WINNING THE COLLECTION GAME

WINNING THE COLLECTION GAME
How to Stop an IRS Levy in 24 Hours and Get Your Money Back
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Copyright © 2002 – 2011 by LINDEN SERIES LLC
Fifth edition
ISBN: 1-930420-08-0
Printed in the United States of America
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How to Stop an IRS Levy in 24 Hours and Get Your Money Back!
CONTENTS
CONTENTS .............................................................................................................VIII
INTRODUCTION ............................................................................................................10
LIBERTY HAS NO NUMBER.........................................................................................12
Eliminating the numbering scheme in practice............................................................................14
W-4 WITHHOLDING .................................................................................................22
REQUESTING RECORDS .............................................................................................44
Request Forms:........................................................................................................................... 44
FOIA Exemptions and Exclusions: .................................................................................53
IRS Disclosure Offices: ...................................................................................................55
DECODING YOUR IMF ............................................................................................65
Basics:......................................................................................................................................... 65
PINEX ............................................................................................................................. 80
Analysis of Form 5546: ...................................................................................................81
EXEMPTION – ACCEPTED FOR VALUE ...............................................................89
EFFECTIVE LETTER WRITING ....................................................................................94
Elements Of An Effectively Written Letter: ................................................................................125
Problem Resolution Office: ...........................................................................................129
The Analogy:.................................................................................................................132
CIVIL DAMAGE CLAIMS .......................................................................................150
TAXPAYER ADVOCATE ........................................................................................................156
I’M NO FOOL, NO SIREE! .....................................................................................165
OMB .......................................................................................................................................... 165
Sixteenth Amendment ..................................................................................................170
Tax Return Is Not A Contract........................................................................................170
Wages........................................................................................................................... 171
Summons......................................................................................................................172
Fifth Amendment Return...............................................................................................176
No Immunity for State Citizens or Fifth Amendment Returns .......................................180
THE SKY IS FALLING............................................................................................185
How to Stop an IRS Levy in 24 Hours and Get Your Money Back!
Pre-Audit Notices: .....................................................................................................................185
The Summons And Audit Process: ...............................................................................207
Third Party Summons, Form 2039:...............................................................................213
Appeals Hearings: ........................................................................................................213
Notices of Deficiency, or 90 day letters: .......................................................................213
U.S. Tax Court: .............................................................................................................214
Five Ways To Stop A Levy: ..........................................................................................226
Federal Court: ...............................................................................................................248
Notices of Federal Tax Lien and Tax Liens: .................................................................252
File Segregation Defeats Notices of Federal Tax Lien .................................................256
Can I Sue The IRS?......................................................................................................257
BUSINESS REORGANIZATIONS AND ESTATE PLANNING ..............................262
Unincorporated Business Organizations ...................................................................................262
Limited Partnerships .....................................................................................................263
The No EIN Business Checking Account: ....................................................................264
Sales Tax Reduction Strategies: ..................................................................................267
APPENDIX A ..........................................................................................................269
APPENDIX B ................................................................................................................278
How to Stop an IRS Levy in 24 Hours and Get Your Money Back!
INTRODUCTION
Knowledge will forever govern ignorance, and a people who mean to be their own
governors, must arm themselves with the power knowledge gives. A popular
government without popular information or the means of acquiring it, is but a
prologue to a farce or a tragedy or perhaps both.
-- James Madison
It is an unfortunate circumstance when the labor and intellect of a population is
strenuously diverted toward publications such as these so as to correct the effects of
a government that has lost its way. However, as I’ve said before, “All this aside, let’s
work the problem.”
Having been involved in the resolution of thousands of IRS collection disputes since
1993, I have written this edition to further expound upon the methods that have
worked for so many of us over recent years. It is my intent with this writing to help
both the IRS and citizens improve their methods of communication so as to avoid
unnecessary expense and wasted time over the many unfounded misconceptions
maintained by both sides. The procedures discussed in this book have been used
by thousands.
Contrary to what some have claimed, I do not work for the FBI, the IRS or any
function of any government, nor have I ever. The closest “three letter” organization
I’ve worked for was IBM. I believe the source for these misguided rumors is fear of
discussing the issues with me directly and typical paranoia associated with
confronting the government. My methods are different than most simply because
I’ve been successful at resolving so many cases and because I study the agency’s
internal operating manuals. I also believe that the best way to win a case against
the IRS is to avoid the conflict altogether.
I will also say that the cause for this writing has its origin in the fact that so many
people jump onto the “non-filer” bandwagon without first interviewing the driver. If
more people would consider the consequences of "removing" themselves from, or
boycotting the tax system before they make the attempt, many of the problems
discussed in this book would not occur so frequently.
I do not encourage anyone to either file a tax return, or not file a tax return. There
are civil and criminal consequences for not filing and this is a risk you must calculate
on an individual basis. This book does not contain any dissertations about whether
or not the filing of an income tax return is voluntary. I believe that any brief or series
of arguments directed to such end is frivolous because it is a simple fact that an
individual is not required to file a particular return until a particular return is filed.
Each year is different. No brief can make this any less ambiguous, and anyone who
puts forth such misinformation has no competence in this subject.
This publication is not intended to give or supplement legal advice. I am not an
attorney. This information is from my own personal experience and the successes I
have enjoyed through my own research and process of trial and error. If you believe
you need legal advice or have a question about your rights, you should consult with
a licensed professional.
The objective of this publication is to take a responsible approach to restoring a
necessary function of our government. There is no need to destroy what we have,
or allow it to collapse. There is, understandably, an incredible level of animosity
toward the IRS because it has been involved in so much abuse and because the
system lacks the basic foundation to legally compel individual participation. I was
very surprised to learn that there is no law, nor has there ever been any law,
compelling my testimony on a federal income tax return and that there are no
application or disclosure requirements for a social security number. These
conditions are suspiciously absent from the tax code and you will discover many
more inconsistencies as you complete the reading of this book. The United States is
a bankrupt corporation, it has been bankrupt since its inception around Lincoln's
term in office and continues to operate in bankruptcy under the reorganization plan
codified into the Administrative Procedures Act found in Title 5 of the United States
Code, Section 552(a). Because so many people are affected one way or another,
including foreign organizations, there is a desperate need for a reliable accounting
function. This is the function provided by the IRS, the accounting organization for
the United States bankruptcy.
It is my sincere hope that this information enables you to resolve any disputes you
may have with the Internal Revenue Service, and that it helps these agents
understand what role each of them play in this national concern.
Liberty Has No Number
Without privacy, we have no sanctuary from government intrusion. The social
security number, or any numbering scheme imposed by common business practice,
culture, ignorance or law necessarily destroys every possible aspect of our freedom
by abdicating the privacy of the individual.
There have been many successful methods developed for the purpose of avoiding
the use of a social security or other tax identification number. It is becoming more
difficult to defeat the use of the social security number now that state government
agencies are using state statutes to require the social security number as a
condition for licensing and working in certain occupations. Some cases have been
won, but the problem persists. We have a desperate need to sunset the Social
Security Act or destroy the perceived integrity of the system by legal means such as
publishing numbers.
We have managed to find solutions engaging in nearly every type of activity without
a social security number, but two major obstacles remain. The first is state licensing
and the second is payee certification requests (W-9). I am not encouraging anyone
to use the same approach to obtaining a license that you might use to opening a
bank account, but at this time, I can offer no administrative solutions. We need to
sue the state agencies and we need to eliminate the source of the problem, public
policy standards. We need to eliminate the state’s ability to require the use of a
federal identification number for state licensing applications. I have referred to this
as leapfrogging legislation, using one law to enact another law that would otherwise
be ruled unconstitutional.
It would be unconstitutional or otherwise prohibited by law to be compelled to
produce a social security number, fingerprint or other biometric information that
could be used for identification, for no reason. The state is using licensing statutes
to require disclosure of this type of information where it would otherwise be
prohibited or found unconstitutional. I am proposing the following legislation:
_____________________________________________
An Act To Compel The Statistical Justification Of New Legislation And Policy Making
To be known as the “Statistical Justification Act of 2000”
Be it enacted by the United States Congress, that:
(a)
Definitions, for purposes of this Act,
A.
the term “agency” shall include any agency under the executive
branch of the United States Government,
B.
the term “population” shall include the class or classes of individuals
intended to be affected by the proposed legislation or policy,
C.
the term “policy” shall include any rule, procedure, practice statute or
regulation of any agency,
D.
the term “statistics” shall include all mathematical records relating to
conviction rates.
(b)
Notwithstanding any provision of law, any new or amended legislation
or agency policy making proposed for the purpose of reducing or eliminating criminal
activity, or which, in any manner, affects individual privacy rights,
A.
shall be supported by a conviction rate increase of no less than
six percent of all populations considered to be affected, for each successive
year, beginning three years preceding, and not including, the year of the
proposed legislation or agency policy; and,
B.
shall identify the affected populations by geographic location; and,
C.
shall not result in any uniform or standard method of identification to be used
by more than one agency; and,
D.
shall not compel application or disclosure of any social security or other
taxpayer identification number; and,
E.
shall not compel disclosure of any physical characteristics such as
fingerprints, retinal patterns, deoxyribonucleic acid (DNA) information; and,
F.
shall specifically identify the conduct to be affected.
(c)
Any proposed legislation or agency policy meeting the requirements of
this Act, shall not be enforceable during any calendar year in which the particular
legislation or policy shall fail to meet any of the criteria set forth in this Act. When
this condition occurs, the enactment will have no force or effect of law until these
criteria are once again satisfied.
(d)
If the enactment has no positive affects upon the statistics used to
justify the act itself, within three years following the date of its enactment, then it
shall be deemed null and void.
(e)
The statistics shall be obtained exclusively from the courts, with the
Chief Justice of the Supreme Court being ultimately responsible for their accuracy.
This information shall be submitted under penalty of perjury by the Chief Justice of
the Supreme Court and published in an annual report to the United States Congress
and the Chief justice of the United States Supreme Court shall be held accountable
for the accuracy and timeliness of the information reported.
SEPERABILITY
(e)
Any provision of this Act which may be determined to be null and void
shall not affect any other provision of this Act.
_______________________________________
If the government wants to write these types of laws in the name of protecting us
from fraud, terrorism, or whatever, then we must impose these types of limitations or
lose everything. Today, simply manipulating the "stupid people" through the news
and entertainment media can support the enactment of many laws. We need to
force the government to justify its claims that more laws are needed to protect us
from ourselves, and the new proposals need to be justified by real and relevant
statistics.
Eliminating the numbering scheme in practice
Let's discuss practical means of avoiding the problems associated with refusing to
disclose a social security number. It's quite simple to have utilities such as your
electricity, telephone, water, and cable service registered in your name without
disclosing any social security number. Many companies are amenable to giving you
service if you just tell them you don't have a social security number and are willing to
make a standard deposit.
Renting a house or apartment is a different situation because of the risk involved.
Leasing management companies want to be sure they can calculate a good risk by
reviewing your credit history. The value of that lease agreement is twelve times your
monthly rate plus deposits and home rental companies want to have a fair
expectation of getting paid on time. It has been my experience that a letter of credit
will satisfy or replace a review of your credit history.
Credit file segregation will not eliminate the practice of using a nine-digit number in
the process of applying for credit, but it will avoid using a social security number. I
refer to the scheme as a "penal" system. This penal system is based on reward and
punishment. You are rewarded for being a good "slave" by going into debt and
paying your debts every month. You are not rewarded for not going into debt or not
paying your debts. Today, it is nearly impossible to engage in any professional or
personal business without a good credit history. Remember that credit equals debt.
Good credit is not an asset; it is nothing more than liability. The credit reporting
system allows creditors and debt collectors to damage or cloud your good name and
title to your property without incurring the expenses of litigation or using the county
records. Because of the system lack of substantial liability for creditors and debt
collectors in reporting false information, it usually results in a great deal of abuse.
