Refusal to Accept Delivery of Proposed Tax Assessment Precludes Taxpayer from Later Contesting Liability. (Parker's Federal Tax Bulletin: June 26, 2013)

A taxpayer who refused to accept delivery of the IRS's notice of proposed assessment of a trust fund recovery penalty was precluded from contesting his liability, and the IRS did not abuse its discretion in sustaining the proposed levy action. Giaquinto v. Comm'r, T.C. Memo. 2013-150 (6/12/13).

Cesare Giaquinto worked as a designer for a professional architectural firm. In 2006, 2007 and 2008, the architectural firm failed to pay over its withholding taxes to the IRS. An IRS Revenue Officer visited the firm on two occasions to secure payment of the withholding taxes. Cesare was present during both of the visits. During the second visit, the Revenue Officer took an inventory of the firm's office equipment and interviewed Cesare regarding the potential application of the Code Sec. 6672 trust fund recovery penalties to him. Cesare completed Form 4180, Report of Interview with Individual Relative to Trust Fund Recovery Penalty or Personal Liability for Excise Taxes. However, he refused to complete Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals. In November 2008, the Revenue Officer sent a Letter 1153 and Form 2751, Proposed Assessment of Trust Fund Recovery Penalty to Cesare's home by certified mail. The envelope was returned to the IRS by the U.S. Postal Service with a Return to Sender sticker, Unclaimed stamp and three notations of dates marked on the envelope. The Letter 1153 informed Cesare that the IRS proposed to assess trust fund recovery penalties against him and he had a right to appeal the decision to an IRS Appeals Office.

In May 2009, the Revenue Officer sent by certified mail to Cesare's home Form 3552, Notice of Tax Due on Federal Tax Return. The envelope was returned to the IRS by the U.S. Postal Service with a Return to Sender sticker, Unclaimed stamp and one notation of a date marked on the envelope. In July 2009, the Revenue Officer hand delivered to Cesare a Letter 1058, Final Notice of Intent to Levy and Notice of Your Right to a Hearing. In August 2009, the Revenue Officer sent Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing under Code Sec. 6320 by certified mail to Cesare's home and the mail was delivered to Cesare.

In August 2009, Cesare timely mailed to the IRS Form 12153, Request for a Collection Due Process or Equivalent Hearing, seeking relief from the proposed levy. In December 2010, Cesare attended an in-person conference with an IRS Settlement Officer and discussed collection alternatives. During the conference, Cesare did not agree to provide Form 433-A or Form 433-B, Collection Information Statement for Businesses. In January 2011, the IRS mailed to Cesare a Notice of Determination Concerning Collection Actions Under Code Sec. 6320 and/or 6330. The IRS Appeal Office attached a notice of determination sustaining the proposed levy action because Cesare had offered no collection alternatives and had a prior opportunity to dispute the underlying liability.

OBSERVATION: The IRS is required to provide the taxpayer with notice of trust fund recovery penalties before assessment. A Letter 1153 is sent and provides a taxpayer with required notice and the means of protesting a proposed trust fund recovery penalty assessment administratively with the IRS. When a Letter 1153 is mailed, the IRS must follow mailing procedures that are similar to those provided for notices of deficiency in Code Sec. 6212 (b).

Code Sec. 6672 imposes a penalty for willfully failing to collect, account for and pay over income and employment taxes of employees. Trust fund recovery penalties are assessed and collected in the same manner as taxes against a person who is an officer or employee of a corporation who is under a duty to perform those duties. These persons are referred to as responsible persons.

The IRS is authorized under Code Sec. 6331(a) to collect tax by levy upon a taxpayer's property if the taxpayer who is liable to pay tax neglects or refuses to pay such tax within 10 days after notice and demand for payment by the IRS. Code Sec. 6330 requires the IRS to send written notice to the taxpayer of the taxpayer's right to request a hearing before a levy is made. If the taxpayer makes a timely request for a hearing, the hearing will be held by the IRS Appeals Office. At the hearing, the taxpayer may discuss any relevant issue.

Cesare claimed that he was entitled to contest his liability for the trust fund recovery penalties during the Code Sec. 6330 hearing because he never received the Letter 1153 that the Revenue Officer sent to him by certified mail in November 2008.

The Tax Court held that Cesare deliberately failed to claim the delivery of the Letter 1153 and was therefore precluded from contesting his liability for the trust fund recovery penalty during the Code Sec. 6330 hearing. The court cited its holding in Mason v. Comm'r, 132 T.C. 301 (2009) in which it concluded that, unless the taxpayer deliberately refused to accept its delivery, a Letter 1153 will be considered to have provided a prior opportunity to dispute liability for the underlying trust fund recovery penalty only if the taxpayer actually received the Letter.

The court noted that Cesare was fully aware that the IRS was considering whether to assert trust fund recovery penalties against him. He offered no adequate explanation for his failure to respond to the two USPS Forms 3849 left for him regarding the Letter 1153 sent in November 2008. Cesare also ignored or failed to claim at least one USPS Form 3849 left for him regarding the notice of tax due sent in May 2009. Thus, the court found Cesare deliberately failed to claim delivery of the Letter 1153. Because Cesare was precluded from contesting his liability for the trust fund recovery penalties at the Code Sec. 6330 hearing, the court determined that it lacked jurisdiction to consider whether Cesare was a responsible person liable for those penalties. Cesare provided no evidence that the determination to sustain the levy was arbitrary, capricious or without sound basis in fact. Thus, the court concluded that the IRS Appeal Office's determination to sustain the proposed levy was not an abuse of discretion.

For a discussion of the penalties for failing to pay employment taxes, see Parker Tax ?210,100.

Staff Editor Parker Tax Publishing

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