                              T.C. Memo. 2019-137



                         UNITED STATES TAX COURT



                 CHARLES J. SCHUMAN, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 26921-16L.                         Filed October 15, 2019.



      Charles J. Schuman, pro se.

      Frederic J. Fernandez and Samuel T. Kuzniewski (student), for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      NEGA, Judge: This case was commenced in response to a Notice of

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

6330 (notice of determination) that sustained a Final Notice of Intent to Levy and

Notice of Your Right to a Hearing (notice of intent to levy) with respect to

petitioner’s unpaid Federal income tax liabilities for years 2011 and 2012 (years at
                                          -2-

[*2] issue).1 Pursuant to section 6330(d)(1) petitioner timely filed a petition

seeking review of respondent’s determination to sustain the proposed levy. The

issue for decision is whether respondent’s Office of Appeals (Appeals Office)

properly sustained the notice of intent to levy.

                                 FINDINGS OF FACT

      Some facts have been stipulated and are so found. The stipulation of facts

and the attached exhibits are incorporated herein by this reference. Petitioner

resided in Wisconsin when the petition was filed.

      Petitioner untimely filed Federal income tax returns for the years at issue

and failed to pay the balances owed. On May 30, 2016, respondent mailed

petitioner a notice of intent to levy with respect to petitioner’s tax liabilities for the

years at issue. The notice of intent to levy listed deficiencies, penalties, and

interest owed for the years at issue totaling $8,927.

      On June 12, 2016, petitioner timely submitted a Form 12153, Request for a

Collection Due Process or Equivalent Hearing (CDP).2 Petitioner stated as a


      1
       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 dollar amounts are rounded to the nearest dollar.
      2
       On petitioner’s CDP request he incorrectly listed the tax years shown on
the notice of intent to levy as 2007 through 2012. Additionally, petitioner
                                                                       (continued...)
                                         -3-

[*3] reason for the request that respondent’s “billing summary” is incorrect. In

support of this assertion petitioner directed the Appeals Office’s attention to “over

50 documents” he allegedly filed with respondent.3 Petitioner failed to explain

how he determined that respondent’s billing summary was inaccurate or how the

50 documents he claimed to file demonstrated inaccuracies in respondent’s billing

summary. Petitioner also stated that a refund notice concerning tax year 2009 is

incorrect. He failed to explain the relevance of the 2009 refund notice to his tax

liabilities for the years at issue. Additionally, petitioner requested collection

alternatives and specifically checked the box marked “Offer in Compromise”.

Petitioner also requested innocent spouse relief but failed to submit Form 8857,

Request for Innocent Spouse Relief, with the CDP request as instructed.



      2
        (...continued)
incorrectly stated that his basis for making the CDP request was his receipt of a
notice of Federal tax lien (NFTL) filing and the notice of intent to levy. No NFTL
was filed against petitioner for the years at issue. Additionally, neither an NFTL
nor a notice of intent to levy was issued to petitioner for tax years 2007 through
2010. As a result the settlement officer (SO) determined petitioner was not
entitled to a CDP hearing on those issues.
      3
        In his CDP request petitioner referred to a petition he filed on June 6, 2016,
seeking relief for tax years 2007 through 2010. The Court dismissed that case in
an order on the ground that no notice of determination had been issued to
petitioner for tax years 2007 through 2010 that would permit petitioner to invoke
the Court’s jurisdiction. Schuman v. Commissioner, T.C. Dkt. No. 13166-16
(Oct. 6, 2016).
                                         -4-

[*4] Petitioner’s CDP request was assigned to an SO with no prior involvement

with the liabilities at issue. On August 24, 2016, the SO sent petitioner a letter

scheduling a telephone CDP hearing for September 27, 2016. The letter also

proposed a streamlined installment agreement under which petitioner would pay

$142 per month until the tax owed is paid. For purposes of discussing collection

alternatives the SO requested that petitioner submit Form 656, Offer in

Compromise, or Form 433-A, Collection Information Statement for Wage Earners

and Self-Employed Individuals, or both, with required attachments before the

hearing. The SO also instructed petitioner that, if he wished to dispute the

underlying liabilities to the extent reported on his tax returns, he must submit for

consideration Forms 1040X, Amended U.S. Individual Income Tax Return

(amended returns). Since petitioner requested innocent spouse relief, the SO

requested that petitioner submit Form 8857 before the hearing. Petitioner never

submitted Form 656, Form 433-A, amended returns, or a request for innocent

spouse relief as directed by the SO.

      In response to the SO’s letter dated August 24, 2016, petitioner sent a letter

dated September 8, 2016, which confirmed his intention to participate in the

telephone CDP hearing scheduled for September 27, 2016. Petitioner attached

documentation to the letter that attempted to substantiate the issues addressed in
                                         -5-

[*5] his CDP request. One such attachment was a spreadsheet he had created,

outlining payments he allegedly made toward tax years ended December 31, 2009

through 2016.4 Petitioner failed to explain how the figures in the spreadsheet

challenged the balances owed for the years at issue. Before the CDP hearing the

SO reviewed the documentation submitted with petitioner’s letter and determined

that none of it pertained to the balances owed for the years at issue.

