Soc. Sec. Disability Taxation Timing 

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IRC 86


The United States Tax Court in Smith v. Comm’r at T.C. Memo 2026-25 filed March 19, 2026 ruled that the only income offset for repayment of Social Security Disability payments can occur in the year the repayments are made.  This case and its effects are unfortunate and likely unintended, but a statute is a statute.  Taxpayer was injured and applied for Social Security Disability in 2022.  In November of 2022, he was awarded disability and was paid a retroactive award for the March 2022 to November 2022 time period.  He then received monthly benefits from December 2022 through March 2023. In April 2023, SSA ceased making payments because they learned the taxpayer had been working since April 2022.  He actually held two part time jobs in 2022 – earning a total of $16,535.  Because he technically did not qualify for disability, he had to repay the benefits paid to him by SSA. He paid a lump sum of $31,116 on May 26, 2023 and monthly payments during 2023 and 2024. He did not report any Social Security benefits paid to him in 2022 on his 1040, though he received an SSA-1099. He was ultimately issued a Notice of Deficiency for $5,454.  He essentially argued to the Court that he re-paid all the money, so it was a wash. However, the statute states that the amount of Social Security received in the taxable year may be reduced by repayments made by the taxpayer “during the taxable year.” As such, he could not reduce his 2022 Social Security income by the amounts he paid back during 2023 and 2024. The Court expressed that they understood the taxpayer’s position, but they were bound by the statute. 

Passport Certifications and Exceptions

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IRC 7345


The U.S. Tax Court in Shaban v. Comm’r filed March 3, 2026 at T.C. Memo 2026-24 provides a good overview of what it means to be certified as a seriously delinquent taxpayer for passport purposes, and exceptions for that certification.  The taxpayer in this matter was nothing but a victim to his own brother’s embezzlement, which approximated $9 million.  Unfortunately, this included trust fund money for payroll taxes.  Since the taxpayer was the owner of the business, he was assessed with the Trust Fund Recovery Penalty, or TFRP. The taxpayer took advantage of the opportunity to protest the proposed TFRP penalty, but his representative failed to timely respond to requests for information and the assessment stuck.  Ultimately, he was certified by the Department of Treasury to the Department of State as seriously delinquent and his passport was affected.  The taxpayer’s goal was to attack the certification through the argument that he was a victim of ID Theft.  The Court reflected on their limited jurisdiction as defined by the relevant statute – IRC 7345. That statute only allows the Court to determine if the certification was erroneous, or if the IRS failed to reverse the certification when required to do so.  It is noteworthy to explore the exceptions to the definition of “seriously delinquent tax debt,” according to the statute.  Those exceptions are debt that is under the statutory amount ($66,000 for 2026), debt paid pursuant to an installment agreement, or an Offer in Compromise.  In addition, a taxpayer can be placed in Currently Not Collectible status. Or, a debt where collection is suspended because of a request for collection due process hearing, or request for innocent spouse relief. It is also feasible for an administrative claim of ID theft approved by the IRS, to remove the liability from qualifying as a seriously delinquent tax debt.  One would think given the taxpayer’s arguments that he was the victim of ID theft that he would have pursued the filing of Form 14039 Identity Theft Affidavit, for processing at the IRS.  He did not, and because of that, along with the inability to substantiate any other exception under the statute, the certification was deemed proper.  The take-away here is that establishment of a collection alternative, and other actions, can result in decertification for passport purposes, even if the debt is not paid in full. 

Federal Rule of Civil Procedure 11(b) 

