In 2021, the Internal Revenue Service filed 212,251 Notices of Federal Tax Lien (“NFTLs”). To provide perspective, in 2019 (i.e., pre-COVID-19 pandemic), the IRS filed 543,604 NFTLs. The IRS is working on ramping up its enforcement efforts; however, the IRS must follow certain procedures with respect to filing NFTLs against taxpayers. The Treasury Inspector General for Tax Administration (“TIGTA”) recently performed its annual audit to review the Internal Revenue Service’s legal compliance with respect to NFTLs. While TIGTA found general compliance by the IRS, it also noted several areas of improvement.NFTLs and Section 6320(a)Section 6320(a) of the Internal Revenue Code explicitly provides that the IRS must file a notice of lien, assuming it complies with certain restrictions on timing, service methods, and notice information. Specifically, Section 6320(a) provides as follows:(a) Requirement of notice(1) In generalThe Secretary shall notify in writing the person described in section 6321 of the filing of a notice of lien under section 6323.(2) Time and method for noticeThe notice required under paragraph (1) shall be—(A) given in person;(B) left at the dwelling or usual place of business of such person; or(C) sent by certified or registered mail to such person’s last known address,not more than 5 business days after the day of the filing of the notice of lien.(3) Information included with noticeThe notice required under paragraph (1) shall include in simple and nontechnical terms—(A) the amount of unpaid tax;(B) the right of the person to request a hearing during the 30-day period beginning on the day after the 5-day period described in paragraph (2)

le in 2000. KPMG was deemed the principal organizer under Temporary Treasury Regulation § 301.6111-1T, and KPMG failed to register the tax shelters. Because Goddard and LGD assisted in the implementation, they were also required to register those alleged tax shelters under pre-AJCA section 6111, but they did not. See Form 8264, Application for Registration of a Tax Shelter.After completion of a summons enforcement action, the IRS, in about May 2014, developed a pre-AJCA section 6707 penalty case against Goddard and LGD. The initiation of the case involved Form 5701, Notice of Proposed Adjustment; Form 886-A, Explanation of Items; a penalty computation; Publication 5 – Your Appeal Rights and How to Prepare a Protest if You Don’t Agree. The case proceeded into 2016 when IRS Appeals Officer sustained the pre-AJCA section 6707 penalties for tax years 2009 and 2000. To collect those penalties, the IRS provided Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320. In 2017, Goddard submitted Form 12153, Request for a Collection Due Process or Equivalent Hearing (CDP hearing request), claiming that he had no opportunity to dispute the underlying tax liability during the Appeals Office process. (Goddard claimed he did not receive Appeals Office’s closing letter, but, in the CDP process, Goddard produced the closing letter to the Settlement Officer.) Later in 2017, the IRS mailed LGD Letter 1058, Final Notice – Notice of Intent to Levy and Notice of Your Rights to Hearing (levy notice), with respect to the pre-AJCA section 6707 penalties for tax years 1999 and 2000. LGD timely submitted a CDP hearing request. LGD did not check any boxes on the CDP hearing request indicating a reason for disagreeing with the proposed levy. Ultimately, the Settlement Officer affirmed that the levy notice and amounts due were properly assessed. LGD contested the determination.Key Issues and Short Answers:(1) Whether the settlement officers (SO) erred by refusing to c

Key Points of Law:A taxpayer may challenge his underlying liability at a CDP hearing only if he did not receive a notice of deficiency for that liability or did not otherwise have a prior opportunity to dispute it. I.R.C. §§ 6320(c), 6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000).An earlier CDP hearing is considered a “prior opportunity” for purposes of sections 6320(c) and 6330(c)(2)(B) if the tax and tax period(s) at issue in the CDP hearing at issue was/were at issue in the earlier hearing.

