voluntary reporting requirements

Part III
Administrative, Procedural, and Miscellaneous
26 CFR 601.105: Examination of returns and claims for refund, credit or abatement;
determination of correct tax liability.
(Also: Part 1, §§ 6662, 6694, 1.6662-4, 1.6694-2)

Rev. Proc. 2011-13

SECTION 1. PURPOSE

This revenue procedure updates Rev. Proc. 2010-15, 2010-7 I.R.B. 404, and
identifies circumstances under which the disclosure on a taxpayer's income tax return
with respect to an item or a position is adequate for the purpose of reducing the
understatement of income tax under section 6662(d) of the Internal Revenue Code
(relating to the substantial understatement aspect of the accuracy-related penalty), and
for the purpose of avoiding the tax return preparer penalty under section 6694(a)
(relating to understatements due to unreasonable positions) with respect to income tax
returns. This revenue procedure does not apply with respect to any other penalty
provisions (including the disregard provisions of the section 6662(b)(1) accuracy-related 2
penalty, the section 6662(i) increased accuracy-related penalty in the case of
nondisclosed noneconomic substance transactions, and the section 6662(j) increased
accuracy-related penalty in the case of undisclosed foreign financial asset
understatements).
This revenue procedure applies to any income tax return filed on 2010 tax
forms for a taxable year beginning in 2010, and to any income tax return filed on
2010 tax forms in 2011 for short taxable years beginning in 2011.
SECTION 2. CHANGES FROM REV. PROC. 2010-15
01 This revenue procedure has been updated to include reference to: (i) the.
section 6662(i) increased accuracy-related penalty in the case of nondisclosed
noneconomic substance transactions; (ii) the section 6662(j) increased accuracy-related
penalty in the case of undisclosed foreign financial asset understatements; and (iii) the
Schedule UTP, Uncertain Tax Position Statement, a new schedule required of certain
corporations.

01 If SECTION 3. BACKGROUND
01 If section 6662 applies to any portion of an underpayment of tax required to.
be shown on a return, an amount equal to 20 percent of the portion of the
underpayment to which the section applies is added to the tax (the penalty rate is 40
percent in the case of gross valuation misstatements under section 6662(h),
nondisclosed noneconomic substance transactions under section 6662(i), or
undisclosed foreign financial asset understatements under section 6662(j)). Section
6662(b)(2) applies to the portion of an underpayment of tax that is attributable to a 3
substantial understatement of income tax.
02 Section 6662(d)(1) provides that there is a substantial understatement of.
income tax if the amount of the understatement exceeds the greater of 10 percent of the
amount of tax required to be shown on the return for the taxable year or $5,000.
Section 6662(d)(1)(B) provides special rules for corporations. A corporation (other than
an S corporation or personal holding company) has a substantial understatement of
income tax if the amount of the understatement exceeds the lesser of 10 percent of the
tax required to be shown on the return for a taxable year (or, if greater, $10,000) or
$10,000,000. Section 6662(d)(2) defines an understatement as the excess of the
amount of tax required to be shown on the return for the taxable year over the amount
of the tax that is shown on the return reduced by any rebate (within the meaning of
section 6211(b)(2)).
03 In the case of an item not attributable to a tax shelter, section.
6662(d)(2)(B)(ii) provides that the amount of the understatement is reduced by the
portion of the understatement attributable to the item if the relevant facts affecting the
item’s tax treatment are adequately disclosed in the return or in a statement attached to
the return, and there is a reasonable basis for the tax treatment of the item by the
taxpayer..
04 Section 6694(a) imposes a penalty on a tax return preparer who prepares a.
return or claim for refund reflecting an understatement of liability due to an
“unreasonable position” if the tax return preparer knew (or reasonably should have
known) of the position. A position (other than a position with respect to a tax shelter or 4
a reportable transaction to which section 6662A applies) is generally treated as
unreasonable unless (i) there is or was substantial authority for the position, or (ii) the
position was properly disclosed in accordance with section 6662(d)(2)(B)(ii)(I) and had a
reasonable basis. If the position is with respect to a tax shelter (as defined in section
6662(d)(2)(C)(ii)) or a reportable transaction to which section 6662A applies, the
position is treated as unreasonable unless it is reasonable to believe that the position
would more likely than not be sustained on the merits. See Notice 2009-5, 2009-3
I.R.B. 309 (January 21, 2009) for interim penalty compliance rules for tax shelter
transactions.

05 In general, this revenue procedure provides guidance for determining when.
disclosure by return is adequate for purposes of section 6662(d)(2)(B)(ii) and section
6694(a)(2)(B). For purposes of this revenue procedure, the taxpayer must furnish all
required information in accordance with the applicable forms and instructions, and the
money amounts entered on these forms must be verifiable..
06 Fiscal and short tax year returns. (a) In general. This revenue procedure.
may apply to a return for a fiscal tax year that begins in 2010 and ends in 2011. This
revenue procedure may also apply to a short year return for a period beginning in 2011
if the return is to be filed before the 2011 forms are available. (Note that individuals are
generally not put in this position as a decedent's final return for a fractional part of a
year is due the fifteenth day of the fourth month following the close of the 12-month
period which began with the first day of such fractional part of the year. See Treas.
Reg. § 1.6072-1(b).) In the case of fiscal year and short year returns, the taxpayer must 5
take into account any tax law changes that are effective for tax years beginning after
December 31, 2010, even though these changes are not reflected on the form.
(b) Tax law changes effective after December 31, 2010. This document does not
take into account the effect of tax law changes effective for tax years beginning after
December 31, 2010. If a line referenced in this revenue procedure is affected by such a
change and requires additional reporting, a taxpayer may have to file Form 8275,
Disclosure Statement, or Form 8275-R, Regulation Disclosure Statement, until the
Service prescribes criteria for complying with the requirement.
07 A complete and accurate disclosure of a tax position on the appropriate.
year’s Schedule UTP, Uncertain Tax Position Statement, will be treated as if the
corporation filed a Form 8275 or Form 8275-R regarding the tax position. The filing of a
Form 8275 or Form 8275-R, however, will not be treated as if the corporation filed a
Schedule UTP.
SECTION 4. PROCEDURE
01 General.
(1) Additional disclosure of facts relevant to, or positions taken with respect to,
issues involving any of the items set forth below is unnecessary for purposes of
reducing any understatement of income tax under section 6662(d) (except as otherwise
provided in section 4.02(3) concerning Schedules M-1 and M-3), provided that the forms
and attachments are completed in a clear manner and in accordance with their
instructions.
(2) The money amounts entered on the forms must be verifiable, and the 6
information on the return must be disclosed in the manner described below. For
purposes of this revenue procedure, a number is verifiable if, on audit, the taxpayer can
prove the origin of the amount (even if that number is not ultimately accepted by the
Internal Revenue Service) and the taxpayer can show good faith in entering that
number on the applicable form.

