Willock v. Comm'r, T.C. Memo. 2009-178 (T.C. 2009) (parenthetical references are to the page number of the opinion).
The Willocks challenge the IRS's use of a lien to collect $191,724 in unpaid taxes and penalties related to their 2001 tax return. (2). The Tax Court sustains the lien because the Willocks "offered no collection alternatives or other defenses to the lien." (6).
Chronology of Events
This opinion moves pretty fast; and fortunately so because it is not all that exciting. A chronology of events leading up to this opinion is helpful here:December 7, 2005 - IRS mails a Notice of Deficiency to the taxpayers. (2).
April 11, 2006 - IRS assesses the tax, penalty, and interest because the taxpayer did not respond to the NOD within the requisite 90-day period. (2).January 23, 2007 - IRS files Notice of Federal Tax Lien. (3).
January 30, 2007 - IRS mails taxpayer the Notice of Federal Tax Lien and Your Right to a Hearing Under IRC 6320 (Letter 3172). (3).February 26, 2007 - Taxpayer requests a collection due process hearing (CDP). (3).
July 23, 2007 - IRS schedule telephone CDP hearing for August 14, 2007. (3).
August 14, 2007 - at the hearing, "[taxpayers] did not present any reason why the filing of the Federal tax lien should not remain in place, nor did [taxpayers] present any collection alternatives during the hearing." (3).
August 23, 2007 - IRS mails taxpayers a Notice of Determination. (4).
October 1, 2007 - Taxpayers file petition with the Tax Court. (4).
October 7, 2008 - Tax Court holds hearing to discuss taxpayer's motion for summary judgment. (4).
June 18, 2009 - Tax Court denies taxpayer's motion for summary judgment. (4).
Tax Court's Decision
At the telephone CDP hearing, the Willocks disputed the amount of tax owed, that is, they disputed the underlying tax liability assessed by the IRS. (3). But, "[b]ecause the petitioners had a prior opportunity to dispute the underlying tax liability for 2001, they would not be permitted to do so during the CDP hearing." (3). In other words, the Willocks had an opportunity to dispute the amount of the liability and they let it pass. Consequently, at the CDP hearing they could only dispute the IRS's collection methods. As the Court points out, in the absence of any relevant arguments from the taxpayers, a lien is a lawful method of enforcing collection of an outstanding tax liability. (6).
Section 6501(a) provides, as a general rule, that taxes must be assessed within three years after a return is filed. This is the basic statute of limitations provision in the Internal Revenue Code. There are exceptions to this general rule, one of which is in section 6501(c)(4)(A). This section states that if "both the Secretary and the taxpayer have consented in writing to its assessment after such time, the tax may be assessed at any time prior to the expiration of the period agreed upon." In other words, the taxpayer can extend the three-year statute of limitations imposed on the Internal Revenue Service.
A review off the above chronology shows that the three-year limitation had expired long before the IRS assessed the tax on April 11, 2006. As is usually the case, there is more here than meets the eye. In footnote no. 2, the Tax Court states that the taxpayers signed Form 872 prior the expiration of the three-year statute of limitations. (4). Form 872 is an agreement between the taxpayer and the IRS that adheres to the requirements under section 6501(c).
I did a search of the IRS website and could not find Form 872. This leads me to believe the IRS has transitioned to a different form. Form 921 appears to be its replacement.