A taxpayer may raise a challenge to the existence or amount of his or her underlying tax liability during a CDP proceeding only if the taxpayer did not receive a statutory notice of deficiency for the tax year at issue or otherwise have an opportunity to dispute it. See 26 U.S.C. §§ 6320(c), 6330(c)(2)(B). If a taxpayer received notice of deficiency but does not timely petition, the taxpayer will likely be barred from later challenging the deficiency in a CDP proceeding.

Collection Due Process HearingsCollection Due Process (CDP) hearings are among the most common proceedings in IRS appeals. A CDP hearing is available where a taxpayer receives one of the following notices:Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320 Final Notice – Notice of Intent to Levy and Notice of Your Right to a HearingNotice of Jeopardy Levy and Right of AppealNotice of Levy on Your State Tax Refund – Notice of Your Right to a HearingPost Levy Collection Due Process (CDP) Notice By law, a taxpayer has the right to a CDP hearing when they receive a notice advising of this right and they timely file a request for a hearing to the address indicated on the Notice. Taxpayers are, however, limited to one hearing under section 6320 (Notice and opportunity for hearing upon filing of notice of lien) and 6330 (Notice and opportunity for hearing before levy) for each tax assessment within a tax period.

Similar to Statutory Notice of Deficiency referred to above, the IRS Appeals Office will send you a Written Notice of Determination at the conclusion of your appeal from which you also have 30 days to file a Petition in Tax Court assuming you are not in agreement with the Written Notice of Determination. Further information concerning this procedure can be found here.Notice of Federal Tax Lien Filing – Letter 3172Sent by Certified Mail to your Last Known Address – The IRS is required under IRC § 6320 to send you a Notice of Federal Tax Lien and Your Right to a Hearing under IRC § 6320 (Letter 3172) not more than five business days after the filing of the first Notice of Federal Tax Lien (NFTL) for a specific tax period. The notice must inform you of your right to request a Collection Due Process hearing before the IRS Appeals Office within 30 days from the date of the letter by submitting a Form 12153 “Request for a Collection Due Process or Equivalent Hearing.”Similar to the appeal of a Final Notice of Intent to Levy discussed above, the appeal of a Notice of Federal Tax Lien Filing initiates the steps and protections afforded by “Collection Due Process” and the opportunity to go to Tax Court if matters cannot be resolved with the IRS Appeals Office.

itigation that taxpayers should closely monitor for years to come.BackgroundFor tax years 2003 through 2010, Alon Farhy (Taxpayer) owned various foreign corporations. For these years, the Taxpayer failed to file requisite Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations (Form 5471).In 2016, the IRS mailed a notice to the Taxpayer informing him of his failure to file the required Forms 5471. The Taxpayer failed to comply. On Nov. 5, 2018, the IRS assessed an initial $10,000 penalty under Section 6038(b)(1) for each year at issue, and on Nov. 12, 2018, the IRS assessed continuation penalties under Section 6038(b)(2) totaling $50,000 for each of the years at issue.Thereafter, the IRS issued a levy notice to collect the Section 6038 penalties, and the Taxpayer timely requested a collection due process (CDP) hearing pursuant to Section 6330. As a result of the CDP hearing, the IRS issued a Notice of Determination Concerning Collection Actions under IRC Sections 6320 or 6330 of the Code (Notice of Determination) sustaining the liabilities for the Section 6038 penalties.The Taxpayer timely petitioned the USTC for review of the Notice of Determination. The sole issue before the USTC was whether the IRS had statutory authority to assess Section 6038(b) penalties.The Taxpayer argued that the Code lacks any provision authorizing the IRS to assess Section 6038(b) penalties but that liabilities for such penalties may be collected in a civil action under Title 28 (and not under the Code). The IRS argued, among other contentions, that "assessable penalties" includes any penalties in the Code not subject to deficiency procedures and, pursuant to Section 6201(a), the IRS (by delegation from the Secretary of the U.S. Department of the Treasury) is authorized and required to make assessments of all taxes (including interest, additional amounts, additions to tax and assessable penalties) imposed by the Code.The DecisionIn concluding the Taxpayer's reading of th