Americans have the absolute right to choose their own name, diet, lifestyle, and
anything else that does not give the state a compelling interest. In other words, as
long as what I do is not expressly prohibited by law or does not end in damage or
loss to another individual, the state cannot regulate me in that activity. As you have
learned by reading this book, credit bureaus that maintain records about your buying
patterns or private lifestyle are heavily regulated. That’s because they don’t have
the absolute right to collect information about citizens.
Americans have the absolute right to control information that businesses and other
people maintain about them; and therefore, are not prohibited by any law in creating
new credit histories as long as it does not involve the elements of fraud. The
elements of fraud can easily be found in case law in your local law library. But it’s
something you’ll never need to be concerned with when doing simple credit file
segregation.
Segregation Process
I do not encourage credit file segregation for the reason that it can be used as one
element in proving a fraud case. This would only be your concern if you really were
involved in fraud. In any case, you should be aware of the potential liabilities. The
Federal Trade Commission has published several informative articles about this on
the Internet. The FTC explains that applying for a new taxpayer identification
number and using it to create a new credit history may be construed as fraud using
the mail system or telephone fraud depending upon the methods used.
If you do this for yourself, you must be cautious about using the United States Mail
and telephone system; but more importantly, do not apply for a new taxpayer
identification number for the purpose of using it in place of the government’s social
security number issued for your use. If you wish to withdraw from the social security
system, simply discontinue the use of a social security number. If you wish to
continue your use of the credit and banking system without a social security number,
but are having difficulty, it is important to make your disputes publicly known. Filing
complaints with the responsible Federal Reserve Bank or the Comptroller of the
Currency where national banks are concerned can accomplish this. It is also
important to sue companies for denying you rights for refusing to disclose a social
security number.
I also recommend seeking opinion letters from attorneys, namely criminal defense
attorneys, stating which particular elements of fraud or other crimes would be
present in a proposed activity. An example of using this type professional of advice
would be, if you want to open a bank account in person, and intend on using an
alternative number in place of your social security number on the application without
informing the bank. You may ask the attorney to explain in writing how this might be
construed as criminal behavior, or how it could be changed to avoid the accusation.
There is no certain method of boycotting the use of the social security number, but
you must use discretion and prudence to reduce the risk of being penalized for doing
something that is morally right.
Several of our subscribers have questioned whether or not opening a bank account
without a social security number would constitute fraud. Some have accused me of
working for the IRS or the government to publish misinformation. It is my hope that
this portion of the chapter will dispel these fears and paranoia, not for the purpose of
convincing anyone to open such an account, but to demonstrate that it is not illegal
in itself.
The elements of fraud include false representation of a present or past fact made by
the defendant, action in reliance thereupon by the plaintiff, and damage resulting to
the plaintiff from such misrepresentation. The authority for this is Citizens Standard
Life Insurance Company vs. Gilley, Tex.Civ.App., 521 S.W.2d 354, 356.
This is the reason I encourage those using this type of strategy in the course of
removing yourselves from the social security system, to use accounts where there is
no substantial monetary gain; not that it would be a problem, but it would be an
element in a case of fraud. Another element is to prove intent, and that is very
difficult. Many subscribers have done this for themselves to create a new credit file
with no social security number and to restore their ability to do business.
When I completed my credit file segregation in 1996, I stopped using my middle
name, so that also helped to further separate my current activities from my former
credit history. You may also consider renting a private mail drop for a year and use
that address on your bank applications for the account and secured credit card. The
fact that some creditors can check a database of private mail drops to see if yours is
one of them should not really affect you because you’ll be applying for a secured
credit card. Many creditors now accept the fact that more and more people use
private mail drops as opposed to their home addresses.
You must understand that creating a new credit file using an alternate nine digit
number means that any credit inquiry using that number will be compared against
the credit bureaus or Social Security Administration's database with the assumption
that it is a social security number. It is not your responsibility that this is the process
they use; however, you should understand what is happening so you can make clear
distinctions in your mind. First of all, no law requires anyone to apply for or use a
social security number in this country, it's just another government lie perpetrated by
the system. If you question this read 26 CFR 301.6109-1(c). Second, you have the
right to privacy and to be treated with fairness, and if your credit file allows
administrative access to your personal information, it can lead to abuse. I do not
recommend establishing a new credit file for the purpose of hiding from child support
enforcement or misleading licensing authorities. Overcoming the SSN disclosure
policies can be accomplished using other methods that are beyond the scope of this
publication.
You will first need to select a nine-digit number that is not currently being used in a
decedent's estate or life insurance claim. It should have been validly issued during
your lifetime, before you or your parents would have had occasion to use it as a
social security number. It should at least have been issued in your lifetime. You can
select a number based on the geographic region in which you were living at the time
the number was recorded as being issued. This database can be found in Appendix
D or on the Internet. Once you find the right number, request an "SSN" verification
on the Internet or through a mortgage broker to be sure the number is okay for use.
After you review Appendix D, you should realize that the total available social
security numbers are limited to one billion and that the database has been
exhausted over the years. If you consider that no number is supposed to be re-used
and that nine-digit numbers are also assigned to businesses, trusts, and passports,
you can easily conclude that there are not enough for everyone. The IRS has
secretly overcome this problem by appending the first four letters of an individual's
last name to the beginning of his social security number in order to separate his
records from the next individual. It's similar to the problem of identical telephone
numbers until the phone company added area codes.
You should receive your denial with a ten days, or immediately if done online. Then
you will confirm your new credit file and should not have any problems opening a
bank account with that information. The bank will simply verify the number you give
with a credit bureau's database, usually Equifax. Try to be sure that when you apply
for credit, the inquiry goes through Equifax. The bank should not scrutinize your
information at all, but if there is any question, a brief explanation will help.
You can explain that you were the victim of credit card fraud or identity theft in the
last two years and this might be the reason why there is some question as to the
information you disclosed. Don't say anything else. Use this same explanation if the
bank asks for your home address. Explain that you were advised by your attorney
to avoid disclosing your home address to anyone. Once you have a bank account,
open a secured line of credit and begin rebuilding your credit history.
Deposit enough money to use as collateral for a secured credit card. The quickest
and simplest way to apply for this secured credit card is through the Internet. If you
don’t have access at home, use the one at your local public library. Just use your
checking account number on the application so that the card issuer can freeze your
checking account and use it for collateral on the credit account. The last step is to
just use your credit card frequently. This credit reporting process to begin restoring
your credit history takes between six and nine months to complete.
Even though this might be a solution to your credit problems, I do encourage people
to learn negotiating techniques so that they do not rely solely on their credit history
for doing business.
Technical Aspects of the Scheme
The social security number consists of nine digits. The first three denote the area
(or state) where the application was filed. Within each area, the group number
(middle two digits) range from 01 to 99 but are not assigned in consecutive order.
Within each group, the numbers are assigned in serial (sequentially) from 0001
through 9999, like this:
000
00
0000
area
group
serial
For administrative purposes, group numbers issued first in a state or territory consist
of the odd numbers. After all numbers in group 98 of a particular area have been
issued, the even groups 02 through 08 are used, followed by odd groups 11 through
99. The chart below shows how group numbers are assigned:
ODD
01, 03, 05, 07, 09
EVEN
EVEN
10 to 98
02, 04, 06, 08
ODD
11 to 99
Here is the mathematical derivation of how I arrived at the total available numbers:
Looking at the chart on the next page, you can see that each state has a limited
number of “areas” for which applicants can be assigned numbers. These must be
“areas” relating to the federal government, but in any case, three digits would
normally result in a combination of ten to the third power, or n x n x n = n3.
Remember that each “n” means “10” because in a range of 0 through 9, you can
count ten numbers, 0, 1, 2, 3, 4, 5, 6, 7, 8, and 9. The exponent 3 represents how
many digits (n). You can see that this yields a possible of 1,000 combinations for
each area. You can see that New Hampshire has three areas, 001, 002 and 003 in
which it can assign numbers, so this leaves a total possible remaining combination
of social security numbers which may be assigned in New Hampshire at: 3 x (n x n)
x (n x n x n x n) = 3 x (10 x 10) x (10 x 10 x 10 x 10) = 3 x 106 = 3 x 1,000,000 =
3,000,000. You can see by the chart on the next page that for each area, there are
one million available numbers.
Notice also that the 622 numbered areas are all consecutive, which should mean
that there are actually 622 million possible social security numbers available (notice
there are none allocated for 596-599); however, Mississippi shares 76 million of its
102 million with 21 other states and three other territories (see box under
Mississippi), and Missouri shares 14 million of its 15 million with Mississippi. This
allows a deficient state to share from a surplus state, thereby increasing the
availability of the social security number across the entire nation and federal
territories, but diminishing availability for the particular state having the surplus.
Temporary numbers are assigned for areas 900 through 999 by a service center.
The fourth and fifth digits are the code of the particular service center assigning the
number. The last four digits are numbers assigned consecutively beginning with
0001. The printed format is TXXXXXXXXX* (T indicates a temporary social security
number, and the asterisk (*) indicates the number is invalid). This demonstrates that
there can be 100 million temporary numbers in existence at any one time among the
total number of service centers.
State or territory
Area
New Hampshire
001-003
Maine 004-007
4 mil.
Vermont
008-009
Massachusetts
mil.
Comb.
State or territory
Area
3 mil.
Iowa
8 mil.
25
Missouri
486-500 15 mil.
Mississippi
487-588 102 mil.
North Dakota
501-502 2 mil.
South Dakota 503-504
2 mil.
2 mil.
010-034
478-485
Comb.
Nebraska
505-508
4 mil.
Rhode Island 035-039
5 mil.
Kansas
509-515
7 mil.
Connecticut
040-049
10 mil.
Montana
516-517
2 mil.
New York
050-134
85 mil.
Idaho 518-519
New Jersey
135-158
24 mil.
Wyoming
520-520
1 mil.
Pennsylvania 159-211
53 mil.
Colorado
521-524
4 mil.
Maryland
212-220
9 mil.
New Mexico
525-525
1 mil.
Delaware
221-222
2 mil.
Arizona
526-527
2 mil.
Virginia
223-231
9 mil.
Utah
West Virginia 232-236
5 mil.
Nevada
530-530
1 mil.
North Carolina 237-246
10 mil.
Washington
531-539
9 mil.
Oregon
540-544
5 mil.
Cal fornia
545-573
29 mil.
South Carolina
Georgia
247-251
252-260
Florida 261-267
7 mil.
Ohio
35 mil.
268-302
Indiana
303-317
Illinois 318-361
9 mil.
15 mil.
44 mil.
5 mil.
528-529
2 mil.
2 mil.
Alaska 574-574
1 mil.
Hawaii 575-576
2 mil.
Washington D.C.
577-579
3 mil.
Virgin Islands 580-580
1 mil.
Michigan
362-386
25 mil.
Puerto Rico
581-584
4 mil.
Wisconsin
387-399
13 mil.
New Mexico
585-585
1 mil.
Kentucky
400-407
8 mil.
All Pacific Territories 586-586
Tennessee
408-415
8 mil.
American Somoas
586-586
Alabama
416-424
9 mil.
Guam 586-586
1 mil.
Mississippi
425-428
4 mil.
Arkansas
429-432
4 mil.
Florida
Arizona
589-595 7 mil.
600-601
2 mil.
Louisiana
433-439
7 mil.
Cal fornia
602-626
Oklahoma
440-448
9 mil.
Texas 449-467
Minnesota
19 mil.
468-477
10 mil.
25 mil.
Total SSN availability:722 mil.
The actual available is more likely to be
c oser to 622 million.
Look at the columns below and you’ll find that in some states, there aren’t enough
numbers available for the current population (negative numbers). I suspect that
these numbers are being re-allocated from other states.
