Johnson v. IRS
| Decision Date | 21 December 1994 |
| Docket Number | Bankruptcy No. CV 94-5325-SVW(Ex). |
| Citation | 888 F. Supp. 1495 |
| Court | U.S. District Court — Central District of California |
| Parties | Dolores JOHNSON, Plaintiff, v. INTERNAL REVENUE SERVICE; Richard Rorosco, District Director; Jim Hughes, Revenue Officer; and United States of America, Defendants. |
Dolores Johnson, Long Beach, CA, pro se.
Nora M. Manella, U.S. Atty., Edward M. Robbins, Jr., Asst. U.S. Atty., Chief, Tax Div., Richard G. Stack, Asst. U.S. Atty., Los Angeles, CA, for defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This matter came on for trial before this Court on October 25, 1994, the Honorable Stephen V. Wilson, United States District Judge, presiding. Further proceedings were held on November 28, 1994 on the issue of whether the Internal Revenue Service sent a statutory notice of deficiency to plaintiff prior to the assessment of the 1987 income tax deficiency against her. Based upon the evidence adduced at trial and at the November 28, 1994 post-trial hearing, and all matters that are properly part of the record, the Court makes the following Findings of Fact and Conclusions of Law:
FINDINGS OF FACT
1. On August 4, 1994, plaintiff Delores Johnson instituted this action by filing a pleading entitled "COMPLAINT TO QUITE sic TITLE UNDER TITLE 28 U.S.C. § 2410(A) AND FOR EQUITABLE RELIEF UNDER THE JUDICIAL DOCTRINE OF ECONOMICAL HARDSHIP; DAMAGES; ACTUAL AND PUNITIVE; FOR BAD FAITH AND OPPRESSION" (hereafter "Complaint"). On August 10, 1994, the Court, the Honorable A. Wallace Tashima presiding, entered an Order denying plaintiff's ex parte motion for a temporary restraining order (hereafter "Ex Parte Motion"). Subsequently, in an Order entered on October 5, 1994, the Court denied plaintiff's motion for a preliminary injunction (hereafter "Motion").
2. In her Complaint, plaintiff seeks to enjoin tax collection action undertaken by the Internal Revenue Service (hereafter "IRS" or "Service") with respect to her 1987, 1992 and 1993 income tax liabilities (hereafter collectively referred to as "subject liabilities").
3. On or about July 27, 1994, the IRS served a Notice of Levy on Wages, Salary, and Other Income (Form 668-W) upon plaintiff's employer, International Transportation Service, with respect to the salary payable to plaintiff. (Complaint, ¶ 14). The Notice of Levy dated July 27, 1994 erroneously stated that plaintiff was not entitled to any exemptions from levy under Section 6334(a)(9) of the Internal Revenue Code. For that reason, on August 9, 1994, Revenue Officer Jim Hughes sent plaintiff's employer an amended levy allowing plaintiff one exemption from levy for herself, as a married person filing a separate return, and such additional exemptions from levy to which plaintiff established entitlement by submitting to the IRS a "written and properly verified statement." See 26 U.S.C. § 6334(d)(2); Treas.Reg. § 301.6334-5(b), 26 C.F.R. On or about August 9, 1994, plaintiff's employer completed an acknowledgement form accompanying the amended levy and tendered a check in the amount of $2,067.08 to the IRS. The amount tendered represented the entire amount of plaintiff's take home salary for the pay period ending August 4, 1994, only because plaintiff refused to accept a check for $240.38 (i.e., the amount exempt from levy based on one exemption from levy). The "Remarks" section of the levy acknowledgement form states:
4. Plaintiff complains of other tax collection activity in her Complaint. For example, on May 11, 1994 and June 13, 1994, respectively, the IRS filed Notices of Federal Tax Lien in Los Angeles County regarding the subject liabilities. (Complaint, ¶¶ 12-13).
5. Plaintiff contends that she meets the statutory and judicial exceptions to the Anti-Injunction Act, 26 U.S.C. § 7421(a) for two reasons. First, the IRS allegedly assessed and collected the subject liabilities without first mailing statutory notices of deficiency to plaintiff at her last known address, as required by 26 U.S.C. §§ 6212 and 6213(a). Thus, plaintiff claims that she falls within the exception to the Anti-Injunction Act prescribed by 26 U.S.C. § 6213(a). (Complaint, ¶¶ 2-3). Second, the IRS allegedly assessed and collected plaintiff's 1987 income tax liability beyond the three-year statute of limitations for assessment prescribed by 26 U.S.C. § 6501(a). (Complaint, ¶ 4). In her complaint, plaintiff asserts that she filed a 1987 return with the IRS in September of 1989, and that the IRS did not make an assessment with respect to that period until April 26, 1993, after the expiration of the applicable statute of limitations. (Complaint, ¶ 15).
