IRS Dirty Trick
The Blog deals with an appeal of a levy action under the "collection due process" appeal rules of IRC 6330. We indicated that there is no tax liability for my client because she was not liabile for the payroll taxes of a company managed by her husband. She was not a "responsible person" for the payment of the payroll taxes under IRC 6672.
Before the conference, we receive a letter from a Settlement Officer Kathryn E. Dugan, in the IRS Appeals Office, 31 Hopkins Plaza, Suite 1310, Baltimore, MD 21201. Dugan said that we could not submit an OIC based on "no liability" because my client had a prior opportunity to resolve that issue in another IRS forum.
I called Ms. Dugan and told her that if she would delay the conference one day, I would send her a legal memorandum on why I believed that an OIC based upon no liability was within the 6330 statute. Ms. Dugan refused.
We had a difficult conference because Ms. Dugan had no answer to my reference to the unmodified language of 6330 that the taxpayer had the right to submit an Offer in Compromise under the statute. My client listened in on the conference call and took notes on the conference.
My Client and I heard Ms. Dugan state that she would allow me to send her a legal memorandum to support my conclusion in the conference that an OIC can be submitted under the clear language of 6330. Without question that language is in the statute and the right to submit an OIC IS NOT MODIFIED BY ANY OTHER LANGUAGE IN THE STAUTE.
I sent Ms. Dugan a memorandum with a technical analysis of IRC 6330 to explain why the statute was clear that we could submit an OIC. I pointed out that the IRC 6330 does not distinguish between an OIC "doubt as to liability" or an OIC on "doubt as to collectibility." I noted that the right to submit an OIC in 6630 is UNQUALIFIED. I also addressed the trust fund penalty issue in that memorandum. I requested that Duggan request technical advice on the technical issue from the IRS National Office. It took about 2 months to hear from Ms. Dugan.
Ms. Dugan drafted a Determination Letter dismissing the CDP Appeal because we did not submit the OIC Form 656. She did not address the 6330 interpretative issue. She did not address the tust fund penalty issue. She merely based the adverse determination letter on the fact that she never receved a Form 656 that she indicating writing she would not consider.
FIRST: Ms. Dugan sent us a memorandum before the conference stating that we could not submit the Form 656.
SECOND: Ms. Dugan in the Appeal Conference allowed me to send her a post-conference technicla memorandum to justify an OIC on Form 656 and indicated that she would reply to that memborandum.
THIRD: My client and I heard Mr. Dugan state that she would nto allow us to file a Form 656.
I contacted the area manager Ruth Vriend. Ms.
Vriend said that the notes of Ms. Dugan states that Dugan said that we could submit the Form 656 even though Dugan's notes also said that we could not submit the Form 656. Ms. Vriend let the determination letter stand without change.
Summary:
1. Ms. Dugan said in writing before the conference that we could not submit the Form 656.
2. Mrs Vriend stated that Ms Dugan's notes said that she believed that the OIC "no liability" could not be submitted. Vriend also said that Dugan's notes told us we could submit the Form 656.
3. My client and I both did not hear Ms. Dugan say we could submit the Form 656. And in the same conference Vriend said that Dugan noted that we could not submit the OIC. We not only have a conflict on the facts, we have A CONTRADITION BY DUGAN WHO SAID WE COULD SUBMIT THE OIC AND ALSO THAT WE COULD NOT SUBMIT THE OIC.
4. Dugan never addressed my argument that IRC 6330 was clear on its face that we could submit an OIC in the 6330 conference as an alternative to collection by the IRS.
5. After Dugan got my memorandum she did not tell me that she also wanted the Form 656 or that she expected it.
6. Since I had a statement by Dugan in writing that I could not submit the OIC, I expected her to reply to my memorandum before the Form 656 would be an issue. Moreover, Ms. Dugan said she would reply to my legal memorandum.
7. My client and I disagree with the appeal notes of Dugan who claims to have said we could submit the Form 656 EVEN THOUGH SHE SAID WE COULD NOT SUBMIT THE FORM 656.
Does that make you crazy, or what?
We will have to go to the Tax Court on this issue to determine if Dugan abused her discretion. That is a very high burden of proof on our part but we have in writing Dugan's statement that we cannot submit the Form 656. And Dugan's notes on the conference state her belief and argument that we could not submit the Form 656.
This was a very "chap shot" by Dugan. She could not and did not disagree with my legal memorandum on the issue. Therefore she closed the case by stating that we did not submit the Form 656.
Ms. Dugan get my nomination for THE IRS ABUSE OF THE DAY. She also gets my nomination for the "cheap shot" of the day and "the liar of the day."
What is clear is that Ms. Dugan did not follow the IRS Mission Statement to apply the tax law with "integrity" and "fairness."
Please post any comment you may have on the issues discussed.
Alvin S. Brown, Esq
ab@irstaxattorney.com