United States Tax Court

United States Tax Court

T.C. Memo. 2022-13

MOHAMMAD A. KAZMI,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

—————

Docket No. 5013-18L.

Filed March 1, 2022.

—————

Molly A. Recar, for petitioner.

Jay D. Adams and Sarah E. Sexton Martinez, for respondent.

MEMORANDUM OPINION

PARIS, Judge: This case is before the Court on a Petition for

review of a Notice of Determination Concerning Collection Action(s)

Under Section 6320 and/or 6330, dated February 13, 2018 (notice of

determination). 1 The notice of determination sustained a notice of

federal tax lien (NFTL) filing (NFTL filing) with respect to trust fund

recovery penalties (TFRPs) under section 6672. The TFRPs were

assessed against petitioner for failing to collect and pay over

employment taxes owed by Urgent Care Center, Inc. (Urgent Care), for

taxable quarters ending June 30 and September 30, 2014 (periods at

1 Unless otherwise indicated, all statutory references are to the Internal

Revenue Code (Code), Title 26 U.S.C., in effect at all relevant times, all regulation

references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all

relevant times, and all Rule references are to the Tax Court Rules of Practice and

Procedure.

Served 03/01/22

2

[*2] issue), resulting in outstanding liabilities of $6,184.23 and

$4,190.77, respectively. 2

The issues for decision are: (1) whether petitioner is entitled to

challenge the underlying liabilities, and if so, whether he is a

responsible person who willfully failed to pay over employment taxes

under section 6672, and (2) whether the settlement officer in the

Internal Revenue Service (IRS) Office of Appeals (Appeals) abused his

discretion in sustaining the collection action.

Petitioner argues that he may challenge his underlying liabilities

because a Letter 1153, Proposed Trust Fund Recovery Penalty, does not

constitute a prior opportunity under section 6330(c)(2)(B) since the

Commissioner’s denial of a Letter 1153 appeal does not result in an

opportunity for the taxpayer to seek judicial review before the Tax

Court. Petitioner further argues that he is not a responsible person

liable for TFRPs under section 6672, or—in essence—that the

Commissioner has the wrong person.

The Commissioner argues that petitioner is prohibited from now

challenging his underlying liabilities because he failed to appeal the

earlier Letter 1153, which constituted an opportunity to dispute them

under section 6330(c)(2)(B). The Commissioner further argues that the

Court should therefore apply an abuse of discretion standard and hold

that the Commissioner did not abuse his discretion.

The Court will hold for the Commissioner. This Court has

consistently held that a properly served and received Letter 1153

constitutes a prior opportunity to challenge the underlying liability and

therefore a failure to appeal it prohibits the same challenge at a

collection due process hearing (CDP hearing). In addition, the Court will

hold the Commissioner did not abuse his discretion in sustaining the

NFTL filing with respect to the periods at issue.

2 The notice of determination and pleadings also include a TFRP for the tax

period ending December 31, 2014. Contemporaneous with this collection due process

hearing request, petitioner also pursued relief through Collections. Petitioner

submitted Form 843, Claim for Refund and Request for Abatement, filed September

26, 2016. The case activity record reflects that Form 843 was submitted after the NFTL

filing in July 2016 but before the CDP hearing in January 2018. The administrative

record includes the transcript for December 31, 2014, which reflects that the TFRP

was abated in full December 2, 2016. The tax period ending December 31, 2014, is

therefore moot and was dismissed by separate order.

3

[*3]

Background

The parties submitted this case for decision without trial under

Rule 122. Relevant facts have been stipulated or are otherwise included

in the record. See Rule 122(a). Petitioner, Mohammad A. Kazmi, resided

in Illinois when he timely filed his petition.

I.

The Corporation

Urgent Care is an Illinois corporation taxed under federal law as

an S corporation. Urgent Care did not pay the employment taxes

reported on its Forms 941, Employer’s Quarterly Federal Tax Return,

for the periods at issue. The sole owner of Urgent Care is Aref Senno,

M.D. Dr. Senno, who is not a party to this case, was also the sole officer,

director, and manager of Urgent Care.

