                        T.C. Memo. 2012-22



                      UNITED STATES TAX COURT



                  WILLIAM B. PERRIN, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16712-10L.              Filed January 19, 2012.



     William B. Perrin, pro se.

     Susan K. Greene, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     COHEN, Judge:   This action was commenced in response to a

notice of determination concerning collection action with respect

to unpaid trust fund recovery penalties under section 6672 for

five quarters ended from September 30, 2003, to September 30,

2004.   With interest calculated through June 30, 2010, the total
                                 - 2 -

liabilities exceeded $399,000.    Unless otherwise indicated, all

section references are to the Internal Revenue Code.

                         FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.

Petitioner resided in Harris County, Texas, when he filed his

petition.   Petitioner is single and resided alone in a house that

he owned at all times relevant to the issues discussed below.

     The Watson Law Firm (Watson) was a professional corporation

owned 100 percent by Charles Watson.     At all relevant times,

petitioner was Watson’s in-house accountant and office manager.

Petitioner had signature authority on Watson’s bank account and

signed payroll checks for Watson.    Petitioner also signed

Watson’s employment tax returns for the quarters ended December

31, 2003, and March 31, 2004.

     During the tax periods ended September 30 and December 31,

2003, and March 31, June 30, and September 30, 2004, petitioner

signed checks and paid Watson’s other creditors while Watson’s

employment taxes for those periods remained unpaid.    Petitioner

followed Watson’s instructions as to what was to be paid in order

to preserve his job.   During those periods, Charles Watson

enjoyed an expensive lifestyle.    Subsequently Charles Watson was

imprisoned, faced State bar disciplinary proceedings, and was
                               - 3 -

involved in bankruptcy proceedings.    The employment taxes thus

remained unpaid.

     On February 27, 2007, the Internal Revenue Service (IRS)

mailed a Letter 1153, Trust Funds Recovery Penalty Letter, to

petitioner, informing him that the IRS was proposing to assess a

penalty against him under section 6672 as a person required to

collect, account for, and pay over withheld taxes for Watson.

The letter informed petitioner of his right to appeal or to

protest the proposed assessment.   Petitioner received the Letter

1153 and, through his then representative David Allie, submitted

a written protest.   After a conference, the Appeals Office

determined that petitioner was a responsible person liable for

Watson’s unpaid employment taxes for the periods in issue here.

On June 11, 2008, the IRS made jeopardy assessments against

petitioner for the amounts in issue here.

     On August 15, 2008, the IRS sent petitioner a Letter 1058,

Final Notice - Notice of Intent to Levy and Notice of Your Right

to a Hearing.   In response to the notice, petitioner requested a

hearing through David Allie.   The request for a hearing indicated

that petitioner was unable to pay the balances due and that he

would like to consider an offer-in-compromise or an installment

agreement, but he did not propose any amounts for these

alternatives.   Petitioner did not challenge the existence or

amounts of the underlying tax liabilities.
                                - 4 -

       Between September 29, 2009, and June 17, 2010, several items

of correspondence and telephone calls were exchanged between the

Appeals settlement officer to whom the case was assigned and

David Allie, then acting on behalf of petitioner.    David Allie

provided to the settlement officer information about petitioner’s

financial circumstances.    The settlement officer reviewed the IRS

transcripts of petitioner’s account and verified that all legal

and procedural requirements for the proposed levy action had been

met.    After receiving a Form 433-A, Collection Information

Statement for Wage Earners and Self-Employed Individuals, signed

by petitioner and a copy of petitioner’s 2008 Federal income tax

return, the settlement officer held a face-to-face hearing with

David Allie.    David Allie requested that petitioner’s account be

placed in “currently not collectible status”.    He did not provide

required forms for an offer-in-compromise or request an offer-in-

compromise as a collection alternative.    He did not challenge the

existence or amounts of the underlying liabilities.

       The settlement officer reviewed all financial information

David Allie submitted on petitioner’s behalf and consulted the

national and local standards established for living expenses for

a one-person household in Harris County, Texas, effective March

1, 2009.    The standards set forth allowances for housing and

utilities, vehicle ownership, out-of-pocket health care costs,

food, clothing, and miscellaneous expenses considered as basic
                                - 5 -

living expenses.    Petitioner’s income, expenses, and taxes

withheld were determined based on his 2008 income tax return.

The settlement officer determined that petitioner could make a

monthly payment of $2,438 against the outstanding employment tax

liabilities.   By letter dated February 1, 2010, the settlement

officer offered petitioner a partial payment installment

agreement of $1,257 per month beginning February 24, 2010,

increasing to $2,438 per month on October 24, 2010.    The proposed

agreement gave petitioner time to reduce his expenses to the

standard amounts used in the settlement officer’s computations.