State or territory
Alabama
Alaska 1,000,000
available SSNs
1997 population
9,000,000
609,000
391,000
4,319,000
All Pacific Territories 333,333
0
333,333
American Somoas
0
333,333
333,333
Arizona
4,000,000
4,555,000
-555,000
Arkansas
4,000,000
2,523,000
1,477,000
California
54,000,000
32,268,000
21,732,000
Colorado
4,000,000
3,893,000
107,000
Connecticut
10,000,000
3,270,000
6,730,000
Delaware
2,000,000
732,000
1,268,000
Florida
Georgia
Guam 333,333
0
Hawaii 2,000,000
1,187,000
813,000
Idaho 2,000,000
1,210,000
790,000
Illinois 44,000,000
11,896,000
32,104,000
Indiana
Iowa
15,000,000
8,000,000
14,000,000
9,000,000
333,333
5,864,000
2,852,000
14,654,000
7,486,000
2,595,000
4,405,000
Kentucky
8,000,000
3,908,000
4,092,000
Louisiana
7,000,000
4,352,000
2,648,000
Maryland
9,000,000
Massachusetts
2,758,000
5,094,000
25,000,000
-654,000
1,514,000
5,148,000
7,000,000
1,242,000
4,681,000
9,136,000
Kansas
Maine 4,000,000
unused
3,906,000
6,118,000
18,882,000
Michigan
25,000,000
9,774,000
15,226,000
Minnesota
10,000,000
4,686,000
5,314,000
Mississippi
102,000,000 2,731,000
99,269,000
Missouri
15,000,000
5,402,000
9,598,000
Montana
2,000,000
879,000
1,121,000
Nebraska
4,000,000
1,657,000
2,343,000
Nevada
New Hampshire
New Jersey 24,000,000
1,000,000
3,000,000
8,053,000
1,677,000
1,173,000
15,947,000
New Mexico
2,000,000
1,730,000
270,000
New York
85,000,000
18,137,000
66,863,000
North Carolina 10,000,000
7,425,000
2,575,000
North Dakota 2,000,000
641,000
1,359,000
-677,000
1,827,000
Ohio
35,000,000
11,186,000
23,814,000
Oklahoma
9,000,000
3,317,000
5,683,000
Oregon
5,000,000
3,243,000
1,757,000
Pennsylvania 53,000,000
12,020,000
40,980,000
Puerto Rico
0
4,000,000
Rhode Island 5,000,000
4,000,000
987,000
4,013,000
State or territory
South Carolina
South Dakota 2,000,000
available SSNs
1997 population
5,000,000
3,760,000
738,000
1,262,000
Tennessee
5,368,000
8,000,000
Texas
Utah 2,000,000
2,632,000
19,000,000
2,059,000
-59,000
19,439,000
-439,000
589,000
1,411,000
Vermont
Virgin Islands 1,000,000
2,000,000
0
1,000,000
Virginia
9,000,000
6,734,000
2,266,000
Washington
9,000,000
5,610,000
3,390,000
Washington D.C.
3,000,000
529,000
2,471,000
West Virginia 5,000,000
1,816,000
3,184,000
Wisconsin
5,170,000
7,830,000
Wyoming
13,000,000
1,000,000
unused
1,240,000
480,000
520,000
It was Grace D. Owen from Concord, New Hampshire, who was issued the lowest
possible numbered social security card. The number was 001-01-0001. And the
first official Social Security record is that of John D. Sweeney Jr. of New Rochelle,
New York, and that number was 055-09-0001. In 1938, a sales representative at E.
H. Ferree Company of Lockport, New York made the mistake of publishing the
number of one of the company’s secretaries on an insert for its new wallets (078-051120). Although it was a mock card, half the size of the social security card itself,
and was marked “specimen”, it has become the most abused number in the history
of the social security scheme. More than 40,000 people have used this number at
one time or another, some as recently as 1977. The Social Security Administration
has now reserved this number along with the following range of numbers to be
officially identified as bogus social security numbers: 987-65-4320 through 987-654329.
The scheme’s first monthly beneficiary was Ida May Fuller of Ludlow, Vermont. She
received $22.54 per month from 1940 until the cost of living increase was issued.
She died in 1975 at age 100, and had received more than $20,000 in benefits.
Since the beginning of the scheme, over four trillion dollars has been paid out in
benefits.
W-4 Withholding
“Because of what appears to be a lawful command on the surface,
many citizens, because of their respect for what only appears to be
law, are cunningly coerced into waving their rights due to ignorance.”
U.S. v. Miller, 350 US 179, 187.
"No law requires a 'Protected Individual' to complete a W-4 Form or to
furnish a social security number to obtain or keep a job." EEOC v.
Information Systems Consulting CA3-92-0169T in the United States District Court
Northern District of Texas Dallas Division
In December of 1999, United States Tax Court attorney Rosemary Schell admitted
that compensation paid as wages does not compel an employer to withhold for
federal income tax purposes. Monaghan v. Commissioner 9981-99 (South Texas
District).
In December of 1999, United States Tax Court attorney Rosemary Schell admitted
that no law compels disclosure of an individual's social security number as a
condition of working. Monaghan v. Commissioner 9981-99 (South Texas District).
In December of 1999, United States Tax Court attorney Rosemary Schell admitted
that the United States Government cannot compel anyone to sign any document
under penalty of perjury. Monaghan v. Commissioner 9981-99 (South Texas
District).
"… the Employer is not authorized to alter the [W-4] form or to dishonor the
employee's claim. The certificate goes into effect automatically." United States v.
Malinowski, 347 F. Supp. 352 (1992)
"The employer has no legal obligation to intervene with the employee. … The IRS
could not enforce a penalty on employers who refused to cooperate with the IRS
with regard to the employee's withholding." (Herbert Mosher, District Director
Massachusetts, pub. Associated Press, October 31, 1980.)
"… Indeed, the IRS not only has failed to pursue these businesses but has in some
cases given refunds after they claimed they did not owe taxes that had been paid
earlier. In at least two cases, the businesses say they even received apologetic
letters from the IRS for not rescinding penalties and issuing refunds sooner. Many
tax experts express astonishment at the idea that the IRS is aware that legitimate
businesses are cheating [editor's words], yet is not pursuing them. How many
businesses are taunting the IRS this way is impossible to know. At least 23 have
made their decisions public. Sixty business owners and their advisers met on the
weekend of Nov. 11 [2000] in California to plan how to persuade thousands of
others to join them. … Michael Graetz, a tax-policy adviser under President George
Bush and now a professor at Yale, added that he thought it was a big mistake that
the IRS had not moved immediately against these employers. 'They have to act,' he
said, 'or this will get out of hand very, very quickly." David Cay Johnston, N.Y.
Times News Service, November 19, 2000.
The current withholding and taxation scheme is nothing more than a rouse created
and implemented by the United States for the sole purpose of collecting information
about Americans.
It's not about taxation because that could have been
accomplished through a national sales tax many years ago. The current income tax
system is about government surveillance and manipulating human behavior. The
reason why these basic elements of the scheme are not required by law is because
it allows the government to avoid the limits imposed against it by Constitutional
prohibitions. No court can test the constitutionality of something that is not required
by law. Government and corporate policies and accounting practices cannot
generally be tested under Constitutional limitations under these circumstances
because of the individual's guaranteed right to contract. Once you know the truth,
you'll see that the IRS is nothing more than a "paper tiger" supported entirely by the
ignorance and fear of Americans.
The "W-4 withholding system" is a government surveillance scheme that causes
employers to collect and report information to the IRS about individuals on a periodic
basis. As long as the IRS is receiving a Form W-2 report about you, they will
assume you have a federal income tax liability and the state will assume you have a
state tax liability if prescribed by law (some states do not have an income tax). The
system is perpetuated by fear and intimidation tactics practiced by the IRS.
Corporations routinely adopt policies conducive to the government's unwritten
demands under this scheme.
The posting of Form W-2 data to the Information Returns Master File (IRMF)
Component of the Individual Master File is what causes the IRS to begin the
audit/examination and subsequent collection process against non-filers or against
those whose reported income (i.e. 1040) differs with the IRMF. The law is very clear
about distinguishing between what is taxable and what is not.
Wages are taxable as gross income as defined under Section 61 of the Internal
Revenue Code; however, not everyone earns a wage simply because he gets paid
for working. The regulations control the status of “wage earner.” The Code defines
a wage to mean compensation paid to an employee. An employee is defined as one
who receives a wage and an employer is defined as one who pays a wage to an
employee. This method of defining the terms is equivalent to defining a word by
using the word in its own definition, or, like a dog chasing its tail. I call it a
molestation because, just like a child being molested, most of us are unable to
explain it to someone else (a court) in an intelligible manner so as to obtain a
remedy. It’s written in such a way that when you make the attempt to explain it to
someone, they think you must be creating your own theory because their brain
cannot follow the three different concepts, each defined by the other one. It’s a
psychological trick, a fraud.
This is the problem facing us today. I have convinced some companies to accept
the fact that there is no penalty imposed when one of their workers does not submit
a Form W-4, an I-9 or a social security number. There are several well-known
methods that have worked to terminate withholding agreements, but there is only
one that is enforceable in court.
I don’t necessarily agree with using the statement of citizenship method but it has
worked for some people in the past. My objection to it is that you must claim to be a
U.S. Citizen under 26 CFR 1.1441-5 but the definition of the United States under
that particular regulation includes the under water coastal regions of the pacific
coast. I also believe it applies only to former nonresident aliens, who have just
gained citizenship, so I don’t believe this can be enforced against a company in
court if they refuse to accept it. As far as I can see, the only enforceable process is
when you follow the notice requirements under 26 CFR 31.3402(p)-1.
That’s another concern I have. I can’t understand why anyone would want to define
his status as that which he is not. When I introduce myself, I don’t say I’m not the
President of Zimbabwe, I introduce myself by my name. I’m not a nonresident alien,
even though it could be argued that it’s not a term negatively defined, that it’s
actually an affirmative definition of one’s status, it’s just too complicated. Life is
much easier if you let it be simple. If you claim to be some defined status within the
tax code, then you’ll be seeking some exemption from regulation. This can be a
never-ending battle. Exemptions under the tax code apply only to taxpayers
included within the tax code. Individuals who are not subject to the tax code cannot
have an exemption under the code, it’s that simple! You shouldn’t be signing federal
forms, such as the Form W-4, and claiming any exemption from withholding. Either
you’re subject to it or you’re not. You can’t have it both ways. That is the purpose
for obtaining a letter ruling or an information letter from the IRS.
The request for information letters explained here would enable you to obtain
information from authorized sources that prove the truth about the withholding and
disclosure requirements of the tax code. These two examples can be made to the
IRS and your local CPA. Most CPAs will agree to answer these questions in writing
for a small fee.
[Subscriber]
[Address]
[City state zip]
Secretary of the Treasury
Internal Revenue Service
Attn: CC:DOM
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
[Date]
Re
request for general information
Greetings:
Thank you for taking a moment to issue the requested information letter. This
request is made to satisfy a need for general information and does not meet the
requirements of the applicable revenue procedure for requesting letter rulings or
determination letters. The subject of this request is under the exclusive jurisdiction
of the Associate Chief Counsel, Domestic.
Which tax regulation imposes a penalty against an employer for not obtaining a
signed Form W-4 from new employees?
Which tax regulation imposes a penalty against an employer for not withholding from
an employee?
Which tax regulation penalizes an employer for not obtaining disclosure of an
individual's social security number as a condition of employment?
