R issued P a notice of intent to levy to collect P's unpaid Federal income taxes for 2002. P timely requested a hearing under
P submitted to the settlement officer Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, indicating she had monthly income of $ 800 and expenses of $ 800, had $ 14 cash on hand, and owned a 1996 Toyota Corolla four-door sedan with 243,000 miles and a value of $ 300. If P's wages are levied on she will be unable to pay her reasonable basic living expenses. If her car is levied on, she will be unable to work.
The settlement officer stated in her log that P meets the criteria to have her account reported as currently not collectible because of hardship in accordance with the Internal Revenue Manual (IRM). However, R's Appeals Office issued a notice of determination to proceed with levy, stating that P was not entitled to collection alternatives because she had not filed her 2005 and 2007 Federal income tax returns. P timely petitioned for review of that determination under
Under 2009 U.S. Tax Ct. LEXIS 36">*37 regulations prescribed by the Secretary, the Secretary must release a levy upon all, or part of, a taxpayer's property or rights to property if, inter alia, the Secretary has determined that the levy is creating an economic hardship due to the financial condition of the taxpayer.
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133 T.C. 392">*393 OPINION
DAWSON,
Petitioner resided in Tennessee when she filed the petition. Her residence is an apartment that she rents for $ 600 per month.
On September 13, 2007, respondent sent petitioner a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (levy notice). The underlying tax liability was attributable to unpaid self-assessed tax reported on her 2002 return. Petitioner timely requested a hearing on September 24, 2007, and the 2009 U.S. Tax Ct. LEXIS 36">*39 hearing was conducted through correspondence and by telephone with the settlement officer.
Petitioner first learned of the collection activity when her employer notified her about the proposed levy on her wages. When the settlement officer asked petitioner whether she wanted to enter into an installment agreement, petitioner said "she has nothing." 2 Petitioner told the settlement officer that she has pulmonary fibrosis and is dying. Because of her health she can only find part-time employment.
The settlement officer could not find a record that petitioner had filed a return for 2005. Petitioner explained to the settlement officer that the payroll company responsible for completing her 2005 Form W-2, Wage and Tax Statement, was no longer in business. She had attempted to get the tax information from the Internal Revenue Service (IRS), but the IRS had no information regarding her income for 2005.
133 T.C. 392">*394 The settlement officer told petitioner that she might be able to have 2009 U.S. Tax Ct. LEXIS 36">*40 her account placed in currently not collectible status. The settlement officer asked petitioner to submit a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and a diagnosis regarding her current health condition.
Petitioner sent a completed Form 433-A, indicating she had monthly income of $ 800 and expenses of $ 800, had $ 14 cash on hand, and owned a 1996 Toyota Corolla four-door sedan with 243,000 miles and a value of $ 300. The Form 433-A reported that petitioner did not own any other assets. Verification received by the settlement officer was consistent with the information petitioner provided in the Form 433-A. Petitioner was unable to obtain a written diagnosis of her medical condition from her physician because her physician would provide a diagnosis only in a claim for worker's compensation.
The settlement officer's log entry dated May 15, 2008, states: TP [petitioner] meets the criteria to have account placed in CNC [currently not collectible] status per IRM 5.16.[1.]2.9 Hardship. The balance due is less than 10K and the TP has stated she has a terminal illness. CIS verification is not required. The TP has stated she has nothing and 2009 U.S. Tax Ct. LEXIS 36">*41 is not able to full pay or make payments. However, the TP is not in compliance. The TP has not filed a 2005 return and there is no record of the 2007 tax return being filed. The TP stated she does not have income information for 2005 and company that did payroll is no longer in business. TP stated she contacted IRS and they advised her they have no income information. There is no information per IRTRL. S/O [the settlement officer] contacted TP regarding filing of the 2007 return. The TP stated the return was filed late. The S/O requested the TP fax a copy of the return with the W-2. TP to fax information by 5-19-08. S/O asked TP if she obtained health diagnosis and the TP stated the doctor would only give her something if she is applying for diability. S/O requested income information for 2005 per IRPTRE.
The settlement officer's log entry dated May 20, 2008, states: TP did not provide a copy of 2007 return and there is no record that the return has been filed per IDRS research. The TP was employed in 2007 and is currently employed. The 2005 return has not been filed. Since the TP is not in compliance, collection alternative cannot be considered. S/O will issue determination letter. 2009 U.S. Tax Ct. LEXIS 36">*42 If the 2005 income information is received, the S/O will forward it to the TP. The settlement officer inquired about a collection alternative and you stated you could not make payments. You stated you had pulmonary fibrosis and can only work part-time hours due to your heath condition. The Settlement officer [who] advised you of the collection alternative however explained a collection alternative could not be considered because you were not in compliance with filing required tax returns. * * *
The attachment explained the balancing of efficient tax collection with concern regarding intrusiveness as follows: Appeals has verified, or received verification, that applicable laws and administrative procedures have been 2009 U.S. Tax Ct. LEXIS 36">*43 met; has considered the issues raised; and has balanced the proposed collection with the legitimate concern that such action be no more intrusive than necessary by Collection alternatives include full payment, installment agreement, offer in compromise and currently-not-collectible. However, since unfiled tax returns exist, the only alternative at present is to take enforced action by levying your assets. It is Appeals decision that the proposed levy action is appropriate. The proposed levy action balances the need for the efficient collection of the taxes with the legitimate concern that any collection action be no more intrusive than necessary.