(3) The disclosure of an amount as provided in section 4.02 below is not
adequate when the understatement arises from a transaction between related parties.
If an entry may present a legal issue or controversy because of a related-party
transaction, then that transaction and the relationship must be disclosed on a Form
8275 or Form 8275-R.
(4) When the amount of an item is shown on a line that does not have a
preprinted description identifying that item (such as on an unnamed line under an “Other
Expense” category) the taxpayer must clearly identify the item by including the
description on that line. For example, to disclose a bad debt for a sole proprietorship,
the words “bad debt” must be written or typed on the line of Schedule C that shows the
amount of the bad debt. Also, for Schedule M-3 (Form 1120), Part II, line 25, Other
income (loss) items with differences, or Part III, line 35, Other expense/deduction items
with differences, the entry must provide descriptive language; for example, "Cost of noncompete agreement deductible not capitalizable.” If space limitations on a form do not
allow for an adequate description, the description must be continued on an attachment.

(5) Although a taxpayer may literally meet the disclosure requirements of this
revenue procedure, the disclosure will have no effect for purposes of the section 6662 7
accuracy-related penalty if the item or position on the return: (1) Does not have a
reasonable basis as defined in Treas. Reg. § 1.6662-3(b)(3); (2) Is attributable to a tax
shelter item as defined in section 6662(d)(2); or (3) Is not properly substantiated or the
taxpayer failed to keep adequate books and records with respect to the item or position.
(6) Disclosure also will have no effect for purposes of the section 6694(a) penalty
as applicable to tax return preparers if the position is with respect to a tax shelter (as
defined in section 6662(d)(2)(C)(ii)) or a reportable transaction to which section 6662A
applies.

02 Items.
(1) Form 1040, Schedule A, Itemized Deductions:
(a) Medical and Dental Expenses: Complete lines 1 through 4, supplying all
required information.
(b) Taxes: Complete lines 5 through 9, supplying all required information. Line 8
must list each type of tax and the amount paid.
(c) Interest Expenses: Complete lines 10 through 15, supplying all required
information. This section 4.02(1)(c) does not apply to (i) amounts disallowed under
section 163(d) unless Form 4952, Investment Interest Expense Deduction, is
completed, or (ii) amounts disallowed under section 265.
(d) Contributions: Complete lines 16 through 19, supplying all required
information. Enter the amount of the contribution reduced by the value of any
substantial benefit (goods or services) provided by the donee organization in
consideration, in whole or in part. Entering the value of the contribution unreduced by
the value of the benefit received will not constitute adequate disclosure. If a contribution
of $250 or more is made, this section will not apply unless a contemporaneous written
acknowledgment, as required by section 170(f)(8), is obtained from the donee
organization. If a contribution of cash of less than $250 is made, this section will not
apply unless a bank record or written communication from the donee, as required by
section 170(f)(17), is obtained from the donee organization. If a contribution of property
other than cash is made and the amount claimed as a deduction exceeds $500, attach
a properly completed Form 8283, Noncash Charitable Contributions, to the return. In
addition to the Form 8283, if a contribution of a qualified motor vehicle, boat, or airplane
has a value of more than $500, this section will not apply unless a contemporaneous
written acknowledgment, as required by section 170(f)(12), is obtained from the donee
organization and attached to the return. An acknowledgment under section 170(f)(8) is
not required if an acknowledgment under section 170(f)(12) is required.
(e) Casualty and Theft Losses: Complete Form 4684, Casualties and Thefts,
and attach to the return. Each item or article for which a casualty or theft loss is claimed
must be listed on Form 4684.
(2) Certain Trade or Business Expenses (including, for purposes of this section,
the following six expenses as they relate to the rental of property):
(a) Casualty and Theft Losses: The procedure outlined in section 4.02(1)(e)
must be followed.