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Don’t use AI for your citations in a brief to the Court! Clinco v. Comm’r filed February 9, 2026 by the U.S. Tax Court at T.C. Memo 2026-16 is a reflection of a growing problem in judicial filings, by both by represented and unrepresented parties.  This is a pretty basic case about an IRS exam where the IRS used bank deposit analysis to propose adjustments to the taxpayer’s gross income.  The IRS also pulled and compared 1099-K information. Ultimately a Notice of Deficiency was issued and the taxpayer hired counsel to represent him in Tax Court.  Unfortunately, counsel made some poor choices in his representations to the Court.  Taxpayer’s support for his positions were based on mostly fabricated cases! It turns out that 3 of the 4 cases his lawyer cited to the Court did not exist and as the Court states, “appear to be hallucinations generated by a large language model AI.” Based on this, “[t]he persuasiveness of Clinco’s argument collapses like an overmixed souffle.” In this case, the Court looked past all of these issues to get to the substance of the matter which still didn’t favor the taxpayer. This may not always be the case. The Court provided warning however: “Submitting a brief with fictitious caselaw is a recipe for sanctions and a clear violation of Rule 11(b) of the Federal Rules of Civil Procedure. We reiterate Chief Justice Roberts’s advice to lawyers who write briefs with citations of nonexistent cases: ‘[a]lways a bad idea.’” Rule 11(b) requires a lawyer or unrepresented party to certify to the Court that their submission is warranted by existing law or nonfrivolous argument for extending or modifying existing law.  Rule 11 also includes sanctions, which can take nonmonetary directives, monetary sanctions, or orders to pay other parties reasonable attorney fees and costs.  In sum, a bad idea all around. 

Personal Liability for Estate Tax

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IRC 6324


The United States District Court for the District of Kansas issued United States of America v. Karst at Case No. 24-cv-04090-TC on February 27, 2026 in which they deemed the recipient of estate property to be personally liable under IRC 6324 for unpaid estate taxes.  In this case, the decedent left an estate with a value of nearly $4 million in 2007.  This was a taxable estate and the Form 706 reported an estate tax due of $792,790.75. The estate was administered by the trustees, who were the decedent’s sons, as successor trustees of his trust.  They opted to pay the estate tax in installments. While they made a few payments, they stopped short and still owed more than the original amount at the time of enforcement action by the IRS. During the administration of the estate, the sons opted to fully distribute the estate to the beneficiaries – themselves, while not paying the estate tax due. The elements of liability under the statute were easily met in this instance as the tax debt was valid and outstanding, while the beneficiaries received distributions of estate property and the estate failed to pay the tax debt.  Couple items to note here…the statute provides that the personal liability under this provision is joint and several among all transferees.  Further, the more practical issue seen by this practitioner is related to potential personal liability under the Federal Lien Priority statute at 31 U.S.C. 3713 whereby an administrator of an estate has risk for personal liability while ignoring the tax liabilities of the decedent on distribution of the estate.  It is highly suggested that if one is a Personal Representative, Executor or successor Trustee on a decedent’s estate administration, that time is taken to fully explore current tax compliance by the decedent so there is no violation of this statute that could cause personal liability for the administrator of the estate. 

Federal Tax Lien and CDP rights

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IRC 6320 


Crawford v. Comm’r filed January 7, 2026 by the U.S. Tax Court at T.C. Memo 2026-3 illustrates the opportunity provided to seek Collection Due Process hearing rights after a Notice of Federal Tax Lien has been issued.  In this case, the taxpayer had been assessed a Trust Fund Recovery Penalty for non-payment of employment taxes. Ultimately, the IRS issued Letter 3172 Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320.  In this case, the taxpayer’s representative filed a Request for Collection Due Process hearing within the 30 day timeline provided in the Lien notice.  By preserving these rights, the taxpayer obtained the ability to review collection alternatives with IRS Appeals. These would include Currently Not Collectible, regular Installment Agreement, Partial Payment Installment Agreement, or an Offer In Compromise. Many times reviewing collection alternatives with IRS Appeals is more advantageous than with IRS collections.  Most commonly, taxpayers will receive CDP rights at the time a Final Notice of Intent to Levy is issued. Once 30 days passes from the issuance of the Final Notice of Intent to Levy, the taxpayer misses the opportunity to have a CDP hearing. However, it has been this practitioner’s experience that the IRS could issue the Notice of Federal Tax Lien Filing either before or after the Final Notice of Intent to Levy. Therefore, there could be another opportunity for a CDP hearing if the hearing opportunity has been missed because a Final Notice of Intent to Levy has been issued at some point in the past.  Or this opportunity could present itself before the taxpayer is issued a Final Notice of Intent to Levy. In the instant case, the taxpayer was attempting to use the CDP hearing to attack the validity of the Trust Fund Recovery Penalty assessment itself.  Fundamentally, a taxpayer must file an Appeal of the Letter 1153 proposed assessment of Trust Fund Recovery Penalty at the time of issuance of that proposal, rather than appealing the assessment after the fact in a CDP hearing.  Regardless, the IRS could entertain collection alternatives in this setting. 