Petitioner timely filed a petition in this Court challenging respondent's determination. Respondent filed the motion for summary judgment, and the Court ordered petitioner to file a response. 32009 U.S. Tax Ct. LEXIS 36">*47 Petitioner filed a response to respondent's motion for summary judgment but did not 2009 U.S. Tax Ct. LEXIS 36">*44 file a cross-motion 133 T.C. 392">*396 for summary judgment. 4 In her response petitioner describes her situation as follows: To Whom It May Concern, I don't know what you want to know cause I don't understand all the legal stuff you sent me. I can't afford a lawyer. And the closest legal aid is in Knoxville 30 miles away. My poor car will not go that far. So I will start at the beginning of my story and see if you can help me. I was in an unhealthy relationship for many years. During a great deal of that time my husband was doing alcohol and drugs. I had 2 children plus his 3 to take care of. I had been doing janitorial work at a strip mall * * *. It was the only place that I could work that I could take my [then] 3 year old daughter with me. I could not support my family and pay day care. * * * My husband took care of bills and such cause he demanded that I turn over my money. We even got a divorce during that time cause I was not obeying him. * * * Now I am not looking for sympathy just understanding. Do you know how hard it is to be a single parent? * * * I have a high school education and nothing else. It was nearly five years before I was notified of a problem by the I.R.S. Danny [petitioner's former 2009 U.S. Tax Ct. LEXIS 36">*45 spouse] was suppose to be doing taxes. He even made me sign a form that because he made more money he could claim my kids on his taxes cause we were no longer legally married. I got all the W-2's from the I.R.S. except 2005 that they still have not sent me. That is why they are not done. I did all those taxes and forfeited the refunds. I do not remember what that total came to. But it was enough to pay I would say most of back taxes. The 2007 taxes were late and I don't know why they didn't arrive. I sent a second copy in as soon as my son gave me my copy. He had my copy for college financial aid and he lost them for a bit of time. I am not a rich person. I work in a job so I can be home with my daughter. I left my husband in July after he threatened to beat my daughter with a baseball bat. Beating me is one thing but I could not have him beating my girl. So I am a single parent again. Right now we have not had much work in nearly a year. I have rent of 600 a mo. Utilities of 150 and get food stamps or I wouldn't eat. I make about 700-800 [per] month. There are no better jobs in our town. My daughter is only 11 so its not like can leave her alone at night or on weekends. D.H.S. says 2009 U.S. Tax Ct. LEXIS 36">*46 it's not even legal. She is too young. There is no child care and I have no family here. I have pulmonary fibrosis that makes me sick all the time and the diagnosis says I have about 10 yrs to live. Right now I can work thank God. 133 T.C. 392">*397 I did my taxes this year [for 2008] and you are getting a little over $ 4,700. I'm not asking for much just a break. You can have my tax returns [refunds ?] I don't care. Well I do that is a tremendous loss but oh well. I don't have any money to send you on a monthly basis. Can we stop all the penalties. They are killing me. I will never be able to pay it off. * * * I let a relationship screw me up. I am truly sorry for that and am begging for a lifeline here. You can come to my home and see for yourself. I don't have fancy t.v.'s or even cable except for internet. I can't afford a phone. My clothes have holes in them.I even cut my own hair. If I could pay this off faster I would just to stop the nightmares it gives me.
Summary judgment is used to expedite litigation and avoid unnecessary and expensive trials. The Court will render a decision on a motion for summary judgment if the pleadings, answers to interrogatories, depositions, admissions, and other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law. 2009 U.S. Tax Ct. LEXIS 36">*48
For purposes of respondent's motion for summary judgment, respondent has the burden of showing the absence of a genuine issue as to any material fact. Petitioner is afforded the benefit of all reasonable doubt, and the material submitted by both sides is viewed in the light most favorable to petitioner. See, e.g.,
Respondent moves the Court for summary judgment on the ground that the settlement officer did not abuse her discretion in rejecting collection alternatives and determining to proceed with levy because petitioner was not in compliance with the filing requirements. Petitioner asks that the levy not be sustained because, if her wages are taken, she will be unable to pay her basic living expenses; and, if her car is taken, she will not be able 2009 U.S. Tax Ct. LEXIS 36">*49 to work.