      On September 27, 2016, during the telephone CDP hearing petitioner

reasserted that respondent failed to properly apply payments that he claimed he

had made toward the balances for the years at issue. Petitioner did not designate

how he wanted respondent to apply the alleged misapplied payments.

      During the CDP hearing the SO reviewed with petitioner his account

transcripts for tax years 2007 through 2012, which confirmed that there were no

missing or misapplied payments affecting the years at issue. The SO verified that

petitioner’s underpayments of tax resulted from insufficient Federal withholding

or from his failure to make necessary estimated tax payments on his earned income

reported on his tax returns or both. The SO also partially abated a failure to pay

      4
       At trial petitioner testified that he compared the figures in his spreadsheet
against respondent’s account transcripts and concluded that the amounts reported
as owed for the years at issue were inaccurate. But petitioner could not support
his assertion that payments allegedly made toward the years at issue were
improperly applied.
                                         -6-

[*6] penalty of $223 for 2009 because petitioner qualified for “First Time Penalty”

abatement. Petitioner orally agreed to the streamlined installment agreement

proposed by the SO in letter sent August 24, 2016.

      The SO also noted that no statutory notice of deficiency was issued for the

years at issue and instructed petitioner to submit amended returns if he wished to

challenge the amounts of tax owed. The SO further instructed petitioner, if he

wanted innocent spouse relief, to submit Form 8857. Petitioner failed to submit

either the amended returns or Form 8857.

      On September 27, 2016, the SO sent petitioner a letter enclosing Form 433-

D, Installment Agreement, and Form 12257, Summary Notice of Determination,

Waiver of Right to Judicial Review of a Collection Due Process Determination,

Waiver of Suspension of Levy Action, and Waiver of Periods of Limitation in

Section 6330(e)(1). The SO instructed petitioner to review, sign, and return these

forms by October 18, 2016. Petitioner did not return either form despite having

orally agreed to the proposed installment agreement during the CDP hearing.

      On October 14, 2016, petitioner mailed a letter to the Appeals Office in

which he stated his belief that there are inconsistencies regarding his tax liabilities

and that he intended to request a hearing before this Court. On November 21,
                                         -7-

[*7] 2016, the Appeals Office issued the notice of determination sustaining the

notice of intent to levy.

      On December 16, 2016, petitioner timely filed a petition with this Court

alleging that respondent determined incorrect amounts owed for tax years 2010,

2011, and 2012.5

      On November 6, 2018, respondent filed a motion for summary judgment.

On March 25, 2019, this case was called from the calendar at the Court’s

Milwaukee, Wisconsin, trial session. The parties appeared and were heard. As a

result of the trial respondent’s motion for summary judgment was denied.




      5
        Petitioner did not receive a notice of intent to levy for tax year 2010 and
was not entitled to a CDP hearing on issues stemming from that year.
Additionally, the petition states that the SO found several errors made by
respondent, specifically referencing a 2009 check for $243. This is a reference to
the check for a refund and related abatement of a “Failure to Pay” penalty issued
for tax year 2009 and does affect the tax owed for the years at issue. The petition
also refers to a $1,200 refund check related to tax year 2007, which is also
inapplicable to the years at issue. The petition also asserted that an $800 credit
from tax year 2009 was not properly applied, that a $400 credit was not properly
applied to the correct month and year, and that a $300 credit was not properly
applied to the correct month and year. These credits are irrelevant to the liabilities
for the years at issue and were appropriately applied to the correct tax years.
                                          -8-

[*8]                                  OPINION

I.     Standard of Review

       Section 6330 requires the Commissioner to notify a taxpayer if he intends to

levy on that taxpayer’s property. The notice must inform the taxpayer of his or her

right to a CDP hearing regarding the proposed collection action. Sec. 6330(a). In

a CDP hearing taxpayers may raise any relevant issue, such as a request for

consideration of a collection alternative. Sec. 6330(c)(2)(A). A determination to

sustain a proposed levy may be reviewed by this Court. Sec. 6330(d)(1); see

Rules 330-334. In general, upon review of a notice of determination sustaining a

proposed levy, the Court will limit its review to those issues properly raised during

the administrative hearing. Giamelli v. Commissioner, 129 T.C. 107, 114-115

(2007); Magana v. Commissioner, 118 T.C. 488, 493 (2002).

       Where the underlying tax liability is properly at issue in a CDP proceeding,

we review that issue de novo. Sego v. Commissioner, 114 T.C. 604, 610 (2000).