Post Bankruptcy Collection Action

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11 U.S.C. 522(c)(2)(B)


The United States Tax Court in Mongogna v. Comm’r of Internal Revenue, Docket No. 18651-23L, filed August 18, 2025, sustained a levy decision from a Collection Due Process hearing after it determined that a Settlement Officer had not abused her discretion. This case presents a good explanation of the effect of a bankruptcy discharge on a pre-petition tax lien filing. Taxpayers are a married couple that owed income taxes for many years. They filed a chapter 7 bankruptcy after the filing of a Notice of Federal Tax lien affecting several tax periods.  They owed total taxes of $288,476 at the time of filing their bankruptcy. A discharge was ultimately issued. Post-bankruptcy, the IRS sent the taxpayers a notice of intent to levy with a right for an Appeal, which the taxpayers took advantage of. The taxpayers were advised that in order to proceed with the Appeals hearing, they would have to provide financials and disclose if they had any exempt or abandoned property from the bankruptcy. Their lawyer argued that it was not their duty to provide this information to the IRS. He further argued that because much of the debt was discharged, it was not necessary to provide financials as they wanted a streamlined payment agreement. That is available when a taxpayer owes less than $50,000. The Appeals officer disagreed and indicated that it was necessary to address the exempt and abandoned property so that the IRS insolvency unit could determine what was discharged and whether or not the pre-petition lien filing attached to the exempt and abandoned assets. The Court agreed with the Appeals Officer that failure to disclose this information prohibited a collection alternative, such as an installment agreement, from being established. It is worth repeating the rule relating to the effect of the lien in this matter. A chapter 7 bankruptcy may discharge a person from personal liability for the federal taxes owed in some cases, however, it does not extinguish a pre-bankruptcy petition federal tax lien. See 11 U.S.C. 522(c)(2)(B). Therefore, collections can be enforced against taxpayers exempt or abandoned property, post-bankruptcy.

Innocent Spouse Relief

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IRC 6015 (c) 


The United States Tax Court in Smith (Petitioner) and Hodge (Intervenor) v. Comm’r of Internal Revenue Service, Docket No. 372-23S, filed June 12, 2025, agreed with the Petitioner and the IRS in a rare case of review associated with a non-requesting spouse’s objection to provision of Innocent Spouse relief. The relevant tax period is 2017. However, the return was filed in July 2021. The return was prepared by Petitioner, wife. The couple legally separated in October 2021. Petitioner had W-2 income. Intervenor husband had W-2 income, 1099 income and cancelled debt income. Neither of the last two items were included on the return, so the IRS later issued a notice adjusting the liability. It was after this that Petitioner filed for Innocent Spouse relief under IRC 6015(c). Under this type of relief, the requesting party can have the liability limited to their income only. This particular provision states that relief is not available if the requesting spouse “had actual knowledge, at the time such individual signed the return, of any item giving rise to a deficiency (or portion thereof) which is not allocable to such individual…” In this case, the IRS agreed that requesting spouse should receive relief. However, the Intervenor (husband), submitted a response indicating that Petitioner must have been aware of the unreported income because she prepared the return and had access to his bank account, so she could not have been “completely oblivious,” as he stated it. The Court deemed his testimony to be self-serving and unverified. During the relevant period, the parties lived apart. The 1099 for self-employment and cancelled debt were addressed to the husband, Intervenor. The 1099 income was deposited into his sole account. Furthermore, the Court pointed out that throughout their marriage they always maintained separate bank accounts. Relief was granted to Petitioner because of the inability to meet the burden of the statute. 

