And a new Circular 230 person?

Although abuse-of-discretion in CDPs is rare, here’s one filed today, Shawn Michael Lewis, 2012 T.C. Mem. 138, filed 5/16/12. Shawn was hit with SNODs, but filed Chapter 11. He and IRS jousted about the deficiencies in Bankruptcy Court, but eventually IRS’ second amended proof of claim carried the day, after Shawn signed a Form 4549, Income Tax Examination Changes.

IRS proceeds to levy, and Shawn asks for a CDP. It takes a year for his request to get assigned to a SO. He asks for a face-to-face, which is granted, so he gets sent from one SO to another. The second SO asks for documents Shawn says he sent but the SO says he never got, so he issues a NOD sustaining the levy for failure to furnish documents.

Shawn can’t challenge the underlying liability, of course. Judge Paris: “Where a taxpayer has filed a bankruptcy action and the Commissioner has submitted a proof of claim for unpaid Federal tax liabilities, the taxpayer has had the opportunity to challenge the underlying tax liability for the purposes of section 6330(c)(2)(b). See Kendricks v. Commissioner, 124 T.C. 69, 77-79 (2005). Additionally, a taxpayer who consents to additional assessments by signing Form 4549 is also deemed to have had the opportunity to dispute his or her tax liability for the years included in the Form 4549. Aguirre v. Commissioner, 117 T.C. 324, 327 (2001).” 2012 T.C. Mem. 138, at p. 8. Incidentally, it’s a proceeding in Bankruptcy Court, not an action, but that doesn’t help Shawn, he’s barred from contesting the liability.

But the second SO dropped the ball. He never gave Shawn a face-to-face, and Shawn had only one phonecall with the SO before the SO issued the NOD. Judge Paris:  “During the call petitioner reasserted his desire for a face-to-face conference on the basis of the complexity of his bankruptcy issues, asked for a total of his liabilities, and restated his desire to explore collection alternatives. SO X advised petitioner that he would have to submit the financial documentation requested in his previous letter in order to be eligible for collection alternatives. At no point did SO X indicate that the phone call would constitute petitioner’s CDP hearing. SO X had no further contact with petitioner until the issuance of the notice of determination….” 2012 T. C. Mem. 138, at p. 11 (Name and date omitted).

Judge Paris throws out the NOD. “In reviewing the administrative record, it is difficult to conclude that SO X dedicated much effort to a meaningful review of the issues presented by petitioner’s CDP hearing request.

“Respondent does a commendable job of attempting to argue that each individual defect in SO X’s administrative review can be rebutted to show that said defect was not an abuse of discretion. However, respondent’s argument seeks to quilt together a string of exceptions to account for SO X’s deviation from what one would consider a thorough review of petitioner’s case. While each individual defect on its own may be insufficient to support a holding that respondent abused his discretion, the cumulative effect of such defects demonstrates that SO X acted both arbitrarily and capriciously in rendering his determination. Accordingly, the Court holds that respondent abused his discretion in sustaining the proposed levy.” 2012 T. C. Mem. 138, at pp. 12-13 (Name omitted).

An also-ran among the Tax Court Memoranda filed May 16 is Gabriel S. Garcia and Maria Garcia, 2012 T. C. Mem. 139. This is another unsubstantiated deduction case, not worth commenting on, except for one interesting remark by Judge Cohen: “Petitioners’ tax returns for 2007 and 2008 were prepared by petitioner’s brother, Richard Garcia. Richard Garcia is not an accountant or an enrolled return preparer.” 2012 T.C. Mem. 139, at p. 3.

Was there such a thing as an “enrolled return preparer” in 2008 and 2009 (when presumably the 2007 and 2008 returns, respectively, were filed)? There certainly were enrolled agents, enrolled actuaries, and enrolled retirement plan agents in those years, and unenrolled return preparers abounded (and probably still do, notwithstanding the latest Circular 230), but Registered Tax Return Preparers only came into existence this year, and so far as I know the candidates are still being tested and screened for registration.

Never heard of an “enrolled return preparer” before 2009, or since. Anybody know who or what they were?