Gregory H. Haubrich v. Commissioner of Internal Revenue – The taxpayer, Haubrich, filed a form 12153 Request for a Collection Hearing, requesting, among other things, that the IRS enter into an Installment Agreement with him for the payment of back taxes in lieu of pursuing enforced collection.
The IRS appeals officer assigned to handle the request refused to enter into an Installment Agreement because, she alleged, that the taxpayer’s related Subchapter “S” corporation incorrectly characterized payments to him as shareholder distributions rather than wages.
Generally, the IRS will not approve an installment payment agreement if the requesting taxpayer is not in full, current compliance with the tax laws.
The parties stipulated in this case that Mr. Haubrich was personally in compliance with all income tax law requirements.
But in spite of Mr. Haubrich’s compliance, the appeals officer had denied his request for an Installment Agreement on the grounds that an S corporation owned by him was not in compliance with the tax law.
The Court remanded the case to the IRS for further consideration of whether or not it had complied with its own procedures as stated in its Internal Revenue Manual:
The [Internal Revenue Manual] draws a distinction between noncompliance by the taxpayer seeking a collection alternative and noncompliance by a related taxpayer. It provides that ‘if the person or entity that is missing the returns does not file the required returns, a recommendation for rejection can be given regarding only the person or entity that is not in compliance, and the taxpayer that is in compliance may be granted an installment agreement.’
Accordingly, we shall remand this case to respondent’s Appeals Office to consider whether petitioner is in compliance within the meaning of IRM provisions and, if so, whether petitioner’s request for an installment agreement is appropriate.
Importance of the Case - This case provides a good example of how the Tax Courts will hold the IRS strictly responsible for following its own policies and procedures as stated in its Internal Revenue Manual.
In addition, and more specifically, Haubrich v. Commissioner should be cited to any IRS collection or appeals officer who attempts to deny an installment agreement request (or a request for some other collection alternative) on the grounds that a related entity or person of the taxpayer is not in compliance with the tax laws.
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