Ellis & Norma Crum, Petitioner

MEMORANDUM OPINION

SWIFT, Judge : Petitioners challenge respondent's proposed levy action relating to petitioners' approximate $133,000 in outstanding assessed Federal income taxes for 1994 through 2002 , i including additions to tax, penalties, and interest .

All section references are to the Internal Revenue Code, and all Rule references are to the Tax Court's Rules of Practice ain d Procedure .

SERVED SEP 1 8 2008

The issue for decision is whether respondent's Appeal s Office abused its discretion in concluding that petitioners ' offer-in-compromise (OIC) was not acceptable because, among other things, alleged overpayments of $2,111 for 1989, $4,561 for 1991, and $6,879 for 1992 were barred by the refund period o f limitations under section 6511 and not available for credi t against petitioners' outstanding Federal income taxes for 199 4 through 2002 .

Background This case has been fully submitted under Rule 122! : The stipulated facts are so found .

For-1989, 1991, and 1992 petitioners late filed their Federal income tax returns, and respondent prepared for petitioners substitute tax returns on which respondent>determine d tax balances .

Respondent mailed petitioners notices of deficiency fo r 1989, ;1991, and 1992 reflecting the tax deficiencies,~an d petitioners did not respond to the notices of deficiency . On May 13, 1996, respondent assessed the tax deficiencies for 1989 , . 1991, and 1992 .

Over the years petitioners made a number of payments t o respondent, and respondent collected by levy funds that wer e applied against the Federal income taxes respondent had assessed i against petitioners for 1989, 1991, and 1992 . The last payments and levies made that wer e applied against petitioners' 1989 , 1991 ., and-1992 :Federa l income taxe s are shown ,below; :

Yea r On January 15,j²⁰ .04, petitioners late filed their 199 4 through 2002 joint Federal income tax returns and reported th e balances shown below on each respective return :

Year .. t Reported Tax Balance Du e I 1994 $9,011 1995 3 729 1996 12,957 1997 5,172 19.98 10,443 1999 '2,452 2000 13,443 1 54 1 2001 2,69 7 200,2 On February 22, .200 .5 , petitioners late filed-their joint Federal income tax returns for 1989, 1991, and 1992 on which tihe y claimed the overpayments at issue herein ( namely -, $ 2,111 for 1989 , $4,581 for 199}1, .

. and $6 , 879 for 1992 ) . T hese late-filed income tax returns for 1989, 1991 , and 1: 992 on which tax overpayments were reported-constitute petitioners' claims for .

refund . See sec .' -301 . 6402 .-3 (a) (1) Proced . & Admin . `Regs-.

4 - I On July 18, 2005, respondent mailed to-petitioners a notice of intent to levy with regard to .the $133,000 balance in petitioners' Federal income taxes for 1994 through 2002 .

On November 8, 2005, petitioners requested an Appeals Office collection hearing under section 6330 with regard to respondent's notice of intent to levy . In connection with petitioners' Appeals Office collection hearing, on or about February 24, 2006, petitioners submitted to respondent an OIC with regard1to their outstanding Federal income taxes for 1994 through 2002 .

As the basis for their OIC, petitioners alleged that they i :1 .

had made overpayments of their Federal income taxes for 1989 , 1991, and 1992 which now should be available to offset a portion of petitioners' outstanding 1994 through 2002 Federal income ta x i liabilities . This was the only collection alternativ e petit, 'ioners . suggested to respondent' s proposed levy action .

Also,'with their OIC petitioners enclosed a $9,000 payment .

!During their Appeals Office hearing, petitionersidid not submit any other financial information to respondent's Appeals officer .

Discussio n .During .the Appeals Office collection hearing petitioners contended that their offer-in-compromise should be' accepte d because their alleged overpayments for 1989, 1991, and 1992 should be applied to their outstanding taxes for 1994 through 2002 . However, under section 6402(a) the application o f overpayments of a tlaxpayer from other years to a .-particular yea r t of the taxpayer is :subject to the applicable . refund period ofd'-.

limitations entitlement to the . cla .imed overpayments from .198.9 , 1991 , .

and 199 2 Claim for credit or refund of an overpayment of any tax imposed b y this title in respect of which tax the taxpayer is required to file a return shall be 'filed by the taxpayer within 3 years from the time the return was filed or 2years from the time the tax was paid, whichever of such periods-expires the later-, orr,if no return was filed by the taxpayer, within 2 years fro m the time the . tax was . paid (cid:127)* * * .

In this case the 3-year look-back period applies . Sec 6511 (a) and (b) (2) (A ;) When petitioner s late filed their 1989, 1991, acid 1992 j o Federal income tax returns on February 22,2005 (which as-stated constituted petitioners' claims for refund at issue herein), the 3-year period provided in section 6511 had long expired, an d } their claimed overpayments were not available for refund or f o offset against petitioners' outstanding Federal income taxes fo r 1994 through 2002 . Accordingly, petitioners'`OIC, based o n unavailable claims for refund, was properly rejected 'b y respondent's Appeals Office .

Without citing any authority petitioners argue that to th e extent the overpayments for 1989, 1991, and 1992 were collecte d by respondent's prior levies, payment thereof should not b e j I treated as made until petitioners had the opportunity t o designate where and how the levied funds should be applied or a t least,until petitioners were notified of the fact of the levie s i d and of now respondent allocated and applie .d the levied funds t o their outstanding tax accounts and for which years . The law i s well established that funds seized by the Commissioner by way o f levy are treated as paid as of the date of the levy and that as involuntarily seized funds they may be allocated by th e Commissioner to a taxpayer's delinquent tax account as the Commissioner sees fit . Secs . 6342, 6402 ; see Landr y Commissioner , 116 T .C . 60, 62-63 (2001) .

We sustain respondent's proposed levy action .

' Decision will be entere d for respondent .

'The parties also raise an issue as to whether we have jurisdiction to consider the effect of petitioners' alleged overpayments in the nonsuit years (i .e ., 1989, 1991, and 1992) o n the appropriateness of the collection action for 1994 through 20021 In Freile v . Commissioner , 125 T .C . 14 (2005),, we held that we had jurisdiction to consider whether an alleged erroneou s application of a payment to a nonsuit year should have been applied to the year before'the Court . Herein, we decline to reconsider Freije .