II.

Petitioner’s Involvement with the Corporation

Mr. Kazmi was employed by Urgent Care as a part-time hourly

bookkeeper during the periods at issue. He had no ownership interest in

Urgent Care. He was not an officer of Urgent Care. His name was not

on any of Urgent Care’s bank accounts. He did not have check signing

authority for Urgent Care nor any authority to make payments on behalf

of Urgent Care. At all times, he worked under the authority and

direction of Dr. Senno.

The record includes Form 4180, Report of Interview with

Individual Relative to Trust Fund Recovery Penalty or Personal

Liability for Excise Taxes. The form reflects Mr. Kazmi as the person

interviewed and includes his signature dated October 20, 2015. In

section 1, block 8 of the form, Mr. Kazmi described his job title as

“bookkeeper” and his duties as “to take care of payroll.” In section 2,

block 1 of the form, he indicated that he did not determine financial

policy for Urgent Care, that he did not authorize payments of bills or

creditors, and that he did not authorize payroll. He did indicate that he

was authorized to transmit payroll tax returns and make federal tax

deposits and that he was aware that withheld taxes had not been

remitted.

The record also includes Form 4183, Recommendation re: Trust

Fund Recovery Penalty Assessment. The form was filled out by the

revenue officer and contains his signature as well as his supervisor’s

signature. Both signatures are dated December 16, 2015. The revenue

officer recommended that Mr. Kazmi be assessed a TFRP because he

4

[*4] was “one of the corporation’s bookkeepers and current [power of

attorney], [who] has been granted the status, duty, authority and power

to direct the collecting, accounting, and paying of trust fund/employment

taxes.” It further states that as power of attorney, he was “responsible

for opening/responding to all IRS correspondence and contacts.” It

describes his duties as “reviewing expenses, bills, and

discussing/arranging payment to creditors along with other

bookkeepers” and that “[t]hese decisions are often made independently

without the involvement of the corporate President.”

Unable to collect the full tax liability from Urgent Care, the

Commissioner determined that Mr. Kazmi was a jointly and severally

liable3 responsible person and proposed assessing TFRPs against him in

a Letter 1153 dated December 16, 2015. Mr. Kazmi does not dispute

receiving the Letter 1153 or signing the accompanying PS Form 3811,

Domestic Return Receipt. 4 A taxpayer has 60 days to challenge a Letter

1153 by submitting a written appeal, but Mr. Kazmi made no appeal.

The Commissioner then timely assessed TFRPs against Mr. Kazmi on

March 22, 2016.

III.

Collection Due Process

On July 19, 2016, the Commissioner issued Mr. Kazmi a Letter

3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing

Under I.R.C. sec. 6320. This time, Mr. Kazmi sought to challenge the

NFTL filing by submitting Form 12153, Request for a Collection Due

Process or Equivalent Hearing. The Form 12153 challenged the

underlying liabilities but neither requested collection alternatives nor

made other challenges to the appropriateness of the collection action. 5

3 Dr. Senno was also determined a responsible person. See infra Discussion

Part I and note 10.

4 The Court accepts the parties’ stipulation that Mr. Kazmi received the Letter

1153 on January 8, 2016, despite the certified mail receipt bearing a seemingly

impossible date stamp of January 8, 2015. The Court presumes without deciding that

the discrepancy is attributable to clerical error on the part of the U.S. Postal Service.

5 The notice of determination states that Mr. Kazmi’s Form 12153 indicated

“[a]batement of the [TFRP] . . . as a collection alternative.” First, Mr. Kazmi did not

check any boxes on his Form 12153 for “Collection Alternative” (those alternatives

being an installment agreement, offer-in-compromise, or inability to pay). Second, it is

not apparent on the face of the Form 12153 that Mr. Kazmi requested abatement.

Ultimately, the confusion is irrelevant since the outcome of this case does not depend

on whether Mr. Kazmi’s Form 12153 requested abatement for the periods at issue. See

infra Discussion Part VI.A.

