A taxpayer was entitled to attorneys' fees because the IRS wasn't substantially justified in refusing to abate an assessment attributable to an invalid change in filing status.
U.S. Tax Court Judge Buch says the IRS was required to abate an assessment that it made under Section 6213 as resulting from a mathematical or clerical error but was based on its changing taxpayer Michael Swiggart's filing status from head of household.
The IRS wasn't substantially justified in requiring Swiggart to prove head of household status when he had timely requested an abatement under Section 6213, Buch says.
During
the CDP hearing Mr. Swiggart provided a signed affidavit dated September
13, 2011, identifying his child by name and Social Security number and stating
that his child spent the greater number of nights in 2010 with him but that he
had an agreement with the child’s mother to waive the dependency exemption deduction
for certain years, including 2010. The settlement officer agreed that claiming
the child as a dependent was not required to qualify as a head of household,
but the settlement officer also concluded that he could not abate the tax attributable
to the change in filing status until Mr. Swiggart provided additional documents
showing that the child had lived with him for more than half of the year. On
February 8, 2012, IRS issued a notice of determination sustaining
On
November 19, 2012, Mr. Swiggart filed a motion for summary judgment, requesting
the Court to conclude that the portion of the assessment attributable to the
change in filing status is void and that respondent may not levy to collect
that portion. Mr. Swiggart 5 did not dispute the portion of the assessment attributable
to the amount reported as due but unpaid with his return. On December 11, 2012,
respondent filed an objection to Mr. Swiggart’s motion for summary judgment,
stating that he did not object to abating the portion of the assessment
attributable to the change in filing status but did object to abating the portion
Mr. Swiggart reported as due on his return, which he acknowledged Mr. Swiggart
was not disputing. On March 8, 2013, respondent filed a supplement to his
notice of objection, informing the Court that he agreed that Mr. Swiggart’s motion
for summary judgment should be granted only in part, as to the portion of the
assessment attributable to the change in filing status. Respondent also stated in
his supplement that the abatement had been approved but had not yet appeared on
the certificate of assessment; respondent included a separate document showing
that the abatement of $2,142 had been approved.
At
trial on April 23, 2013, the parties filed a stipulation of settled issues. In the
stipulation, the parties agreed that respondent had abated $2,142 of the assessment
without prejudice to his right to reassess the amount using deficiency procedures
and that the collection action is sustained as to the $2,149 that Mr. Swiggart
reported as due but unpaid on his original return, plus penalties and
Conclusion
Mr. Swiggart was the prevailing party in this case, and the IRS was not substantially justified in failing to abate the assessment attributable to the change in filing status. As a result, we will grant Mr. Swiggart’s motion for an award of reasonable litigation and administrative costs under section 7430 in that he is awarded $3,256.50.
Feel like You're Not Getting a Square Deal from the IRS?
Background
On
May 19, 2011, Mr. Swiggart filed a 2010 Form 1040, U.S. Individual Income
Tax Return. Mr. Swiggart claimed head of household filing status, reported
tax due of $15,766, and reported tax withheld of $13,617. Mr. Swiggart did
not pay the remaining $2,149. Moreover, Mr. Swiggart did not report the name
of the dependent who qualified him for the head of household filing status because
he had agreed to allow the child’s mother to claim the dependency exemption
deduction for the child for 2010.
On
June 20, 2011, the IRS issued a math error notice to Mr. Swiggart, stating
that the IRS had changed his filing status because the name of the dependent
who qualified him for head of household filing status was not reported on
his tax return. As a result, the IRS recalculated Mr. Swiggart’s tax using a filing
status of single and determined that Mr. Swiggart instead owed $4,354, an increase
of $2,205 to the amount Mr. Swiggart had reported as due on his return.
In
the notice, the IRS stated: “If you contact us in writing within 60 days of the
date of this notice, we will reverse the change we made to your account.”
Sixteen
days later, on July 6, 2011, the IRS issued a Final Notice of Intent to Levy
and Notice of Your Right to a Hearing, seeking to collect the amount from the
math error notice plus penalties and interest.
On
August 5, 2011, 46 days after the IRS issued the math error notice, Mr. Swiggart’s
counsel, Mr. Johnson, mailed a request for abatement by certified mail to
the address listed on the math error notice. Also on August 5, 2011, Mr. Johnson
mailed a Form 12153, Request for a Collection Due Process or Equivalent
Hearing, by certified mail to the “person to contact” listed on the notice of
intent to levy. Mr. Johnson attached a supporting statement to the request for
a hearing listing the reasons he believed Mr. Swiggart was entitled to head of household
filing status, stating why he believed the IRS’ change in Mr. Swiggart’s filing
status was not a proper mathematical or clerical error under section 6213(g)(2),
and stating that he had timely requested abatement under section 6213(b)(2)(A).
On
September 15, 2011, respondent issued Mr. Swiggart a letter stating that the
IRS was unable to process his claim for abatement because his supporting information
was not complete and the additional information Mr. Swiggart provided did not
give the IRS a basis to change the assessment.
On October 24, 2011, Mr. Johnson contacted the settlement officer assigned to the CDP
On October 24, 2011, Mr. Johnson contacted the settlement officer assigned to the CDP
hearing
by letter informing him that the request for abatement had been denied despite
his timely request and again requesting that the assessment be abated and that
deficiency procedures be followed.
During
the CDP hearing Mr. Swiggart provided a signed affidavit dated September
13, 2011, identifying his child by name and Social Security number and stating
that his child spent the greater number of nights in 2010 with him but that he
had an agreement with the child’s mother to waive the dependency exemption deduction
for certain years, including 2010. The settlement officer agreed that claiming
the child as a dependent was not required to qualify as a head of household,
but the settlement officer also concluded that he could not abate the tax attributable
to the change in filing status until Mr. Swiggart provided additional documents
showing that the child had lived with him for more than half of the year. On
February 8, 2012, IRS issued a notice of determination sustaining
the
proposed levy because Mr. Swiggart had not proven that he was entitled to head
of household filing status and because he had not proposed a collection alternative
or provided financial information showing whether he was eligible for a
collection alternative.
Mr.
Swiggart, residing in Minnesota at the time, timely filed a petition disputing
the notice of determination and asserting that the assessment respondent attempted
to collect was invalid as to the portion relating to his filing status. Mr. Swiggart
asserted that the change in filing status was not properly subject to a math
error notice, that he had timely requested abatement, that the IRS had
erroneously
concluded that he was required to prove his entitlement to the filing status
before abatement, and that respondent had erroneously determined the assessment
was valid. Respondent’s answer alleges that “the settlement officer
provided the opportunity to contest liability which would cure any procedural
issues” Mr. Swiggart raised.
At
trial on April 23, 2013, the parties filed a stipulation of settled issues. In the
stipulation, the parties agreed that respondent had abated $2,142 of the assessment
without prejudice to his right to reassess the amount using deficiency procedures
and that the collection action is sustained as to the $2,149 that Mr. Swiggart
reported as due but unpaid on his original return, plus penalties and
interest.
After trial Mr. Swiggart filed a motion for an award of costs and a memorandum
in support of his motion. Respondent filed a response asserting that Mr.
Swiggart was not the prevailing party and that he is not entitled to attorney’s fees
in excess of the statutory rate.
Conclusion
Mr. Swiggart was the prevailing party in this case, and the IRS was not substantially justified in failing to abate the assessment attributable to the change in filing status. As a result, we will grant Mr. Swiggart’s motion for an award of reasonable litigation and administrative costs under section 7430 in that he is awarded $3,256.50.
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