section

6330(c)(2)(B).   See Perkins v. Commissioner, 129 T.C. 58 (2007);

Lewis v. Commissioner, 128 T.C. 48 (2007).    Neither the Internal

Revenue Service Restructuring and Reform Act of 1998 (RRA), Pub.

L. 105-206, sec. 3401, 112 Stat. 746, nor the Internal Revenue

Code defines what Congress intended by the phrase “otherwise have

an opportunity to dispute” a tax liability.    The Commissioner has

defined this phrase to some extent by promulgating a regulation

indicating that an opportunity “includes a prior opportunity for

a conference with Appeals”.    Sec. 301.6330-1(e)(3), Q&A-E2,

Proced. & Admin. Regs. (emphasis added).

     The Commissioner’s limited definition leaves open the

opportunity for deciding what other circumstances do or do not

constitute an “opportunity”.    Lewis v. Commissioner, supra at 55.

Regarding this subject, this Court has explained:

     As we see it, if Congress had intended to preclude only
     those taxpayers who previously enjoyed the opportunity
     for judicial review of the underlying liability from
     raising the underlying liability again in a collection
     review proceeding, the statute would have been drafted
     to clearly so provide. The fact that Congress chose
     not to use such explicit language leads us to believe
     that Congress also intended to preclude taxpayers who
     were previously afforded a conference with the Appeals
     Office from raising the underlying liabilities again in
     a collection review hearing and before this Court.
                              - 32 -

Id. at 61.   We concluded our analysis by holding that “A

conference with the Appeals Office provides a taxpayer a

meaningful opportunity to dispute an underlying tax liability.”

Id.

      In his determination sustaining the filing of the notice of

tax liens, the Appeals officer decided that petitioner had had an

opportunity to dispute her liability for the trust fund

penalties when he reviewed her Form 843 abatement request.        We

find the Appeals officer’s conclusion unsupportable.   As

explained in Perkins v. Commissioner, supra at 65, section

6330(c)(2)(B) “utilizes the past tense in reference to the

opportunity to dispute, indicating that Congress contemplated

that the dispute opportunity would have already transpired when

the hearing under section 6330 occurred.”   It was also noted that

the Commissioner’s regulation specifies that a prior conference

with Appeals is an opportunity to dispute a liability.      Id.    The

analysis and reasoning we applied in Perkins is equally

applicable to petitioner’s situation.   Petitioner’s concurrent

appeal of the denial of her abatement request was not an

“opportunity” as contemplated by section 6330(c)(2)(B).     To hold

otherwise would unduly limit judicial review.   Accordingly, a

simultaneous collection due process appeal and underlying tax

liability appeal is not an “opportunity” to contest the
                              - 33 -

underlying tax liability within the meaning of section

6330(c)(2)(B).

     To challenge the propriety of the proposed lien filing,

petitioner filed an appeal with respondent’s CAP.    The CAP

Settlement Officer, an Appeals officer, was fully aware of

petitioner’s pending Form 843 abatement request.    The CAP

Settlement Officer did not consider petitioner’s underlying tax

liability and instead focused her review solely on the propriety

of the proposed notice of lien filing.12   Petitioner’s CAP

prelien filing hearing did not rise to the level of an

“opportunity to dispute” her underlying tax liability where the

Appeals officer limited her review to the propriety of filing the

notice of liens.

     Where a taxpayer has not received a notice of deficiency or

had an opportunity to contest her liability and raises her

underlying liability at her CDP hearing, we review the underlying

liability.   Sec. 6330(c)(2)(B); see, e.g., Bach v. Commissioner,

T.C. Memo. 2008-202, affd. without published opinion 103 AFTR 2d

1340, 2009-1 USTC par. 50,286 (4th Cir. 2009).   Where a taxpayer

is incorrectly advised at a CDP hearing that she had a prior

opportunity to contest her underlying liability, we consider the



     12
      It is clear from the record that petitioner raised her
concern that she did not receive the Letter 1153, but that SO
White solely focused petitioner’s CAP hearing on the propriety
of the proposed notice of lien filing.
                                 - 34 -

underlying liability.      Petitioner raised the underlying

liability, and it was reviewed and considered in her abatement

hearing.   The Appeals officer conducting petitioner’s CDP hearing

mistakenly believed she had had a prior opportunity to raise her

underlying tax liability.      We find that petitioner did not have

an opportunity to dispute her liability for the trust fund

penalty assessments before her CDP hearing with SO Hill.