5

[*5] The Commissioner received Mr. Kazmi’s Form 12153 on August 22,

2016.

Attached to the Form 12153 and included in the administrative

record is a letter dated August 15, 2016, from Dr. Senno describing the

situation with Mr. Kazmi as follows: Mr. Kazmi, as “a part time

bookkeeper is not responsible for collection or accounting or making

payments for any tax obligation for the corporation. His duty is to

perform whatever task is given to him by me. He is not authorized to

sign any check or documents on behalf of the company. Hence, I request

you to have his name removed as a person for any tax obligation for

Urgent Care Center Inc. By the way, I have an installment payment

agreement of $450.00 per month with IRS for [Urgent Care].”

Mr. Kazmi’s request for a CDP hearing was assigned to a

settlement officer in Appeals. On December 21, 2017, the settlement

officer sent Mr. Kazmi Letter 4837, Substantive Contact Letter, which

scheduled a CDP hearing for January 23, 2018, and requested that he

provide certain information, including a completed Form 433-A,

Collection Information Statement for Wage Earners and SelfEmployment Individuals.

Before the CDP hearing, the settlement officer verified that the

requirements of applicable laws and administrative procedure had been

met, including the proper issuance of the Letter 1153, notice and

demand, the NFTL filing, and the notice of a right to a CDP hearing.

The settlement officer further determined that Mr. Kazmi was

prohibited from challenging the underlying liabilities in a CDP hearing

because the Letter 1153 provided him with a prior opportunity to contest

his underlying liabilities of which he failed to take advantage.

Mr. Kazmi did not answer when the settlement officer telephoned

on January 23, 2018, so the settlement officer sent Letter 4000,

Substantive Contact Letter, giving him 14 days to provide any

additional information for his case. He telephoned the settlement officer

on January 26, 2018. They discussed his underlying liabilities6 (namely,

6 “A taxpayer’s underlying tax liability includes all ‘amounts a taxpayer owes

pursuant to the tax laws that are subject of the Commissioner’s collection activities.’”

McNeill v. Commissioner, 148 T.C. 481, 488 n.10 (2017) (quoting Callahan v.

Commissioner, 130 T.C. 44, 49 (2008)); see Katz v. Commissioner, 115 T.C. 329, 338–

39 (2000) (“Although the term ‘underlying tax liability’ is defined in neither sections

6320 and 6330 nor the legislative history, Congress’ intent in ensuring due process to

6

[*6] his position that he was neither a responsible person nor willful in

failing to remit payroll taxes). He again stated that he did not wish to

pursue collection alternatives. And he never provided Form 433-A or any

additional financial information relative to a collection alternative or

other challenge to the appropriateness of the collection action.

The settlement officer sustained the NFTL in the notice of

determination dated February 13, 2018, and Mr. Kazmi timely

petitioned this Court for redetermination.

Discussion

I.

Section 6672 TFRPs

Employers have a duty to withhold or collect from an employee’s

wages the employee’s share of federal tax 7 and then must pay over the

withheld amounts to the Federal Government. Dixon v. Commissioner,

T.C. Memo. 2019-79, at *16 (citing Jarrett v. Commissioner, T.C. Memo.

2018-73, at *31). Such withheld amounts are known as “trust fund

taxes,” Jarrett, T.C. Memo. 2018-73, at *31 (citing Pollock v.

Commissioner, 132 T.C. 21, 25 n.10 (2009)), because they are “held to be

a special fund in trust for the United States,” § 7501(a).

When net wages are paid to an employee and the employer does

not pay over the withheld funds, the Commissioner has no recourse

against the employee. Cashaw v. Commissioner, T.C. Memo. 2021-123,

at *9 (citing Mazo v. United States, 591 F.2d 1151, 1154 (5th Cir. 1979)).