(b) Legal Expenses: The amount claimed must be stated. This section does not
apply, however, to amounts properly characterized as capital expenditures, personal 9
expenses, or non-deductible lobbying or political expenditures, including amounts that
are required to be (or that are) amortized over a period of years.
(c) Specific Bad Debt Charge-off: The amount written off must be stated.
(d) Reasonableness of Officers' Compensation: Form 1120, Schedule E,
Compensation of Officers, must be completed when required by its instructions. The
time devoted to business must be expressed as a percentage as opposed to "part" or
"as needed." This section does not apply to "golden parachute" payments, as defined
under section 280G. This section will not apply to the extent that remuneration paid or
incurred exceeds the employee-remuneration deduction limitations under section
162(m), if applicable.
(e) Repair Expenses: The amount claimed must be stated. This section does
not apply, however, to any repair expenses properly characterized as capital
expenditures or personal expenses.
(f) Taxes (other than foreign taxes): The amount claimed must be stated.
(3) Differences in book and income tax reporting.
For Schedule M-1 and all Schedules M-3, including those listed in (a)-(f) below,
the information provided must reasonably apprise the Service of the potential
controversy concerning the tax treatment of the item. If the information provided does
not so apprise the Service, a Form 8275 or Form 8275-R must be used to adequately
disclose the item (see Part II of the instructions for those forms).
Note: An item reported on a line with a pre-printed description, shown on an
attached schedule or “itemized” on Schedule M-1, may represent the aggregate 10
amount of several transactions producing that item (i.e., a group of similar items,
such as amounts paid or incurred for supplies by a taxpayer engaged in
business). In some instances, a potentially controversial item may involve a
portion of the aggregate amount disclosed on the schedule. The Service will not
be reasonably apprised of a potential controversy by the aggregate amount
disclosed. In these instances, the taxpayer must use Form 8275 or Form 8275-R
regarding that portion of the item.

Combining unlike items, whether on Schedule M-1 or Schedule M-3 (or on an
attachment when directed by the instructions), will not constitute an adequate
disclosure.

Additionally, for taxpayers that file the Schedule M-3 (Form 1120), the new
Schedule B, Additional Information for Schedule M-3 Filers, must also be completed.
For taxpayers that file the Schedule M-3 (Form 1065), the new Schedule C, Additional
Information for Schedule M-3 Filers, must also be completed. When required, these
new Schedules are necessary to constitute adequate disclosure.

(a) Form 1065. Schedule M-3 (Form 1065), Net Income (Loss) Reconciliation for
Certain Partnerships: Column (a), Income (Loss) per Income Statement, of Part II
(reconciliation of income (loss) items) and Column (a), Expense per Income Statement,
of Part III (reconciliation of expense/deduction items); Column (b), Temporary
Difference, and Column (c), Permanent Difference, of Part II (reconciliation of income
(loss) items) and Part III (reconciliation of expense/deduction items); and Column (d),
Income (Loss) per Tax Return, of Part II (reconciliation of income (loss) items) and 11
Column (d), Deduction per Tax Return, of Part III (reconciliation of expense/deduction
items).

(b) Form 1120. (i) Schedule M-1, Reconciliation of Income (Loss) per Books
With Income per Return.
(ii) Schedule M-3 (Form 1120), Net Income (Loss) Reconciliation for
Corporations with Total Assets of $10 Million or More: Column (a), Income (Loss) per
Income Statement, of Part II (reconciliation of income (loss) items) and Column (a),
Expense per Income Statement, of Part III (reconciliation of expense/deduction items);
Column (b), Temporary Difference, and Column (c), Permanent Difference, of Part II
(reconciliation of income (loss) items) and Part III (reconciliation of expense/deduction
items) and Column (d), Income (Loss) per Tax Return, of Part II (reconciliation of
income (loss) items); and Column (d), Deduction per Tax Return, of Part III
(reconciliation of expense/deduction items).


(c) Form 1120-L. Schedule M-3 (Form 1120-L), Net Income (Loss)
Reconciliation for U.S. Life Insurance Companies With Total Assets of $10 Million or
More: Column (a), Income (Loss) per Income Statement, of Part II (reconciliation of
income (loss) items) and Column (a), Expense per Income Statement, of Part III
(reconciliation of expense/deduction items); Column (b), Temporary Difference, and
Column (c), Permanent Difference, of Part II (reconciliation of income (loss) items) and
Part III (reconciliation of expense/deduction items); and Column (d), Income (Loss) per
Tax Return, of Part II (reconciliation of income (loss) items) and Column (d), Deduction
per Tax Return, of Part III (reconciliation of expense/deduction items).

(d) Form 1120-PC. Schedule M-3 (Form 1120-PC), Net Income (Loss)
Reconciliation for U.S. Property and Casualty Insurance Companies With Total Assets
of $10 Million or More: Column (a), Income (Loss) per Income Statement, of Part II
(reconciliation of income (loss) items) and Column (a), Expense per Income Statement,
of Part III (reconciliation of expense/deduction items); Column (b), Temporary
Difference, and Column (c), Permanent Difference, of Part II (reconciliation of income
(loss) items) and Part III (reconciliation of expense/deduction items); and Column (d),
Income (Loss) per Tax Return, of Part II (reconciliation of income (loss) items) and
Column (d), Deduction per Tax Return, of Part III (reconciliation of expense/deduction
items).

(e) Form 1120S. Schedule M-3 (Form 1120S), Net Income (Loss) Reconciliation
for S Corporations With Total Assets of $10 Million or More: Column (a), Income (Loss)
per Income Statement, of Part II (reconciliation of income (loss) items) and Column (a),
Expense per Income Statement, of Part III (reconciliation of expense/deduction items);
Column (b), Temporary Difference, and Column (c), Permanent Difference, of Part II
(reconciliation of income (loss) items) and Part III (reconciliation of expense/deduction
items); and Column (d), Income (Loss) per Tax Return, of Part II (reconciliation of
income (loss) items) and Column (d), Deduction per Tax Return, of Part III
(reconciliation of expense/deduction items).
(f) Form 1120-F. Schedule M-3 (Form 1120-F), Net Income (Loss) Reconciliation
for Foreign Corporations With Total Assets of $10 Million or More: Column (b),
Temporary Difference, Column (c), Permanent Difference, and Column (d), Other 13
Permanent Differences for Allocations to Non-ECI and ECI, of Part II (reconciliation of
income (loss) items) and Part III (reconciliation of expense/deduction items).