Best regards,
[Subscriber]
[Subscriber]
[Address]
[City state zip]
Secretary of the Treasury
Internal Revenue Service
Attn: CC:DOM
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
[Date]
Re
request for general information
Greetings:
Thank you for taking a moment to issue the requested information letter. This
request is made to satisfy a need for general information and does not meet the
requirements of the applicable revenue procedure for requesting letter rulings or
determination letters. The subject of this request is under the exclusive jurisdiction
of the Associate Chief Counsel, Domestic.
According to 26 CFR Part 31.3121(e)-1, the terms “State,” “United States” and
“citizen” are defined as follows:
“(a) When used in the regulations in this subpart, the term ‘State’
includes the District of Columbia, the Commonwealth of Puerto Rico,
the Virgin Islands, the Territories of Alaska and Hawaii before their
admission as States, and (when used with respect to services
performed after 1960) Guam and American Samoa.
(b) When used in the regulations in this subpart, the term ‘United States’, when
used in a geographical sense, means the several states (including the Territories of
Alaska and Hawaii before their admission as States), the District of Columbia, the
Commonwealth of Puerto Rico, and the Virgin Islands. When used in the
regulations in this subpart with respect to services performed after 1960, the term
‘United States’ also includes Guam and American Samoa when the term is used in a
geographical sense. The term ‘citizen of the United States’ includes a citizen of the
Commonwealth of Puerto Rico or the Virgin Islands, and, effective January 1, 1961,
a citizen of Guam or American Samoa.”
My request relating to this information is: Why were Alaska and Hawaii
excluded from this definition of State and United States after their admission as
states?
Best regards,
[Subscriber]
[Sender]
[Address]
[City state zip]
[CPA]
[Address]
[City state ZIP]
[Date]
Re
request for general information
Greetings:
Thank you for taking a moment to issue the requested information letter. Please
keep a record of your time and invoice me when you return your answer.
1. Which tax regulation imposes a penalty against an employer for not obtaining
disclosure of a social security number from new employees?
2. Which tax regulation imposes a penalty against an employer for not entering into
a withholding agreement with new employees?
3. Which tax regulations imposes a penalty against an employer for not withholding
from an employee when there is no withholding agreement?
4. Which tax regulation imposes a penalty against an employer for not obtaining a
signed Form W-4 from new employees?
5. Which tax regulation imposes a penalty against an employer for not reporting a
wage Form W-2 for an employee at the end of the tax period?
6. Which tax regulation imposes a penalty against an employer for not reporting a
Form 1099 for an independent contractor at the end of the tax period?
7. Does filing a federal income tax return require that I waive certain rights?
8. Does any law compel me to waive certain rights?
Thanks again for answering my questions.
Best regards,
[Sender]
Remember that it's not so important to get an admission from the IRS or any taxprofessional. A non-responsive answer would be sufficient to prove your point.
If the IRS would issue an official determination on the matter, it would establish the
fact that because you were not earning “wages,” as recognized by the tax code, you
were not an employee for that same year. Likewise, if you’re not an employee, then
the company for which you work is not you’re employer, within the meaning of the
tax code. The twenty common law principles defining employment are not relevant
to this determination.
If you’re fired or denied a job because of this, you should sue the company causing
you the damage. If that same company disregards your termination of the W-4
agreement, they may also be subject to a damage claim. You should do your
research before making a claim and this book will help you understand the legal
principles behind the subject. It is important to pursue this type of case because if
you let it go, the same problem will be much more difficult for the next person. If you
take the time to study this material, you should be competent enough to make a
claim in court and win. The objective is not to proceed to trial, it should not go that
far, and it should not be because you expect to set a precedent. You cannot set a
precedent at the trial court level, just make your claim and get it resolved and be
finished with it. This type of case involves merely a contract dispute.
When confronted on the issue, an IRS agent in Sarasota Florida admitted to me that
even though it’s not required as a condition of contract, when the employer believes
it is and makes the employee sign it, the IRS processes the form as if the person
was earning wages and was required to submit the W-4. Two other agents in Ft.
Myers admitted that the subscriber did not have to sign one, but then hounded her
for months about it after the meeting. She finally had to quit her job and after
several complaints, with no real resolution, they stopped harassing her.
I have never found any legal requirement that anyone must sign a Form W-4, even if
that person is earning “wages.” It just makes good sense to submit one if you really
are earning wages so that less has to be paid at the end of the year. After you read
this book, you’ll find that most people do not earn wages and therefore, do not incur
any obligation to file a return at the end of the year.
Be careful as to how you classify your activities. Instead of saying that you receive
“wages” and risk it being misunderstood as taxable wages within the meaning of the
tax code, don’t use the phrase. Describe what you do by using the definition instead
of the defined word. I don’t earn wages and I’m not self-employed; however, I
simply work for a living. I’m not a person or a U.S. Citizen, I’m a human being, a
creature of reason.
Many of our subscribers have submitted false W-4 Forms, claiming more
exemptions than would actually be permitted if it was a legitimate submission in the
first place. You should remember that if you claim an exemption under a statute,
you create the presumption that you are subject to the statute so you must then
comply with its requirements. In other words, you accomplish the exact opposite
objective by signing a false Form W-4, tax return (known as a “zero tax return”) and
other similar document. Don’t do it, it’s just plain stupid. Either don’t sign the form
and/or sue your company.
Section 11.00 of the Criminal Tax Manual published in 1994 will help you
understand the caveats involved with submitting W-4 Forms, or their substitute. The
manual refers to certain forms as “false forms.” Remember, if you’re signing one,
it’s only because you must be earning taxable wages within the meaning of the tax
code, and the presumption is created that you must file a tax return at the end of the
tax period. I’ve found no law requiring anyone to sign a Form W-4 but it’s
convenient to have withholding if you truly are engaged in a taxable activity, such as
earning wages. Otherwise, you shouldn’t be signing any federal form, not even a
Form I-9 from the Immigration and Naturalization Service.
The signing of a federal Form W-4 is an “admission of employee status”, so this is
how you create the presumption of being an “employee.” It’s not so much that
everyone is an employee and then they each admit it upon signing the form, it’s that
you actually become an employee when you sign the form and then the agency
treats you as if you’ve “admitted” to being an employee. The term “admission”
implies that you are disclosing something that was true before you did the act of
signing the form; this is the psychological scheme. Remember that those earning
wages determine the status of employee and the status of employer is determined
by those paying wages. The whole game devolves upon the meaning of wages.
You cannot be an employee until you are paid a wage. If your pay is not a wage as
defined by the Code, then you cannot possibly become an employee; however,
when you elect to sign a Form W-4, you agree to treat your pay as a wage within the
meaning of the tax code. Everything else after that is irrelevant.
The question that usually follows is: “Well, if I’m not receiving a wage, then what am
I receiving?” The answer is that you can call your pay anything you want, bananas,
moola, dough; whatever, you can even call it a wage; however, it is not a wage
within the meaning of the tax code! I don’t use the term “wage” at all because those
who only have an eighth grade education, reading level and attention span get
confused. I explain it like this: When I do work for this company, the company pays
me for my labor. Stay away from using keywords like “wage.” The law tells us that
it’s the circumstances under which you are being paid that determines whether or
not you’re earning a wage, so just be aware of this when you communicate with
people.
A second element creating a presumption that you are earning a wage is the amount
of income stated on a Form W-2 that is reported to the IRS at the end of the tax
period because you signed a Form W-4. Please review Fed. R. Evid. Rule 801(2);
and 26 U.S.C. § 6064 for a better understanding. Your company should not be
reporting what you are being paid on the Form W-2 unless it truly is a wage. When
you sign a Form W-4, you also make the company you’re contracting with, into an
“employer”, by presumption.
I’ll just suggest that you find a copy of the Criminal Tax Manual in your local library
and read this policy for yourself. The bottom line about the requirements for the
Department of Justice necessary to get a conviction against you under 26 USC §
7205(a) or 18 USC § 3571 (formerly 3623) are as follows:
1. The defendant was required to furnish an employer with a signed
withholding exemption certificate (Form W-4) relating to the number of withholding
exemptions claimed;
2. The defendant supplied his or her employer with a signed withholding statement
[or failed to supply the employer with a signed withholding exemption certificate];
3. The information supplied to the employer was false or fraudulent;
4. The defendant acted willfully.
These are the elements that need to be proven by the Department of Justice before
they can convict you for any alleged violation. Remember, it does not matter so
much as to what is right, or how the law works, it just matters how the policy of the
government can influence a jury against you. We live in a lawless society, and the
government commits most lawless acts.
At about the same time you begin collecting evidence or making the inquiries
explained above, you may send a notice terminating your withholding agreement. If
you have already expressed your intention of doing this and have not signed another
W-4 or an exempt W-4, you can begin with the following correspondence:
[Company]
Attn: [attorney for company]
[Address]
[City state zip]
[Phone]
[Date]
Re
withholding agreement
Dear Mr. [attorney or other representative]:
Thank you for taking a moment to review this correspondence.
Part 31 of Section 3402(p)-1 of the Code of Federal Regulations allows
taxpayers to terminate withholding agreements upon notice, please see the attached
facsimile of this regulation.
Please attach [Sender’s] statement made pursuant to this regulation to Form
W-4 that he had previously filed with your company and terminate withholding on the
date specified. [Sender] has also indicated to me that he is willing to post an
indemnity bond and sign a release agreement, at his own expense, if you perceive
some liability for complying with this federal regulation.
Best regards,
[Sender]
[Code of Federal Regulations]
[Title 26, Volume 14, Parts 30 to 39]
[Revised as of April 1, 1998]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR31.3402(p)-1]
TITLE 26--INTERNAL REVENUE
CHAPTER I--INTERNAL
TREASURY—
REVENUE
SERVICE
DEPARTMENT
OF
THE
PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT
SOURCE—
Table of Contents
Subpart E--Collection of Income Tax at Source
Sec. 31.3402(p)-1 Voluntary withholding agreements.
(a) In general. An employee and his employer may enter into an agreement
under section 3402(b) to provide for the withholding of income tax upon payments of
amounts described in paragraph (b)(1) of Sec. 31.3401(a)-3, made after December
31, 1970. An agreement may be entered into under this section only with respect to
amounts which are includible in the gross income of the employee under section 61,
and must be applicable to all such amounts paid by the employer to the employee.
The amount to be withheld pursuant to an agreement under section 3402(p) shall be
determined under the rules contained in section 3402 and the regulations
thereunder. See Sec. 31.3405(c)-1, Q&A-3 concerning agreements to have more
than 20-percent Federal income tax withheld from eligible rollover distributions within
the meaning of section 402.
(b) Form and duration of agreement.
(1)
(i) Except as provided in subdivision (ii) of this subparagraph, an employee
who desires to enter into an agreement under section 3402(p) shall furnish his
employer with Form W-4 (withholding exemption certificate) executed in accordance
with the provisions of section 3402(f) and the regulations thereunder. The furnishing
of such Form W-4 shall constitute a request for withholding.
(ii) In the case of an employee who desires to enter into an agreement
under section 3402(p) with his employer, if the employee performs services
(in addition to those to be the subject of the agreement) the remuneration for
which is subject to mandatory income tax withholding by such employer, or if
the employee wishes to specify that the agreement terminate on a specific
date, the employee shall furnish the employer with a request for withholding
which shall be signed by the employee, and shall contain-(a) The name, address, and social security number of the
employee making the request,
(b) The name and address of the employer,
(c) A statement that the employee desires withholding of Federal income tax, and
applicable, of qualified State individual income tax (see paragraph (d)(3)(i) of Sec.
301.6361-1 of this chapter (Regulations on Procedures and Administration)), and
(d) If the employee desires that the agreement terminate on a specific date, the date
of termination of the agreement.
If accepted by the employer as provided in subdivision (iii) of this subparagraph, the
request shall be attached to, and constitute part of, the employee's Form W-4. An
employee who furnishes his employer a request for withholding under this
subdivision shall also furnish such employer with Form W-4 if such employee does
not already have a Form W-4
in effect with such employer.
