Taxpayer’s CDP case dismissed without prejudice

The Tax Court granted a taxpayer’s motion to dismiss his case without prejudice after the IRS conceded that it would not be prejudiced by the dismissal in light of the Supreme Court’s decision in Boechler, P.C., 142 S. Ct. 1493 (2022). The court stated, however, that it is highly unlikely a taxpayer could refile their petition and obtain review of a Collection Due Process (CDP) case, even though the 30-day filing deadline for a petition to review a CDP case is now, under Boechler, a nonjurisdictional deadline subject to equitable tolling.

Facts: Jay Dunn timely requested a CDP hearing with the IRS Independent Office of Appeals in response to a notice of intent to levy for tax years 2018, 2019, and 2020, challenging his underlying tax liabilities. However, Dunn did not propose any collection alternatives. The Appeals officer (AO) assigned to the CDP hearing scheduled a telephone conference for Feb. 24, 2025. Dunn failed to call at the appointed time, prompting the AO to mail him a “last chance letter” that set a March 10, 2025, deadline for him to respond. Dunn did not respond by this deadline, so the AO closed the case. Two days later, the IRS issued a notice of determination sustaining the proposed levy.

In April 2025, Dunn petitioned the Tax Court pro se to review the IRS’s determination, but he later retained counsel. After the IRS filed its answer to his petition, Dunn filed a motion asserting that he no longer wanted to pursue the proceedings. He did not provide a reason for seeking dismissal. The court issued an order asking the IRS if it would be prejudiced by the dismissal, considering the Supreme Court’s decision in Boechler, in which the Supreme Court held that the 30-day period to petition the Tax Court to review CDP cases under Sec. 6330(d)(1) is a nonjurisdictional deadline subject to equitable tolling. The IRS answered that it would not be prejudiced by the dismissal, stating that Dunn planned to submit an offer in compromise (OIC), which it was willing to consider. At the court’s request, Dunn confirmed that he did not intend to file another petition, understanding that he would be subject to collection action by the IRS if his motion were granted.

Issues: At issue in the case was whether the court should grant Dunn’s request to dismiss his case without prejudice. In support of his request, Dunn cited the Tax Court’s decision in Wagner, 118 T.C. 330 (2002).

The Tax Court applied the dismissal rules under Rule 41(a) of the Federal Rules of Civil Procedure in the case because there is no rule addressing voluntary dismissal in the Tax Court Rules of Practice and Procedure. The Tax Court may give “particular weight” to the Federal Rules of Civil Procedure where no Tax Court rule governs (T.C. Rule 1(b)).

Fed. R. Civ. P. 41(a)(1)(A) allows for dismissal without a court order if (1) the plaintiff filed a notice of dismissal before the defendant filed an answer or motion for summary judgment or (2) the parties signed and filed a stipulation of dismissal. If Fed. R. Civ. P. 41(a)(1) does not apply, a dismissal under Fed. R. Civ. P. 41(a)(2) requires a court order, which is granted without prejudice, unless stated otherwise by the court (Davidson, 114 T.C. 273, 276 (2015)). When a court dismisses a case without prejudice, it is “treated as if it had never been filed” (Fed. R. Civ. P. 41(a)(2); see Wagner, 118 T.C. at 333—34).

Granting a dismissal without prejudice under Fed. R. Civ. Pr. 41(a)(2) is at the discretion of the court (Wellfount, Corp. v. Hennis Care Center of Bolivar, Inc., 951 F.3d 769 (6th Cir. 2020)), and the objective behind Fed. R. Civ. P. 41(a)(2) is to protect the nonmoving party from “unfair treatment” (Bridgeport Music, Inc. v. Universal-MCA Publishing, Inc., 583 F.3d 948, 953 (6th Cir. 2009)). Therefore, dismissal without prejudice should be granted unless the defendant “will suffer clear legal prejudice, other than the mere prospect of a subsequent lawsuit” (Stein, 156 T.C. 167 (2021)). In granting dismissal, courts must “weigh the relevant equities and do justice between the parties … imposing such costs and attaching such conditions to the dismissal as are deemed appropriate” (McCants v. Ford Motor Co., 781 F.2d 855, 857 (11th Cir. 1986)).

The Tax Court noted that when it decided Wagner, under its precedent, the Sec. 6330(d)(1) 30-day filing period was a jurisdictional requirement and could not be extended (McCune, 115 T.C. 114 (2000)). Thus, its jurisdiction under Secs. 6320 and 6330 depended on the issuance of a valid determination letter and the filing of a timely petition for review (Sarrell, 117 T.C. 122, 125 (2001)).

