Valteau, Harris, Koenig and Mayer v. Commissioner of Internal Revenue, 072114 FEDTAX, 5584-09L

Docket Nº:5584-09L
Opinion Judge:GOEKE, Judge
Party Name:VALTEAU, HARRIS, KOENIG AND MAYER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Attorney:James R. Washington, III and Jason R. Anders, for petitioner. Ardney J. Boland, III and Steven Gallo (student), for respondent.
Case Date:July 21, 2014
Court:United States Tax Court
 
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T.C. Memo. 2014-144

VALTEAU, HARRIS, KOENIG AND MAYER, Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 5584-09L

United States Tax Court

July 21, 2014

James R. Washington, III and Jason R. Anders, for petitioner.

Ardney J. Boland, III and Steven Gallo (student), for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

GOEKE, Judge

This is a collection due process (CDP) appeal pursuant to section 6330(d)[1] for petitioner's employment tax, unemployment tax, and income tax liabilities for 26 different periods (periods at issue). The unpaid balances for the various accounts are as follows:

Type

Form

Period

Balance1

Employment

Form 941

12/31/99

$167.10

Employment

Form 941

9/30/00

475.30

Employment

Form 941

3/31/01

1, 751.03

Employment

Form 941

6/30/01

1, 599.93

Employment

Form 941

9/30/01

1, 532.36

Employment

Form 941

12/31/01

961.77

Employment

Form 941

3/31/02

1, 407.74

Employment

Form 941

6/30/02

1, 334.37

Employment

Form 941

9/30/02

277.51

Employment

Form 941

12/31/02

64.88

Employment

Form 941

3/31/03

5, 350.43

Employment

Form 941

6/30/03

5, 116.89

Employment

Form 941

9/30/03

5, 474.01

Employment

Form 941

12/31/03

335.22

Employment

Form 941

6/30/04

64.71

Employment

Form 941

9/30/04

949.55

Employment

Form 941

3/31/05

59.74

Employment

Form 941

6/30/05

5, 115.10

Employment

Form 941

9/30/05

1, 722.81

Employment

Form 941

12/31/05

1, 068.98

Employment

Form 941

9/30/06

712.59

Unemployment

Form 940

1999

1, 745.31

Unemployment

Form 940

2000

936.23

Unemployment

Form 940

2005

23.70

Income Tax

Form 1065

2004

750.00

Income Tax

Form 1065

2006

840.00

1Amounts are exclusive of accrued, but unassessed, interest. After concessions, 2 two issues remain for our consideration:

(1) whether respondent is required to apply certain fund transfers as petitioner directed on its Federal tax deposit forms. We hold he is not.

(2) whether petitioner is entitled to an abatement of the tax, additions to tax, or tax penalties for any of the periods at issue. We hold that it is not.

FINDINGS OF FACT

Petitioner is a New Orleans law firm that began operations in 1990 and had a principal place of business in Louisiana when it filed its petition. Before the periods at issue petitioner relied on a certified public accountant (C.P.A.) to help it meet its various tax obligations. At some point petitioner terminated its relationship with the C.P.A., and Edmond Harris, petitioner's tax matters partner, assumed responsibility for filing petitioner's tax returns and for meeting various remittance deadlines.

Petitioner failed to timely file any of the returns for the 26 periods at issue. It did, however, make 31 separate remittances partially satisfying the liabilities it incurred during those periods. Petitioner made the remittances as if they were Federal tax deposits. It prepared Forms 8109-B, Federal Tax Deposit Coupon (FTD coupon or coupon), and submitted them with the remittances to banks authorized to accept tax deposits. The FTD coupons indicated the period to which the remittances were to apply as did the memo line of each check. Petitioner designated many of the remittances to satisfy past due liabilities. Because the coupons and payments were submitted to banks rather than to respondent, respondent did not always receive petitioner's designation instructions. Respondent allocated only 20 of the payments in accordance with petitioner's instructions.

Although it failed to timely pay its employment and unemployment taxes during the periods at issue, petitioner continued to operate as usual. Petitioner never missed a payroll and continued to make bonus payments to its employees. Petitioner also organized yearend parties for its employees and took only minimal steps to reduce its expenses.

Respondent determined that petitioner had underpaid its employment and unemployment taxes for the periods at issue and that petitioner is liable for additions to tax under section 6651 for failing to timely file employment and unemployment tax returns. He also determined that petitioner is liable for penalties under section 6656 for failing to make tax deposits and under section 6698 for failing to file its partnership returns. If respondent had allocated petitioner's payments as it had requested, its penalties and additions to tax would have been less.

Between February and April 2008 respondent issued petitioner two notices of intent to levy and four notices of Federal tax lien filing for collection of the tax liabilities for the periods at issue. Petitioner timely requested CDP hearings for the various collection notices.

Petitioner's CDP hearing was assigned to an Internal Revenue Service (IRS) settlement officer (SO). Mr. Harris met with the SO and gave her documents he believed demonstrated that the IRS had misapplied certain fund transfers. Mr. Harris requested that the IRS reallocate the funds because he believed the reallocation would significantly reduce petitioner's tax liabilities. Mr. Harris also disputed respondent's determination of petitioner's tax liability for the fourth quarter of 1999. Mr. Harris then told the SO that all additions to tax, penalties, and interest should be abated because (1) all tax was eventually paid and (2) Mr. Harris was not qualified to handle petitioner's tax liabilities even though he was designated as petitioner's tax matters partner.

After reviewing the evidence, the SO concluded that respondent had properly applied all of the funds. The SO further concluded that respondent had properly determined petitioner's fourth quarter 1999 employment tax liability and that the arguments presented did not justify abating the additions to tax and penalties for the periods at issue. On the basis of these conclusions, the SO sustained respondent's proposed collection action. Petitioner timely petitioned the Court for review of the SO's determinations.

OPINION

I. Jurisdiction

Petitioner comes before us pursuant to section 6330(d) to appeal the SO's determinations in its CDP hearing. Our jurisdiction under section 6330(d) is established when there is (1) a written notice that embodies a determination to proceed with the collection of taxes in issue and (2) a timely filed petition. Lunsford v. Commissioner, 117 T.C. 159, 164 (2001).

Petitioner received two levy notices and four lien notices for collection of the 26 tax liabilities at issue, and it timely filed a petition challenging the notices. Therefore, we have jurisdiction under section 6330(d).

II. CDP Hearing and Standard of Review

The lien and levy notices gave petitioner a statutory right to a CDP hearing with the Appeals Office, which petitioner requested. During a CDP hearing a taxpayer may raise any relevant issue, including challenges to the appropriateness of the collection action and possible collection alternatives. Sec. 6330(c)(2)(A). At a CDP hearing a taxpayer may challenge its underlying liability if it has had no...

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