Opinion
18553-21L
03-31-2022
ANTHONY L. PHILLIPS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Albert G. Lauber Judge
In this collection due process (CDP) case, petitioner seeks review of the determination by the Internal Revenue Service (IRS or respondent) to uphold the filing of a notice of Federal tax lien (NFTL). Petitioner timely submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing, checking the box "Offer in Compromise." He premised his offer-in-compromise (OIC) on "doubt as to collectibility." The IRS reviewed his proposal and, on January 6, 2021, issued him a preliminary rejection letter stating that he could seek reconsideration during the CDP hearing.
Petitioner's CDP case was assigned to a settlement officer (SO) in the IRS Appeals Office. The SO sent petitioner a letter advising him that, in addition to pursuing an OIC, he could apply for lien withdrawal or request a different collection alternative, such as an installment agreement. The SO told petitioner that, on the basis of the financial information he had already supplied, he was eligible for an installment agreement with monthly payments of $443.
On February 12, 2021, petitioner responded to the SO's letter. He expressed interest in an installment agreement, but stated that he was "requesting a lower monthly repayment of $333.00 per month." His unpaid balance, as of that date, exceeded $32,000.
The SO called petitioner to discuss his proposal. During this call the SO advised petitioner that, to qualify for an installment agreement, he would need to satisfy his unpaid balance within 72 months. See Internal Revenue Manual pt. 4.20.1.4.3(2) (June 23, 2020). The SO explained that his balance would not be satisfied within 72 months unless he paid more than $330 each month. However, the SO advised petitioner that the IRS would accept monthly payments of $330 during the first 12 months if he would agree to pay $475 monthly during the final 60 months.
Petitioner agreed to this proposal. His first payment was due in June 2021, and the payments were to increase in June 2022.
Following the call the SO sent petitioner a letter confirming the details of their agreement with an attached Form 433-D, Installment Agreement. The SO instructed petitioner that, if he wished to accept the installment agreement, he should sign the Form 433-D and formally withdraw his OIC request. On April 1, 2021, petitioner submitted the Form 433-D and signed a document acknowledging that he had "orally accepted an Installment Agreement as part of the Appeals process" and was "withdraw[ing] [his] Form 656, Offer in Compromise."
On April 19, 2021, the IRS closed the CDP case and issued petitioner a notice of determination. The notice correctly stated that the parties had agreed to an installment agreement with monthly payments of $330 beginning in June 2021. But the notice erroneously stated that the monthly payments would increase to $650, and that this increase would take effect in February as opposed to June 2022. These latter terms do not match the terms to which the SO and petitioner appear to have agreed during the CDP hearing.
The notice also determined that petitioner did not meet the conditions for lien withdrawal. Although an NFTL may be withdrawn if the taxpayer enters into an installment agreement, see I.R.C. § 6323(j)(1)(B), the notice stated that petitioner had identified "no grounds for withdrawal." The IRS accordingly upheld the NFTL filing.
Petitioner timely petitioned this Court, challenging the propriety of the collection action, and the case was calendared for trial on the Court's April 11, 2022, New York, New York, trial session. On February 2, 2022, respondent filed a Motion for Summary Judgment contending that the SO did not abuse her discretion in sustaining the collection action as stated in the notice of determination. After we directed petitioner to respond to that Motion, respondent filed, on March 18, 2022, a pretrial memorandum representing that the status of this case was "probable settlement." On March 21, 2022, we struck the case from the New York trial calendar and retained jurisdiction.
The notice of determination appears to misdescribe critical terms of the installment agreement. While the Form 433-D calls for monthly payments of $330 beginning in June 2021 and increasing to $475 in June 2022, the notice of determination states that monthly payments would increase to $650 in February 2022. Respondent in his Motion did not address this discrepancy. Nor did respondent explain why it was proper for the IRS to uphold the NFTL filing notwithstanding the execution of an (apparently binding) installment agreement.
If his case cannot be settled, we request that respondent file a response to this Order addressing the following questions. First, how should the Court deal with the fact that the terms of the installment agreement as reflected in the notice of determination do not match the terms of the installment agreement as executed by the parties? Second, what was the justification for declining to withdraw the NFTL filing (at the close of the CDP hearing or at some future date) given that petitioner and the IRS apparently executed a binding installment agreement?
In consideration of the foregoing, it is
ORDERED that, on or before May 16, 2022, respondent shall file a response to this Order addressing the questions discussed above.