6. Plaintiff contends that she does not have an adequate legal remedy because the IRS allegedly deprived her of an opportunity to challenge the claimed deficiencies in the United States Tax Court by failing to send her notices of deficiency and failing to timely demand payment pursuant to 26 U.S.C. § 6303(a). Thus, plaintiff asserts that the deprivation of a pre-payment forum in which to litigate her tax liabilities has caused her "substantial hardship," since she will now be required to pay the taxes before seeking refund. (Complaint, ¶¶ 5-6). Plaintiff further alleges that the levy on her wages has caused "more than monetary harm," since it allegedly has deprived her of the necessities of life, and she allegedly "has no other source of income." See Complaint, ¶¶ 14 and 22-23.
7. In her Complaint, plaintiff prays for a temporary restraining order and/or a preliminary or permanent injunction prohibiting the defendants from garnishing plaintiff's wages and bank accounts, for actual damages against each defendant in the amount of $5,000.00, for "compensatory damages" against each defendant in the amount of $3,000.00 for allegedly depriving plaintiff of her "procedural due process" rights to petition the Tax Court for a redetermination of her liabilities without first having to pay the subject liabilities, for punitive damages against each defendant in the amount of $3,000.00, for "breach of fiduciary relationship and duties; and for bad faith and oppression," and for costs and paralegal fees incurred.
8. On October 4, 1994, defendants filed an answer to plaintiff's complaint. In their answer, defendants averred that plaintiff was not entitled to any of the relief requested.
9. In her Memorandum of Contentions of Fact and Law filed on October 18, 1994 and at trial, plaintiff abandoned her causes of action pertaining to the tax years 1992 and 1993. Thus, plaintiff agreed that she is liable for the 1992 and 1993 Federal income tax liabilities assessed and collected from her.
10. Therefore, the only issues raised in this case are whether the IRS assessed plaintiff's 1987 income tax liability outside of the three-year statute of limitations for assessment prescribed by 26 U.S.C. § 6501(a); whether the IRS sent a statutory notice of deficiency to plaintiff at her last known address prior to the assessment of the 1987 income tax deficiency; and, if not, whether the IRS nevertheless was authorized to make the 1987 tax assessment against plaintiff. Plaintiff's ability to obtain relief in this action depends upon the date that she filed her 1987 return with the IRS and whether the IRS sent her a notice of deficiency for that year. Plaintiff also would be required to establish irreparable injury and an inadequate legal remedy in order to obtain injunctive relief.
11. On October 20, 1994, the parties lodged a Stipulation to Continue the trial on the grounds that this case had been pending for only two and one-half months and that the parties had not had an opportunity to conduct discovery. The parties and the Court discussed that proposed Stipulation prior to the start of trial on October 25, 1994. The Court explained that either party had the right to a continuance of the trial, if it so desired. Plaintiff and defendants' counsel each stated that they wished to proceed with the scheduled trial.
12. The IRS has made the following assessments and abatements of income taxes, penalties and interest against plaintiff for the 1987 tax year:
Assessment/ Amount
Tax Year Abatement Date Assessed/Abated1
1987 04/26/93 $91,471.41 (T)2
1,669.00 (P1)
20,965.85 (P1)
360.57 (P3)
4,516.79 (P3)
72,785.35 (I)
01/10/94 10.00 (F)
02/28/94 1,669.00 (P2)
03/28/94 (83,863.41)(T)
(20,965.85)(P1)
(4,516.79)(P3)
(66,700.18)(I)
(Exhibit No. 100, Certificate of Assessments and Payments).
13. As of August 5, 1994, the unpaid balance of the tax liability assessed against plaintiff for the year 1987 was $12,887.34, excluding statutory additions and accruals.
14. Prior to trial, plaintiff submitted the declarations of Delores Johnson and Ted Freedman, pursuant to the Court's "Order Re: Civil Trial Preparation" dated September 26, 1994. The Court admitted those declarations at trial as Exhibit Nos. 15 and 16. Prior to trial, defendants submitted the declaration of Spencer Kell pursuant to the Court's Order dated September 26, 1994. At the close of trial, the Court admitted the Kell Declaration in its entirety as Exhibit No. 112.
15. The Johnson and Freedman declarations address only the question of when plaintiff mailed her 1987 return to the IRS. Plaintiff made no showing in either her declaration or trial testimony that she has an inadequate remedy at law and/or that she would sustain...
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