(iii) No request for withholding under section 3402(p) shall be effective
as an agreement between an employer and an employee until the employer
accepts the request by commencing to withhold from the amounts with
respect to which the request was made.
(2) An agreement under section 3402 (p) shall be effective for such period as
the employer and employee mutually agree upon. However, either the employer or
the employee may terminate the agreement prior to the end of such period by
furnishing a signed written notice to the other. Unless the employer and employee
agree to an earlier termination date, the notice shall be effective with respect to the
first payment of an amount in respect of which the agreement is in effect which is
made on or after the first ``status determination date'' (January 1, May 1, July 1, and
October 1 of each year) that occurs at least 30 days after the date on which the
notice is furnished. If the employee executes a new Form W-4, the request upon
which an agreement under section 3402 (p) is based shall be attached to, and
constitute a part of, such new Form W-4.
(86 Stat. 944, 26 U.S.C. 6364; 68A Stat. 917, 26 U.S.C. 7805)
[T.D. 7096, 36 FR 5216, Mar. 18, 1971, as amended by T.D. 7577, 43 FR 59359,
Dec. 20, 1978; T.D. 8619, 60 FR 49215, Sept. 22, 1995]
[Employee]
Social Security No. 000-00-0000
[Address]
[City state zip]
[Company]
Attn: [attorney for company]
[Address]
[City state zip]
[Date]
Re
withholding agreement
Greetings:
This statement is made pursuant to Part 31, Section 3402(p)-1 of the Code of
Federal Regulations, paragraph b. Please terminate the withholding agreement on
[date] and attach this statement to Form W-4 that I have previously filed with your
company. This change shall terminate on December 31, [year]. I do not wish to
have any withholding from my paycheck during this period.
Best regards,
[Sender]
After sending this notice to terminate your withholding agreement, the company will
probably continue withholding at the same rate, or at least FICA, just as they were
before the notice. Because they are not withholding a tax and have no immunity
under the tax code (as one would for withholding a tax) the difference in what they
continue to withhold for purported taxes and the remaining payment you receive
(after considering all automatic deductions for things like insurance and child
support) is the deficiency in your salary that you are owed.
Just like any unpaid bill, you would need to send your company an invoice for the
difference. The following language would probably be what you need:
[Subscriber]
[Address]
[City state zip]
[Phone]
[Company]
Attn: Payroll
[Address]
[City state zip]
[Phone]
[Fax]
[Date]
Re
Invoice - Goods Sold & Delivered
Greetings:
During the pay periods of _____ through _____, I received $_______; for
goods sold and delivered; however, our agreement was that I was to receive $___.
The difference between what you paid me and what you owe me is $_______.
Please send me a check for this difference within the next thirty days.
Best regards,
[Subscriber]
The purpose of this invoice is to further establish that the dispute arises over an
unpaid invoice for goods sold and delivered and not withheld tax payments under
some withholding agreement, since there is no such agreement any longer.
Non-covered Labor Leasing:
This seems to be the best means of entirely avoiding the W-4/W-2 problem. Beyond
the legal issue of whether or not someone earns wages in determining whether or
not he is an employee earning taxable income (wages), the law requires that
employers classify their workers as employees if the work they perform meets any of
the twenty common law principles that define employment. The way to avoid this
question is to lease employees from a company established for the sole purpose of
leasing employees. There are many companies doing this today as it provides a
cost effective way to meet the needs of business while simultaneously avoiding the
liabilities and expenses normally attached to employment arrangements. A special
type of leasing company, those engaged in “non-covered” leasing meets this
demand much more effectively because non-covered employment is excluded from
all withholding and matching programs administered by both the state and federal
government.
Release Agreements:
Anytime you’re in a situation where someone wants you to file a federal form or
disclose a social security number, and you know it’s not required by law, you may
offer to release them of any liability, which they perceive to have, by an agreement.
This is a very simple contract and most attorneys have the form in a file format
where it’s readily available. If you’d like to prepare one in advance, Am Jur
Pleadings and Forms have excellent forms that you can use. I would highly
recommend that you read about release agreements in Am Jur if you are
considering this option.
A release agreement would relieve one party of liability for acts done by another
party in good faith. If you’ve been hired for a job, but the company wants you to sign
a withholding agreement, an I-9, or disclose a social security number because it’s
believed there is some liability for not doing these things, a release agreement might
be the solution. Once the agreement is signed, you would be liable for any fines
imposed against the other party by the government along with any costs or other
losses attributable to your acts of not signing the federal forms or disclosing a
taxpayer identification number.
You may find that some companies will not be willing make this agreement, even
though they will recover any losses that might be incurred. If the labor agreement or
other contract is valuable enough to each of you, you might offer to post a
reasonable bond or make a deposit of cash or assets to secure this release
agreement. Here is an example of what a bond may look like, but you may also find
more examples in your local count recorder’s office.
BOND
Indemnity bond
I, (obligor) as principal, and (obligee), as surety, is bound to (obligee) in the
sum of $ ________ for the payment of which I bind myself, my heirs, personal
representatives, successors, and assigns, jointly and severally.
THE CONDITION OF THIS BOND is that if (obligor) shall pay all costs and damages
that (obligee) sustains in consequence of any claims arising out of the release
agreement herein, then this bond is void; otherwise it remains in force.
SIGNED AND SEALED on _______________, 19___.
___________________(SEAL)
By _____________________
As Principal As Attorney in Fact, As Surety
__________________________________________________
RELEASE AGREEMENT
For valuable consideration given, the undersigned hereby agree to the
following:
1.
(Releaser) agrees to hold harmless, and release (Releasee), its heirs,
personal representatives, successors, and assigns, jointly and severally, from all
liability resulting from not withholding state and federal income taxes from
(Releaser).
These items include the following taxes, but are not limited to: wage, social
security, medicare, FUTA, supplemental unemployment compensation benefits, and
third-party payments of sick pay, state and federal unemployment tax.
2.
(Releaser) agrees to incur all liability resulting from (Releasee), its heirs,
personal representatives, successors, and assigns, jointly and severally, not
withholding state and federal income taxes from (Releaser)
These items include the following taxes, but are not limited to: wage, social
security, medicare, FUTA, supplemental unemployment compensation benefits, and
third-party payments of sick pay, state and federal unemployment tax.
3.
If any provision of this agreement shall be deemed to be null and void, it shall
not affect any other provision and reasonable opportunity shall be made by the
parties to amend its terms to bring this agreement into conformity with the original
intent of the bond and this agreement.
4.
The term of this agreement shall not exceed any length of time beyond the
last day for the year in which this agreement becomes effective.
5.
(Releaser) shall execute a bond for $______ as security for this agreement
within thirty days of the date when this agreement becomes effective.
______________________________
Obligor
______________________________
Obligee
State of ___________
)
)
County of _________
ss
)
Subscribed and Sworn (or affirmed) to before me a notary public this ___ day
of _______, _____.
______________________________
signature of notary
(ls)
I’ve made this offer in the course of resolving several cases, and it was declined
every time, but my subscribers’ requests were still upheld. I think that when you
show you’re willing to assume all the liability, you have a tendency to be taken
seriously. There are related issues to the W-4 problem and I’ve included examples
of the types of language you might use in corresponding with your company:
[Sender]
[Address]
[City state ZIP]
[Company]
[Address]
[City state ZIP]
[Date]
Re
request for social security number
Hello [attorney for company]:
Thank you for your recent inquiry.
The law requires you, or your company who is the payer, to request
disclosure of his taxpayer identification number. If he refuses, the law requires you
to make a second request stating to him that its disclosure is required by law (even
though it’s not). If he refuses a second time, you are required by law to submit the
requested forms to the IRS, together with an affidavit so stating that you have
complied with these requirements. There is no penalty and there is no 31%
withholding rate until disclosure is made. Please review 26 USC § 6109 and 26
CFR Part 301.6109-1(c), relating to identifying numbers.
I am also prepared to sign a release if you still believe there is some liability
to your company.
Further, many people are unaware that applying for and using a social
security number is not required by any law in this country. I have a letter from
Congressman Davis in which he makes this admission.
I hope you’ll accept our apologies for any confusion caused because of this
misunderstanding.
Best regards,
The next example is a response to a Form W-9 request and on the next several
pages. I’ve included an example of the type of letter we would draft on behalf of a
subscriber for the purpose of terminating a withholding agreement. The "EIN"
mentioned in this next letter is an "Entity Identification Number" created by the
business, not issued by the government.
[Sender]
[Address]
[City state ZIP]
[Company]
[Address]
[City state ZIP]
[Date]
Re
W-9 request
Hello ___,
In order to comply with federal tax regulations, you are required to request
disclosure of an identifying number twice. The law does not compel disclosure nor
does it compel testimony on Form W-9. Please review 26 CFR 301.6109-1(c) or
consult competent counsel if you have questions about the law.
Backup withholding is defined under Section 3406 of the tax code. It applies only to
payments of interest or dividends where there has been a payee certification failure
with respect to the payment of interest or dividends, underreporting of interest or
dividends, a failure to report interest or dividends or an incorrect submission of a
taxpayer identification number with respect to the payment of interest or dividends.
Please review 26 USC 3406 and its applicable regulations to gain further
understanding, or consult with competent counsel if you have more questions.
Fear of the IRS does not justify breaking the law. The law does not require me to
disclose any taxpayer identification number to you, nor does it require me to produce
testimony as a condition for working or being paid. If you wish to impose these
unlawful conditions I will seek damages against your company for lost pay.
The EIN used by my company is ___________. If you wish to use this number for
your records only, you may do so.
Best regards,
[Sender]
We want to avoid a lawsuit but if that is not an option, there is a particular strategy
we recommend. In some cases, your company may agree to voluntarily default on
a judgment where you would cover all the related expenses and they would be able
to stop withholding without fear of reprisal .
In many cases, you will need to argue the case in court on the merits. The problem
you will face is the statutory immunity provided to employers relating to tax issues. It
is important to present your argument as if it did not relate to any tax disputes, but
merely involved an unpaid invoice, goods sold and delivered or open account. The
balance of this subject is adequately addressed in Volume 3, Courtroom Code
Breaker 1st Ed.
Requesting Records
I want to make a very important point about attempting to use records obtained
under the Freedom of Information and Privacy Acts to challenge a purported tax
liability. The supreme court in some states has ruled that records obtained under
these acts cannot be used to challenge a purported tax liability because such
challenges are barred by statute, 26 USC § 7852(e). I know many people like
decoding master files, but none of that work will help support your challenge to any
purported tax liability.
This chapter will show you how to go about obtaining information maintained about
you by the IRS. The addresses listed on the following forms and instructions are
generic and you must use the addresses that are located closer to your area.
Substitute the sending address with the appropriate one from the list. I’ve also
included form letters for you that will make your work much easier, but you should
also review the regulations cited in the request for further instruction.
Request Forms:
1)
Freedom of Information and Privacy Act Request
2)
Freedom of Information Appeal
3)
Privacy Act Appeal
4)
Privacy Act Amendment and Correction Request
5)
Privacy Act Corrective Statement
This section is followed by an explanation of exemptions and exclusions, established
under both Acts, upon which the agency may rely for any of its denials. The records
requested in these forms are just a few of the records available; there are many
records maintained about each individual. Records maintained about individual
people are called “entity modules” and are created when the particular person files a
statement or other information with the agency. The actual entity name is created in
the same name as the citizen, but in all capital letters and is known as the
“taxpayer.” When information is subsequently reported to the agency about
activities taking place for that “entity module”, or taxpayer, a “taxpayer module” is
then appended to the entity module. Examples of these types of information are W2 Forms and 1099 Forms which state amounts of income received under your entity
name and identifying number. The identifying number is usually the taxpayer’s
social security number.
