TC decides Sec. 6330's jurisdiction.

• Author: Packard, Pamela
• Position: Petitions to redetermine deficiencies in taxes - Tax Court

In Downing, 118 TC No. 2 (2002), the Tax Court held that it had jurisdiction to review a Sec. 6651 (a)(2) addition to tax under Sec. 6330(d)(1)(A), even though the IRS did not determine or issue a deficiency notice. Sec. 6330(d)(1) provides taxpayers with judicial review when not previously available.

Sec. 6213(a) gives the Tax Court jurisdiction over taxpayers' petitions to redetermine deficiencies in income, estate, gift and generation-skipping transfer (GST) taxes issued by the Service under Secs. 6211(a) and 6212(a). Under Sec. 6214(a), the Tax Court has jurisdiction over additions to the tax asserted by the IRS. Sec. 6651(a)(2) provides for an 0.5% addition to tax per month (not to exceed 25%) for late payment of the tax due on any income, estate or gift (and GST) return, unless the taxpayer shows reasonable cause. Under Sec. 6665(a), deficiency procedures that apply to taxes also apply to additions to tax. However, under Sec. 6665(b)(1), Sec. 6665(a) does not apply to Sec. 6651 additions to tax unless the Service issues a deficiency notice. In Estate of Forgey, 115 TC 142 (2000), the Tax Court ruled that it did not have jurisdiction over a Sec. 6651(a)(1) addition to tax, because it was not attributable to a tax deficiency.

Sec. 6330, enacted in 1998 and effective for collection actions initiated after Jan. 18, 1999, expands taxpayers' lien and levy rights, including notice before levy, the right to a fair hearing and judicial review. Under Sec. 6330(a), the IRS Appeals Office has to conduct a hearing before making a levy on any property. According to Sec. 6330(c), the taxpayer may raise any relevant issue as to the proposed levy at the hearing, but could only raise challenges to the underlying tax liability if he did not receive a deficiency notice or otherwise have an opportunity to dispute the tax liability. Under Sec. 6330(d)(1)(A), the taxpayer has 30 days to appeal the hearing's determination of income, estate, gift and GST taxes to the Tax Court. Sec. 6330 does not otherwise specify any details about the Tax Court's scope or standard of review.

In Downing, the taxpayers timely filed their 1995 return, indicating $32,561 in tax due. They enclosed $5,000 with an offer-in-compromise as full payment (even though they had net assets of about $44,000). After misplacing the offer for one year and erroneously applying the $5,000 to reduce the Downings' tax liability, the Service returned the $5,000 to them with interest; it did not...