For this reason, section 6672 provides a collection tool allowing the

Commissioner to impose a TFRP on certain persons who fail to withhold

and pay over trust fund taxes. See Newsome v. United States, 431 F.2d

742, 745 (5th Cir. 1970). The TFRP under this section is equal to the

total amount of the tax not paid over. Mazo, 591 F.2d at 1154. The TFRP

must be paid upon notice and demand by the Commissioner and shall

be assessed and collected in the same manner as taxes. § 6671(a). The

TFRP is known as an “assessable penalty” because the Commissioner

taxpayers when the Commissioner seeks to collect taxes by liens or levies suggests that

the term includes any amounts owed that are the subject of the Commissioner’s

collection activities.” (quoting H.R. Rep. No. 105-599, at 263–67 (1998) (Conf. Rep.))).

7 These include the employee’s share of (1) Social Security tax, see §§ 3101(a),

3102(a), (2) Medicare tax, see §§ 3101(b), 3102(a), and (3) federal income tax, see

§§ 3402(a)(1), 3403.

7

[*7] can assess 8 the TFRP against a taxpayer without first having to

issue the taxpayer a notice of deficiency. See generally Smith v.

Commissioner, 133 T.C. 424, 428–30 (2009) (providing an overview of

assessable penalties); Williams v. Commissioner, 131 T.C. 54, 58 n.4

(2008) (noting that assessable penalties fall outside of the deficiency

notice regime of sections 6212 to 6214 and thus fall outside this Court’s

deficiency jurisdiction). The assessable penalty was approved on

December 16, 2015, by the group manager on Form 4183. See Blackburn

v. Commissioner, 150 T.C. 218, 223 (2018).

Section 6672(a) imposes the TFRP on (1) “[a]ny person required

to collect, truthfully account for, and pay over any tax imposed by this

title” who (2) “willfully fails to collect such tax, or truthfully account for

and pay over such tax, or willfully attempts in any manner to evade or

defeat any such tax or the payment thereof.”

The term “person” includes an officer or employee of a corporation

who is under a duty to collect, account for, and pay over the tax.

§ 6671(b). Such persons are referred to as “responsible,” 9 and the term

may be applied broadly. Mason v. Commissioner, 132 T.C. 301, 321

(2009) (citing Logal v. United States, 195 F.3d 229, 232 (5th Cir. 1999),

and Barnett v. IRS, 988 F.2d 1449, 1454 (5th Cir. 1993)). Whether

someone is a responsible person is “a matter of status, duty and

authority, not knowledge.” Mazo, 591 F.2d at 1156.

The U.S. Court of Appeals for the Seventh Circuit, the court to

which an appeal of this case would presumably lie absent a stipulation

to the contrary, see § 7482(b); Golsen v. Commissioner, 54 T.C. 742, 757

8 An “assessment” is “the formal recording of a taxpayer’s tax liability” in the

IRS’s records. Baltic v. Commissioner, 129 T.C. 178, 183 (2007); see also Hibbs v. Winn,

542 U.S. 88, 100 (2004) (“An assessment is made ‘by recording the liability of the

taxpayer in the office of the Secretary in accordance with rules or regulations

prescribed by the Secretary.’” (quoting section 6203)); Treas. Reg. § 301.6203-1. It is

“essentially a bookkeeping notation.” Laing v. United States, 423 U.S. 161, 170 n.13

(1976) (“The ‘assessment,’ essentially a bookkeeping notation, is made when the

Secretary or his delegate establishes an account against the taxpayer on the tax

rolls.”).

9 The IRS collects the trust fund liability only once. Consequently, the IRS

cross-references payments against the trust fund liability of the employer and

payments against the TFRPs of responsible persons. See Weber v. Commissioner, 138

T.C. 348, 358 (2012). In addition, for circumstances in which there is more than one

responsible person, a taxpayer who paid the TFRP may bring a separate suit against

the other responsible person(s) claiming a right of contribution. § 6672(d); see Weber,

138 T.C. at 358 n.8.

8

[*8] (1970), aff’d, 445 F.2d 985 (10th Cir. 1971), considers the following

to be indicia of “responsible person” status: (1) holding corporate office,

(2) owning stock in the company, (3) serving on the board of directors,

(4) having authority to sign checks, and (5) having control over corporate

financial affairs, United States v. Kim, 111 F.3d 1351, 1362–63 (7th Cir.