The Internal Revenue Service does not maintain records relating to people; its
records are only maintained for taxpayer entities. The example records that you’ll
find on page two of the FOIA request are only requested under certain
circumstances.
I’ve found that when I ask for the Individual Master File together with the record of
assessment, the Disclosure officer replies by submitting the IMF but not the record
of assessment, claiming that the elements necessary for the record of assessment
are included in the IMF and there is no need to disclose it. The Disclosure Officer
will also sometimes admit that the record of assessment is not maintained for
individuals, but only for a region, and will only be created when it is summoned by a
court for evidence. Therefore, I ask for them separately and cite the Robinson case
to establish that they have a legal duty to produce a valid record of assessment as
defined by the court under Section 6203 and its regulation.
We know that without an assessment, there can be no tax liability. That means that
the IRS cannot begin any deficiency or collection procedures; however, when you
file a return, you are assessing yourself. Your filed tax return is the record of
assessment but the Secretary must agree with the assessment and enter a
Transaction Code (TC) 166 as the first transaction in the tax module of your IMF. As
a general rule, the IRS doesn’t make an assessment when you don’t file. You
should also make a special note to remember that TC 166 is the correct code for the
filing of a tax return for an individual, but you will find that TC 150 is posted instead.
This is a BMF transaction code. It’s for business entities having an EIN. Remember
this and it will better help you understand the whole scheme of things as you learn
more.
After they complete deficiency procedures, like the ninety-day letter, they begin
collection procedures. If you don’t respond properly to the notice of deficiency, they
will make what they call an “assessment” and file a substitute return for you. A TC
150 and a Substitute for Return (SFR) will be recorded in your IMF. A proper
response does not include a notice stating something like “refused for cause without
dishonor.” The UCC is strictly for banks, warehouses and those dealing in chattel
mortgages, papers and notes. It’s for commerce, not for private citizens! You’ll find
further instruction on this in the chapter titled, “Effective Letter Writing.”
Please allow me to digress for a moment. This type of letter writing (refused for
cause…) is nonsense and has no foundation in law and doesn’t have any effect on
the IRS or the collection procedure. I can’t understand why people continue to send
those letters after so many years of having no success with them. Moreover, I can’t
see how anyone of these patriots can justify selling these form letters for money,
unless they truly are profiteers and care nothing about fixing the problem. I’ve even
asked subscribers if they could explain the meaning of the “refused for cause”
phrase to me, because I really don’t know what it means, and they can never explain
it. We don’t have time for this type of brainless letter writing; we need to make our
efforts calculated and purposeful and we need to work the problem.
The work that I do is necessary; and in order for me to be successful, I must offer
my services in the same manner as any business. My problem with it is that Due
Process owes its existence to problems created by this out of control government;
and its only saving grace is that we don’t create them but instead, help people have
a better chance of not being victimized by the government and other corporations. It
just makes my job much more difficult when these patriots for profit instigate
litigation just like any ambulance-chaser-attorney used to do before the supreme
courts began regulating them. Sometimes I can help a subscriber, but by the time
they finish getting shuffled through the patriot circuit, following just plain stupid
advice, and spending most of their money on useless and worthless letter writing,
they don’t have enough money for the retainer. Additionally, some of them want our
paralegals to work for free! I hope you’ll pardon my vignette but it’s rational and well
deserved.
Instructions for completing FOIA Request:
1) Record the certified mail receipt number in the blank on the request form.
2) Write in the date that you will mail this request in the space provided.
3) Print your correct legal name in the blank across from “Other Requester.”
4) Write in your social security number in the blank across from “Identifying Number.”
5) Print neatly, your correct return mailing address at the bottom of the form.
6) Sign this request and attach a photocopy of your driver’s license, passport or other form of
identification.
7) Make one photocopy of this completed request form and keep it for your records.
8) Re-fold the original completed form and seal it into a #10 business envelope.
9) Write your return address on the envelope and write the following sending address:
Director, ________ District
Internal Revenue Service
FOIA Request, Attn: Disclosure Officer
P.O. Box (or street) ________, Stop _______
(city), (state) (zip)
FOIA Appeal Procedure:
1) If you do not receive the records you requested within 45 days from the date on which you
mailed the request, then send in the appeal form to the address on the top left corner. Do this
by certified mail and make a copy of your completed form just as you did for the original
request.
2) You must attach the copy of your original request to the appeal.
Instructions for certified mail receipts:
1) On the green and white receipt slip, write in the following three lines for the “sent to” address:
Director, ________ District
Internal Revenue Service
FOIA Request, Attn: Disclosure Officer
P.O. Box (or street) ________, Stop _______
(city), (state) (zip)
The postal clerk will complete the rest and give you the date stamped receipt portion, this is for your
records only.
2) On the green card, the one which will be stamped by the Disclosure Officer and returned to you in
a few days, write in the following address in box 3 on the side which does not have the white
adhesive strips:
Director, ________ District
Internal Revenue Service
FOIA Request, Attn: Disclosure Officer
P.O. Box (or street) ________, Stop ______
(city), (state) (zip)
3) In box 4a, write in the full certified mail number found on the green and white receipt slip, for
example: “Z 302 887 564.”
4) In box 4b, only check the box labeled “Certified.”
5) On the reverse side that just contains one large box, print your name, address and ZIP code. You
must do this to receive this green card back from the Disclosure Officer.
6) Do not write any other information on these receipts. If you make a mistake, you can always
obtain another card at the post office. Just remember to use the correct certified mail number if you
need another green and white receipt slip.
7) Take the sealed envelope and your completed green card with the green and white receipt slip to
the post office and the clerk will help you mail your request. Keep the stamped receipt with your
FOIA copy.
Director, ________ District
Certified Mail No. ___________
Internal Revenue Service
FOIA Request, Attn: Disclosure Officer
P.O. Box (or street) ________, Stop _______
[city state zip]
“Other Requester”:
[Date]
____________________________
“Identifying Number”: ______-____-________
Re
FREEDOM OF INFORMATION ACT and PRIVACY ACT REQUEST
NOTICE TO DISCLOSURE OFFICER:
This request is made pursuant to both the Freedom and Information Act and the
Privacy Act, must be processed under both Acts, and does meet all procedural
requirements of 31 CFR Subtitle A, Part 1, Appendix B, Subpart C, Appendix B; 26 CFR
601.702, and those listed on the Federal Register. I am requesting that you submit all of the
items listed on the back of this request that are maintained under this Requester’s assigned
name and Identifying number, as stated above, pertaining to each of the years, 1991
through 2000 inclusive:
(Please see the back of this request form for a list of the records requested.)
If there are any fees for searching for, or copying any of these items, please inform
me of them before you complete this request. I am requesting this information so that I may
better understand the operating policies and procedures of your agency. As you know, the
Freedom of Information Act permits you to reduce or waive fees when the release of the
information is considered as “primarily benefiting the public.” I believe that this request
satisfies that criteria and ask that you waive any fees.
I understand the penalties for requesting information under false pretenses. I
believe that the documents requested herein are publicly available, within the custody of
your Commission’s Office, and not exempt or excluded under any statute, e.g. “the
documents are not exempt under exemption (b)(5) as they represent a purely factual record
of the agency’s post decisional file in this matter.” I also believe that reasonable grounds do
not exist for withholding, in accordance with § (a)(4)(F) of the Act’s penalties section. If all
or any part of this request is denied, please provide me with indexing, itemization and return
to me a detailed statement citing the specific exemption(s) which you believe would justify
your refusal to release the information, and inform me of the appeal procedure available to
me as prescribed by law.
Please remember that it is the policy of the Department of Justice (FOIA Update
spring/summer 1993) to refuse to represent your agency when it has failed to comply with
regulations pertaining to this request, and because the Congress has not authorized the
Secretary to appear on behalf of your agency, I would be awarded my claim plus all costs if
the need to file a civil complaint in the U.S. District Court arose. However, I am very
optimistic that I can obtain the information requested without such action.
I would appreciate your processing this request as quickly as possible, and I look
forward to your written acknowledgment within twenty (20) days, as provided by law.
Best regards,
___________________________
Signature of Requester
return
Address:
______________
______________
______________
1.
Information Returns Master File (IRMF) Transcript
2.
Form 5546, Examination Return Charge-Out form
3.
Form 4340, Certificate of Assessments and Payments.
Freedom of Information Appeal, D.O.
Commissioner of Internal Revenue Service
c/o Ben Franklin Station
Certified Mail No.: ______
P.O. Box 929
Washington, DC 20044
“Other Requester”:
“Identifying Number”:
Re
[date].
________________________
______-____-________
FREEDOM OF INFORMATION APPEAL
NOTICE TO DISCLOSURE OFFICER:
This appeals the denial of information requested by me pursuant to the
Freedom of Information Act, Privacy Act and agency regulations. My letter of
request, mailed on the ___ day of ____________, 1997, was denied by the
Freedom of Information Officer at the Chief Disclosure Branch for the Internal
Revenue Service, a copy of such request is attached.
The issues on this appeal are framed by the fact that no answer was made by
the Disclosure Officer within the twenty (20) day limit. This denial is incapable of
withstanding close scrutiny by the courts, should judicial de novo review be sought.
It has been the policy of the Department of Justice to refuse the represent the IRS
after this type of refusal to answer or denial (see FOIA Update, 1993 spring/summer
edition).
The Internal Revenue Service has failed to disclose records pertaining to the
years ending ______ through ______; yet, my original request included these years.
Furthermore, because the Freedom of Information Act exemptions do not cover the
requested material, I request that the agency review the record and order the
documents to be disclosed to me. In the event that any portions are withheld or
deleted, I request a specific statement of the portions withheld, an index or similar
statement of the scope of the material withheld, and a citation of the exemption
sections of the initial denial upon which the denial on appeal is based. Pursuant to
the Act’s requirements on administrative appeals, I request a response to this
appeal within twenty (20) working days. In the event of any denial, I further request
that the agency obtain the opinion of the Justice Department as a precondition
denial under the terms 28 CFR § 50.9.
Best regards,
return
__________________________
address: __________________________
__________________________________
signature of requester
__________________________
Privacy Act Appeal, D.O.
Chief Disclosure Branch
Department of the Treasury
Certified Mail No.: ____
1500 Pennsylvania Avenue NW
Washington, DC 20220
“Other Requester”:
“Identifying Number”:
Re
[date].
_________________________
______-____-________
PRIVACY ACT ACCESS APPEAL
NOTICE TO DISCLOSURE OFFICER:
This will present my appeal from your agency’s denial of access to my
individual file, a denial that was received from Agent _________ of your agency on
the ___ day of ________, [year]. In that denial letter, a copy of which is attached, I
was advised that your office would handle my appeal.
The denial of my access request frames the issues on this appeal. In his letter,
Agent _________ states that the agency is withholding my personal file from
access because it is allegedly exempt under the Privacy Act exemption for [subject].
This exemption is not applicable to the information requested, because that
information of the type Congress intended to cover under the Privacy Act. The
material is not within the claimed exemption because [state reasons]. Furthermore,
the agency denial is unlawful because the agency regulations upon which it is
permitted fail to have valid support in the statutory exemptions, since the regulations
impermissibly expand a statute that the Congress directed to be construed narrowly
on behalf of individuals seeking access to their own records.
The other exemption claimed by the agency is a general exemption from
coverage of the Privacy Act for your agency’s activities. In the court of the activities
in which you apparently compiled this file, your agency was not acting as a criminal
law enforcement authority within the very narrow confines of the general exemptive
authority in Privacy Act section (j). The agency’s conduct of an investigation was
civil in nature and your agency has no blanket immunity from operation of the
Privacy Act access provisions.