In Wagner, the Tax Court granted the taxpayers’ motion to dismiss without prejudice to their right to refile a petition with the court for review of the collection action, despite the IRS’s objection. Even though the IRS did not object to the case being dismissed without prejudice when it came to the taxpayers’ filing a refund suit in district court, the Service argued that the case should have been dismissed with prejudice when it came to refiling the same petition under Sec. 6320(c) in Tax Court, since the second petition was based on the same claims as the original one. The Tax Court dismissed both filings without prejudice and left it to the district court “to determine whether the taxpayers were entitled to any relief there.” Noting that the statutory period had expired for filing a petition for review of the collection action in Tax Court, the court concluded that the IRS was “not prejudiced in maintaining the subject collection action against [the taxpayers] as if the instant proceeding had never been commenced” (Wagner, 118 T.C. at 334).

The Tax Court stated that even though in Wagner it used the words “without prejudice,” the dismissal operated as a dismissal with prejudice when it came to the taxpayer’s ability to seek the court’s review of the CDP case. The court pointed to Duffy v. Ford Motor Co., 218 F.3d 623 (6th Cir. 2000) (citing LeCompte v. Mr. Chip, Inc., 528 F.2d 601 (5th Cir. 1976)), in which the Sixth Circuit stated that it is the legal effect and not the formal wording of the dismissal that determines if legal prejudice results.

In 2022, the Supreme Court held in Boechler that the Sec. 6330(d)(1) 30-day filing period for a petition to review a CDP case was a nonjurisdictional, procedural requirement that is subject to equitable tolling. This allows the Tax Court to consider late-filed petitions in a CDP case if the taxpayer can prove equitable tolling is warranted (Boechler, P.C., 142 S. Ct. at 1501).

The Tax Court found that after Boechler, the reasoning in Wagner about when a case can be dismissed without prejudice required further analysis because there is no longer a jurisdictional bar to a taxpayer’s filing a second petition for review of a CDP case. After Dunn filed his motion, the court asked the IRS to address Boechler’simpact on Wagner and whether it would be prejudiced by the availability of equitable tolling of the Sec. 6330(d)(1) filing period. The IRS conceded it would not be prejudiced.

As the Tax Court explained, because dismissal without prejudice generally protects a plaintiff’s right to file a subsequent lawsuit, its decision in Wagner to grant dismissal without prejudice might, on its face, have caused taxpayers to think they had another chance for Tax Court review of a collection action. The court stated that before Boechler they did not, but after it, taxpayers technically have another chance for Tax Court review of a collection action if they can establish that either equitable tolling or some other relief to the 30-day petition period of Sec. 6330(d)(1) applies.

The Tax Court found, however, that the phrase “without prejudice” still might confuse taxpayers because they are severely restricted in seeking further review, even though Sec. 6330(d)(1) does not impose a jurisdictional bar to filing a subsequent petition. As a practical matter, in the court’s view, taxpayers will not likely have another opportunity for their collection action to be reviewed since they face a “heavy burden” of proving they are entitled to equitable tolling, which courts use “sparingly.”

The court stressed that taxpayers generally need to understand the “substantive impact of a dismissal.” Although Dunn had counsel, the court observed that “approximately 80%” of Tax Court cases are litigated pro se, and these taxpayers might be unfamiliar with “how best to protect their right to judicial review.” The court remarked, “When [the Tax Court grants] a voluntary dismissal without prejudice in a CDP case, the taxpayer’s ability to refile a petition with [the Tax Court] for review of the collection action is severely restricted. It is questionable whether a taxpayer could ever show that equitable tolling applies after moving to dismiss their own case.”

Holding: Because the IRS did not object, the Tax Court granted Dunn’s motion to dismiss the case without prejudice. However, according to the court, even with a dismissal without prejudice, “it is unlikely [Dunn] could refile a petition and obtain Court review of a collection action.”

The Tax Court stated that Dunn understood that if the IRS rejected his OIC, it would not issue a supplemental notice of determination for the court to review. Furthermore, Dunn also acknowledged that he would be subject to any collection actions provided by law and informed the court that he did not intend to refile a petition.

• Dunn, T.C. Memo. 2026-2

— John McKinley, CPA, CGMA, J.D., LL.M., and Thomas Godwin, CPA, CGMA, Ph.D., are both professors of the practice in accounting and taxation in the SC Johnson College of Business at Cornell University. To comment on this column, contact Paul Bonner, the JofA’s tax editor.