Petitioner’s liability for the trust fund penalties is

accordingly before this Court for de novo review.

II.   Trust Fund Penalty

      Section 6672 imposes a penalty for the willful failure to

collect, account for, and pay over income and employment taxes of

employees.   Income and employment tax withholding is commonly

referred to as “trust fund tax” because the Internal Revenue Code

characterizes such withholding as a “special fund in trust for

the United States.”     Sec. 7501(a).     As set forth in section 6671,

penalties for the failure to collect, account for, and pay over

trust fund taxes are assessed and collected in the same manner as

tax against a person including “an officer or employee of a

corporation, or a member or employee of a partnership, who as

such officer, employee, or member is under a duty to perform” the

duties referred to in section 6672.       Sec. 6671(b).   Such persons

are referred to as “responsible persons” and the term may be

broadly applied.   See generally Logal v. United States, 195 F.3d
                               - 35 -

229, 232 (5th Cir. 1999); Barnett v. IRS, 988 F.2d 1449, 1454

(5th Cir. 1993).

     A trust fund   penalty may be assessed against any

responsible person and is separate from the employer’s liability

for the unpaid income and employment taxes.    Sec. 6672(a); Howard

v. United States, 711 F.2d 729, 733 (5th Cir. 1983).      While there

is no requirement that the Commissioner pursue collection of the

taxes from the employer before assessing the penalty against a

responsible person, as a matter of policy the Commissioner does

not pursue collection of the penalty where the employer pays its

liability.   Hornsby v. IRS, 588 F.2d 952, 954 (5th Cir. 1979).13

     A.   Preliminary Notice

     Generally, before a section 6672 penalty may be assessed,

the Commissioner must mail a Letter 1153 to the responsible

person’s last known address advising that a trust fund penalty

will be assessed.   Sec. 6672(b)(1).14   While we determined

petitioner did not have an opportunity to contest her liability

for the penalties because she did not receive the Letter 1153, we


     13
      According to the Service’s Policy Statement P-5-14, “The
withheld income and employment taxes or collected excise taxes
will be collected only once, whether from the business, or from
one or more of its responsible persons.” 1 Administration,
Internal Revenue Manual (IRM) (CCH), pt. 1.2.14.1.3(2), at 2404
(June 9, 2003).
     14
      The exception is where the Commissioner determines that
collection of the penalty is in jeopardy. Sec. 6672(b)(4).
Respondent does not assert that the penalty was in jeopardy of
collection; therefore, this exception does not apply.
                              - 36 -

arrived at that determination by applying the standard

established in section 6330(c)(2)(B).   Whether the Government

must ensure that a taxpayer actually receives a Letter 1153 or

whether it is sufficient for the Government to show it timely

mailed the notice to a taxpayer’s last known address in order for

the assessment to be valid is a question recently addressed by

this Court.   We concluded that the mailing of section 6672

notification to a taxpayer’s “last known address” would be

sufficient to advise a responsible officer of the assertion of a

trust fund penalty.   See Hickey v. Commissioner, T.C. Memo. 2009-

2.   In Hickey we held that where the notice has been mailed to

the taxpayer’s last known address, it is not necessary for the

taxpayer to receive the notice before the Commissioner can assess

the trust fund penalty.   A bankruptcy court reached the same

conclusion in In re Chabrand, 301 Bankr. 468, 476-477 (Bankr.

S.D. Tex. 2003).

      The other means of providing notice to a taxpayer pursuant

to section 6672(b)(1) is by personal service.   This option was

added to the statute in 1998 with the enactment of RRA sec. 3307,

112 Stat. 744.   A Senate Finance Committee report explains the

addition to the statute and states, in a parenthetical to the

explanation, that “In some cases, personal delivery may better

assure that the recipient actually receives notice.”     S. Rept.

