In Bilal Salahuddin et ux. (T.C. Memo. 2012-141) the taxpayers owed outstanding Federal income tax liabilities for tax years 2004, 2005, and 2006.
The IRS issued them a levy notice to collect those unpaid liabilities. The taxpayers requested a collection due process (CDP) hearing before IRS Appeals pursuant to Sec. 6330, during which they sought an installment agreement. They submitted a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, without supporting documentation. The taxpayer did not use a tax professional to assist them.
An Appeals team manager informed the taxpayers that the IRS's Philadelphia Service Center had calculated their acceptable amount for an installment agreement to be $900 to $1,000 monthly and advised them that their prior submission would be "sufficient". Without further communication with the taxpayers, the Appeals settlement officer closed the CDP hearing and sustained the proposed levy on the ground that the taxpayers had not provided sufficient financial information and that their ability to pay exceeded the proposed $900 to $1,000 per month.
The taxpayers filed a timely petition for review of that determination with the Tax Court, and the IRS moved for summary judgment. The Court held there was a genuine issue of material fact as to whether Appeals, having advised the taxpayers that their submission was "sufficient", abused its discretion in terminating the CDP hearing and rejecting their proposal for an installment agreement, rather than soliciting a satisfactory substitute proposal. The Court denied the IRS's motion for summary judgment.
If the taxpayers had consulted with a tax professional, the taxpayers may have saved themselves a lot of money, time and aggravation. A qualified tax professional would have ensured that the 433-A was properly completed and with the required documentation. When the IRS said they wanted $900-$1000 per month, a tax professional could have invoked the "One Year Rule" as outlined in the Internal Revenue Manual, to force the IRS to accept payments the taxpayers could have afforded. KR Hoffman & Co., LLC is that tax professional. Call us at 954.591-8290 to see how we can assist you.
K.R. Hoffman & Co., LLC, counsels Entrepreneurs, Professionals and Select Individuals in taking control of their taxes, and businesses. Discover how we can help you overcome your tax and business challenges. For more information or to become a client, call me at (954) 591-8290 TODAY or drop me a note.