Tax court upholds IRS levy after Kansas doctor ignores notices
Foulds v. Commissioner (U.S. Tax Court 2025) Collection Due Process Levy Summary
The Tax Court upheld an IRS levy against a Kansas taxpayer who failed to file returns or respond to deficiency notices, ruling that the IRS properly mailed notices and that Appeals did not abuse its discretion in sustaining collection.
Holding
The Tax Court held that the IRS properly mailed deficiency notices to the taxpayer’s last known address, precluding her from challenging the underlying tax liabilities in a collection due process (CDP) hearing.
The Office of Appeals verified compliance with statutory and procedural requirements and did not abuse its discretion in upholding the levy.
Why It Matters
Reinforces that proof of proper mailing, including Form 3877 entries, can establish notice even with minor procedural defects.
Confirms that failure to petition after a deficiency notice bars later challenges to liability in CDP proceedings.
Illustrates that a lack of filing compliance and cooperation can foreclose collection alternatives.
Demonstrates that the court will grant summary judgment where taxpayers fail to respond or raise substantive issues.
Timeline
2013–2019: Foulds failed to file federal income tax returns.
2014 & 2016: IRS prepared substitutes for returns and issued deficiency notices to her business address.
October 3, 2020: Outstanding liabilities totaled $729,910; the IRS issued a notice of intent to levy.
March 2021: CDP hearing held; the taxpayer was noncompliant and provided no documentation.
Remand: Case sent back to Appeals to verify mailing of deficiency notices; verification confirmed.
October 30, 2025: Tax Court granted IRS summary judgment sustaining the levy.
Key Facts
Petitioner: Carol Rae Foulds, Kansas-based taxpayer, acting pro se.
Years at issue: 2014 and 2016.
Unpaid liabilities: $729,910 as of 2020.
IRS prepared substitutes for returns under IRC §6020(b).
Deficiency notices were mailed to her Leawood, Kansas, office address, verified through USPS Form 3877.
Foulds acknowledged the address and did not deny receipt.
No returns filed for 2017–2021; no collection alternatives proposed.
Statutory or Regulatory Framework
IRC §6330: Governs CDP hearings and taxpayer rights before levy actions.
IRC §6330(c)(2)(B): Bars challenges to underlying liabilities if a valid deficiency notice was issued.
IRC §6020(b): Authorizes the IRS to prepare substitutes for returns when none are filed.
Tax Court Rule 121: Permits summary judgment when no material facts are in dispute.
Arguments
Taxpayer argued:
Intended to challenge the assessed amounts because they were based on substitutes for return.
Claimed lower self-prepared return amounts but did not submit them.
IRS argued:
Notices of deficiency were properly mailed and not contested.
The taxpayer failed to file returns or provide financial information, rendering collection alternatives unavailable.
Appeals properly verified compliance and balanced collection needs with taxpayer rights.
Court’s Reasoning
The court found no dispute of material fact; summary judgment was appropriate.
IRS records and Form 3877 established proper mailing to the taxpayer’s regular business address.
Even without the presumption of official regularity, the evidence of mailing was sufficient.
The taxpayer admitted to receiving mail at the address and did not deny receipt.
Because valid deficiency notices were issued, she could not contest liability during CDP review.
Appeals verified compliance with law and procedure and reasonably concluded the levy was appropriate.
Failure to provide returns or information justified the denial of collection alternatives.
Forward-Looking Implications
Highlights the importance of taxpayers responding promptly to deficiency notices to preserve their rights.
Confirms the evidentiary sufficiency of Form 3877 mailing records in Tax Court proceedings.
Emphasizes that noncompliance and failure to participate can lead to summary judgment in CDP cases.
Signals continued judicial support for IRS collection determinations when procedural steps are verified.
Result
Summary judgment granted for the Commissioner; IRS levy sustained for 2014 and 2016 liabilities.
The Takeaway
Taxpayers who ignore deficiency notices and fail to file returns cannot later contest their liabilities in CDP proceedings. Proper mailing to a known address, even with minor procedural flaws, satisfies statutory notice requirements.
Citations
IRC §§ 6020(b), 6330 – Substitutes for returns; CDP procedures.
Sego v. Commissioner, 114 T.C. 604 (2000) – Standard of review in CDP cases.
Coleman v. Commissioner, 94 T.C. 82 (1990) – Presumption of proper mailing via Form 3877.
Portwine v. Commissioner, T.C. Memo. 2015-29 – Proof of mailing in CDP context.
Kelby v. Commissioner, 130 T.C. 79 (2008) – Scope of CDP hearings on remand.