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. 

Nominee Lien

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IRC 6321

The United States District Court, S.D. California in United States of America v. Charles Le Beau, et al. signed January 30, 2024 at 2024 WL 347918 explores the application of liens, nominee liens and fraudulent conveyances.  This case reviews the many transfers of property between the husband, who is a lawyer, his wife, and his business.  The government is seeking to enforce its tax lien against the wife, who holds legal title to the property.  Among other arguments, the government argues that she is a nominee lienholder.   The Court explains that there are six factors to be reviewed in this type of analysis: 1) whether inadequate or no consideration was paid by the nominees; 2) whether the properties were placed in the nominees’ names in anticipation of a lawsuit or other liability while the transferor remains in control of the property; 3) whether there is a close relationship between the parties; 4) failure to record the conveyances; 5) whether the transferor retained possession; and 6) whether the transferor continues to enjoy the benefits of the transferred property. In this matter, five of the six factors favored treating the wife as nominee lienholder of the husband, which allowed the government to enforce the lien filing. 

Trust Fund Recovery Penalty—Assessment Statute

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IRC 6501

The United States District Court in Dawn D. Lagerkvist v. USA, 2024 WL 869548, N.D. Indiana, signed February 29, 2024, ruled in favor of the Government on its Motion for Summary Judgment and against the taxpayer’s argument that the statute of limitations for assessment of the Trust Fund Recovery Penalty (TFRP) had expired. In this case, upon application for a tax id number, the taxpayer advised the IRS that it was qualified to file a Form 944, rather than a Form 941 for its beginning tax year of 2012.  In reality, the taxpayer attempted to file a 1st Quarter Form 941 in early 2012 that was rejected in a return letter by the IRS. The taxpayer was advised it must change its filing to 941’s by proper request, or file a timely Form 944 annually. The taxpayer did neither, but in this case argues that the statute of limitations for collection of the TFRP has expired.  The law in Section 6501 states that the IRS is required to assess a tax within 3 years after the return was filed. If the taxpayer fails to file a return, the IRS may assess the tax (TFRP in this instance) at any time.  In other words, no return, no statute on assessment. The taxpayer argued that there was a dispute as to whether or not she actually filed the returns because she provided employee testimony that all filings were handled the same way. She argued the attempted filing of the First Quarter 941, along with other documents, such as her filed 1120-S, W-2s and W-2, should be sufficient to meet her annual return filing requirements and therefore the TFRP assessment was untimely. For multiple reasons, and through several pages of analysis, the Court rejected this premise as not only undermining the statute, but also imposing an unworkable administrative burden on the IRS. 

Tax Lien Filing ­—Location

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IRC 6321


The United States Tax Court ruled in Robert A. Zienkowski v. Comm’r, T.C. Memo 2024-039 filed April 8, 2024 that a Notice of Federal Tax Lien was valid even though it was not filed in the taxpayer’s county of residence. The Taxpayer in this case had an unpaid balance of $57,873 on his 2016 Form 1040.  The IRS filed a Notice of Federal Tax Lien, correctly stating the taxpayer’s address in Bryn Mawr, Pennsylvania, in Montgomery County.  The taxpayer timely filed a request for Collection Due Process (CDP) hearing in response to the lien notice.  Among other resolutions, he sought a withdrawal of the tax lien.  During processing of the CDP request, the IRS noticed that the taxpayer actually resided in a part of Bryn Mawr that was in Delaware County, Pennsylvania. As such, the IRS filed another lien notice in Delaware county and captured the 2016 balance, along with a balance on 2017 and 2018.  The IRS ultimately held the CDP hearing and upheld the lien determination. The Taxpayer filed this action before the Tax Court.  The Court reviewed the applicable law at Section 6321 which generally states that if a taxpayer doesn’t pay his or her taxes upon demand, then a lien arises that is attached to all property automatically at the assessment of tax.  A Notice of Federal Tax Lien (NFTL) filed in the land records per the Regulations at section 301.6323(f)-1(d) must be on Form 668, Notice of Federal Tax Lien and must identify the taxpayer, the tax liability giving rise to the lien and the date the assessment arose. Citing caselaw, the Court explained that notwithstanding any other provision of the law regarding the form or content of a notice of lien, including State law, the lien is valid if it meets these requirements. In this situation, it clearly met those requirements and was valid even though it was originally filed in a county that was not where the taxpayer resides. 