105-174, at 66 (1998) 1998-3 C.B. 537, 602.   The Committee’s
                               - 37 -

explanation implies that Congress added personal delivery as an

option for the Commissioner that would “better assure” receipt of

the notice, thereby acknowledging that mailing notice to the

taxpayer’s last known address does not guarantee receipt.     The

delivery methods are alternatives, and the statute permits the

Commissioner to choose which method to use; thus, we have

concluded that Congress did not require the Commissioner to

ensure that a taxpayer actually receive the notice.

      Accordingly, proper mailing of a preliminary notice to the

last known address is sufficient to comply with section

6672(b)(1).   In this case the notice requirement of the statute

was satisfied by respondent’s certified mailing of a Letter 1153

to petitioner’s last known address.

     B.   Burden of Proof

      The parties have not raised the issue of who bears the

burden of proof in this proceeding.     Generally, the burden of

proof is upon the taxpayer.   Sec. 7453; Rule 142(a).    Section

7491(a), providing for a shift to the Commissioner of the burden

of proof in certain circumstances, is inapplicable to trust fund

penalty cases.15   In any event we find on a preponderance of the

evidence that employment taxes were not paid, that petitioner was


     15
      Sec. 7491(a)(1) provides that the burden of proof may be
shifted to the Commissioner, provided that certain requirements
are met, for “any tax imposed by subtitle A or B”. The sec. 6672
trust fund penalty is imposed by subtit. F of the Internal
Revenue Code.
                                - 38 -

a responsible person, and that she willfully failed to pay over

those taxes.

     C.    Responsible Person

     Liability is imposed upon all persons responsible for

collecting, accounting for, or paying over employment withholding

taxes.16   The Court of Appeals for the Fifth Circuit, to which

this case is appealable, “generally takes a broad view of who”

qualifies as a “responsible person under § 6672.”    Gustin v.

United States, 876 F.2d 485, 491 (5th Cir. 1989).    It is one’s

duties, status, and authority that define him as a responsible

person.    Turnbull v. United States, 929 F.2d 173, 178 (5th Cir.

1991); Gustin v. United States, supra at 491.    A delegation of

that duty to others does not necessarily change that person’s

status as a responsible person.    Turnbull v. United States, supra

at 178.    Further, an individual may be a responsible person even

though he did not know that withholding taxes were not being paid

over to the Government.    Barnett v. IRS, 988 F.2d at 1454.

     The Court of Appeals for the Fifth Circuit considers the

following to be indicia of a responsible person:    (i) Holding the

position of officer or member of the board of directors; (ii)



     16
      The U.S. Supreme Court explained that responsibility for
collecting, truthfully accounting for, and paying over employment
taxes must be read disjunctively because Congress did not intend
to limit liability for trust fund taxes “to those persons in a
position to perform all three of the enumerated duties”. Slodov
v. United States, 436 U.S. 238, 250 (1978).
                                - 39 -

substantial ownership of the business; (iii) possessing the

authority to hire and fire employees; (iv) managing the day-to-

day operations of the business; (v) deciding how to disburse

funds and pay creditors; and (vi) possessing the authority to

sign checks for the business.     Id. at 1455.     “No single factor is

dispositive.”   Id.    In applying these indicia, there may be, and

often are, more than one responsible person within each business.

Id.   However, for purposes of imposing liability for trust fund

penalties, it does not matter how many responsible persons there

are, or who is the most responsible, because the statute applies

equally to all responsible persons.      Id.    Therefore, we must

determine only whether petitioner is a responsible person.

      During the periods at issue petitioner was the president,

treasurer, and an employee of New Life.        She was also the

majority (75 percent) shareholder of the corporation.        She admits

she had the ability to and did exercise her right to hire and

terminate employees.    Petitioner was a signatory on New Life’s

checking account.     There is considerable evidence that she signed

most of the checks for New Life.    There is evidence she was

involved in managing the corporation although that responsibility

was shared with others.    She concedes that she had “overall

management” responsibilities for the corporation.        Finally,

petitioner admits that she had the authority to direct the
                               - 40 -

payment of corporate funds, and there is ample evidence she

exercised that authority.

     It is clear on the basis of her admissions that petitioner

possessed, albeit in varying degrees, all six of the indicia of

a responsible person.   There is ample evidence to support the

conclusion that petitioner was a responsible person, for purposes

of section 6672.