1997).

A responsible person will be held liable for a TFRP only where the

failure to pay the withholding tax was willful. § 6672. “Willful” for this

purpose does not mean the responsible person must have a “criminal or

other bad motive . . . , but simply a voluntary, conscious and intentional

failure to collect, truthfully account for, and pay over the taxes withheld

from the employees.” Newsome, 431 F.2d at 745. To establish

willfulness, there is no requirement that the responsible person

intended to deprive the Federal Government of the withholding tax. Id.

at 747. Willfulness can exist where the “responsible person acts with a

reckless disregard of a known or obvious risk that trust funds may not

be remitted to the [Federal] Government.” Mazo, 591 F.2d at 1155.

Willfulness is typically proven by evidence that a responsible person

paid other creditors when withholding taxes were due to the Federal

Government. Gustin v. United States, 876 F.2d 485, 492 (5th Cir. 1989).

Mr. Kazmi contends that he is not liable for a TFRP because he

was not a responsible person who willfully failed to pay over the

withheld taxes for any of the periods at issue. Because the underlying

tax liability of a TFRP is the penalty itself, the Court must first decide

whether Mr. Kazmi is entitled to challenge his underlying liabilities

before reaching the merits of his contention. See cases cited supra note 6.

II.

Section 6320

Before imposing a TFRP under section 6672, the IRS must

properly notify the responsible person and properly assess the penalty

against that person. In order to properly assess, the Commissioner must

generally notify the taxpayer in writing by mail to the taxpayer’s last

known address advising that the person will be subject to an assessment

of the TFRP. §§ 6672(b)(1), 6212(b); Mason, 132 T.C. at 322. Letter 1153

satisfies this preliminary notice requirement. See Mason, 132 T.C.

at 317–18, 322.

The Commissioner may not assess a TFRP for at least 90 days

after providing the notice (in this case, Letter 1153). § 6672(b)(3). Within

9

[*9] those 90 days, the taxpayer may challenge the notice by requesting

an administrative hearing before Appeals. § 6672(b)(3)(A).

If the responsible person fails to pay the TFRP after notice and

demand, the amount becomes a lien in favor of the United States upon

that person’s property and rights to property. § 6321. The IRS may then

file an NFTL to protect the priority of the lien against certain third

parties. § 6323. Once the IRS files an NFTL, it must notify the person of

the filing and of the person’s right to a CDP hearing to appeal the NFTL

filing. § 6320(a) and (b).

III.

Jurisdiction and Burden of Proof

Sections 6320(c) and 6330(d)(1) grant this Court jurisdiction to

review the Commissioner’s determination that a proposed collection

action was proper. Williams, 131 T.C. at 58 n.4; Callahan, 130 T.C.

at 48. Taxpayers who challenge their underlying tax liabilities in cases

arising under section 6320 or 6330 bear the burden of proof regarding

their correct tax liabilities. See Rule 142(a); Thompson v. Commissioner,

140 T.C. 173, 178 (2013).

IV.

Standard of Review

In general, a taxpayer must raise an issue at a CDP hearing to

preserve it for this Court’s review. Perkins v. Commissioner, 129 T.C. 58,

63 (2007); Magana v. Commissioner, 118 T.C. 488, 493 (2002); Treas.

Reg. § 301.6330-1(f)(2), Q&A-F3. In reviewing a determination under

section 6330(c)(2), the Court considers only issues that the taxpayer

properly raised during the CDP hearing. Treas. Reg. §§ 301.6320-1(f)(2),

Q&A-F3, 301.6330-1(f)(2), Q&A-F3; see Giamelli v. Commissioner, 129

T.C. 107, 115 (2007). Therefore, “[a] taxpayer is precluded from

disputing the underlying liability [in this Court] if it was not properly

raised in the CDP hearing.” Thompson, 140 T.C. at 178. A taxpayer

during a CDP hearing does not properly raise an issue, including an

issue concerning his underlying tax liability, if he “fails to present to

Appeals any evidence with respect to that issue after being given a

reasonable opportunity to present such evidence.” Treas. Reg.