Installment Agreement 

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IRC 6159

The Tax Court held that an IRS Settlement Officer did not abuse her discretion in sustaining collection action against a taxpayer in Michael J. Stevens and Alexis M. Stevens v. Comm’r of Internal Revenue, Docket No. 15761-21L, filed July 24, 2023.  The IRS filed notices of intent to levy against the taxpayers for tax years 2015 and 2016 to collect over $100,000 owed in income taxes.  As a result, the taxpayers requested a Collection Due Process hearing.  During the course of the hearing, the Settlement Officer explained to the taxpayers that she would need a Collection Information Statement disclosing assets, income and expenses, in order to entertain an installment agreement or Offer in Compromise.  While the taxpayers attended the hearing, they never provided complete financials.  Rather, they provided an incomplete financial with little supporting documentation that showed they could pay $93 per month.  The IRS then used information they had to make adjustments to the financials, which ultimately showed the taxpayers could pay $746 per month.  This was offered as an installment agreement a couple of times, but the taxpayers refused to accept it or respond with more documentation to support their proposal.  IRC Section 6159 authorizes the Secretary of the Treasury to enter into a written agreement to pay tax in installments if it determines it will ultimately facilitate collection of the liability.  The IRS generally has discretion to accept or reject an installment agreement proposal.  The Court ruled there was no abuse of discretion by the IRS since the Settlement Officer based many of her calculations on IRS standardized expenses and income on tax returns and a paystub that was provided by the taxpayers.  

Trust Fund Recovery Penalty

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IRC 6672

The United States Court of Appeals for the Fifth Circuit held that the taxpayer was a responsible person who willfully failed to pay over employment taxes on behalf of her employer in Pamela Cashaw v. Comm’r of Internal Revenue, filed May 31, 2023, and as such was liable for the Trust Fund Recovery Penalty (TFRP). The TFRP is equal to 100% of the unpaid income taxes, Social Security and Medicare withheld from employee’s paychecks, but not paid over to the government.  In this case, the employer was Riverside General Hospital.  The person held liable was initially hired as a pharmacist, but ultimately took over as hospital administrator after the chief administrative officer of the hospital was indicted for Medicare fraud. Cashaw, the taxpayer in this matter, was directed to take over as administrator temporarily by a federal judge.  She was given nonexclusive signatory authority and oversaw the functionality of the hospital.  That included payroll and operations.  During her time, the hospital had serious financial distress as Medicare and Medicaid funding had been withdrawn due to the prior administrator’s alleged fraud. During this time, the hospital failed to pay its payroll taxes.   The law at issue, set out in IRC Section 6672, states in summary that a penalty equal to the unpaid portion of the trust fund taxes may be assessed against “any person,” required to collect, account for, or pay over the withheld taxes who “willfully” fails to do so.  The Court ultimately ruled that Capshaw “falls within the sweeping net of Section 6672 responsibility.” The record showed she was presented with checks to sign, reviewed them to see what they were for and even declined to sign one when she disagreed with the purpose of the check.  While the Court indicated that she may not be the most responsible for payment of the taxes, she need only be “a” responsible person under the statute.  For the “willful” component, the Court explained that the statute requires only a “voluntary, conscious, and intentional act, not a bad motive or intent.”  The taxpayer’s testimony at trial established that she was aware the hospital was not paying its taxes and she made a choice to prioritize essential patient services above paying payroll taxes.  The Court ruled that once she was aware the hospital was paying other creditors before the IRS, then she reached the standard of willfulness under the statute.  This is a tough conclusion, but given the very broad nature of this statute, the correct conclusion.