## Facts

- The IRS sought to collect Kathleen A. Vinatieri’s unpaid federal income tax liability for tax year 2002.
- The IRS issued a Notice of Intent to Levy, and Vinatieri timely requested a Collection Due Process (CDP) hearing under I.R.C. § 6330.
- At the CDP hearing, Vinatieri submitted Form 433-A showing severe financial distress: about $800 monthly income and $800 monthly expenses, $14 cash on hand, and a 1996 Toyota Corolla (243,000 miles) worth about $300 as her only meaningful asset.
- The settlement officer’s internal notes indicated Vinatieri met criteria for “currently not collectible” status due to hardship under IRS administrative guidance.
- Appeals nonetheless issued a Notice of Determination sustaining the proposed levy, reasoning Vinatieri was ineligible for collection alternatives because she had not filed federal income tax returns for 2005 and 2007.
- Vinatieri petitioned the Tax Court under I.R.C. § 6330(d), asserting that levying her wages or car would prevent her from paying basic living expenses and from working.
- The Commissioner moved for summary judgment, contending the Appeals determination was not an abuse of discretion.

## Issues

1. Whether I.R.C. § 6343(a)(1)(D) and Treas. Reg. § 301.6343-1(b)(4) require release of a levy that creates economic hardship regardless of the taxpayer’s failure to file required returns.
2. Whether Appeals abused its discretion in sustaining the levy despite evidence that the levy would create economic hardship.
3. Whether the Commissioner was entitled to summary judgment.

## Decision

- The Tax Court denied the Commissioner’s motion for summary judgment.
- The court held that the statutory and regulatory hardship-release rule requires release of a levy that creates economic hardship regardless of unfiled returns.
- The court held that levying Vinatieri’s wages or car would leave her unable to pay reasonable basic living expenses and would impair her ability to work, satisfying the economic-hardship standard.
- Because Appeals sustained the levy despite economic hardship, the determination was wrong as a matter of law and therefore an abuse of discretion.

## Legal Principles

- I.R.C. § 6343(a)(1)(D) requires the IRS to release a levy when the levy is determined to create economic hardship due to the taxpayer’s financial condition.
- Treas. Reg. § 301.6343-1(b)(4) defines economic hardship as a levy that would cause an individual taxpayer to be unable to pay reasonable basic living expenses.
- In a CDP determination, Appeals must consider issues properly raised and must balance efficient collection against the taxpayer’s concern that collection be no more intrusive than necessary. I.R.C. § 6330(c)(3).
- IRS administrative policies conditioning some collection alternatives on filing compliance cannot override the statutory obligation to release a levy that would create economic hardship.

## Conclusion

The Tax Court held that once the record shows a proposed levy would cause an individual taxpayer to be unable to pay reasonable basic living expenses, the levy must be released, and Appeals abuses its discretion by sustaining the levy even if the taxpayer has unfiled returns.


Vinatieri v. Comm’r, 133 T.C. 392 (2009)