Tax News

CCH (cch.taxgroup.com) reports:

The Tax Court had jurisdiction to determine whether trust fund recovery penalty assessments against the majority shareholder of a home health care corporation were proper, as part of its review of a Collection Due Process (CDP) hearing. The taxpayer did not receive IRS Letter 1153, the notice of intent to assess a trust fund recovery penalty, and so did not have an opportunity to contest the liabilities before the CDP hearing.

Although the notice was mailed by certified mail to the taxpayer's last known address, the letter was returned to the IRS undelivered and marked unclaimed. Additionally, the IRS did not present any evidence that the notice was received, but refused by the taxpayer. The taxpayer also did not have an opportunity before the CDP hearing to dispute the underlying tax liabilities at the time her Form 843 was reviewed. The CDP hearing and the Appeals review of her Form 843 abatement request were simultaneous and the taxpayer challenged her liability for the penalties at the hearing. A CAP pre-lien filing request did not rise to the level of an opportunity to dispute the underlying liability because the Appeals officer limited review to the propriety of filing the notice of liens.

The taxpayer was, however, liable for the trust fund penalties. For purposes of imposing the penalties, the notice requirement was satisfied by a proper mailing of Letter 1153 to the taxpayer's last known address. As the majority shareholder, and an officer and employee of the corporation who had the authority to hire and fire employees, write checks and manage the corporation, the taxpayer possessed six indicia of a responsible person. While initially unaware of the bookkeeper's failure to remit employment taxes, once she became aware, she continued to authorize payments to other creditors. Accordingly, her failure to pay over employment taxes was willful and the defense of reasonable cause was not available to her.

Finally, the Appeals officer correctly determined that the IRS could proceed with the collection action. The trust fund recovery penalty assessment was not invalidated by the taxpayer's failure to receive the Letter 1153. The handling of the corporation's installment agreement default and rejection of an offer-in-compromise had no bearing on the IRS's discretion to pursue trust fund recovery penalties. All legal and procedural requirements with respect to the proposed lien were complied with and the IRS was not prohibited from filing a notice of federal tax lien while the taxpayer was perfecting her Form 843 abatement request.

M.M. Mason, 132 TC No. 14, Dec. 57,807

Other References:

Code Sec. 6321

CCH Reference - 2009FED ¶38,136.101

Code Sec. 6330

CCH Reference - 2009FED ¶38,184.50

Code Sec. 6672

CCH Reference - 2009FED ¶39,780.21

CCH Reference - 2009FED ¶39,780.705

CCH Reference - 2009FED ¶39,780.853

Tax Research Consultant

CCH Reference - TRC IRS: 51,056.25
CCH Reference - TRC PENALTY: 3,150