     D.   Willfulness

     A responsible person will be held liable for the penalty

only where that failure to pay over withholding tax was willful.

The Court of Appeals for the Fifth Circuit has determined that

“willful”, in the context of section 6672, does not mean the

responsible person must have a “criminal or other bad motive * *

*, but simply a voluntary, conscious and intentional failure to

collect, truthfully account for, and pay over the taxes withheld

from the employees.”    Newsome v. United States, 431 F.2d 742, 745

(5th Cir. 1970).   To establish willfulness, there is no

requirement that the responsible person have intended to deprive

the Government of the withholding tax.    Id. at 747.   However,

willfulness is established where the “responsible person acts

with a reckless disregard of a known or obvious risk that trust

funds may not be remitted to the Government”.    Mazo v. United

States, 591 F.2d 1151, 1154 (5th Cir. 1979).    While willfulness

is typically proven by evidence that a responsible person paid
                                - 41 -

other creditors when withholding tax was due to the Government,

mere negligence is not sufficient to establish willfulness.

Gustin v. United States, supra at 492.

     Delegation of the responsibility to handle trust fund taxes

appropriately is not proof that the responsible person was not

willful.   Hornsby v. IRS, 588 F.2d at 953.    “Responsible persons

owe a fiduciary obligation to care properly for the funds that

are temporarily entrusted to them for the ultimate use of the

United States.”    Id.   A responsible person’s fiduciary duty

remains with him even where he has delegated responsibility for

discharging that duty to a subordinate.     Id.

     Petitioner admits that as early as March 2002 she became

aware that New Life had not been paying over its trust funds to

the Government.    Petitioner employed a bookkeeper who was

responsible for preparing New Life’s Form 941, Employer’s

Quarterly Federal Tax Return, and remitting payment along with

these returns.    For all periods at issue petitioner signed the

quarterly employment tax returns reflecting an unpaid liability

for employment taxes.    She does not recall whether at the time

she signed these returns they were blank or had been completed by

the bookkeeper.    There is evidence petitioner signed checks

paying for the corporation’s rent and insurance, as well as an

“advance” payable to herself.    These payments were made
                                - 42 -

before and after she became aware of the corporation’s unpaid

employment tax liability.

     Petitioner’s delegation of the duty to prepare and remit the

employment tax returns and payments does not insulate her from

liability.    Her defense is that she was unaware of the

bookkeeper’s failure to remit the employment taxes.    Petitioner

did, however, become aware during March 2002, if not sooner, that

the corporation had not been paying over these taxes.      Other

creditors were paid despite New Life’s liability to respondent

and its failure to remit employment taxes continued for the

quarters ended March 31, June 30, and September 30, 2002, and

September 30, 2003.    Petitioner’s authorization of payment to

other New Life creditors after becoming aware that employment

taxes were unpaid is indicative that as a responsible person her

“conduct was willful as a matter of law.”    See Mazo v.

Commissioner, supra at 1157.

      Even though petitioner was distracted and pressured by

business problems and responsibilities, her failure to discharge

the outstanding obligations to the Government is not thereby

excused.     We can draw only one conclusion from these facts:

Petitioner’s failure to pay over employment taxes was “willful”.

     E.    Reasonable Cause

     Finally, the Court of Appeals for the Fifth Circuit

recognizes that a taxpayer may avoid liability for a trust fund
                               - 43 -

penalty by showing reasonable cause for a failure to collect,

account for, or pay over trust fund taxes.    Newsome v. United

States, supra at 746-747; Frazier v. United States, 304 F.2d 528,

530 (5th Cir. 1962).    It is a very limited exception to a finding

of willfulness.    Logal v. United States, 195 F.3d at 233; Bowen

v. United States, 836 F.2d 965 (5th Cir. 1988); Newsome v. United

States, supra at 747.    While reasonable cause is a defense,

conceptually, the Court of Appeals has stated that “no taxpayer

has * * * carried that pail up the hill.”    Id.   Further,

reasonable cause is not a defense where a responsible person

“knew that the withholding taxes were due, but * * * made a

conscious decision to use corporate funds to pay creditors other

than the government.”    Logal v. United States, 195 F.3d at 233.

       While petitioner does not assert the reasonable cause

exception applies to her, we consider its applicability.

