U.S. Tax Court Precludes Taxpayers’ Challenge of Section 6707 Penalties in CDP Hearing After Declining IRS Appeals Opportunity

The U.S. Tax Court held that taxpayers were precluded from challenging their underlying tax liabilities for section 6707 penalties in a collection due process (CDP) hearing. The taxpayers had received letters from the IRS offering them the opportunity to dispute the penalties with IRS Appeals before assessment, but they declined to do so. Under section 6330(c)(2)(B), this prior opportunity to dispute the liabilities barred the taxpayers from raising liability challenges in the subsequent CDP hearing. The court rejected various arguments by the taxpayers, including that the opportunity was not meaningful and that the IRS Appeals officers were improperly appointed under ...