Collection Due Process hearing
The United States Tax Court ruled in Leciel L. Lowery, Jr. and Charlene A. Lowery v. Comm’r, Docket No. 13022-17L, Filed November 18, 2019, that it could not determine if the IRS Appeals officer has abused her discretion in sustaining the proposed collection levy. As such, the Court remanded the case to Appeals for further review of several specific issues. This situation is rather common. The taxpayers owed the IRS in excess of $638,000 for several years. The taxpayers proposed paying the IRS the sum of $6,064 per month. The problem was that this would not retire all liabilities by the time the government ran out of time to collect. As such, the Appeals officer indicated it would be necessary to either increase the payment proposal to $13,997 per month, or liquidate a retirement account valued at $232,838 and sell a house with equity valued at $50,000 in the wife’s trust. After application of these proceeds, the payment agreement would be $6,341 per month to satisfy the liability within the statute. The Court had too many questions of Appeals to simply rule there was no abuse of discretion. The Court wanted Appeals to: 1) explain why mandatory deductions from husband’s pay were not allowed as a reduction of gross income, 2) review records relating to unreimbursed employee expenses that were not allowed as a reduction of gross income, 3) consider whether Arizona law affects wife’s power as trustee to sell the house in the trust, and finally 4) to determine whether special circumstances, such as age, restrict the full or partial liquidation of petitioner husband’s retirement account to pay back taxes. The taxpayer had argued that he should not be required to liquidate because he was near retirement age. This case is an important one for taxpayers looking for guidance to avoid asset liquidation when future income potential will not allow for payment of the taxes within the collection statute.