§ 301.6320-1(f)(2), Q&A-F3; see Pough v. Commissioner, 135 T.C. 344,

349 (2010). The taxpayer must also raise the issue in his petition to this

Court. Rule 331(b)(4) (“Any issue not raised in the assignments of error

shall be deemed to be conceded.”).

A taxpayer cannot challenge an underlying liability in a CDP

hearing, and this Court cannot review that liability, if the taxpayer had

10

[*10] an earlier opportunity to dispute the assessment of that liability.

§ 6330(c)(2)(B); Mason, 132 T.C. at 317.

Where a taxpayer’s underlying tax liability is properly at issue

before this Court, the Court reviews the Commissioner’s determination

regarding the underlying liability de novo. Sego v. Commissioner, 114

T.C. 604, 610 (2000). The Court reviews any other administrative

determination regarding proposed collection actions for abuse of

discretion. Id.; Goza v. Commissioner, 114 T.C. 176, 182 (2000). An

abuse of discretion is any action that is arbitrary, capricious, or without

sound basis in law or fact. Woodral v. Commissioner, 112 T.C. 19, 23

(1999).

V.

Underlying Liabilities

The liabilities in this case involve TFRPs. Before TFRPs can be

assessed, the Commissioner must generally notify the taxpayer in

writing by mail to the taxpayer’s last known address advising that

TFRPs will be assessed. § 6672(b)(1); Mason, 132 T.C. at 322. Letter

1153 satisfies this preliminary notice requirement. See Mason, 132 T.C.

at 317–18, 322.

The Commissioner issued Mr. Kazmi a Letter 1153. Mr. Kazmi

does not dispute receiving Letter 1153 or signing the accompanying PS

Form 3811, Domestic Return Receipt. 10 The Letter 1153 satisfied the

notice requirement of section 6672. See id. The assessment of the TFRPs

against Mr. Kazmi was thus valid. The Court may therefore consider the

merits of that assessment—i.e., the underlying liabilities—provided

that Mr. Kazmi was not statutorily precluded from raising them during

his CDP hearing.

A Letter 1153 also provides a taxpayer with an administrative

means for protesting a proposed assessment of TFRPs. In the specific

context of CDP cases involving TFRPs, this Court has held that, for

purposes of section 6330(c)(2)(B), a taxpayer has an “opportunity” to

dispute his underlying tax liability for a TFRP when he receives Letter

1153. See Mason, 132 T.C. at 317–18. Thus, if the taxpayer receives

Letter 1153 but fails to challenge the underlying tax liability at the

Appeals conference, then the taxpayer is precluded by section

6330(c)(2)(B) from challenging the underlying tax liability in a

10 A Letter 1153 that is neither received nor deliberately refused by a taxpayer

does not constitute an opportunity to dispute the taxpayer’s liability. See Mason, 132

T.C. at 318; Fitzpatrick v. Commissioner, T.C. Memo. 2016-199, at *18.

11

[*11] subsequent CDP hearing. This is the circumstance in which Mr.

Kazmi now finds himself.

Mr. Kazmi does not dispute that he failed to challenge the Letter

1153. Instead, he asks this Court to overturn its previous holdings that

Letter 1153 constitutes a prior opportunity. His argument is that

Letter 1153 does not provide a prior opportunity under section

6330(c)(2)(B) because the Commissioner’s denial of a Letter 1153 appeal

does not result in an opportunity for the taxpayer to seek judicial review

before the Tax Court.

Mr. Kazmi is correct to the extent that, if a taxpayer appeals

Letter 1153 and the Commissioner denies the appeal, the taxpayer

cannot at that stage challenge the denial of the appeal in the Tax Court.

This is so because the Tax Court is a Court of limited jurisdiction. See

§ 7442; Burns, Stix Friedman & Co. v. Commissioner, 57 T.C. 392, 396

(1971). It has only the jurisdiction which is conferred on it by statute.

