In Peoplease, LLC v. Commissioner, T.C. Memo. 2025-14, the Tax Court reviewed a determination by the Internal Revenue Service (IRS) Independent Office of Appeals to uphold a proposed levy action against Peoplease, LLC, for unpaid liabilities reported on Form 941, Employer’s Quarterly Federal Tax Return, for the tax period that ended December 31, 2021. The court ultimately granted the IRS’s motion for judgment on the pleadings, finding no abuse of discretion by the Appeals Officer.

Factual Background

The IRS sent Peoplease a Final Notice of Intent to Levy dated February 28, 2023, regarding its outstanding liability for the quarter ending December 31, 2021. Peoplease timely requested a Collection Due Process (CDP) hearing, which was held by telephone on May 9, 2023. During the hearing, Peoplease’s representative stated that the company had submitted Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, for the relevant quarter to claim an Employee Retention Tax Credit (ERTC). The representative asserted that if the claim was accepted, it would result in a large refund and resolve the outstanding tax liability. The representative also indicated that Peoplease was not interested in a collection alternative. As of November 30, 2023, the liability for the quarter ending December 31, 2021 was $11,224,113.98. The IRS requested additional information to process the ERTC claim, but Peoplease did not respond. As a result, the Appeals Officer (AO) issued a Notice of Determination on January 11, 2024, sustaining the proposed levy. Peoplease then filed a Petition with the Tax Court on February 8, 2024.

The ERTC Claim

The ERTC claim was central to Peoplease’s initial dispute. Peoplease argued that the submitted but unprocessed claim for the ERTC would eliminate the outstanding liability for the quarter in question. However, the IRS unit responsible for ERTC claims informed the AO that Peoplease needed to submit additional information to process the claim. Despite the AO’s request for that information on December 20, 2023, Peoplease did not respond. After the Notice of Determination was issued, Peoplease submitted amended Forms 941-X for the quarter ending December 31, 2021, as well as for other quarters, claiming tax credits that it asserted would satisfy the outstanding liability for the quarter in issue. However, the court noted that the Notice of Determination before it was limited to the tax liability for the quarter ending December 31, 2021.

Legal Analysis

The Tax Court’s analysis focused on two key areas: the standard of review and the scope of issues that can be raised in a CDP case.

Standard of Review: The court explained that when the underlying tax liability is in dispute, the court reviews the Commissioner’s determination de novo, with the taxpayer bearing the burden of proof. See Goza v. Commissioner, 114 T.C. 176, 181–82 (2000). However, because Peoplease conceded in its Objection that there was an underlying liability for the quarter ending December 31, 2021, the court’s review was limited to whether the AO abused her discretion.
Scope of Issues: The court noted that it does not have the authority to consider issues under I.R.C. § 6330(c)(2) that were not raised before the Appeals Office. See Giamelli v. Commissioner, 129 T.C. 107, 115 (2007). I.R.C. § 6330(c)(2) allows for the consideration of “any relevant issue relating to the unpaid tax or the proposed levy” including challenges to the appropriateness of collection actions and challenges to the underlying liability under I.R.C. § 6330(c)(2)(B). Further, the court stated it does not have jurisdiction to determine an overpayment of an unrelated liability in a CDP case. See Weber v. Commissioner, 138 T.C. 348, 366 (2012). The court further stated that a mere claim of an overpayment is not an available credit and thus cannot be taken into account in a CDP hearing to determine whether the underlying tax remains unpaid. See Weber v. Commissioner, 138 T.C. at 372.

Peoplease, in its objection to the Motion for Judgment on the Pleadings, requested a collection alternative, specifically time to process amended returns for other tax periods, asserting that these returns would satisfy the tax liability for the quarter in issue. Because Peoplease did not raise the issue of amended returns and ERTC claims for other periods at the CDP hearing, the court could not consider those arguments. Additionally, the court pointed out that it did not have jurisdiction to determine overpayments of unrelated liabilities. Since Peoplease had only alleged that it submitted ERTCs for other quarters not at issue in the case and that these credits would satisfy the liability for the period in issue, the court found that the AO did not abuse her discretion in sustaining the proposed levy.

Ultimate Ruling

The court granted the IRS’s Motion for Judgment on the Pleadings, concluding that there was no dispute as to the material facts and that the IRS was entitled to judgment as a matter of law. The court found that the AO did not abuse her discretion in sustaining the levy because Peoplease failed to provide the requested information related to its ERTC claim for the quarter at issue, and did not raise issues of ERTCs for other quarters at the CDP hearing. The court therefore upheld the proposed levy action.

Prepared with assistance from NotebookLM.