(4) Foreign Tax Items:
(a) International Boycott Transactions: Transactions disclosed on Form 5713,
International Boycott Report; Schedule A, International Boycott Factor (Section
999(c)(1)); Schedule B, Specifically Attributable Taxes and Income (Section 999(c)(2));
and Schedule C, Tax Effect of the International Boycott Provisions, must be completed
when required by their instructions.
(b) Treaty-Based Return Position: Transactions and amounts under section
6114 or section 7701(b) as disclosed on Form 8833, Treaty-Based Return Position
Disclosure Under Section 6114 or 7701(b), must be completed when required by its
instructions.

(5) Other:
(a) Moving Expenses: Complete Form 3903, Moving Expenses, and attach to
the return.
(b) Employee Business Expenses: Complete Form 2106, Employee Business
Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses, and attach
to the return. This section does not apply to club dues, or to travel expenses for any
non-employee accompanying the taxpayer on the trip.
(c) Fuels Credit: Complete Form 4136, Credit for Federal Tax Paid on Fuels, and
attach to the return.
(d) Investment Credit: Complete Form 3468, Investment Credit, and attach to the 14
return.

SECTION 5. EFFECTIVE DATE
This revenue procedure applies to any income tax return filed on a 2010 tax form
for a taxable year beginning in 2010, and to any income tax return filed on a 2010 tax
form in 2011 for a short taxable year beginning in 2011.
SECTION 6. DRAFTING INFORMATION
The principal author of this revenue procedure is Francis M. McCormick of the
Office of Associate Chief Counsel (Procedure & Administration). For further information
regarding this revenue procedure, contact Branch 2 of Procedure and Administration at
(202) 622-4940 (not a toll free cal

