Lose Your CNC

Judge Christian N. (“Speedy”) Weiler has a hard lesson for Sherrie L. Webb, 2021 T. C. Memo. 105, filed 8/31/21*. Sherrie filed for a CDP off a NITL, asking for abatement of penalty, reasonable cause for the add-on for failure to pay timely, and eligibility for collection alternative. But her representative did not request OIC for the chop or add-on at Appeals, and only went for CNC.

Sherrie fired her representative (a bad sign), and didn’t provide some information the AO requested. So the AO bounced Sherrie, figuring per the guidelines that Sherrie could pay $56 per month, based on a recalculation of her monthly withholding, and dropping Sherrie’s 401(k) contribution.

Sherrie petitions. IRS moves for summary J, and Judge Speedy Weiler finds he can go outside the administrative record as Sherrie petitioned from FL, which is in 11 Cir. 11 Cir hasn’t limited Appeals review to admin record.

Mox nix, he decides.

“The only issue petitioner now raises is whether her account should have been placed into CNC status by Appeals. However, even after specific requests from [AO] petitioner did not provide the supporting documentation [AO] needed to be able to grant such a collection alternative. Furthermore, petitioner conceded that she still contributes to a section 401(k) account. [AO] adhered to the IRM in determining that contributions to voluntary retirement plans (including section 401(k) accounts) are not necessary expenses for purposes of CNC status based on financial hardship. See IRM pt. 5.15.1.28(2) (Aug. 29, 2018). Accordingly, we are compelled to determine that [AO] has not abused her discretion as to her consideration of the CNC issue petitioner raised.” 2021 T. C. Memo. 105, at pp. 9-10. (Name, citation and footnotes omitted, but they say Sherrie raised the prospect that her rent might go up in response to the summary J motion, and that fails because she could have raised it at Appeals and didn’t; anyway, Appeals still has jurisdiction and Sherrie can go back there if her situation worsens, but if Appeals tosses her she gets no second shot at Tax Court).

I’m a great fan of 401(k)s, and contributed to them when I was employed. All, or almost all, financial advisers are fans as well. 401(k)s are among the very few places where your gain is compounded without the tax siphon. But if you want CNC, the 401(k) contribution must go on hold.

*Sherrie L Webb 2021 T C Memo 105 8 31 21