Linda Romano-Murphy v. Commissioner of IRS
2016 U.S. App. LEXIS 4254
| 11th Cir. | 2016Background
- Linda Romano-Murphy was COO of Nurses PRN, LLC; the company failed to remit trust fund (withheld) employment taxes for Q2 2005 and reported liability on Form 941.
- In July 2006 the IRS sent a Letter 1153 proposing a §6672 trust-fund-penalty assessment of roughly $346,732 and explained a taxpayer could file a written protest within 60 days to preserve administrative appeals rights.
- Romano-Murphy mailed a timely written protest (Sept. 6, 2006) requesting a conference and disputing liability and the amount, but the IRS failed to forward the protest to Appeals, so no pre-assessment determination or conference occurred.
- The IRS assessed the penalty on Oct. 15, 2007, filed a lien, and later issued a levy notice; Romano-Murphy timely requested a CDP hearing under §6330 in Sept. 2008.
- Appeals conducted a post-assessment review during the CDP process, sustained the assessment, and the Tax Court upheld liability; on appeal Romano-Murphy challenged only the validity of the 2007 assessment because she was denied a pre-assessment determination on her timely protest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §6672(b) and related law entitle a taxpayer who files a timely protest to a pre-assessment administrative determination of liability | Romano-Murphy: timely protest created a right to a pre-assessment determination (and conference) before assessment | IRS: statute requires only pre-assessment notice; no right to a pre-assessment hearing or final determination, so IRS may decline to resolve some protests | Court: Taxpayer is entitled to a pre-assessment administrative determination when she files a timely protest; IRS erred by not providing one |
| Whether the IRS’s failure to make a pre-assessment determination was harmless (i.e., whether the assessment nonetheless stands) | Romano-Murphy: IRS error prejudiced her (interest, lost records, lien credit harm) and may require invalidating the assessment | IRS: error was harmless because Romano-Murphy later had a CDP hearing where liability and amount were considered | Court: Error was established, but harmlessness unclear on this record; remanded to Tax Court to determine prejudice and appropriate remedy |
Key Cases Cited
- Hibbs v. Winn, 542 U.S. 88 (explaining assessment as government recording that triggers collection)
- United States v. Galletti, 541 U.S. 114 (assessment is calculation and recording of liability)
- William-Russell & Johnson, Inc. v. United States, 371 F.3d 1350 (assessment is a bookkeeping procedure)
- Huckabee Auto Co. v. United States, 783 F.2d 1546 (assessment creates lien against taxpayer property)
- Moore v. United States, 648 F.3d 634 (§6672(b) requires notice before imposing penalty)
- Griswold v. United States, 59 F.3d 1571 (agency manual and regulations can guide ambiguous statutory implementation)
- Mayo Found. for Med. Educ. & Research v. United States, 562 U.S. 44 (Treasury regulations promulgated under §7805 receive Chevron deference)
- Bragg v. Comm’r of Internal Revenue, 856 F.2d 163 (standard of review for Tax Court denial of motion to vacate)