Restitution cannot be abated in an Offer in Compromise

Thomas M. Gillum v. Commissioner, TC Memo 2010-280 , Code Sec(s) 6330; 7122.
________________________________________
THOMAS M. GILLUM, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent .
Case Information:
Code Sec(s): 6330; 7122
Docket: Docket No. 16110-07L.
Date Issued: 12/22/2010
Judge: Opinion by THORNTON
HEADNOTE
XX.
Reference(s): Code Sec. 6330 ; Code Sec. 7122
Syllabus
Official Tax Court Syllabus
Counsel
Kenneth R. Boiarsky, for petitioner.
Elizabeth Downs, for respondent.
Opinion by THORNTON
MEMORANDUM FINDINGS OF FACT AND OPINION
Pursuant to sections 6320(c) and 6330(d), petitioner seeks judicial review of respondent's determination sustaining the filing of a Federal tax lien with respect to petitioner's Federal income tax liabilities for 1998, 2000, 2001, and 2002, and sustaining a proposed levy to collect petitioner's Federal income tax liabilities for each of the years 1996 through 2002. 1Petitioner also seeks judicial review of various letters that respondent allegedly sent to various entities, as petitioner's nominees or alter egos, denying them collection due process hearings with respect to respondent's filing of Federal tax liens.
FINDINGS OF FACT
The parties have stipulated some facts, which we incorporate by this reference. When he filed his petition, petitioner resided in Arkansas.
Petitioner is a veterinarian. He operates his practice under the business name Cloverdale Animal Hospital, LLC (Cloverdale).
In 2004 petitioner was criminally prosecuted for willful failure to file tax returns, in violation of section 7203, for taxable years 1996 through 2002. In December 2005 petitioner pleaded guilty to one count of criminal failure to file a Federal income tax return for 2000. His criminal plea agreement provided, inter alia, for entry of an order of mandatory restitution under 18 U.S.C. section 3663A for “the full amount of the taxes due and owing for all prosecution years.” The plea agreement stated: “At this time, the United States and the defendant agree that the amount of restitution payable by the defendant is $416,210.” The plea agreement also stated: “Except to the extent otherwise expressly specified herein, this Agreement does not bar or compromise any civil or administrative claim pending or that may be made against the defendant, including but not limited to tax matters.” The plea agreement stated further: “This Agreement is binding only upon the United States Attorney's Office for the Eastern District of Arkansas and the defendant. It does not bind *** any other federal, state or local prosecuting, administrative, or regulatory authority.”
In its judgment filed December 12, 2005, the District Court reduced the amount of restitution, labeled “criminal monetary penalties”, to $246,226. 2 The District Court also ordered a schedule of payments, with a lump sum of $25 due immediately and the balance due in monthly installments equaling 10 percent of petitioner's monthly gross income. 3
While the criminal proceedings were pending against petitioner, on August 13, 2004, he filed amended returns for taxable years 1996, 1997, and 1998, and on September 7, 2004, he filed an amended return for taxable year 1999. 4 Also on September 7, 2004, petitioner filed delinquent returns for taxable years 2000, 2001, and 2002.
On October 25, 2004, respondent assessed the taxes that petitioner had reported on his delinquent returns for 2000, 2001, and 2002. On March 14, 2005, respondent assessed the tax that petitioner had reported on his amended 1998 return, and on June 26, 2006, respondent assessed the taxes that petitioner had reported on his amended returns for 1996, 1997, and 1999. In each instance, respondent also assessed applicable additions to tax and interest.
On October 18, 2006, respondent sent petitioner Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 (the lien notice), with respect to petitioner's taxable years 1998, 2000, 2001, 2002, and 2003. On October 26, 2006, respondent sent petitioner Letter 1058, Final Notice, Notice of Intent to Levy and Notice of Your Right to a Hearing (the levy notice), with respect to petitioner's taxable years 1996 through 2003. The levy notice indicated that as of November 25, 2006, petitioner would owe $839,856 of tax, penalties, and interest for these years. 5
On November 21, 2006, petitioner timely submitted Form 12153, Request for a Collection Due Process Hearing, indicating that he disagreed with both the lien notice and the levy notice. 6
The request covered petitioner's tax years 1996 through 2002 but not 2003. In his request petitioner asserted that the criminal plea agreement and judgment reflected the full settlement of his tax liabilities for 1996 through 2002. He asserted that “payment on these years is exclusively covered under an agreed court order for restitution”, that he was making payments to the IRS for these tax years under this agreement, and that unless he failed to meet his obligations under the court order, the IRS must “cease and desist from further collection activity.” Petitioner did not propose any collection alternative in his hearing request.
On October 26, 2006, in anticipation of submitting a request for a hearing, petitioner submitted Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, with respect to himself, and on October 27, 2006, petitioner submitted Form 433-B, Collection Information Statement for Businesses, with respect to Cloverdale. On these forms petitioner failed to provide complete information. For example, on Form 433-A he did not provide requested bank account numbers and routing information, detailed credit card information, the estimated value of three vehicles, or required information with respect to his personal assets and living expenses. In response to a question asking whether he had transferred any assets for less than their actual value within the past 10 years, he checked “No” but then wrote “Possible”. The form required several attachments, including proof of current expenses, which petitioner failed to provide.
On Form 433-B petitioner did not provide detailed information with respect to Cloverdale's accounts receivable, business assets, bank accounts, or available credit. In response to a question requesting detailed information with respect to Cloverdale's income and expenses, petitioner replied “see statement attached”, but did not attach any such statement. The form also required several other attachments, which petitioner failed to provide.
On May 15, 2007, the settlement officer held the first of three telephone conferences with petitioner's representative. In this conference the settlement officer opined that neither the criminal plea agreement nor the judgment barred the IRS from any civil or administrative actions with respect to petitioner's civil tax liabilities and did not compromise those liabilities. The settlement officer asked the representative whether he wished to propose any collection alternatives. The representative proposed as a collection alternative that the IRS limit its collection action to the terms of the plea agreement and judgment. They agreed to have a second conference.
Before the second conference the settlement officer reviewed the collection administrative case file, which included, among other things: (1) A memorandum, dated February 22, 2007, from Revenue Officer Robert Brown to IRS district counsel in Oklahoma City, Oklahoma, requesting approval to file alter ego and nominee liens and levies against several entities created by petitioner
(the request); (2) a memorandum from respondent's associate area counsel in Oklahoma City responding to the request (the memorandum); and (3) several diagrams detailing petitioner's alleged alter ego and nominee activities. 7
The request indicated on the basis of findings contained therein that, notwithstanding his prior criminal conviction, petitioner was still using various sham trusts, nominees, and alter egos to shield assets and income from taxation. More particularly, the request included findings that petitioner had funneled unreported cash payments from Cloverdale to grantor trusts and other entities to pay his and his family's personal expenses, including cable TV bills, college tuition, life insurance premiums, vacation expenses, car payments, and hardwood flooring for petitioner's residence. The request concluded that petitioner had created certain nominee entities, including a trust known as Lestat Ops, to hold personal assets and real estate for the purpose of placing them out of the reach of creditors, mainly the Government. 8
The memorandum indicates that “nominee” refers to an entity or person to whom a taxpayer has transferred property in an attempt to conceal it. According to the memorandum, a Federal tax lien encumbers such property because although a third party may have legal title, the taxpayer actually owns the property and enjoys its full use and benefit. The memorandum also indicates that an alter ego generally involves a sham corporation or other entity used by the taxpayer as an instrumentality to avoid his or her own legal obligations. In the memorandum respondent's associate area counsel approved nominee liens against three trusts created by petitioner, including Lestat Ops, as well as against petitioner's wife, and approved alter ego liens againstCloverdale, another limited liability company, and two other trusts that petitioner had created.