     By letter dated February 24, 2010, David Allie sent to the

settlement officer a copy of petitioner’s Form W-2, Wage and Tax

Statement, for 2009, showing a reduction in his earnings compared

to 2008 and increased taxes withheld.    The settlement officer

then determined that petitioner could make a monthly payment of

$1,944, using standards for a one-person household in Harris

County, Texas, effective March 1, 2010.    By letter dated March 4,

2010, the settlement officer informed David Allie that the amount

of Federal income tax petitioner had chosen to have withheld was

overstated and could be reduced to allow more cashflow for him to

apply to the unpaid liabilities.    The settlement officer offered

petitioner a partial payment agreement of $783 per month

beginning April 24, 2010, increasing to $1,944 per month on

October 24, 2010.    After receiving additional information
                                 - 6 -

concerning legal fees petitioner owed, by letter dated April 2,

2010, the settlement officer offered petitioner a partial payment

agreement of $583 per month beginning April 30, 2010, increasing

to $1,744 per month on October 30, 2010, and further increasing

to $1,944 per month on October 30, 2011.   Petitioner refused to

enter into a partial payment agreement for anything over $479 per

month.    On June 17, 2010, the notice of determination sustaining

the proposed levy was issued.

                                OPINION

     In his petition and at trial, petitioner argued that he was

not a responsible person subject to section 6672 penalties for

failure to pay the employment taxes at issue here and that it is

unfair to require him to pay taxes that should be paid by Charles

Watson.   Petitioner, however, had a prior opportunity to contest

the underlying liabilities and is thus precluded from doing so in

this proceeding.   See sec. 6330(c)(2)(B); Lewis v. Commissioner,

128 T.C. 48, 50-61 (2007); McClure v. Commissioner, T.C. Memo.

2008-136; sec. 301.6320-1(e)(3), Q&A-E2, Proced. & Admin. Regs.

Moreover, petitioner’s representative did not raise the

underlying liabilities before the settlement officer and may not

raise them here.   See Pough v. Commissioner, 135 T.C. 344, 349

(2010); Giamelli v. Commissioner, 129 T.C. 107, 111-114 (2007).

     Petitioner stipulated that the settlement officer was

impartial and had no prior involvement with the tax periods
                                - 7 -

involved in this case and that she verified that all legal and

procedural requirements for the proposed levy action had been

met.    See sec. 6330(b) and (c).   Thus our review of the notice of

determination is for abuse of discretion.    See, e.g., Jones v.

Commissioner, 338 F.3d 463, 466 (5th Cir. 2003).

       Proof of an abuse of discretion requires a showing that the

Appeals action was arbitrary, capricious, or without foundation

in fact or law.    See, e.g., Giamelli v. Commissioner, supra at

111.    In view of the record of the settlement officer’s

consideration of the financial information petitioner’s

representative submitted and downward adjustments to proposed

partial installment agreements, we cannot characterize the

settlement officer’s determination as arbitrary or capricious.

       Petitioner raises arguments about the assumptions in the

settlement officer’s computations about his tax liabilities.      He

contends that if he were to sell his house to bring his expenses

to the national and local standards applied in his case, he would

be unable to itemize deductions and would pay more in Federal

income tax.    This argument was not made during the administrative

proceedings by petitioner’s representative, and it cannot be used

to show an abuse of discretion.     See id. at 115; Magana v.

Commissioner, 118 T.C. 488, 493 (2002).

       In any event, petitioner’s arguments about the details of

the settlement officer’s computations are unavailing.    The use of
                                - 8 -

local and national standards is expressly authorized by Congress

and does not constitute an abuse of discretion even if it forces

a taxpayer such as petitioner to change his lifestyle.      See,

e.g., Speltz v. Commissioner, 124 T.C. 165, 179 (2005), affd. 454

F.3d 782 (8th Cir. 2006).    Petitioner does not contend that the

standards were misapplied.   In reviewing for abuse of discretion,

we do not recompute the appropriate amount of an installment

agreement.   Id.; Orum v. Commissioner, 123 T.C. 1, 12-14 (2004),

affd. 412 F.3d 819 (7th Cir. 2005).

     As respondent’s counsel indicated at trial, petitioner may

continue to negotiate with IRS collection officers concerning his

tax liabilities.   He is, however, entitled to only one

administrative hearing and court proceeding with respect to the

proposed levy.   To reflect the foregoing,


                                             Decision will be entered

                                        for respondent.
