Ingrid Maria Persson v. Commissioner

The $11,000 Surprise After the Deal Was Signed

Ingrid Maria Persson believed she had resolved her 2019 tax obligations after entering into an Installment Agreement (IA) with the IRS. However, she was soon hit with a notice of deficiency for $11,436, stemming from Advance Premium Tax Credits (APTC) she had received. This case hinges on whether that IA shielded her from this subsequent assessment. The Tax Court ultimately ruled it did not, meaning Ms. Persson remained liable for the additional tax. Her argument that the IA constituted a binding agreement that the IRS breached was unsuccessful.

Math Errors, Advocates, and a Misunderstood Agreement

Following the events leading to the potential tax liability and the taxpayer's assertion that an agreement shielded her, the timeline of events becomes crucial. The record shows that Ms. Persson filed her Form 1040, U.S. Individual Income Tax Return, for 2019, which the IRS received on May 13, 2021. On this initial filing, she checked the box indicating single filing status, though she later asserted she intended to file as married filing separately. She also submitted Form 8962, Premium Tax Credit (PTC), which the IRS received on July 23, 2021, listing her family size as two and household income as $73,763, but leaving other sections of the form incomplete.

Upon review of this initial return, the IRS made a math error adjustment, determining Ms. Persson's adjusted gross income (AGI) to be $71,891. Subsequently, on or around June 11, 2021, an examination of her return began. Seeking assistance, Ms. Persson contacted her congressional representative on July 8, 2021. Her case was then forwarded to the Taxpayer Advocate Service, where Tina Fleming was assigned to assist her.

On September 6, 2021, Ms. Persson and her husband entered into an installment agreement (IA) covering taxable years 2015 through 2019. The Form 433–D, Installment Agreement, listed the total amount owed as of September 28, 2021, as $23,141.24, and the first payment was made on that date. However, after this IA was in place, on December 3, 2021, the IRS issued a notice informing Ms. Persson that her 2019 return was under examination and proposing a deficiency stemming from the Advance Premium Tax Credit (APTC).

Following this notice, on December 16, 2021, Ms. Persson submitted a second Form 1040 for 2019, this time omitting any indication of filing status or information about her husband. On the same day, she also submitted a second Form 8962, listing the tax family size as two and reporting household income as $59,063, completing the other boxes on the form and reporting a net premium tax credit subject to a repayment limitation of $2,650.

Statutory Roadblocks: Why the Credit Was Denied

Following this notice, on December 16, 2021, Ms. Persson submitted a second Form 1040 for 2019, this time omitting any indication of filing status or information about her husband. On the same day, she also submitted a second Form 8962, listing the tax family size as two and reporting household income as $59,063, completing the other boxes on the form and reporting a net premium tax credit subject to a repayment limitation of $2,650. The Tax Court, however, found two critical flaws in Ms. Persson's claim for the Advance Premium Tax Credit (APTC), both rooted in the statutory requirements of Section 36B.

Section 36B allows a credit to subsidize the cost of health insurance purchased through a health insurance exchange for taxpayers meeting specific requirements. The court noted that to be eligible for the APTC, married couples must file a joint return, as stipulated in Section 36B(c)(1)(C) and Treasury Regulation § 1.36B-2(b). Ms. Persson, however, filed as single. The court stated that Ms. Persson did not assert, nor demonstrate, that an exception applied that would allow her to file separately and still claim the credit.

Even if Ms. Persson had met the filing requirement, the court found a second, independent reason to deny the credit. Section 36B(f)(2)(B) provides a repayment limitation for the APTC, but this limitation only applies to taxpayers whose household income is less than 400% of the federal poverty line (FPL). The FPL for a family of two in California in 2019 was $16,910, making 400% of that amount $67,640. Ms. Persson's adjusted gross income (AGI) was determined to be $71,891, exceeding the 400% FPL threshold. Therefore, even if she were otherwise eligible for the APTC, she would not be entitled to the repayment limitation and would be responsible for repaying the full amount of the APTC she received.

Final Verdict: An Installment Plan is Not a Settlement

The court then addressed Ms. Persson's argument that the IRS should have considered the deficiency stemming from the Advanced Premium Tax Credit (APTC) within her installment agreement. Section 6159(a) authorizes the IRS to enter into a written agreement allowing a taxpayer to pay a tax liability in installments if the IRS concludes that the agreement “will facilitate full or partial collection of such liability."

The court emphasized that an installment agreement (IA) operates under statutory authority and can only be terminated according to Section 6159's provisions. The IRS argued that while the IA included tax year 2019, it only covered the adjustment related to the math error and not the later-determined APTC deficiency. The IRS further contended that an IA is simply a mechanism to satisfy a pre-existing liability over time, not a contract requiring additional consideration from the taxpayer, citing United States v. Ullman, No. CIV.A. 01-0272, 2002 WL 987998, at *4 (E.D. Pa. May 8, 2002).

The Tax Court sided with the IRS. It stated that regardless of whether the IA was viewed as a contract, the agreement clearly stated the amount due as of the initial payment date and did not include the APTC deficiency. The court found no indication that the IRS had terminated or modified the IA in violation of Section 6159. Referencing Oppenheim v. United States, No. 07-852 T., 2009 WL 586118 (Fed. Cl. Mar. 6, 2009), the court noted that an IA does not restrict the IRS's authority to apply refunds or overpayments to outstanding tax liabilities. Crucially, the court found nothing precluding the IRS from determining a deficiency for the year in question. The court stated it was not bound by any erroneous advice Ms. Fleming, an IRS employee, might have provided, citing precedent such as Dixon v. United States, 381 U.S. 68, 72–73 (1965), which holds that courts must follow statutes, regulations, and caselaw, even if IRS representatives give incorrect advice.

This case underscores a critical point for taxpayers: entering into a standard installment agreement under Section 6159 to pay off a known tax liability does not shield them from future audits or the determination of additional deficiencies for the same tax year. The agreement simply facilitates the collection of a known debt and does not preclude the IRS from uncovering further liabilities.