I advise the agency that withholding of this information, on grounds of the law
enforcement exemption among specific exemption, may prejudice my future rights
and privileges as a citizen and worker. Included in the rights protected by the
proviso to Privacy Act section (k) (2) is my continuing right to be free of the adverse
effects of incorrect or inflammatory government file information, including the right
not to have incorrect information disseminated to potential employers. In the
exercise of my protected rights I request that the agency void the determination
below, and grant this appeal. Access to the documents is requested immediately,
and your prompt response would be appreciated.
Best regards,
return
_____________________
address: _____________________
__________________________________
signature of requester
______________________
Privacy Act Officer
Chief Disclosure Branch
Department of the Treasury
Certified Mail No.: _____
1500 Pennsylvania Avenue NW
Washington, DC 20220
[date].
“Other Requester”:
________________________
“Identifying Number”:
______-____-________
Re
PRIVACY ACT AMENDMENT AND CORRECTION REQUEST
NOTICE TO DISCLOSURE OFFICER:
Greetings:
On the ___ day of [month] [year], your agency provided me with a copy of
agency records pertaining to me which your letter identified as coming from agency
system (number). I disagree with the statements contained in this agency record
and demand corrections as follows:
Page ____, item ____ is incorrect. I have never been engaged in any taxable
activity known as “xxx”, nor have I ever applied for a license to engage in this
particular taxable activity, nor have I ever derived income from this taxable activity
and I demand that this be corrected immediately.
Page ____, item ____ is false and misleading. This record states that during
the years ___, I was engaged in the taxable activity of ______; however, I have
never been engaged in any taxable activity known as “xxx”, nor have I ever applied
for a license to engage in this particular taxable activity, nor have I ever derived
income from this taxable activity. This statement is false and recklessly inaccurate,
and I demand that it be deleted from this file and corrected immediately.
In accordance with your agency’s regulations, I request that you supply me
with a formal statement agreeing to these deletions within ten days or that you
provide me with an opportunity to file a full rebuttal. As to the second statement
above, regarding this taxable activity, I categorically deny that statement and I
hereby request an explanation of its presence in your agency’s file, including the
source and date of inclusion of the statement into this file. Your agency is hereby
given notice that unless prompt corrective action is taken I fully intend to seek
damages in an appropriate legal action.
Best regards,
return
_______________________
Address: _______________________
__________________________________
Signature of requester
_______________________
Privacy Act Officer
Chief Disclosure Branch
Department of the Treasury
Certified Mail No.: _____
1500 Pennsylvania Avenue NW
Washington, DC 20220
“Other Requester”:
“Identifying Number”:
Re
[date].
________________________
______-____-________
PRIVACY ACT CORRECTIVE STATEMENT
NOTICE TO DISCLOSURE OFFICER:
Greetings:
Your letter dated [date] denied my appeal for reconsideration by the agency
of my formal request for correction of inaccurate, false and misleading file
information about me which is contained in your agency’s system of records number
_________. A copy of the denial letter is attached. Under the terms of section (d)
(3) of the Privacy Act, I am entitled to file a statement of my disagreement with those
records. Please reproduce the following statement immediately and insert it with
any and all agency records pertaining to me:
“STATEMENT OF DISAGREEMENT. Pursuant to the terms of the
Privacy Act, I _____________ have had an opportunity to examine the
contents of my agency file. The statements made in that file are false,
incorrect, and misleading, and should be deleted or changed by the
agency to conform to true facts. Since the agency has refused, I
advise users of this record that (explain errors and made correction).
This statement is filed as a matter of legal right and must be made a
part of the record on any future release of this record. Filing of this
statement is without prejudice to my rights for judicial review and
damages.”
Best regards,
return
__________________
Address: __________________
__________________________________
Signature of requester
__________________
FOIA Exemptions and Exclusions:
Each request for agency records made under the Freedom of Information Act is
processed under both this Act and the Privacy Act. This means that an employee
analyzes the records you’ve requested and tests them against each exemption and
exclusion under both Acts, and against exemptions from withholding of records
allowed under 26 USC § 6103. If none apply, the records you’ve requested will be
disclosed to you, provided that you owe no fees from prior requests. You will only
owe a fee, for private use, when your requests involves the disclosure of records
exceeding one hundred pages and/or two hours of research. Here is a list of the
particular exemptions but you will want to purchase a copy of the Freedom of
Information Act Guide & Privacy Act Overview from the Government Printing Office
(GPO) for sale on written request made to: Superintendent of Documents, Mail
Stop: SSOP, Washington, DC 20402-9328 (the ISBN is: 0-16-048853-2). These
exemptions can be overcome when any reasonably segregable portion of a record
can be provided to any person requesting such record after deletion of the portions
which are exempt under these provisions. You can research specific case law found
in this GPO publication for instructions as to how this type of partial disclosure might
be accomplished in the event that a request is denied. Records will not be disclosed
under the following conditions:
FOIA Exemption 1:
any withholding specifically authorized under criteria
established by an executive order to be kept secret in the interest of national
defense or foreign policy, which are properly classified under such an order;
FOIA Exemption 2:any withholding related solely to the internal personnel rules
and practices of an agency;
FOIA Exemption 3:any withholding specifically exempted from disclosure by statute
(other than section 552b of Title 5 USC)
FOIA Exemption 4:any withholding of agency records relating to trade secrets and
commercial or financial information obtained from a person and privileged or
confidential;
FOIA Exemption 5:inter-agency or intra-agency memorandums or letters which
would not be available by law to a party other than an agency in litigation with the
agency;
FOIA Exemption 6:personnel and medical files and similar files the disclosure of
which would constitute a clearly unwarranted invasion of personal privacy;
FOIA Exemption 7:records or information compiled for law enforcement purposes,
but to the extent that the production of such law enforcement records or information
(A) could reasonably be expected to interfere with enforcement proceedings, (B)
would deprive a person of a right to a fair trial or an impartial adjudication, (C) could
reasonably be expected to constitute an unwarranted invasion of personal privacy,
(D) could reasonably be expected to disclose the identity of a confidential source,
including a State, local, or foreign agency or authority or any private institution which
furnished information on a confidential basis, and, in the case of a record or
information compiled by a criminal law enforcement authority in the course of a
criminal investigation or by an agency conducting a lawful national security
intelligence investigation, information furnished by a confidential source, (E) would
disclose techniques and procedures for law enforcement investigations or
prosecutions, or would disclose guidelines for law enforcement investigations or
prosecutions if such disclosure could reasonably be expected to risk circumvention
of the law, or (F) could reasonably be expected to endanger the life or physical
safety of any individual;
FOIA Exemption 8:contained in or related to examination, operating, or condition
reports prepared by, on behalf of, or for the use of an agency responsible for the
regulation or supervision of financial institutions; or
FOIA Exemption 9:geological and geophysical information and data, including
maps, concerning wells.
(c)(1) Whenever a request is made which involves access to records described in
subsection (b)(7)(A) and –
FOIA Exclusion 1:
(A) the investigation or proceeding involves a possible
violation of criminal law; and (B) there is a reason to believe that (i) the subject of the
investigation or proceeding is not aware of its pendency, and (ii) disclosure of the
existence of the records could reasonably be expected to interfere with enforcement
proceedings,
FOIA Exclusion 2: Whenever informant records maintained by a criminal law
enforcement agency under an informant’s name or personal identifier are requested
by a third party according to the informant’s name or personal identifier, the agency
may treat the records as not subject to the requirements of this section unless the
informant’s status as an informant has been official confirmed.
FOIA Exclusion 3: Whenever a request is made which involves access to records
maintained by the Federal Bureau of Investigation pertaining to foreign intelligence
or counterintelligence, or international terrorism, and the existence of the records is
classified information as provided in subsection (b)(1), the Bureau may, as long as
the existence of the records remains classified information, treat the records as not
subject to the requirements of the section.
FOIA Exemption under 26 USC § 6103:
is codified from the language of the
previous sections and pertains to disclosures in which the requester is not properly
identified or does not have the standing due to lack of power of attorney or similar
circumstances.
The items requested in the first FOIA request shown at the beginning of this chapter
are described in that manner because of the trouble usually encountered when
requesting them. You don’t usually need to be so elaborate when requesting other
records. Just remember not to request a record of assessment in the same request
with one for the IMF because the IRS will claim that the IMF transcripts contain all
the elements of the record of assessment, and then refuse to produce it. On the
next several pages, you will find a complete list of offices from which you can
request records. These offices are divided into two sections; the first is a list of
disclosure office locations and the second is a list of the ten service center locations.
IRS Disclosure Offices:
A FOIA request should generally be addressed to the IRS Disclosure Office that
services your current address. If you know that the records that you are requesting
are located in another area you should direct your request to the Disclosure Office
where those records are kept. IRS Disclosure Offices are listed below. If you are
requesting headquarters IRS policy documents please write to the Headquarters
Disclosure Office included at the end of the address list.
IRS Disclosure Office Addresses
Alabama IRS FOIA Request
New Orleans Disclosure Office
Mail Stop 40
600 S. Maestri Place
New Orleans, LA 70130
Alaska IRS FOIA Request
Oakland Disclosure Office
1301 Clay Street, Suite 800-S
Oakland, CA 94612
Arkansas IRS FOIA Request
Nashville Disclosure Office
MDP 44
801 Broad Street, Room 48
Nashville, TN 37203
Arizona IRS FOIA Request
Phoenix Disclosure Office
Mail Stop 7000 PHX
210 E. Earll Drive
Phoenix, AZ 85012
California IRS FOIA Request
Laguna Niguel Disclosure Office
Post Office Box 30207
Laguna Niguel, CA 92607-0208
IRS FOIA Request
Los Angeles Disclosure Office
Mail Stop 1020
300 N. Los Angeles Street
Los Angeles, CA 90012-3363
IRS FOIA Request
Oakland Disclosure Office
1301 Clay Street, Suite 800-S
Oakland, CA 94612
IRS FOIA Request
San Jose Disclosure Office
Mail Stop HQ-4603
55 South Market Street
San Jose, CA 95113
Colorado IRS FOIA Request
Denver Disclosure Office
Mail Stop 7000 DEN
600 17th Street
Denver, CO 80202-2490
Connecticut IRS FOIA Request
Hartford Disclosure Office
William R. Cotter F.O.B.
Mail Stop 140
135 High Street
Hartford, CT 06103
Delaware IRS FOIA Request
Baltimore Disclosure Office
George Fallon Fed. Bldg.
31 Hopkins Plaza, Room 1210
Baltimore, MD 21201
District of Columbia IRS FOIA Request
Baltimore Disclosure Office
George Fallon Fed. Bldg.
31 Hopkins Plaza, Room 1210
Baltimore, MD 21201
Florida IRS FOIA Request
Fort Lauderdale Disclosure Off.
Mail Stop 4030
7850 SW 6th Court, Rm. 260
Plantation, FL 33324-3202
IRS FOIA Request
Jacksonville Disclosure Office
Suite 35045, MS 4030
400 West Bay Street
Jacksonville, FL 32202-4437
Georgia IRS FOIA Request
Atlanta Disclosure Office
Mail Stop 602D, Room 926
401 W. Peachtree Street, NW
Atlanta, GA 30308
Hawaii IRS FOIA Request
Laguna Niguel Disclosure Office
Post Office Box 30207
Laguna Niguel, CA 92607-0208
Illinois IRS FOIA Request
Chicago Disclosure Office
Mail Stop 7000 CHI, Room 2344
230 S. Dearborn Street
Chicago, IL 60604
Indiana IRS FOIA Request
Indianapolis Disclosure Office
Mail Stop CL 658
575 N. Penn. Avenue
Indianapolis, IN 46204
Iowa IRS FOIA Request
St. Paul Disclosure Office
Stop 7000
316 N. Robert Street
St. Paul, MN 55101
Idaho IRS FOIA Request
Seattle Disclosure Office
Mail Stop 625
915 2nd Avenue
Seattle, WA 98174
Kansas IRS FOIA Request
St. Louis Disclosure Office
Mail Stop 7000 STL, Room 9.206
1222 Spruce Street
St. Louis, MO 63103
Kentucky IRS FOIA Request
Cincinnati Disclosure Office
Post Office Box 1818, Rm. 7019
Cincinnati, OH 45201
Louisiana IRS FOIA Request
New Orleans Disclosure Office
Mail Stop 40
600 S. Maestri Place
New Orleans, LA 70130
Maine IRS FOIA Request
Boston Disclosure Office
Mail Stop 41150
JFK Building
Post Office Box 9
Boston, MA 02203
Maryland IRS FOIA Request
Baltimore Disclosure Office
George Fallon Fed. Bldg.
