Tax Court cannot determine overpayment in CDP review case.

• Author: Beavers, James A.
• Position: Collection Due Process - 2018 memorandum decision in McLane v. Commissioner

The Tax Court held that it did not have jurisdiction under Sec. 6330(d)(1) to determine the amount and order the credit or refund of a taxpayer's overpayment in a Collection Due Process (CDP) hearing review.

Background

Brian McLane filed a 2008 return reporting a tax liability that included a Schedule C, Profit or Loss From Business, for his contracting business. The IRS later audited McLane's return, disallowing his Schedule C deductions and assessing additional taxes of $23,615 for 2008. The IRS sent McLane a notice of deficiency for the assessment, but he did not receive it.

The IRS sent McLane a Notice of Federal Tax Lien (NFTL) in March 2013, which he did receive. In response, he timely requested a CDP hearing. After the hearing, the IRS sustained the NFTL, and McLane petitioned the Tax Court under Sec. 6330(d)(1) to review the IRS's determination. In the petition, McLane asserted that the IRS did not issue him a deficiency notice for 2008 and that the IRS had not given him sufficient opportunity to substantiate the deductions it disallowed for 2008.

In 2018, because of additional documentation McLane submitted while his Tax Court case was pending, the IRS conceded that McLane was entitled to more Schedule C deductions than he had included on his return and agreed to abate the assessment and release the lien against him for 2008. Although McLane had not made any claim that he was entided to a refund in his petition to the Tax Court or the previous proceedings in his case, he requested that the Tax Court determine the amount of his overpayment for 2008 and order the IRS to issue him a refund for it.

The law

Under Sec. 6512(a), the Tax Court has jurisdiction to redetermine the amount of a taxpayer's deficiency when a taxpayer timely files a petition with the court for redetermination. Under Sec. 6512(b)(1), the court has jurisdiction in a deficiency case to determine the amount of a taxpayer's overpayment for a tax year before the court. However, the Tax Court's jurisdiction to order a credit or refund is limited to the part of a tax paid after the mailing of a notice of deficiency (Sec. 6512(b)(3)(A)) or for which a timely claim for refund was pending (or could have been filed) on the date of mailing of the notice of deficiency (Sec. 6512(b)(3)(B)).

Sees. 6320 and 6330 provide a taxpayer the right to an Appeals hearing--the CDP hearing--before the IRS can collect taxes by means of a hen or levy. Sec. 6330(d)(1) allows a taxpayer to...