In Eichler v. Commissioner, 143 T.C. 2, the U.S. Tax Court said that the IRS Notice of Intent to Levy was proper even though the IRS failed to follow its policy to check an installment request into its system which would have stopped IRS collection actions.
Facts & Procedural History
The IRS assessed Section 6672 trust fund recovery penalties in the amount of $89,760 for the fourth quarter of 2008, $82,725 for the first quarter of 2009, and $16,889 for the second quarter of 2009.
On April 11, 2011, Dr. Eichler sent the IRS a letter asking for a “partial payment installment agreement” of $350 per month for the three quarters previously mentioned as well as the fourth quarter of 2007 and enclosed a completed and signed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals and supporting financial documentation.This letter was received by the IRS on April 28, 2011.
IRS policy requires the IRS to input transaction codes in the IRS computer system within twenty four hours of receipt to indicate that an installment agreement request was received.
The IRS Collection Division failed to input any code until June 6, 2011.
In the meantime, on May 9, 2011, the IRS had sent to petitioner three Letters CP 90, Final Notice–Notice of Intent to Levy and Notice of Your Right to a Hearing (notices of intent to levy), with respect to Dr. Eichler’s unpaid trust fund recovery penalties for the last quarter of 2008 and first two quarters of 2009.
The IRS Service Center in Atlanta, Georgia sent Dr. Eichler a letter saying that it was researching the installment agreement request on May 13, 2011.
The Office of Appeals (Appeals) received a timely Form 12153, Request for a Collection Due Process or Equivalent Hearing, from Dr. Eichler on June 1, 2011.
The request noted stated: “I previously submitted Form 433-A with supporting documentation and a request for an installment agreement. (Copy attached) The Final Notice (CP 90) was issued prematurely. I request that the Final Notice be withdrawn and that the installment payment agreement I requested be implemented. In the alternative I REQUEST AN IN PERSON HEARING IN NASHVILLE, TN.”
The request also asserted that the notices of intent to levy should be withdrawn pursuant to Section 6331(k) and IRM 220.127.116.11.2.8.
Appeals contacted Dr. Eichler to schedule an in-person conference.
Dr. Eichler then sent a letter to Appeals saying that his “financial situation has deteriorated and accordingly, we are now requesting that the accounts be designated ‘Currently Not Collectible.’”
Dr. Eichler also included a Form 433-A that reflected total gross monthly income of $5,464, of which $3,079 was attributable to Dr. Eichler and $2,385 was attributable to his wife. The Form 433-A reported monthly expenses of $5,573. The Form 433-A also reported debts of approximately $260,000 “on credit cards and store accounts and judgments.”
Appeals determined that the issuance of the notices of intent to levy was not premature and that these notices should not be rescinded.
Collection Alternative Conclusion
Appeals concluded that an appropriate collection alternative would be an installment agreement of $25 per month for one year increasing to $734 per month in November 2012, provided that petitioner also submitted with his installment agreement a downpayment of $8,520. The $8,520 down payment was Dr. Eichler’s percentage share of a joint savings account he held with his wife.
Dr. Eichler agreed to the payment agreement, but not the $8,520 down payment.
Regarding the Notice of Intent to Levy that was issued after the IRS received the installment agreement request, the court noted:
The regulations expressly provide that while levy is prohibited “[t]he IRS may take actions other than levy to protect the interests of the Government”. Sec. 301.6331-4(b)(1), Proced. & Admin. Regs. A notice of intent to levy is an action other than a levy to protect the interests of the Government; unlike a levy, it is merely preliminary to a collection action, rather than a collection action barred by section 6331(k)(2). See Politte, 2009 WL 3166924, at *5. Accordingly, under the regulations, consistent with the plain language of the statute, the IRS was not prohibited from issuing the notices of intent to levy after petitioner submitted his offer for an installment agreement.
The court also addressed the $8,520 down payment required by the IRS. Dr. Eichler argued that having to make the $8,520 down payment would cause economic hardship for him and his wife. The court noted that:
The IRM describes procedures the IRS uses in determining whether a proposed installment agreement facilitates the collection of an unpaid tax liability. These procedures require taxpayers to liquidate assets in order to qualify for an installment agreement in the absence of special circumstances such as old age, ill health, or economic hardship. See IRM pt. 18.104.22.168(5)-(6) (June 1, 2010).
During petitioner’s Appeals hearing Mr. Westlake asserted repeatedly that petitioner and his wife were elderly and had limited financial resources and that making the $8,520 downpayment would pose an undue economic hardship for them. Additionally, Mr. Westlake asserted that the funds in the joint bank account did not actually belong to petitioner. We find no indication in the record that SO Magee expressly considered these issues.
Given that Appeals did not document whether it considered this information, the court remanded the case to Appeals to consider any new collection alternative that Dr. Eichler proposed “taking into account any changed circumstances and other relevant factors.”