Court bars penalty and interest challenge after taxpayer signs installment agreement
Diego E. Salazar v. Commissioner. U.S. Tax Court. No. 14285-23L. T.C. Memo. 2026-9.
Once a taxpayer accepts an installment agreement in a collection due process (CDP) case, the fight over penalties and interest is over.
Holding
The Tax Court granted summary judgment for the IRS. It held that the taxpayer could not challenge penalties or interest after agreeing to an installment agreement that resolved the liabilities.
Why It Matters
CDP hearings are not a second chance to relitigate missed deficiency cases.
Accepting an installment agreement ends the controversy over the liabilities covered by the agreement.
Arguments based on fairness or bad tax preparers do not reopen penalties or interest.
Failure to raise issues properly during the CDP hearing is fatal on review.
Timeline
2014–2017: Taxpayer files returns. Two are delinquent.
January 30, 2019: IRS issues a notice of deficiency with §6662 accuracy-related penalties.
August 12, 2019: IRS assesses tax, penalties, and additions after no Tax Court petition.
October 27, 2021: IRS issues a notice of intent to levy.
June 29, 2023: IRS issues a notice of determination sustaining the levy.
December 2023: Case remanded for a supplemental CDP hearing.
August 29, 2024: Taxpayer signs an installment agreement.
February 3, 2026: Tax Court grants IRS summary judgment.
Key Facts
The taxpayer overreported deductions and lacked documentation.
Accuracy-related penalties totaled about $9,500.
Interest and failure-to-pay additions exceeded $17,000.
The taxpayer did not petition the Tax Court after the notice of deficiency.
During the CDP hearing, the taxpayer accepted an installment agreement of $1,637 per month.
The taxpayer claimed he signed the agreement “under protest.”
Statutory Framework
§6330 governs collection due process hearings.
§6330(c)(2)(B) limits liability challenges if the taxpayer had a prior opportunity to dispute them.
§6662 imposes accuracy-related penalties.
§6651(a)(2) applies additions to tax for failure to pay.
§6404(e) allows interest abatement only for IRS error or delay.
§6159 authorizes installment agreements.
Arguments
Taxpayer argued:
Penalties and interest should be partially abated for fairness reasons.
A dishonest return preparer caused errors.
Signing the installment agreement should not constitute a waiver of future challenges.
Government argued:
The taxpayer had an opportunity to dispute the penalties.
Interest and additions were not properly raised or supported in the CDP hearing.
The installment agreement resolved the liabilities and eliminated the levy.
Appeals acted within its discretion.
Court’s Reasoning
A request to abate penalties or interest is a challenge to the underlying liability.
The taxpayer received a valid notice of deficiency and failed to petition the Court.
That failure barred penalty challenges in the CDP case.
Interest abatement requires proof of IRS error or delay, which was not shown.
Failure-to-pay additions were never challenged during the CDP hearing.
Issues not properly raised before the Appeals cannot be reviewed.
Accepting an installment agreement resolved the collection dispute.
Appeals did not act arbitrarily or ignore required procedures.
Forward-Looking Implications
Taxpayers must contest penalties in deficiency cases, not later CDP hearings.
Signing an installment agreement closes the door on liability disputes.
Claims based on preparer misconduct require evidence and proper procedural vehicles.
Appeals can offer installment agreements even without full financial disclosures.
Result
The IRS's motion for summary judgment was granted. The installment agreement stands.
The Takeaway
You cannot agree to pay and keep fighting at the same time. An installment agreement ends the liability dispute, whether or not the taxpayer says they signed it “under protest.”