ATL & Sons Holdings Inc. v. Commissioner, 152 T.C. 138

ATL & Sons Holdings, Inc. (S corporation) filed its 2012 Form 1120S almost six months late (filed Sept. 13, 2013) and did not file Form 7004 to extend the S‑corp deadline.
ATL’s two shareholders timely filed Form 1040 for 2012 after obtaining an extension (Form 4868); ATL argued that that extension should cover the S‑corp return.
The IRS assessed a §6699 failure‑to‑file penalty of $2,340 (6 months × $195 × 2 shareholders) on Nov. 18, 2013; assessment was computer‑generated and lacked prior written supervisory approval.
ATL requested a CDP hearing, disputed the penalty amount, raised reasonable‑cause and disparate‑treatment arguments (IRS allegedly abated a similar 2013 penalty), and claimed the IRS improperly applied a 2013 overpayment to the 2012 penalty before the CDP hearing concluded.
Appeals verified no Form 7004 existed, upheld the proposed levy, and ATL petitioned the Tax Court; the Commissioner moved for summary judgment.

Issue	Plaintiff's Argument	Defendant's Argument	Held
1) Whether ATL is liable for the §6699 S‑corp failure‑to‑file penalty despite shareholders’ Form 4868	ATL: shareholders’ extension should suffice; no one was harmed	IRS: S‑corp is separate; extension requires Form 7004; §6699 applies	Held: Liability sustained; ATL needed Form 7004; §6699 applies regardless of shareholder extension
2) Proper amount of penalty under §6699	ATL: penalty should be limited or tied to tax amount	IRS: statutory formula is $195 × shareholders × months (subject only to 12‑month cap)	Held: Amount correct ($2,340); §6699 is fixed‑amount monthly penalty not tied to tax shown
3) Whether §6751(b)(1) supervisory written approval was required before assessing the penalty	ATL: no electronic exception applies; supervisor approval required	IRS: §6751(b)(2)(B) excepts penalties ‘‘automatically calculated through electronic means’’; ATL’s penalty was computer‑generated	Held: Supervisory approval not required because §6699 penalty was automatically calculated through electronic means and within §6751(b)(2)(B) exception
4) Whether IRS improperly credited a 2013 overpayment to the 2012 penalty before CDP hearing concluded	ATL: offset was effectively a premature levy in violation of §6330(e)(1)	IRS: applying overpayments under §6402 is a non‑levy collection action and permitted	Held: Credit/offset was proper; §6330’s levy prohibitions do not bar non‑levy offsets under §6402

Goza v. Commissioner, 114 T.C. 176 (Tax Ct. 2000) (standard for de novo review of underlying liability in CDP hearings)
Craig v. Commissioner, 119 T.C. 252 (Tax Ct. 2002) (abuse‑of‑discretion standard for other CDP determinations)
Murphy v. Commissioner, 125 T.C. 301 (Tax Ct. 2005) (definition of abuse of discretion)
Graev v. Commissioner, 149 T.C. 485 (Tax Ct. 2017) (consequences when §6751(b)(1) supervisory approval is absent)
United States v. Skelly Oil Co., 394 U.S. 678 (U.S. 1969) (each tax year stands on its own)
Rose v. Commissioner, 55 T.C. 28 (Tax Ct. 1970) (tax admin decisions in one year do not bind treatment in other years)
Boyd v. Commissioner, 451 F.3d 8 (1st Cir. 2006) (informal offsets not subject to levy procedural protections)