).Failure to Pay Estimated Tax. Section 6654(a) imposes an addition to tax on an individual who underpays his estimated tax. This addition to tax is calculated with reference to four required installment payments of the taxpayer’s estimated tax liability. 26 U.S.C. § 6654(c) and (d). However, no addition to tax is imposed if the taxpayer is U.S. citizen who “did not have any liability for tax for the preceding [12-month] taxable year.” 26 U.S.C. § 6654(e)(2).Abuse of Discretion. In deciding whether the IRS settlement officers (SOs) abused their discretion the courts consider whether they (1) properly verified that the requirements of applicable law or administrative procedure were met, (2) considered relevant issues the taxpayer raised, and (3) considered “whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of [petitioner] that any collection action be no more intrusive than necessary.” See 26 U.S.C. §§ 6330(c)(3), 6320(c).Insights: Expenses incurred by a lawyer in engaging in car-racing activities are not likely deductible as an “ordinary” and “necessary” expense that is “appropriate and helpful” in carrying on the lawyer’s profit-seeking activity of practicing law. At least in Avery’s case, the primary motive for incurring the expenses in issue was personal and, thus, not deductible under section 162(a). If an expenditure is primarily motivated by personal considerations, no deduction is allowed.[View source.]

ncluding the Court-ordered section 6673(a)(1) penalty, must be legally enforceable as of the time of the certification. 26 U.S.C. § 7345(b)(1) (flush text).Fourth Requirement: Collection Actions Already Taken. For the certification to stand, the record must show that when the IRS certified the taxpayer to the State Department, the IRS had already engaged in collection actions, such as issuance of lien and levy notices for the tax years in issue. See 26 U.S.C. § 7345(b)(1)(C); Ezekwo v. Commissioner, T.C. Memo. 2022-54, at *5 (clarifying that either a notice of lien filed pursuant to section 6323 or a levy made pursuant to section 6331 “is sufficient to render a tax debt ‘seriously delinquent’”).Period of Limitations on Collection After Assessment. Under section 6502(a)(1), the IRS has ten years to collect tax by levy or judicial proceeding. That ten-year period of limitations is suspended when a taxpayer requests a collection due process hearing pursuant to sections 6320 and 6330. See 26 U.S.C. §§ 6320(c), 6330(e)(1); Boyd v. Commissioner, 117 T.C. 127, 130 (2001). The suspension remains in effect throughout the CDP hearing and any subsequent appeals. 26 U.S.C. § 6330(e)(1). It ends on the 90th day after the day the final appeal determination is made. See id.; Treas. Reg. § 301.6330-1(g).Expiration of Filed Tax Liens. When a taxpayer fails to pay an assessed tax liability after receiving notice and demand for payment, a lien automatically arises by operation of law and continues until the liability is satisfied or becomes unenforceable by lapse of time. 26 U.S.C. §§ 6321, 6322. That lien, however, is generally not valid against third parties unless the IRS records the lien, i.e., files a notice of federal tax lien. See 26 U.S.C. § 6323(a); Thompson v. Commissioner, T.C. Memo. 2013-260, at *7–8; Treas. Reg. §§ 301.6323(a)-1(a), 301.6323(f)-1(d). The IRS need not record the lien in order to enforce it against the taxpayer. If the underlying liability becomes unenforceable by lapse of tim

Podlucky v. Commissioner, TC Memo. 2022-45| May 5, 2022 | Lauber, J. | Dkt. No. 453-17Wolfson v. Comm’r, T.C. Memo. 2022-46 | May 5, 2022 | Lauber, Judge | Docket No. 21343-21LMemo. OpinionSummary: A taxpayer sought review pro se under IRC sections 6320(c) and 6330(d)(1) of an IRS determination to uphold a collection action following a Collections Due Process (CDP) hearing with a Settlement Officer (SO). Upon motion of the IRS, the Court granted summary judgment.