The Tax Court found that an Appeals officer properly sustained a proposed levy for a taxpayer’s 2016 unpaid taxes, because he failed to file multiple years of tax returns and to provide requested financial information to support his request for a collection alternative. (Tellock, T.C. Memo. 2026-59, 7/20/2026)
The collection dispute
Don M. Tellock failed to file income tax returns for 2016 and 2017. In response, the IRS prepared a Substitute for Return (SFR) for each year and issued Notices of Deficiency. Because Tellock did not petition the Tax Court to challenge those notices, he was later barred from disputing the underlying tax liability.
In December 2022, the IRS issued a Final Notice of Intent to Levy for both years, prompting the Tellock to request a collection due process (CDP) hearing with the IRS Independent Office of Appeals. The court’s decision focused solely on the proposed levy for the 2016 tax year since by this time the taxpayer owed no tax for 2017.
Repeated failures to provide information
During both an initial and a supplemental CDP hearing, Tellock requested collection alternatives such as an offer-in-compromise (OIC) or an installment agreement (IA). At each stage, the Appeals officer (AO) informed him that he first needed to become compliant with his tax obligations before any alternatives could be considered.
Initially, the AO gave the taxpayer a deadline to file returns for tax years 2016 through 2021, which he failed to meet. After the case was remanded to the Appeals Office to correct the administrative record, the AO held a supplemental hearing and again instructed the taxpayer to file his outstanding returns, this time for 2018 through 2023. The taxpayer missed this second deadline as well.
No abuse of discretion
Because the taxpayer was precluded from challenging the amount of his 2016 tax liability, the Tax Court reviewed the AO’s decision for an abuse of discretion. The court found that the AO properly verified that all legal and administrative requirements were met; considered all relevant issues raised by the taxpayer; and properly balanced the need for efficient tax collection against the taxpayer’s concern that the action not be overly intrusive.
Addressing the taxpayer’s primary argument, the court held that an AO’s refusal to consider an OIC or IA is not an abuse of discretion when a taxpayer fails to provide the necessary documentation and remains non-compliant with their return filing obligations. The court stated that IRS guidelines require taxpayers to be current with their filing obligations to qualify for an installment agreement or have an OIC considered.
Because Tellock was given multiple opportunities to submit his delinquent returns and failed to do so, the court concluded that the AO’s decision to sustain the levy action was not arbitrary, capricious, or without a sound basis in fact or law.
For more information about the general standards for evaluating offers in compromise (OICs), see Checkpoint’s Federal Tax Coordinator 2d ¶T-9609.
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