If a taxpayer liable for Federal taxes fails to pay the taxes within 10 days after notice and demand,
A taxpayer alleging that collection of the liability would create undue hardship must submit complete and current financial data to enable the Commissioner to evaluate the taxpayer's qualification for collection alternatives or other relief. (A) The taxpayer's age, employment status and history, ability to earn, number of dependents, and status as a dependent of 2009 U.S. Tax Ct. LEXIS 36">*51 someone else; (B) The amount reasonably necessary for food, clothing, housing * * *, medical expenses * * *, transportation, current tax payments * * *, alimony, child support, or other court-ordered payments, and expenses necessary to the taxpayer's production of income * * *; 133 T.C. 392">*399 (C) The cost of living in the geographic area in which the taxpayer resides; (D) The amount of property exempt from levy which is available to pay the taxpayer's expenses; (E) Any extraordinary circumstances such as special education expenses, a medical catastrophe, or natural disaster; and (F) Any other factor that the taxpayer claims bears on economic hardship and brings to the attention of the director.
The taxpayer may raise any relevant issue during the hearing, including appropriate spousal defenses and 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."
During the hearing the Appeals officer must verify that the requirements of applicable law and administrative procedure have been met, consider issues properly raised by the taxpayer, and consider whether any proposed collection action balances the need for the efficient collection of taxes with the taxpayer's legitimate concern that any collection action be no more intrusive than necessary.
Under
When a taxpayer establishes in a pre-levy collection hearing under
Respondent argues under the holdings of
Generally, we have found the Commissioner's policy requiring individuals seeking collection alternatives to be current with filing their returns to be reasonable. 72009 U.S. Tax Ct. LEXIS 36">*56 However, taxpayers in those cases have had sufficient income to meet basic living expenses. See, e.g.,
We have found no cases addressing the requirement that the taxpayer be current with filing returns in a levy case involving economic hardship under
The financial information petitioner submitted on the Form 433-A, which was consistent with other information the settlement officer obtained, showed that if petitioner's 133 T.C. 392">*402 wages are levied on, she will be unable to pay her basic living expenses; and, if her car is levied on, she will not be able to work. After analyzing petitioner's financial information, the settlement officer concluded that the levy would create an economic hardship and so stated in her log. However, the settlement officer determined collection alternatives to the levy, including an installment agreement, an offer-in-compromise, and reporting the account as currently not collectible, were not available because petitioner had not filed her 2005 and 2007 returns. The settlement officer's determination to proceed with the levy was reviewed and approved by the Appeals team manager who signed 2009 U.S. Tax Ct. LEXIS 36">*58 the notice of determination. Although the attachment to the notice of determination shows that the Appeals team manager was aware of petitioner's financial situation and health problems, the Appeals team manager signed the notice of determination to proceed with the levy because petitioner had not filed her 2005 and 2007 returns. Proceeding with the levy would be unreasonable because
1. All Rule references are to the Tax Court Rules of Practice and Procedure, and all section references are to the Internal Revenue Code.↩
2. Petitioner explained to the settlement officer that she had previously agreed to pay in installments and that she was told she would be sent envelopes for each payment, but she never received the envelopes or monthly bills.↩
3. In the order we observed that our preliminary review of the record indicated that the proposed levy action involved a hardship situation and that petitioner needed the assistance of an attorney. We urged petitioner to contact the legal aid society or the local bar association pro bono services and provided their addresses and phone numbers.
4. After petitioner filed her response to respondent's motion for summary judgment, respondent filed a motion to continue the case wherein respondent stated that petitioner was in the process of submitting a collection alternative to the IRS and that, if the alternative is accepted by the IRS, a trial in this case would not be necessary. The Court granted respondent's motion and directed the parties to file a status report on or before July 27, 2009. In a status report filed on July 17, 2009, respondent reported that respondent has not received any communication from petitioner and requested the Court to grant respondent's motion for summary judgment.↩
5. The regulations provide a method whereby a taxpayer may inform the Secretary that a levy is creating an economic hardship and request that the levy be released. See
6. Generally, the IRS will not grant an installment agreement, accept an offer-in-compromise, or report an account as currently not collectible if any tax return for which the taxpayer has a filing requirement has not been filed. See Internal Revenue Manual pts. 5.14.1.4.1(4)-(6) (Sept. 26, 2008) (installment agreements); 5.8.3.13(1), (2), (4) (Sept. 23, 2008) (offers-in-compromise); 5.16.1.1(5) and (6), 5.16.1.2.9(8) (May 5, 2009) (currently not collectible), 5.1.11.2.3 (June 2, 2004) (general collection procedures).↩
7. In