Burns, Stix Friedman & Co., 57 T.C. at 396; see also § 7442. But the Tax

Court’s lack of jurisdiction does not necessarily mean that a taxpayer

lacks any opportunity for judicial review.

This Court addressed an argument similar to Mr. Kazmi’s in

Bishay v. Commissioner, T.C. Memo. 2015-105, aff’d without published

opinion, 2017 WL 11453028 (1st Cir. 2017). In that case, the Court noted

that

[t]he lack of opportunity for judicial review after the Letter

1153 proceeding does not severely prejudice the taxpayer

because, as we have previously noted, “the section 6672

penalty is divisible, so that a taxpayer may litigate the

penalty after having paid an amount corresponding to the

tax withheld from a single employee”. See Weber v.

Commissioner, 138 T.C. 348, 363 n.12 (2012) (citing Davis

v. United States, 961 F.2d 867, 870 n.2 (9th Cir. 1992), and

Bland v. Commissioner, T.C. Memo. 2012-84). Thus, the

taxpayer whose liability is upheld in the Letter 1153

proceeding can make a small “token” payment towards the

section 6672 penalty, file a refund claim with the IRS, and,

if the refund claim is denied, file a refund suit in the

Federal District Court or the Court of Federal Claims.

Bishay, T.C. Memo. 2015-105, at *17 n.9.

12

[*12] At this time, the Court declines to overturn its previous holdings

that a properly mailed and received Letter 1153 constitutes a prior

opportunity. Mr. Kazmi’s failure to challenge the Letter 1153 thus

precluded him from challenging his underlying liabilities in the CDP

hearing, and the Court will review for abuse of discretion the

Commissioner’s determination to sustain the NFTL filing.

VI.

Abuse of Discretion

A.

In General

In reviewing for abuse of discretion the Court must uphold the

settlement officer’s determination unless it is arbitrary, capricious, or

without sound basis in law or fact. See Murphy v. Commissioner, 125

T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006); see also Keller v.

Commissioner, 568 F.3d 710, 716–18 (9th Cir. 2009), aff’g in part T.C.

Memo. 2006-166, and aff’g in part, vacating in part decisions in related

cases. The Court does not conduct an independent review or substitute

its own judgment for that of the settlement officer. Murphy, 125 T.C.

at 320.

At the agency-level CDP hearing, the settlement officer must

determine whether the proposed collection action may proceed. The

procedures for the agency-level hearing regarding an NFTL are similar

to those set forth in section 6330(c) for a notice of intent to levy.

§ 6320(c).

First, the settlement officer must verify that the requirements of

any applicable law and administrative procedure have been met by IRS

personnel. § 6330(c)(3)(A). The attachment to the notice of

determination summarized the settlement officer’s compliance with

these requirements. 11 However, the Court construes Mr. Kazmi’s

contention that the Commissioner has the wrong person as an argument

that not all requirements of applicable law were met and addresses it

infra Discussion Part VI.B.

Second, the taxpayer may “raise at the hearing any relevant issue

relating to the unpaid tax or the [collection action], including” challenges

11 Mr. Kazmi has not raised whether the settlement officer failed to obtain

verification of compliance with the supervisory approval requirement under section

6751(b). In any event the Form 4183 in the administrative record reflects the

settlement officer’s verification of supervisory approval. See Blackburn, 150 T.C.

at 223.

13

[*13] to the appropriateness of the collection action and collection

alternatives such as an installment agreement or an offer-incompromise. 12 § 6330(c)(2)(A). Mr. Kazmi declined to propose any

collection alternatives before or during his CDP hearing. It is not an

abuse of discretion for a settlement officer to sustain a collection action

and not consider collection alternatives where the taxpayer has

proposed none. See McLaine v. Commissioner, 138 T.C. 228, 242–43

(2012); Kendricks v. Commissioner, 124 T.C. 69, 79 (2005); see also

Treas. Reg. § 301.7122-1(d)(1) (requiring that offers to compromise a tax

liability must be made in writing and include all the information

prescribed or requested by the IRS).

