Actor Charlie Sheen finally got the agreement he was looking for to settle his tax liabilities, with the IRS’s acceptance of a $3.3 million offer in compromise.
The IRS Independent Office of Appeals accepted the OIC in a supplemental notice of determination dated July 22, resolving Sheen’s tax liabilities for the 2015, 2017, and 2018 tax years, according to an August 5 status report in Sheen v. Commissioner.
The settlement followed a remand by the Tax Court after Sheen filed a petition in November 2021 protesting an IRS Appeals determination that initially rejected the offer, which would cover his liability.
The Los Angeles area director for IRS Appeals in 2018 overruled the decision of a settlement officer and others in the chain of command who had agreed that the OIC was legally sufficient, according to the petition.
The area director rejected the offer without considering the Form 433-A, “Collection Information Statement for Wage Earners and Self-Employed Individuals,” contrary to proper procedure, according to Sheen’s counsel, Steven L. Jager of Fineman West & Co. Jager told Tax Notes that “the initial OIC would have been accepted if the taxpayer was someone other than Sheen.”
Before the area director’s rejection of the OIC, Sheen submitted all required payments, including monthly payments, as required by the Tax Increase Prevention and Reconciliation Act of 2005, according to the petition.
The area director hadn’t participated in negotiations, but overrode, “supplanted and vetoed” the settlement officer’s judgment and decreed the OIC rejected without providing a rational explanation, the petition said.
Missing Form
The administrative record may not have been “accurate and complete, as it appears to be missing the Collection Information Statement, Form 433-A,” as signed and dated by Sheen, according to the January 1 petitioner’s response to the IRS’s October 2021 motion for summary judgment included in the status report.
“Further scouring of the ‘administrative record’ as presented by” the IRS didn’t turn up a copy of the statement, according to the response. Nevertheless, the statement was included in the file transferred from Sheen’s original counsel to Jager.
The IRS’s counsel was alerted to the existence of a Form 433-A in an email from Jager after the transfer of documents from Sheen’s former counsel.
The status report notes that the settlement officer appeared to be in too much of a hurry during the original collection due process hearing, which lasted “a mere 34 calendar days” from the date the settlement officer sent his initial letter to the date the CDP hearing was concluded.
Sheen was given “only 14 days to provide full documentation” and complete Form 433-A, and the settlement officer refused to grant a continuance, the status report said.
The petitioner in Sheen v. Commissioner, Dkt. Nos. 14774-18 and 29680-21, is represented by Steven L. Jager of Fineman West & Co.
Correction, August 12, 2022: This article has been corrected to say that the IRS accepted a $3.3 million offer in compromise.