Petitioner concedes that she knew withholding taxes for New Life

were due.    Additionally, the record contains considerable

evidence she paid other creditors after becoming aware of the

corporation’s unpaid liability for employment taxes.    Thus, we

find that a defense of reasonable cause is not available to

petitioner.

III.    Collection Due Process Appeal

       Having found petitioner liable for the trust fund

penalties, we turn to other aspects of respondent’s notice of
                              - 44 -

determination upholding the filing of the notices of lien against

petitioner.   A section 6330 hearing is to be conducted by an

officer or employee of the Commissioner’s Appeals Office who has

had no prior involvement with respect to the tax in controversy.

Sec. 6330(b)(1), (3).   The Appeals officer or employee is

required to verify that the requirements of any applicable law or

administrative procedure have been met.   Sec. 6330(c)(1).    At the

hearing, the taxpayer may raise “any relevant issue relating to

the unpaid tax”.   Sec. 6330(c)(2)(A).   At the conclusion of the

hearing, the Appeals officer must determine whether and how to

proceed with collection and shall take into account:   (i) The

verification that the requirements of any applicable law or

administrative procedure have been met; (ii) the relevant issues

raised by the taxpayer; (iii) challenges to the underlying tax

liability by the taxpayer, where permitted; and (iv) whether any

proposed collection action balances the need for the efficient

collection of taxes with the legitimate concern of the taxpayer

that the collection action be no more intrusive than necessary.

Sec. 6330(c)(3).

     In regard to matters other than the tax liability, our

standard for review of an Appeals officer’s determination

concerning a collection due process hearing is generally whether

there has been an abuse of discretion, a standard which the Court

of Appeals for the Fifth Circuit also applies when it reviews
                              - 45 -

such aspects of collection due process cases.    Christopher Cross,

Inc. v. United States, 461 F.3d 610, 612 (5th Cir. 2006).      This

Court will find an abuse of discretion has occurred in collection

due process cases where the exercise of discretion is without

sound basis in fact or law.   See Freije v. Commissioner, 125 T.C.

14, 23 (2005); Ansley-Sheppard-Burgess Co. v. Commissioner, 104

T.C. 367, 371 (1995).   The Court of Appeals for the Fifth Circuit

has adopted a similar test for whether an abuse of discretion has

occurred.   Christopher Cross, Inc. v. United States, supra at 612

(defining an abuse of discretion as “clear taxpayer abuse and

unfairness by the IRS”); see Burnett v. Commissioner, 227 Fed.

Appx. 342, 343   (5th Cir. 2007) (citing Cross and stating that

the court is “applying the same abuse-of-discretion standard as

the Tax Court” (emphasis added).   We, therefore, proceed by

considering whether respondent’s determination, insofar as

related to matters other then petitioner’s challenge to her

underlying liabilities, was an abuse of discretion.

     Petitioner challenged the propriety of the Appeals officer’s

determination on three grounds:    (1) Respondent never mailed her

the Letter 1153; (2) notification was not sent to New Life

advising it had defaulted on an installment agreement with

respondent for payment of the employment tax liability; and (3)

a notice of lien was filed against petitioner despite an

agreement not to file the notice within a certain period and
                                - 46 -

despite petitioner’s having informed respondent that the $2,927

payment needed to institute the refund abatement could not be

made until 1 week after the agreed time.

     We held that petitioner did not receive the Letter 1153, and

we reviewed her underlying liability.    Our finding that

petitioner did not receive the Letter 1153 did not invalidate the

trust fund penalty assessment.    Petitioner has not raised any

other issue with respect to respondent’s determination to assess

the trust fund penalty, and nothing in the record would cause us

to invalidate the assessment.