Third, the taxpayer may contest the existence and amount of the

underlying liability, but only if he did not receive a notice of deficiency

or otherwise have an opportunity to dispute the tax liability.

§ 6330(c)(2)(B). As the Court discussed supra, Mr. Kazmi could not

contest his underlying liabilities in the CDP hearing because he received

but did not challenge the Letter 1153, which provided him with a prior

opportunity. In such a case the primary purpose of the CDP hearing was

for Mr. Kazmi and the settlement officer to discuss collection

alternatives. See Bishay, T.C. Memo. 2015-105, at *17.

Fourth, the settlement officer must determine “whether any

proposed collection action balances the need for the efficient collection

of taxes with the legitimate concern of the person that any collection

action be no more intrusive than necessary.” § 6330(c)(3)(C). Mr. Kazmi

does not argue this point. Moreover, the actions sustained by the

settlement officer’s determination—i.e., the filing of an NFTL, rather

than issuing a notice of intent to levy—was among the less intrusive

collection methods available to the IRS. The IRS was only preserving its

place in Mr. Kazmi’s line of creditors. The IRS chose the least intrusive

collection method and did not abuse its discretion in doing so.

B.

Verification of Responsible Person

To Mr. Kazmi, it seems clear that the Commissioner has the

wrong person because he was merely a part-time bookkeeper. He was

not an officer or director of the company. He had no ownership stake in

the company. He had no authority to sign checks. As Urgent Care’s sole

12 For a review of various grounds for compromise, see Treasury Regulation

§ 301.7122-1(b) and T.D. 9007, 2002-2 C.B. 250. For an overview of the legislative

history surrounding compromises, see generally H.R. Rep. No. 105-599, at 289 (1998)

(Conf. Rep.), and T.D. 8829, 1999-2 C.B. 235.

14

[*14] owner wrote, Mr. Kazmi’s sole duty was “to perform whatever task

is given to him.”

The Court construes Mr. Kazmi’s contention that he is not a

responsible person to whom the TFRP should be applied as an argument

that the law requires the Commissioner to determine whether someone

is a responsible person to whom the TFRP applies as a condition

precedent to the issuance of a Letter 1153, that Mr. Kazmi met none of

the indicia of responsible person status, and that the settlement officer

must have acted arbitrarily when he verified that the requirements of

applicable law had been met.

The term “responsible person” is derived from the mandate in

section 6672(a) that “[a]ny person required to collect, truthfully account

for, and pay over any tax imposed by this title” shall be liable for the

TFRP. Congress added section 6672(b)(1) to the Code in 1996 as part of

The Taxpayer Bill of Rights 2, Pub. L. No. 104-168, § 901, 110 Stat. 1452,

1465. That section requires that “[n]o [TFRP] shall be imposed . . . unless

the Secretary notifies the taxpayer in writing . . . that the taxpayer shall

be subject to an assessment of such penalty.” § 6672(b)(1). In other

words, it requires that once the Commissioner determines someone is a

responsible person subject to the TFRP, he must provide that person

with notice (i.e., Letter 1153) before assessing the TFRP.

The record indicates that the settlement officer complied with

procedural requirements and gave due consideration to Mr. Kazmi’s

case. Before the issuance of the Letter 1153, the settlement officer

verified that a determination had been made that Mr. Kazmi was a

responsible person to whom the TFRP applied and that the penalty had

received supervisory approval. See Blackburn, 150 T.C. at 223. The

settlement officer also verified that the Letter 1153 was sent by certified

mail and received by Mr. Kazmi. As the Court stated supra p. 12, in

reviewing for abuse of discretion, it does not substitute its own judgment

for that of the settlement officer. A difference of reasonable minds does

not rise to the level of arbitrariness required for finding an abuse of

discretion.

VII.

Conclusion

In view of the foregoing, the Court sustains the notice of

determination for the NFTL filing for taxable quarters ending June 30

and September 30, 2014.

15

[*15] The Court has considered all arguments by the parties and, to the

extent not specifically mentioned above, concludes that they are moot,

irrelevant, or without merit.

To reflect the foregoing,

An appropriate decision will be entered.