To the extent that the underlying tax liability is not at issue, this Court reviews the

determination of the Appeals Office for abuse of discretion.6 Id. Abuse of

       6
       Although petitioner’s argument ostensibly challenged the validity of the
underlying tax liabilities, his argument failed to communicate a proper challenge
to the merits of the liabilities. Petitioner did not dispute the validity of the
underlying liabilities. Instead, he asserted that respondent’s failure to properly
                                                                           (continued...)
                                        -9-

[*9] 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).

II.   Analysis

      Petitioner challenged the amount of tax owed during the CDP hearing on

the grounds that he believed respondent had failed to account for and misapplied

certain payments. Although petitioner provided a spreadsheet attempting to

outline the alleged misapplied payments, the SO determined that this and other

documentation provided by petitioner was not pertinent to the years at issue. The

SO accounted for all payments and refunds for the years at issue. The SO also

guided petitioner through his account transcripts for years 2007 through 2010

during the CDP hearing in order to explain that there were no misapplied

payments. We find that petitioner has not adduced any evidence that these

transcripts are incorrect.

      6
       (...continued)
apply certain payments resulted in incorrect amounts of tax due and owing.
Taxpayers are required to provide all relevant information requested by the
Appeals Office. Sec. 301.6330-1(e)(1), Proced. & Admin. Regs. Petitioner failed
to submit amended returns as instructed by the SO or otherwise present evidence
credibly calling into question the underlying liabilities after being given
reasonable opportunity to present such evidence. Thus, petitioner did not raise a
proper challenge to the underlying liabilities. See Giamelli v. Commissioner, 129
T.C. 107, 113 (2007); sec. 301.6320-1(f)(2), Q&A-F3, Proced. & Admin. Regs.
                                        - 10 -

[*10] Although petitioner claims that there were missing and misapplied payments

that would lower the balances for the years at issue, petitioner failed to designate

how he wanted any of these alleged payments to be applied. Without such

designation, the Internal Revenue Service may apply payments in the

Government’s best interests and in this case would be free to apply payments to

the earliest years with balances due. See United States v. Schroeder, 900 F.2d

1144, 1149 (7th Cir. 1990); see also Buffalow v. United States, 109 F.3d 570, 574

(9th Cir. 1997).

      In deciding whether there was an abuse of discretion in the sustaining of a

notice of intent to levy, we review the record to determine whether the SO

(1) properly verified that the requirements of applicable law and administrative

procedure have been met, (2) considered issues raised by the taxpayer, and

(3) considered whether any proposed collection action balances the need for the

efficient collection of taxes with the legitimate concern of the taxpayer that any

collection action be no more intrusive than necessary. See sec. 6330(c)(1), (2),

and (3).
                                        - 11 -

[*11] Our review of the record establishes that the SO verified that the

requirements of applicable law and administrative procedure had been met.7

Further, we find that the SO balanced the need for efficient collection of taxes

with the legitimate concern of petitioner that any collection action be no more

intrusive than necessary.8

      The SO took into consideration all issues petitioner raised. Petitioner raised

innocent spouse relief in his request for a CDP hearing but failed to submit

Form 8857 or provide the SO with any other information supporting a basis for

innocent spouse relief. An issue is not properly raised if the taxpayer fails to

present the Appeals Office with any evidence with respect to that issue after being



      7
        The CDP hearing was conducted by an officer or employee who had no
prior involvement, per sec. 6330(b)(3). The SO reviewed all of petitioner’s tax
account transcripts before the CDP hearing and discussed petitioner’s account
transcripts with him during the CDP hearing. See May v. Commissioner, T.C.
Memo. 2014-194; Med. Practice Sols., LLC v. Commissioner, T.C. Memo. 2010-
98. The SO verified the proper and timely assessment of the liabilities as required
by sec. 6303(a). The SO further verified that petitioner was given the required
notice of intent to levy per sec. 6330(a).
      8
        In his CDP request petitioner indicated that he wanted to submit an offer-
in-compromise, but he failed to submit Form 656 or supporting financial
information as instructed by the SO. During the hearing petitioner agreed to a
proposed streamlined installment agreement of $143 per month. The Appeals
Office subsequently mailed petitioner Form 433-D and Form 12257, but petitioner
did not return the signed forms as requested. Petitioner did not request any other
collection alternatives.
                                       - 12 -

[*12] given reasonable opportunity to present such evidence. See sec. 301.6330-

1(f)(2), Q&A-F3, Proced. & Admin. Regs. In addition, petitioner has not pursued

innocent spouse relief in this proceeding. Thus, innocent spouse relief is not at

issue in this case.

      In the light of our findings above, we sustain the notice of determination.

We have considered all the other arguments of the parties, and to the extent not

discussed above, find those arguments to be irrelevant, moot, or without merit.

      To reflect the foregoing,


                                                Decision will be entered for

                                       respondent.
