Ahmed v. Commissioner of Internal Revenue, No. 22-1091 (3d Cir. 2023)
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Ahmed was President of Aspen Construction, which failed to pay the IRS federal income, Social Security, and Medicare taxes withheld from employees' wages, 26 U.S.C. 7501, 3102(a), 3402(a). Aspen owed more than $600,000 in withheld taxes. Without recourse against Aspen’s individual employees (who were credited with withheld taxes when their net wages were paid), the IRS shifted liability to Ahmed, 26 U.S.C. 6672. Whether Ahmed received notification of proposed penalties is unclear. The IRS assessed the penalties and later filed liens against Ahmed’s property to secure the penalties. Ahmed immediately sought a Collection Due Process review with the IRS Independent Office of Appeals.
While Ahmed’s petition was pending, he sent the IRS $625,000, with instructions that it be treated as a “deposit” to freeze the running of interest on his disputed penalties. The IRS instead applied the money as a direct payment to the tax bill, thereby ending the matter. Without any remaining tax liability to dispute, the Tax Court dismissed Ahmed’s petition. The Third Circuit vacated. Ahmed’s petition was moot only if the IRS properly treated his remittance as a payment, which depends on whether he sent money to the IRS after it validly assessed his penalties. There is ambiguity in the record on that issue.
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