Cloverdale and Lestat Ops received from the IRS Letters 3172, dated May 15, 2007, providing notice of the filing of Federal tax liens and advising of the right to a collection due process (CDP) hearing. By letters dated June 20, 2007, requests for CDP hearings with respect to these two entities were timely submitted. Shortly thereafter, Cloverdale and Lestat Ops received letters from Revenue Officer Robert Brown, dated June 25, 2007, acknowledging receipt of the hearing requests but advising that CDP rights were not available to these entities because petitioner previously had been afforded CDP rights with respect to the same tax periods listed in the lien notices. The letters indicated, however, that the entities were entitled to a “Collection Appeal” with the revenue officer's manager.
On May 21, 2007, the settlement officer held a second telephone conference with petitioner's representative. Petitioner's representative continued to maintain, as a collection alternative to the proposed levy, that collection should be limited to the amount specified in the criminal plea agreement and judgment. The settlement officer indicated that he had reviewed financial statements and related information in the collection administrative file and concluded that the financial statements did not provide full disclosure of petitioner's income and assets. Consequently, he was unable to recommend acceptance of petitioner's proposed collection alternative. Petitioner's representative requested details of the alleged nondisclosure. The settlement officer declined to discuss the details at that time, indicating that he would research the matter. They agreed to have another conference.
After seeking advice of IRS counsel, on May 24, 2007, the settlement officer held the third and final telephone conference with petitioner's representative. The settlement officer asserted that petitioner had failed to completely disclose his income, expenses, and assets, making it impossible to adequately evaluate his ability to pay. Without specifically referencing the request or memorandum that he had reviewed, the settlement officer asserted that petitioner had diverted income into various entities and paid personal expenses through these entities for no apparent legitimate business reason. He also asserted that petitioner had attempted to place numerous assets beyond respondent's reach in various nominee or alter ego entities. According to the settlement officer's case activity record, petitioner's representative expressed surprise at this information, indicated that petitioner apparently had not disclosed all the facts to him, and stated that he understood why the settlement officer could not consider a collection alternative. After another discussion about the effect of the criminal plea agreement and judgment, the settlement officer advised the representative that the proposed collection actions would be sustained.
On June 15, 2007, respondent's Office of Appeals mailed petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (the determination), sustaining the Federal tax lien filing and the proposed levy. With respect to petitioner's underlying liability the determination stated:
In this case the taxpayer agreed to pay restitution for the full amount of the taxes due for all prosecution years (1996 through 2002), but the judge, who is not bound by the plea agreement, subsequently ordered payment of restitution in the amount that is equivalent of the tax liability for only one count of the total criminal case. The restitution amount relates to the tax liability, but it is not the equivalent of the tax liability. It is the determination of Appeals that neither the plea agreement nor the court judgment represent a settlement or compromise of the tax liability, and do not bar IRS from taking additional collection actions. The determination also rejected petitioner's proposed collection alternative of limiting collection to the terms of the criminal plea agreement and judgment, stating:
Appeals has determined from this review that the taxpayer has not accurately reported income and expenses, which make it impossible to determine his true ability to pay the tax liability. The taxpayer has done this by diverting income through various entities (trusts, limited liability companies, and his wife) and paying personal expenses through these entities for no apparent reason other than to avoid taxes and the collection of taxes. He has also placed assets beyond the reach of IRS by purchasing them in the name of various entities he controls or transferring them to these entities. It is clear that the taxpayer maintains full use and benefits of these assets, which include real estate, vehicles, watercraft, and all-terrain vehicles. Because these assets and any encumbrances against these assets have not been disclosed, Appeals is not able to determine their net equity and collection potential. For these reasons Appeals cannot accept the only collection alternative proposed by the taxpayer's representative. The determination also concluded that the proposed tax lien filing and levy action properly balanced the need for efficient collection of taxes with the concern that collection action be no more intrusive than necessary.
Petitioner timely petitioned this Court for judicial review of this determination. The petition also seeks judicial review of letters which petitioner asserts respondent mailed on June 25, 2007, to four entities created by petitioner, including Cloverdale and Lestat Ops, denying them the opportunity for CDP hearings with respect to the filing of tax liens against them as petitioner's alleged nominees, transferees, or alter egos. 9
OPINION
I. Statutory Framework Section 6321 imposes a lien in favor of the United States on all property and property rights of a person who is liable for and fails to pay tax after demand for payment has been made. The lien arises when assessment is made and continues until the liability is paid or becomes unenforceable by lapse of time. Sec. 6322. For the lien to be valid against certain third parties, the Secretary must file a notice of Federal tax lien; within 5 business days thereafter, the Secretary must provide written notice to the taxpayer. Secs. 6320(a), 6323(a). The taxpayer then has 30 days to request an administrative hearing before an Appeals officer. Sec. 6320(a)(3)(B), (b)(1); sec. 301.6320-1(c)(1), Proced. & Admin. Regs. To the extent practicable, a hearing requested under section 6320 is to be held in conjunction with a related hearing requested under section 6330. Sec. 6320(b)(4).
Section 6330 requires the Secretary to furnish a person notice and opportunity for a hearing before levying on the person's property. At the hearing, the person may raise any relevant issue relating to the unpaid tax or proposed levy, including spousal defenses, challenges to the appropriateness of the collection action, and offers of collection alternatives. The person may challenge the underlying tax liability if the person did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the liability. Sec. 6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604 (2000). After receiving a notice of determination, the person may seek judicial review in this Court. Sec. 6330(d)(1); Pension Protection Act of 2006, Pub. L. 109-280, sec. 855, 120 Stat. 1019. If the validity of the underlying tax liability is properly at issue, we review Sego v. Commissioner, supra. Other issues that issue de novo. we review for abuse of discretion. Id.
II. Petitioner's Challenge to His Underlying Liabilities
Petitioner contends that respondent erred in sustaining the lien and levy notices because they contravene the criminal plea agreement and judgment. Petitioner's contention represents in part a challenge to his underlying liabilities for 1996 through 2002. 10 Respondent concedes that petitioner is entitled to make such a challenge but contends that it is without merit.
Respondent assessed petitioner's taxes for the years in question on the basis of the amounts petitioner self-reported on his amended or delinquent returns for these years. Petitioner does not contend that he incorrectly reported his tax liabilities on these returns. Rather, he contends that his aggregate tax liability for 1996 through 2002 is limited to the $246,226 of restitution ordered in the criminal judgment. We disagree.
Pursuant to 18 U.S.C. section 3663(a) (2006), a District Court may order restitution to the victim of a criminal offense. In some circumstances, as in petitioner's criminal case, restitution is mandatory. See 18 U.S.C. sec. 3663A (2006). An order to pay restitution is a criminal penalty rather than a Creel v. Commissioner, 419 F.3d 1135, 1140 [96 AFTR 2d 2005-5487] (11th civil penalty. Cir. 2005). Although restitution is based upon an estimation of civil tax liability, it is not a determination of civil tax liability and generally does not bar the Commissioner from assessing a greater amount of civil tax liability. See Morse v. Commissioner, 419 F.3d 829, 833-835 [96 AFTR 2d 2005-5814] (8th Cir. 2005), affg. T.C. Memo. 2003-332 [TC Memo 2003-332]; Hickman v. Commissioner, 183 F.3d 535, 537-538 [84 AFTR 2d 99-5346] (6th Cir. 1999), affg. T.C. Memo. 1997-566 [1997 RIA TC Memo ¶97,566]; M.J. Wood Associates, Inc. v. Commissioner, T.C. Memo. 1998-375 [1998 RIA TC Memo ¶98,375]. In fact, the restitution statute expressly contemplates that a civil claim may be brought after the criminal prosecution by providing that the amount paid under a restitution order “shall be reduced by any amount later recovered as compensatory damages for the same loss by the victim in *** any Federal civil proceeding”. 18 U.S.C. 3664(j)(2) (2006). 11
