Attorney-at-Law

“I’VE BEEN WORKIN’ ON THE RAILROAD”

In Uncategorized on 04/27/2015 at 16:15

That’s Walter D. Ligman’s story in 2015 T. C. Memo. 79, filed 4/27/15, but now Walt is retired and living on his Railroad Retirement Board benefits. Walt claims he’s disabled and distressed. And his RRB benefits are exempt from IRS levy.

Walt wants a CDP after getting a NITL for the self-reported tax he didn’t pay. But Walt also filed the return for the year in question four years late, and although his representative claims the return was wrong and that Walt doesn’t owe the money it says he owes, the rep never files a 1040X although he had three months to do so, or gave the SO any information in that score.

Judge Kerrigan intones the litany: “A taxpayer may challenge the underlying tax liability during a CDP hearing if he or she did not receive a statutory notice of deficiency for the liability or did not otherwise have the opportunity to dispute the liability. The Court considers an underlying tax liability on review only if the taxpayer properly raised the issue during the CDP hearing. A taxpayer did not properly raise an underlying tax liability if the taxpayer failed to present the settlement officer with any evidence regarding the liability after being given a reasonable time.” 2015 T. C. Memo. 79, at pp. 6-7. (Citations omitted).

So the joust is now over whether the SO should have included Walt’s RRBs in his RCP.

The SO did so, and bounced Walt’s proposed installment agreement. True, Section 6334(a)(6) exempts the RRBs from levy, but Section 6331(h) lets IRS grab 15% thereof.

As my old colleague, a different Walter, says, “The large print giveth, and the small print taketh away.”

But did the SO abuse discretion thereby? No, says Judge Kerrigan. “IRM pt. 5.15.1 (Oct. 2, 2012) instructs IRS collection personnel on how to analyze a taxpayer’s financial condition. It states that “[g]enerally all household income will be used to determine the taxpayer’s ability to pay.” Id. pt. 5.15.1.11.  The IRM does not carve out any exceptions for levy-proof benefits. For example, it instructs that income consists of pensions, including Social Security benefits.  Id. pt. 5.15.1.11(2)(e). Certain Social Security payments, like Railroad benefits, are subject to a maximum 15% levy under the Federal Payment Levy Program. See sec. 6331(h)(2)(B); see also IRM pt. 5.11.7.2.1.1(2)(e), (j) (Aug. 28, 2012).

“Although the IRM does not specifically state that Railroad benefits are included in income, it does not specifically exempt them. The IRM specifically includes other analogous partial or fully levy-proof benefits in the income calculation, such as Social Security benefits. We find that the settlement officer did not act arbitrarily, capriciously, or without sound basis in fact or law by including petitioner’s Railroad benefits to analyze petitioner’s financial condition and calculate his monthly disposable income.” 2015 T. C. Memo. 79, at pp. 9-10.

Takeaway– Don’t let your choo-choo clients get railroaded when you’re preparing a 433-A.

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