     Petitioner next contends that the decision to proceed with

filing a notice of lien was in error because she was not advised

that New Life had defaulted on its installment agreement.17   At

her CDP hearing and at trial petitioner also raised her concern

that New Life’s offers-in-compromise had been inappropriately

rejected.   As we understand petitioner’s argument, she is

asserting that respondent’s mishandling of these administrative




     17
      On Mar. 3, 2004, New Life and respondent entered into an
installment agreement for payment of its employment tax
liabilities. Respondent admits that an employee agreed not to
pursue the trust fund penalties against petitioner as long as
certain conditions were met, including New Life’s timely payment
of the amounts agreed to under the installment agreement.
Petitioner does not contend that the installment payments were
made; instead, she asserts that respondent should have notified
her of the default and failed to do so.
                                - 47 -

tasks led respondent to pursue trust fund penalties against

her.18

     Respondent’s handling of the installment agreement default

or of the offers-in-compromise with New Life has no direct

bearing on petitioner’s case.     Whether or not New Life was paying

a portion of its liability under an offer-in-compromise or

installment agreement, respondent had discretion to collect the

unpaid trust fund tax by pursuing a penalty against petitioner as

a responsible person.19    Because the pursuit of the trust fund

penalties against petitioner was within respondent’s discretion,




     18
      As previously noted, petitioner was impeded by the fact
that respondent had as many as five different employees dealing
with her regarding the employment tax and trust fund penalties
for the same tax periods. These circumstances do not constitute
an abuse of discretion. It is possible, however, that petitioner
would have encountered less confusion and there might have been
an administrative resolution of this case if she had been able to
deal with a single point of contact concerning the employment
tax.
     19
         It is the Service’s policy that the amount offered to
         compromise a liability subject to assertion of the TFRP
         will represent what can be collected from the employer.
         If the Service enters into a compromise with an employer
         for a portion of the trust fund tax liability, the
         remainder of the trust fund taxes may still be collected
         from a responsible person pursuant to Section 6672 of the
         Internal Revenue Code.

1 Administration, IRM (CCH), pt. 5.8.4.13.2(2), at 16.349-11
(Sept. 23, 2008); see also Hult v. Commissioner, T.C. Memo. 2007-
302; sec. 301.6159-1(d)(3), Proced. & Admin. Regs. (stating the
Commissioner may file a lien while a taxpayer has an installment
agreement in place as long as the terms of the agreement do not
provide otherwise).
                               - 48 -

we cannot, on that basis, conclude respondent abused his

discretion.

     Petitioner’s final argument is that respondent should not

have filed the liens once she submitted the necessary payment

with her Form 843 abatement request.    The CAP officer gave

petitioner until May 24, 2006, to perfect her Form 843 abatement

request and agreed not to file the notice of lien until a

decision was reached on her abatement request.    Petitioner,

however, did not submit the payment to perfect her abatement

request until June 2, 2006.   Petitioner and respondent disagree

as to whether petitioner was given the impression that the lien

filing would be held in abeyance even though she missed the May

24 deadline.   Whether petitioner was or was not granted

additional time to perfect her abatement request has no bearing

on the appropriateness of respondent’s decision to file notices

of tax lien.   The Commissioner may proceed with filing a tax lien

after a tax has been assessed, notice and demand has been given,

and a taxpayer has refused or neglected to pay.    Sec. 6321.

There is no legal prohibition to filing a notice of Federal tax

lien while a taxpayer is seeking administrative review of the

underlying liability.20   Respondent’s decision to proceed with


     20
      Unlike notice of lien filings, the Commissioner is
prohibited from pursuing a levy where a taxpayer satisfies the
requirements of sec. 6672(c). Included in the list of
requirements is that the taxpayer file a refund/abatement
                                                   (continued...)
                               - 49 -

filing the lien was well within the bounds of respondent’s

discretion.

     The Appeals officer verified that respondent had complied

with all legal and procedural requirements pertaining to the

proposed lien.   Petitioner did not challenge the appropriateness

alternative.   Also, petitioner did not raise any other defenses

to collection.   Finally, as explained in the notice of

determination, the Appeals officer took into account whether any

proposed collection action balanced the need for the efficient

collection of taxes with the legitimate concern of petitioner

that the collection action be no more intrusive than necessary.

See sec. 6330(c)(3).    Consequently, the Appeals officer

determined the filing of a notice of lien was legally and

procedurally correct.

     The Appeals officer’s determination to uphold the lien is

sustained.

     To reflect the foregoing,

                                          Decision will be entered

                                     for respondent.




     20
      (...continued)
request. Sec. 6672(c)(1)(B); 1 Administration, IRM (CCH), pt.
5.7.7.6.2(1), at 16,216 (Apr. 13, 2006).