Petitioner relies upon Creel v. Commissioner, supra, in support of his contention that respondent's proposed collection actions contravene the restitution order. Petitioner's reliance on Creel is misplaced. In Creel, the Court of Appeals found that a restitution order, which specifically encompassed “any interest and penalties which may be imposed by the Internal Revenue Service”, included the civil penalties that the Id. at Commissioner later sought to recover in a civil suit. 1140. Furthermore, at the time of the civil suit the taxpayer in Creel had fully settled the ordered restitution, and the U.S. attorney had filed a satisfaction of judgment and had also recorded a cancellation and release that of the judgment lien.
Taking into account these unusual circumstances, the Court Id. of Appeals held that the Government had discharged the taxpayer's civil tax liabilities as part of the criminal case.
By contrast, petitioner's plea agreement expressly states that it “does not bar or compromise any civil or administrative claim pending or that may be made against the defendant, including but not limited to tax matters.” Further, the plea agreement states that it is “binding only upon the United States Attorney's Office for the Eastern District of Arkansas and the defendant” and “does not bind *** any other federal, state or 11(...continued) this statement or the appropriateness of this treatment. Consequently, we give this issue no further consideration. local prosecuting, administrative or regulatory authority.” The criminal judgment refers to the restitution payments as “criminal monetary penalties” and makes no mention of civil liabilities or penalties. Furthermore, there is no evidence that petitioner has satisfied his criminal restitution order or received any discharge.
We conclude and hold that petitioner's criminal plea agreement and judgment ordering restitution did not discharge, and do not limit respondent's assessment and collection of, petitioner's civil tax liabilities for his taxable years 1996 through 2002.
III. Petitioner's Proposed Collection Alternative We review the settlement officer's denial of a collection alternative for abuse of discretion. See Sego v. Commissioner, 114 T.C. 604 (2000). The U.S. Court of Appeals for the Eighth Circuit, to which any appeal of this case would lie, describes the abuse of discretion standard as “markedly deferential: if the amount of tax owed is not in dispute, courts may disturb the administrative decision only if it constituted `a clear abuse of discretion in the sense of clear taxpayer abuse and unfairness by the IRS.” Fifty Below Sales & Mktg., Inc. v. United States, 497 F.3d 828, 830 [100 AFTR 2d 2007-5551] (8th Cir. 2007) (quoting Robinette v. Commissioner, 439 F.3d 455, 459 [97 AFTR 2d 2006-1391] (8th Cir. 2006), revg. 123 T.C. 85 (2004)).
The only collection alternative that petitioner has proposed is to limit his 1996 through 2002 liability to $246,226; i.e., the amount of restitution ordered by the District Court in the criminal proceeding. Insofar as this “collection alternative” represents petitioner's reassertion of his challenge to his underlying civil tax liabilities, it was properly rejected for the reasons just discussed. And for essentially those same reasons, the restitution order does not require respondent to adhere to the restitution payment schedule set forth therein to collect petitioner's civil tax liabilities.
Insofar as petitioner's “collection alternative” might be viewed as representing, in effect, an offer-in-compromise, the settlement officer did not abuse his discretion in rejecting it. The regulations set forth three grounds for compromising a liability: (1) Doubt as to liability; (2) doubt as to collectibility; and (3) promotion of effective tax administration. Sec. 301.7122-1(b), Proced. & Admin. Regs. As just discussed, petitioner has put forward no legitimate issue regarding his civil tax liabilities. Nor has he expressly argued that his collection alternative was for the promotion of effective tax administration. 12 That leaves doubt as to collectibility.
For purposes of evaluating an offer-in-compromise, doubt as to collectibility exists “where the taxpayer's assets and income are less than the full amount of the liability.” Sec. 301.7122- 1(b)(2), Proced. & Admin. Regs. Because he submitted incomplete Forms 433-A and 433-B, petitioner failed to provide the settlement officer all financial information necessary to evaluate his ability to fully pay his civil tax liabilities. For that reason, if for no other, the settlement officer did not abuse his discretion in rejecting any collection alternative based on doubt as to collectibility. See, e.g., Kansky v. Commissioner, T.C. Memo. 2007-40 [TC Memo 2007-40]; Criner v. Commissioner, T.C. Memo. 2003-328 [TC Memo 2003-328].
IV. Fair Hearing Petitioner complains that he was denied a fair collection hearing because the settlement officer did not disclose to his representative all the information in the collection administrative file which the settlement officer had reviewed in reaching his conclusions. 13
Collection hearings are conducted in an informal setting that does not include the right to discovery. See Katz v. Commissioner, 115 T.C. 329 (2000), Davis v. Commissioner, 115 T.C. 35, 41-42 (2000). The information that the settlement officer reviewed related to matters that should have been within petitioner's knowledge, and the settlement officer did in fact share with petitioner's representative the nature of his concerns about petitioner's nondisclosure of income and assets. 14 More fundamentally, as just discussed, petitioner's failure to provide the settlement officer all required financial information was reason enough for the settlement officer to reject his collection alternative. We do not see that the settlement officer's disclosure or nondisclosure of the materials in question had any significant bearing on the fairness or outcome of petitioner's hearing.
V. Denial of CDP Hearings for Nominees and Alter Egos Petitioner asserts that certain entities, including Cloverdale and Lestat Ops, received nominee or alter ego lien notices but were improperly denied CDP hearings. 15 According to the regulations, nominees and alter egos holding property for a taxpayer are not entitled to CDP hearings. Sec. 301.6330- 1(b)(2), Q&A-B5, Proced. & Admin. Regs. In any event, we cannot enter a decision affecting the entities in question because they are not parties to this proceeding. See Dalton v. Commissioner, 135 T.C. , (2010) (slip op. at 15).
V. Conclusion
We sustain respondent's determinations sustaining the filing of the notice of Federal tax lien and the proposed levy.
Decision will be entered for respondent.
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1
Unless otherwise indicated, all section references are to the Internal Revenue Code. All figures are rounded to the nearest dollar.
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2
This amount corresponded to the amount stated in the plea agreement as representing petitioner's total tax liability for the years 1999 through 2001. The record does not conclusively show why the District Court reduced the restitution in this manner.
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3
The record does not establish whether petitioner has complied with the restitution order.
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4
Insofar as the record shows, these were the first returns that petitioner filed for these years. Apparently, they were characterized as “amended” returns because respondent had previously prepared substitutes for returns for petitioner's taxable years 1996 through 1999.
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5
The notice indicates that $47,567 of this amount relates to petitioner's 2003 taxable year.
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6
After petitioner submitted his request for a collection due process (CDP) hearing, on Dec. 8, 2006, respondent issued to petitioner a notice of deficiency with respect to petitioner's taxable years 1998 through 2002. The parties agree that the deficiencies determined in the notice are not at issue in this case.
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7
The record does not reveal who prepared these diagrams.
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8
The request describes Lestat Ops as a trust which holds the real estate upon which petitioner's veterinary clinic is located and indicates that the trust's beneficiaries are petitioner's children.
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9
The record contains the June 25, 2007, letters, described supra , from Revenue Officer Robert Brown to Cloverdale and Lestat Ops. The petition seems to assert that two other entities, Piraeus Group and MRMLBS, received similar letters also dated June 25, 2007. The record does not contain copies of any such letters.
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10
Petitioner has stipulated that his 2003 liability (which was encompassed by the lien and levy notices but was not included either in petitioner's request for a CDP hearing or in respondent's determinations) is not at issue in this case.
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18

