As tax professionals, navigating the complexities of tax collection and litigation is crucial. The recent decision in United States v. Timothy M. Ragen, Case No. 4:23-CV-306 in the United States District Court for the Southern District of Georgia, provides valuable insights into the government’s process for reducing tax assessments to judgment, particularly regarding the application of the statute of limitations and the significance of taxpayer actions and defenses.

Case Background and Factual Summary

This case involves the United States suing Defendant Timothy M. Ragen to reduce to judgment his unpaid federal income tax liabilities for seven tax years: 2004, 2006, 2007, 2010, 2011, 2012, and 2013. The federal tax system is primarily one of self-assessment, where taxpayers compute and report their tax due. According to the government, Mr. Ragen completed the first step by filing returns but consistently failed to pay the taxes owed.

The Internal Revenue Service ("IRS") made assessments against Mr. Ragen for these tax years, encompassing not only the primary tax liability but also accrued interest and various penalties, including penalties for Failure to Prepay and Late Payment. For the 2011 tax year, an Accuracy Penalty pursuant to 26 U.S.C. § 6662 was also assessed. The amounts assessed for the years in question were substantial, totaling hundreds of thousands of dollars in tax liabilities alone, before considering interest and penalties. The Treasury Department issued notices and demands for payment to Mr. Ragen, but he failed to satisfy the balances due.

As of June 17, 2024, the total outstanding balance, including taxes, interest, penalties, and other additions, was reported to be $1,286,984.64 for tax years 2006 through 2013, plus an additional $11,403.51 for the 2004 tax year (based on the amount assessed on May 14, 2007). This balance accrues future statutory additions and interest until paid in full.

Significantly, Mr. Ragen admitted in his answer to the complaint that he remains liable for unpaid taxes, though he claimed insufficient knowledge to admit or deny the exact balances stated.

Taxpayer Actions Impacting Collection (Tolling Events)

Several events occurred during the period of unpaid tax liabilities that are pertinent to the IRS’s ability to collect and the statutory period for collection. These events are described as "tolling events" because they suspend the running of the statute of limitations. Mr. Ragen admitted to taking these actions.

Bankruptcy: Mr. Ragen filed for bankruptcy on July 25, 2008, and the proceeding concluded without a discharge on December 15, 2011.
Offers in Compromise (OIC): Mr. Ragen submitted two Offers in Compromise to the IRS. An OIC is a contract where the IRS may agree to accept less than the full amount owed. The first was filed on November 19, 2012, and rejected on December 10, 2012. The second was filed on February 13, 2013, and rejected on April 19, 2014.
Installment Agreement Request: Mr. Ragen also filed a proposed installment agreement with the IRS on August 31, 2021, which allows for scheduled periodic payments. The IRS rejected this proposal on March 11, 2022.

Mr. Ragen’s answer indicated he lacked information regarding how these events specifically suspended the statute of limitations. Crucially, Mr. Ragen did not respond to the United States’ motion for summary judgment, and his counsel indicated he did not intend to respond or defend against the lawsuit.

Legal Framework for Tax Collection Suits

The statutory scheme for the government to collect unpaid taxes involves several steps.

Taxes must be assessed within three years after the return is filed (26 U.S.C. § 6501(a)).
An assessment is the formal recording of the tax liability in IRS records. It functions as the government’s determination that a taxpayer owes a specific amount.
Properly made assessments are entitled to a legal presumption of correctness.
The assessment is typically memorialized by a Certificate of Assessments, Payments, and Other Specified Matters (Form 4340).
Within sixty days after the assessment, the IRS must issue a notice and demand for payment (26 U.S.C. § 6303(a)).
If the tax remains unpaid, the IRS may pursue collection through a court proceeding (26 U.S.C. § 6502(a)(1)).

In a suit to reduce an assessment to judgment, the government’s initial burden is to prove the assessment was properly made. Submission of a Form 4340 establishes this presumption. The burden then shifts to the taxpayer to prove the assessment is erroneous.

Statute of Limitations and Tolling

A critical aspect of tax collection suits is timeliness. Generally, the government must file suit to collect assessed taxes within ten years from the date of assessment (26 U.S.C. § 6502(a)). However, this ten-year period can be suspended (tolled) under specific circumstances when the IRS is prohibited from collection action.

The tolling events relevant to this case include:

Bankruptcy: The limitations period is suspended during the pendency of a Title 11 bankruptcy case plus six months thereafter (26 U.S.C. § 6503(h)).
Offers in Compromise: Filing an OIC suspends the limitations period from the date filed until the offer is terminated, withdrawn, or formally rejected, plus thirty days thereafter (26 U.S.C. § 6331(k)(1)(B)). OICs typically contain a waiver of the limitations period to allow the IRS time to consider the offer.
Installment Agreements: A proposed installment agreement suspends the limitations period while the proposal is pending with the IRS, plus thirty days after rejection (26 C.F.R. § 301.6331-4(c); 26 U.S.C. § 6331(k)(2)).

