Vinatieri v. Comm'r of Internal Revenue, 15895–08L.

• Decision Date: 21 December 2009
• Docket Number: No. 15895–08L.,15895–08L.
• Citation: 133 T.C. 392,133 T.C. No. 16
• Parties: Kathleen A. VINATIERI, Petitioner v. COMMISSIONER of INTERNAL REVENUE, Respondent.
• Court: U.S. Tax Court

133 T.C. 392

133 T.C. No. 16

Kathleen A. VINATIERI, Petitioner

v.COMMISSIONER of INTERNAL REVENUE, Respondent.

No. 15895–08L.

United States Tax Court.

Dec. 21, 2009.

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 sec. 6330, I.R.C.

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 sec. 6330(d), I.R.C. R filed a motion for summary judgment. P, proceeding pro se, did not file a cross-motion for summary judgment.

Under 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. Sec. 6343(a)(1)(D), I.R.C. The regulations provide that a levy is creating an economic hardship due to the financial condition of an individual taxpayer and must be released “if satisfaction of the levy in whole or in part will cause an individual taxpayer to be unable to pay his or her reasonable basic living expenses.” Sec. 301.6343–1(b)(4), Proced. & Admin. Regs.

1. Held: Sec. 6343(a)(1)(D), I.R.C., and sec. 301.6343–1(b)(4), Proced. & Admin. Regs., require release of a levy that creates an economic hardship regardless of the taxpayer's noncompliance with filing required returns.

2. Held, further, a levy on P's wages or car would cause P to be unable to pay her reasonable basic living expenses, creating an economic hardship that would require release of the levy pursuant to sec. 6343(a)(1)(D), I.R.C., and sec. 301.6343–1(b)(4), Proced. & Admin. Regs.

3. Held, further, R's motion for summary judgment is denied because R's determination to proceed with the levy was wrong as a matter of law and, therefore, was an abuse of discretion.

Kathleen A. Vinatieri, pro se.

Martha J. Weber, for respondent.

OPINION

DAWSON, Judge.

This matter is before the Court on respondent's motion for summary judgment filed pursuant to Rule 121.¹ Petitioner timely filed a petition pursuant to section 6330(d) appealing respondent's determination to proceed with collection by levy of petitioner's 2002 income tax liability. The issue to be decided is whether respondent's determination was an abuse of discretion.

Background

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 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.

The settlement officer told petitioner that she might be able to have 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 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. If the 2005 income information is received, the S/O will forward it to the TP.

Respondent issued petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice of determination) dated June 2, 2008, sustaining the proposed levy action and stating that, because petitioner was not in compliance with filing the required tax returns, a collection alternative could not be considered. The notice of determination was reviewed and signed by the Appeals team manager. The attachment to the notice of determination stated:

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 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 IRC Section 6330(c)(3).

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.

Neither the notice of determination nor the attachment reflect any consideration of the fact that the levy would create an economic hardship as stated by the settlement officer in her daily log and supported by the Form 433–A petitioner submitted.

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.³ Petitioner filed a response to respondent's motion for summary judgment but did not file a cross-motion 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...