Levy Challenge

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IRC 6330


The United States Tax Court in Ziegler v. Comm’r of Internal Revenue, Docket No. 4466-22L, filed June 13, 2025 sustained a Motion for Summary Judgment by the government in relation to the taxpayers’ action filed under IRC section 6330 to challenge a Notice of Determination by IRS Appeals to sustain collection action by Federal tax levy. Taxpayers owed income taxes for multiple years that exceeded $350,000. Taxpayers filed their own returns. Appeals determined the taxpayers could pay $600 per month. The record showed that from the outset, the taxpayers indicated that Mr. Ziegler’s health should be considered in determining whether the IRS levy action was appropriate. The taxpayers wanted to be placed in Currently Not Collectible (CNC) status. The Court was presented with evidence showing that Mr. Ziegler had leukemia and potential heart issues. In essence, the taxpayers’ concern for health issues was the primary reason they argued they should be placed in CNC status. But, their actual actions were their undoing. The Court, while explaining there are remedies to deal with dramatic health situations as it relates to tax collections, expressed dismay that the taxpayers had purchased a new vehicle with a value of $51,000 and took on a car payment of $800 per month. This action caused the taxpayers to own two vehicles…while neither of them were employed. Additionally, the Court reviewed their bank account statements and found that over a six month period, of the 207 transactions on the statements, only 8 were medical related…and none were significant or catastrophic in any way. Ultimately, the Court found that the taxpayers “purchase of [the] vehicle demonstrates [taxpayers] cavalier attitude about the tax liabilities, and also the fact that they were not overly concerned with the potential high cost of Mr. Ziegler’s medical bills.” The levy was sustained. 

Civil Fraud Penalty

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IRC 6663


The United States Tax Court in Remus Beleiu and Naomi J. Beleiu v. Comm’r of Internal Revenue, Docket No. 16518-19, Filed July 2, 2025 ruled that the IRS had carried its burden to prove civil fraud against Mrs. Beleiu and therefore she would incur $100,000 of fraud penalties. The taxpayers are a married couple. It appears that Mr. Beleiu owned two separate businesses – an IT business and a consulting business. Mrs. Beleiu is a financial analyst for a Hospital System. She has an undergraduate degree in accounting and an MBA with a concentration in accounting. She self-prepared the returns. While her education was a factor, other actions she took mattered a good deal to the Court. Three tax periods were picked for Exam. Mrs. Beleiu attended an office conference with the Examiner without representation, and without many documents requested. In particular she excluded all documentation from one business. The Examiner set another appointment and though the taxpayer appeared, she still did not present information requested. At that point, Exam subpoenaed bank records from two banks and performed a deposit analysis. While it was clear that the Schedule C from the first business, (there was no Schedule C’s filed for the second business), didn’t reflect enough gross revenue as compared to 1099-Misc’s and 1099-K’s, it became apparent to the Examiner was that there were other bank accounts referenced on bank statements associated with another business owned by the taxpayers. Prior to issuing a report, the IRS had a third meeting, with newly hired counsel and accountants for the taxpayer. At that meeting the IRS attempted to reconcile the bank statements with the documents provided by the taxpayer and their representatives. This failed because Mrs. Beleiu had not disclosed the existence of all bank accounts, or the second business. The opinion proceeds to review the 11 badges of fraud. Two factors were neutral, or against the fraud determination – that the taxpayer had not filed a return, and that the taxpayer operated an illegal business. Nine factors weighed against taxpayer: understating income, keeping inadequate records, giving implausible or inconsistent explanations of behavior, concealing income or assets, failing to cooperate with the tax authorities, supplying incomplete or misleading information to a tax return preparer, providing testimony that lacks credibility, and dealing in cash. It certainly didn’t help the taxpayer’s case for her to testify that she didn’t really hide the other business, since providing bank statements that showed transfers to that businesses’ accounts were provided! 

Property Lien Attachment

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IRC 7425(b)(1)


The United States District Court for the Eastern District of Missouri held in Tavis Merriman v. United States of America, Case No. 4:25 CV 476 CDP, entered on August 14, 2025 that the United States Tax lien remains attached to real property post transfer even though the taxpayers for whom a tax lien was filed were no longer owners. The Plaintiff in this action for quiet title was seeking to prove that the tax lien did not attach to property he acquired at a Collector’s Deed tax sale. The taxpayers who owed the debt resided in St. Louis County where the IRS filed a notice of tax lien on August 8, 2019. After failing to pay their real property taxes for a number of years, the Collector sold their property for taxes owed to Plaintiff on October 23, 2023. Plaintiff filed a State quiet title action to clear title, but for the Federal Tax Lien. The Plaintiff then filed this action in Federal Court. The Court ruled that the same rule used by any lender or other party that executes a non-judicial sale of property on which the US has a tax lien, applies. More particularly, IRC section 7425(b)(1), (c)(1) states that a tax lien will remain attached to property if notice of the lien was recorded more than 30 days before the sale and the United States was not given notice of the sale “by registered or certified mail or by personal service, not less than 25 days prior to such sale.” The tax lien remained attached and the fact that the taxpayers no longer owned the property was irrelevant.