Drilling v. Commissioner of Internal Revenue, 052516 FEDTAX, 6347-12L

Docket Nº:6347-12L
Opinion Judge:MORRISON, Judge
Party Name:RICKEY L. DRILLING, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Attorney:R. Jeanette Parham, for petitioner. David Baudilio Mora, for respondent.
Case Date:May 25, 2016
Court:United States Tax Court
 
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T.C. Memo. 2016-103

RICKEY L. DRILLING, Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 6347-12L

United States Tax Court

May 25, 2016

R. Jeanette Parham, for petitioner.

David Baudilio Mora, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

MORRISON, Judge

CONTENTS FINDINGS OF FACT ............................................... 3

1. Drilling's Form 1040EZ for 2007.. ............................... 3

2. The IRS's notice to Drilling that it had filed a notice of lien; Drilling's initial collection-review hearing before the Appeals Office. . ........... 6

3. Drilling's petition, the Court's remand order, and the supplemental collection-review hearing ....................................... 20

4. Trial ........................................................ 38

OPINION ..................................................... 39

1. Withdrawing notice of lien or releasing lien for 2007 ................. 39

2. The $4, 000 offer-in-compromise.. ................................ 53

a. Reasonable collection potential .. ........................... 54

b. Special circumstances.. ................................... 61

c. Counteroffer. . .......................................... 62

3. Correction of amounts of tax liabilities. . .......................... 63

4. Conclusions. . ................................................ 70

This is an appeal pursuant to sections 6320(c) and 6330(d)(1)1 by which petitioner Rickey L. Drilling seeks this Court's review of a determination of the Appeals Office of the Internal Revenue Service (IRS) sustaining the filing of a notice of federal tax lien for the tax years 2004, 2005, and 2007. That determination was made after the Appeals Office had conducted a collection-review hearing under section 6330(b) and a supplemental collection-review hearing pursuant to a remand by this Court. The determination was made in a supplemental notice of determination dated July 29, 2013. It is described infra pp. 32-38. We hold that the Appeals Office did not err in its determination.

FINDINGS OF FACT

When he filed the petition, Drilling was a resident of Texas. 1. Drilling's Form 1040EZ for 2007

April 15, 2008, was the filing deadline for Drilling's 2007 federal-income-tax return. On or before that date, Drilling filed a Form 1040EZ, "Income Tax Return for Single and Joint Filers With No Dependents", with the IRS.2 On the Form 1040EZ, Drilling reported $14, 605 as his tax due (before accounting for any payments of tax and any amounts of tax withheld from his wages). Drilling made a payment of $475 with the Form 1040EZ. He did not attach a Form W-2, "Wage and Tax Statement", to the Form 1040EZ. A Form W-2 would have stated how much was withheld from Drilling's wages for federal income tax.

For the date April 18, 2008, the IRS made an entry on its records3 for Drilling's 2007 tax year that there was a "Payment with return". The amount of this entry is -$475. This entry supports our finding that Drilling made a $475 payment with his Form 1040EZ for 2007. This entry also supports our finding that Drilling filed his return timely.[4]

On June 4, 2008, the IRS sent Drilling a letter stating that it had received his Form 1040EZ for 2007 but that it needed "more information to process the return accurately." In particular, the letter made the following request of Drilling: "Please provide a form with information that supports the wage or withholding entry of $14, 130.00 on line 7, Form 1040EZ. It could be Form W-2, Form W-2G (for gambling winnings), or Form 1099-R (for pension income)." The letter supports our finding that Drilling did not attach a Form W-2 to the Form 1040EZ.5

For the date July 14, 2008, the IRS made an entry in its records for Drilling's 2007 tax year. The entry was "Tax return filed". The amount of this entry was $14, 605. Another portion of the IRS's records for Drilling's 2007 tax year states:

RETURN DUE DATE OR RETURN RECEIVED DATE (WHICHEVER IS LATER) Apr. 15, 2008
PROCESSING DATE Jul. 14, 2008
The July 14, 2008 entry in the IRS's records of "Tax return filed" and the identification of July 14, 2008, as the "PROCESSING DATE" indicate to us that the IRS finally processed the Form 1040EZ around July 14, 2008. The $14, 605 amount associated with the July 14, 2008 entry supports our finding of fact that Drilling had reported $14, 605 on the Form 1040EZ as his tax due (before accounting for payments and wage withholding). Drilling did not respond to the IRS's June 4, 2008 request for his Form W-2. 2. The IRS's notice to Drilling that it had filed a notice of lien; Drilling's initial collection-review hearing before the Appeals Office On May 11, 2010, the IRS mailed a notice to Drilling that on that day it had filed a notice of lien in Harris County, Texas, to collect income-tax liabilities for the following tax years in the following amounts:
Year Amount
2004 $236.87
2005 2, 144.25
2007 14, 736.94
The May 11, 2010 notice stated that Drilling could request a collection-review hearing with the Appeals Office. On June 17, 2010, Drilling mailed the IRS a Form 12153, "Request for a Collection Due Process or Equivalent Hearing", by which he requested a collection-review hearing. As to the "reason" that Drilling "disagree[d] with the filing of the lien", Drilling made the following entries on the form: •Under the heading "Collection Alternative", Drilling checked both the box for "Installment Agreement" and the box for "Offer in Compromise".

•Under the heading "Lien", Drilling checked the box for "Withdrawal" and explained: "Originally requested offer in compromise then arranged installments which you did not deduct under multiple court ordered payments. Need Relief." On April 1, 2011, the Appeals Office had a telephone conference with Drilling and his representative, R. Jeanette Parham. The settlement officer assigned to the hearing, Alvena Taylor-White, made notes of what transpired during the telephone conference. The notes reflect that Settlement Officer Taylor-White asked Parham whether Drilling had any issues to raise besides those discussed in the Form 12135; Parham responded that Drilling wished to submit an amended tax return for 2007; Parham stated that Drilling had not been given credit for $14, 129 of federal income tax withholding for 2007; Settlement Officer Taylor-White reviewed certain records and agreed that Drilling had not been given credit for $14, 129 of federal income tax withholding; Parham stated that she had "no issue" with the tax liabilities for 2004 and 2005; Settlement Officer Taylor-White responded to Drilling's request for a collection alternative by stating that Drilling had not filed his 2006 and 2008 returns; Parham promised to fax returns for 2006 and 2008 and an amended 2007 return; Parham stated that lien withdrawal would facilitate the collection of tax; Settlement Officer Taylor-White explained to Parham the difference between an "IA" [installment agreement] and an "offer"; and Settlement Officer Taylor-White gave Parham until April 15, 2011, to provide "the addtl info" [i.e., the additional information]. On April 15, 2011, Parham faxed to Settlement Officer Taylor-White a set of documents. Here is a partial list of the documents:

Date of document Description of document
Apr. 15, 2011
...

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