The burden of proof for a limitations defense rests with the taxpayer.

Court’s Analysis and Application to the Facts

The Court first addressed the timeliness of the government’s suit. The relevant assessments occurred on various dates between May 14, 2007, and October 15, 2012. The suit was filed on October 13, 2023.

The Court calculated the total tolling period resulting from Mr. Ragen’s actions:

Bankruptcy (July 25, 2008 - Dec 15, 2011 + 6 months): 1,422 days.
First OIC (Nov 19, 2012 - 30 days after Dec 10, 2012): 51 days. (Note: The source text calculation uses Dec 9, 2012, resulting in 51 days).
Second OIC (Feb 13, 2013 - 30 days after April 19, 2014): 460 days.
Installment Agreement (Aug 31, 2021 - 30 days after March 11, 2022): 223 days.
Total Tolling: 1422 + 51 + 460 + 223 = 2,156 days.

The Court applied this tolling to each assessment date:

May 14, 2007 (2004 Tax Year): 10 years from assessment + 2,156 days tolling = April 8, 2023. Since the suit was filed October 13, 2023, this assessment was untimely unless a defense was waived.
November 19, 2007 (2006 Tax Year): 10 years from assessment + 2,156 days tolling = October 15, 2023. Suit filed October 13, 2023. Timely.
October 20, 2008 (2007 Tax Year): This assessment occurred during the bankruptcy. The 10-year period began after the bankruptcy tolling ended (June 15, 2012). Period runs from June 15, 2012 + 10 years + subsequent tolling from OICs and Installment Agreement (51+460+223 = 734 days) = June 18, 2024. Suit filed October 13, 2023. Timely.
November 21, 2011 (2010 Tax Year): Assessed during bankruptcy. Period runs from June 15, 2012 + 10 years + 734 days tolling = June 18, 2024. Suit filed October 13, 2023. Timely.
October 15, 2012 (2011 Tax Year): 10 years from assessment + tolling from OICs and Installment Agreement (734 days) = October 18, 2024. Suit filed October 13, 2023. Timely.

The Court determined that the assessments for tax years 2006, 2007, 2010, and 2011 (specifically the Oct 15, 2012 assessment) were timely based on the tolling calculations. The suit also mentions assessments for 2012 and 2013, which would have occurred after the earliest assessments and thus likely fall within the timely period based on the tolling, though specific calculations for these were not detailed as being outside the original 10-year window requiring tolling to be timely.

Crucially, regarding the 2004 assessment (untimely based on calculation alone), the Court noted that the timeliness of a tax collection suit under § 6502(a) is an affirmative defense in the Eleventh Circuit. Mr. Ragen did not raise a statute-of-limitations defense in his answer or respond to the summary judgment motion. Therefore, the Court found that Mr. Ragen, the taxpayer, waived the defense. Citing precedent, the Court held that because the defense was not asserted, its potential effect was waived, making the 2004 assessment recoverable despite being otherwise untimely.

Next, the Court evaluated the tax liability itself. Since the government submitted Form 4340s for each recoverable tax year, it established the presumption that the assessments were properly made. The burden shifted to Mr. Ragen to prove the assessments were erroneous. Given Mr. Ragen’s failure to oppose the summary judgment motion and his admission of liability in his answer (albeit without admitting the exact amounts), the Court found that he had not met this burden. The Court reviewed the evidentiary materials, including the Form 4340s and IDRS computations, confirming they accurately reflected assessments based on Mr. Ragen’s returns, correct numbers, proper interest calculations, and notice provided.

Conclusion

Based on its analysis of timeliness and the validity of the assessments, the Court found that the United States was entitled to recover the assessments for all specified tax years (2004, 2006, 2007, 2010, 2011, 2012, and 2013) as a matter of law. This was based on the timeliness of most assessments due to tolling, and the waiver of the limitations defense for the earliest assessment. The government successfully established that the assessments were properly made, and the taxpayer failed to present evidence to the contrary or assert available defenses.

Therefore, the Court GRANTED the United States’ motion for summary judgment. Final judgment is to be entered against Mr. Ragen for the full amount owed as of June 17, 2024 ($1,286,984.64), plus the balance for 2004 ($11,403.51 as of Oct 13, 2023), and any subsequent statutory additions and interest. The case highlights the importance for taxpayers and their representatives to proactively raise affirmative defenses, such as the statute of limitations, and to respond to court filings, as failure to do so can result in waiver and adverse judgment based on the government’s prima facie evidence.

The case United States v. Ragen underscores the effectiveness of the government’s process in reducing tax assessments to judgment when the taxpayer does not actively contest the assessments or assert applicable defenses. It particularly clarifies the treatment of the statute of limitations under Section 6502(a) in the Eleventh Circuit as a waivable affirmative defense.

Prepared with assistance from NotebookLM.