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11
Conversely, payments made pursuant to restitution orders are applied against tax liabilities. See United States v. Clayton, 613 F.3d 592 [106 AFTR 2d 2010-5556] (5th Cir. 2010); United States v. Tucker, 217 F.3d 960, 962 [89 AFTR 2d 2002-409] (8th Cir. 2000); M.J. Wood Associates, Inc. v. Commissioner, T.C. Memo. 1998-375 [1998 RIA TC Memo ¶98,375]. The record is silent as to what amounts, if any, of restitution petitioner has paid. On brief respondent states that petitioner's “restitution payments will ultimately be applied to his civil tax liability for the taxable year 2000, and if in excess of that liability to other years”. Petitioner, who filed no reply brief, has not challenged
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11

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12
The Commissioner may compromise a tax liability for promotion of effective tax administration if: (1) Collection in full could be achieved but would cause economic hardship; or (2) if there are compelling public policy or equity considerations identified by the taxpayer. Sec. 301.7122-1(b)(3), Proced. & Admin. Regs.; see Speltz v. Commissioner, 124 T.C. 165, 172-173 (2005), affd. 454 F.3d 782 [98 AFTR 2d 2006-5364] (8th Cir. 2006). Petitioner has not argued and the record does not suggest that he meets these conditions. Nor does the record suggest that petitioner raised these issues at the collection hearing; accordingly, he is not entitled to raise them in this proceeding. See Giamelli v. Commissioner, 129 T.C. 107, 114 (2007).
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13
The materials which the settlement officer reviewed included Revenue Officer Brown's request to IRS district counsel to file alter ego and nominee liens and levies and district counsel's memorandum approving the filing of alter ego and nominee liens. Petitioner contends that these materials were not included in the administrative file. The parties have stipulated, however, that the stipulated exhibits, which include the materials in question, “constitute the complete administrative record in this case”. Petitioner has not raised, and consequently we do not consider, any issue as to whether the settlement officer's review of such materials entailed any improper ex parte communication.
Over respondents' objection, petitioner called the settlement officer as a witness at trial, attempting to show that the settlement officer failed to adequately explain the reasons for his determination. Cf. Robinette v. Commissioner, 439 F.3d 455, 461 [97 AFTR 2d 2006-1391] (8th Cir. 2006) (indicating that judicial review based on the administrative record may permit “the receipt of testimony or evidence explaining the reasoning behind the agency's decision”), revg. 123 T.C. 85 (2004). The settlement officer's testimony, however, had little probative value or relevancy. On brief respondent renews his objection to the settlement officer's testimony. Because we have not relied upon this testimony in our analysis or holdings, it is unnecessary to address further respondent's objection.
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14
Shortly before the second telephone conference between petitioner's representative and the settlement officer on May 21, 2007, the IRS had mailed to Cloverdale and Lestat Ops (and, according to petitioner's allegations, at least two other entities) nominee notices of Federal tax lien filing.
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15
Respondent issued the nominee notices of Federal tax lien filing for Cloverdale and Lestat Ops (and, according to petitioner's allegations, for at least two other entities) on May 15, 2007, months after respondent had issued petitioner the notice of Federal tax lien filing upon which this case is predicated.