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Tax Court Finds IRS Worker Did Not Abuse His Discretion in Tax Levy Case

Tax Court Finds IRS Worker Did Not Abuse His Discretion in Tax Levy Case

In Scholz v. Commissioner of Internal Revenue, a self-employed Mississippi man filed a late federal income tax return for tax years 2007 through 2010. At the time, the man failed to pay the entire amount of tax that was listed as due on each return. After he filed the late returns, the Internal Revenue Service sent the man a Final Notice of Intent to Levy related to the unpaid taxes. The Agency also provided the man with a notice regarding his right to request a hearing on the matter. The man submitted a timely request for a hearing and asked the IRS to list his account as not collectible or consider allowing him to enter into an installment agreement.


An IRS Settlement Officer sent the man a notice that his collection due process hearing was scheduled to be held in 11 days. The Officer also told the man that he would need to submit a Form 433-A as well as certain financial information before the Agency would consider his request for a collection alternative. At the man’s hearing, his counsel received an extension regarding the timely submission of the man’s financial information in support of his request for alternatives to the proposed tax levy. The Settlement Officer also apparently warned the man that the Agency would sustain the proposed levy if he failed to submit the requested documentation by the agreed-upon date. Unfortunately, the man never submitted his financial information to the IRS. Two weeks after the expired deadline, the Settlement Officer issued a Notice of Determination sustaining the proposed levy. The man next sought Tax Court review.  The IRS responded to the case by filing a motion for summary judgment.



First, the Tax Court stated summary judgment was created in order to avoid unnecessary and lengthy trials. Next, the court said a motion for summary judgment should be granted when there are no genuine issues of material fact in dispute and the moving party is entitled to judgment in its favor based on the law. Merely denying the allegations included in a party’s pleading is not sufficient to create an issue of fact. Instead, specific facts must be alleged in order to refute the claims alleged. After that, the Tax Court stated the man failed to allege that a material fact was in dispute in his response to the Agency’s motion. Because of this, the court said it would review the Settlement Officer’s actions for an abuse of discretion.


According to the Tax Court, an abuse of discretion occurs when an Agency’s decision is “arbitrary, capricious, or without sound basis in fact or law.” The court then examined whether the Settlement Officer verified that the legal requirements for sustaining the proposed levy were met, if the proposed collection properly balanced the need for efficiency against the requirement that it be as non-intrusive as possible, and whether the Officer considered any issues raised by the man.


After examining the record before it, the Tax Court stated it was clear the Settlement Officer thoroughly reviewed the man’s records and ensured that the legal procedures required for sustaining the proposed tax levy were met. The court also said the man failed to propose a specific installment agreement to the Agency, and an IRS Officer is not required to consider an installment agreement that was never presented. In addition, the court found it significant that the man failed to complete Form 433-A and submit the appropriate financial documentation, even though the Settlement Officer provided him with an extended timeframe during which to do so. The court also dismissed the man’s claim that he was not provided with sufficient time to explore less intrusive tax collection avenues by stating the IRS is not required to wait a specific time period before issuing a determination regarding a proposed levy.


Since the Tax Court found that the Settlement Officer did not abuse his discretion when he sustained the proposed tax levy at issue, the court granted the Agency’s motion for summary judgment.


If you are facing a tax collection, you should speak with a knowledgeable tax attorney as soon as possible. William Hartsock is a certified tax law specialist with more than 30 years of experience assisting clients in San Diego and across Southern California with their international income and other taxation matters. For a free consultation with a veteran tax lawyer, give Mr. Hartsock a call today at (858) 481-4844 or contact him online.


Additional Resources:

Scholz v. Commissioner of Internal Revenue, 2015 TC Memo 2 – Tax Court 2015



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