31 Hopkins Plaza, Room 1210
Baltimore, MD 21201
Massachusetts IRS FOIA Request
Boston Disclosure Office
Mail Stop 41150
Post Office Box 9112
JFK Building
Boston, MA 02203
Michigan IRS FOIA Request
Detroit Disclosure Office
Mail Stop 11
Post Office Box 330500
Detroit, MI 48232-6500
Minnesota IRS FOIA Request
St. Paul Disclosure Office
Stop 7000
316 N. Robert Street
St. Paul, MN 55101
Mississippi IRS FOIA Request
New Orleans Disclosure Office
Mail Stop 40
600 S. Maestri Place
New Orleans, LA 70130
Montana IRS FOIA Request
Denver Disclosure Office
Mail Stop 7000 DEN
600 17th Street
Denver, CO 80202-2490
Missouri IRS FOIA Request
St. Louis Disclosure Office
Mail Stop 7000 STL, Room 9.206
1222 Spruce Street
St. Louis, MO 63103
Nebraska IRS FOIA Request
St. Paul Disclosure Office
Stop 7000
316 N. Robert Street
St. Paul, MN 55101
New Hampshire IRS FOIA Request
Boston Disclosure Office
Mail Stop 41150
Post Office Box 9112
JFK Building
Boston, MA 02203
New Jersey IRS FOIA Request
Springfield Disclosure Office
955a South Springfield Avenue
Springfield, NJ 07081
New York
(New York City, and counties of Nassau, Rockland, Suffolk, and Westchester)
IRS FOIA Request
Brooklyn Disclosure Office
10 Metro Tech Center
625 Fulton Street
Brooklyn, NY 11201-5404
(All other areas)
IRS FOIA Request
Manhattan Disclosure Office
110 W. 44th Street
New York, NY 10036
IRS FOIA Request
Buffalo Disclosure Office
Post Office Box 180
Niagara Square Station
Buffalo, NY 14201
Nevada IRS FOIA Request
Phoenix Disclosure Office
Mail Stop 7000 PHX
210 E. Earll Drive
Phoenix, AZ 85012
New Mexico IRS FOIA Request
Phoenix Disclosure Office
Mail Stop 7000 PHX
210 E. Earll Drive
Phoenix, AZ 85012
North Carolina IRS FOIA Request
Greensboro Disclosure Office
320 Federal Place, Room 409
Greensboro, NC 27401
North Dakota IRS FOIA Request
St. Paul Disclosure Office
Stop 7000
316 N. Robert Street
St. Paul, MN 55101
Ohio IRS FOIA Request
Cincinnati Disclosure Office
Post Office Box 1818, Rm. 7019
Cincinnati, OH 45201
Oklahoma IRS FOIA Request
Oklahoma City Disclosure Office
Mail Stop 7000 OKC
55 N. Robinson
Oklahoma City, OK 73102
Oregon IRS FOIA Request
Seattle Disclosure Office
Mail Stop 625
915 2nd Avenue
Seattle, WA 98174
Pennsylvania IRS FOIA Request
Philadelphia Disclosure Office
600 Arch Street, Room 3214
Philadelphia, PA 19106
Rhode Island IRS FOIA Request
Hartford Disclosure Office
William R. Cotter F.O.B.
Mail Stop 140
135 High Street
Hartford, CT 06103
South Carolina IRS FOIA Request
Greensboro Disclosure Office
320 Federal Place, Room 409
Greensboro, NC 27401
South Dakota IRS FOIA Request
St. Paul Disclosure Office
Stop 7000
316 N. Robert Street
St. Paul, MN 55101
Tennessee IRS FOIA Request
Nashville Disclosure Office
MDP 44
801 Broad Street, Room 48
Nashville, TN 37203
Texas IRS FOIA Request
Austin Disclosure Office
Mail Stop 7000 AUS
300 East 8th Street, Room 262
Austin, TX 78701
IRS FOIA Request
Dallas Disclosure Office
Mail Stop 7000 DAL
1100 Commerce Street
Dallas, TX 75242
IRS FOIA Request
Houston Disclosure Office
Mail Stop 7000 HOU
1919 Smith Street
Houston, TX 7 7002
Utah IRS FOIA Request
Denver Disclosure Office
Mail Stop 7000 DEN
600 17th Street
Denver, CO 80202-2490
Vermont IRS FOIA Request
Boston Disclosure Office
Mail Stop 41150
Post Office Box 9112
JFK Building
Boston, MA 02203
Virginia IRS FOIA Request
Richmond Disclosure Office
400 North 8th Street, Room 1068
Richmond, VA 23240
Washington IRS FOIA Request
Seattle Disclosure Office
Mail Stop 625
915 2nd Avenue
Seattle, WA 98174
West Virginia IRS FOIA Request
Richmond Disclosure Office
400 North 8th Street, Room 1068
Richmond, VA 23240
Wisconsin IRS FOIA Request
Milwaukee Disclosure Office
Mail Stop 7000 MIL
310 W. Wisconsin Avenue
Milwaukee, WI 53203-2221
Wyoming IRS FOIA Request
Denver Disclosure Office
Mail Stop 7000 DEN
600 17th Street
Denver, CO 80202-2490
All APO and FPO addresses, American Samoa, nonpermanent residents of Guam
or the Virgin Island*, Puerto Rico.
IRS FOIA Request
Headquarters Disclosure Office
Director, Freedom of Information
Post Office Box 795
Ben Franklin station
Washington, DC 20044
IRS Headquarters (for IRS headquarters policy documents)
IRS FOIA Request
Headquarters Disclosure Office
Director, Freedom of Information
Post Office Box 795
Ben Franklin station
Washington, DC 20044
Service Centers at the Internal Revenue Service. You may request your records of
assessment by directing your requests to the Accounting Branches within each of
these offices.
Director, Andover Service Center
Director, Andover Service Center
IRS, FOIA Request
Attn: Disclosure Officer
310 Lowell Street Stop 218
Andover, Massachusetts 01812
Brookhaven
Service
Director,
Brookhaven
Service
IRS,
FOIA
Attn:
Disclosure
P.O.
Box
400,
Stop
Brookhaven, New York 11719
Center
Center
Request
Officer
241
Philadelphia
Service
Director,
Philadelphia
Service
IRS,
FOIA
Attn:
Disclosure
P.O.
Box
245,
Drop
Point
Bensalem, Pennsylvania 19020
Center
Center
Request
Officer
590A
Atlanta
Director,
Atlanta
IRS,
Attn:
4800
Chamblee, Georgia 30006
Center
Center
Request
Officer
Highway
Memphis
Director,
Memphis
IRS,
Attn:
P.O.
Box
Memphis, Tennessee 38130
Service
Service
FOIA
Disclosure
Buford
Service
Service
FOIA
Disclosure
30309,
Stop
Center
Center
Request
Officer
30
Kansas
City
Director,
Kansas
IRS,
Attn:
P.O.
Box
Kansas City, Missouri 64131
Service
Service
City
FOIA
Disclosure
24551
Stop
Center
Center
Request
Officer
7
70000
Center
Center
Request
Officer
AUSC
Cincinnati Service Center
Director, Cincinnati Service Center
IRS, FOIA Request
Attn: Disclosure Officer
P.O. Box 267 Stop 68
Covington, Kentucky 41019
Austin
Director,
IRS,
Attn:
P.O.
Box
Austin, Texas 78767
Ogden
Director,
IRS,
Attn:
P.O.
Box
Ogden, Utah 84409
Service
Austin
Service
FOIA
Disclosure
Stop
934
Service
Ogden
Service
FOIA
9411
Fresno Service Center
Director, Fresno Service Center
IRS, FOIA Request
Attn: Disclosure Officer
P.O. Box 24014 Stop 891
Fresno, California 93779
Disclosure
Stop
7000
Center
Center
Request
Officer
OSC
Decoding Your IMF
The Individual Master File is a magnetic tape record of all individual income tax
filers, in Social Security Number sequence, and is maintained at the Martinsburg
Computing Center (MCC). All tax data and related information pertaining to
individual income taxpayers are posted to the Individual Master File so that the file
reflects a continuously updated and current record of each taxpayer’s account. All
settlements with taxpayers are effected through computer processing of the
Individual Master File account and the data therein is used for accounting records,
for issuance of refund checks, bills or notices, answering inquiries, classifying
returns for audit, preparing reports and other matters concerned with the processing
and enforcement activities of the Internal Revenue Service.
Basics:
The Individual Master File is designed to accumulate in each taxpayer’s account, all
data pertaining to the income taxes for which the taxpayer is liable. The Account is
further sectionalized into separate tax periods (Tax Modules) each reflecting the
balance, status, and transactions applicable to the specific tax period. This includes
the returns filed, assessment, debit and credit transactions, and all changes made to
the filed tax returns.
Each taxpayer account has an Entity Module and one or more Tax Modules. In
addition to MFT 30 tax modules, an IMF account may have Civil Penalty modules
(MFT 55) effective 1/1/85. The Entity Module contains data which describes the
taxpayer as an entity and which applies to all records of the taxpayer. Detailed
processes for establishing and maintaining the Entity Module are contained in
Project 439 (IMF Account Numbers). This entity module contains groups of data
which are maintained in separate sections as follows.
1.
Entity Section - Contains Taxpayer’s Name Control, Check Digit, SSN,
and Spouse’s SSN; name under which each income tax return was filed; current
address and ZIP Code; District and Area Office handling the account (and District
and Area Office holding TDA’s if different); month in which taxpayer’s tax year ends;
type of tax return package to be mailed to taxpayer; indicators to show presence of
open balance tax modules and/or TDA modules; account freezes and holds. Civil
Penalty Name data may also be present.
2.
Transaction Section - contains transactions which created or updated
the entity module
3.
Deferred Action Section - Shows the cycle during which specified
action are to be taken, e.g., mailing 2nd notices, placing an account in TDA status,
etc.
4.
Audit History Section - contains information on the two most recent
years which were under audit examination. The data retained include the tax period,
disposal code, audit results, and no change issue codes.
5.
Offset Section - Used in communicating between different
Programming Runs for the purpose of Offsetting between different Tax Modules of a
taxpayer’s account. When it has served its purpose, it is dropped from the file.
6.
Vestigial Section - Shows data related to Tax Modules removed and
recorded on the “Retention Register”. Contains the tax class, cycle removed, control
district office and tax period.
7.
Energy Credit Tracking Section - Used by Examination Division for IMF
Accounts containing residential energy credits.
8.
IDRS Section - Shows modules under IDRS control indicating specific
MFT, tax period and service center.
A Tax Module contains records of tax liability and accounting information
pertaining to the income tax and/or civil penalty for one tax period. Each Tax
Module contains groups of data that are maintained in separate sections as follows.
1.
Balance Section - This section contains the Module Balance (i.e.,
current debit or credit balance of tax and penalties); assessed and paid interest;
Total Interest; Total Late Payment Penalty and Late Payment Penalty Assessed;
Control DLN; and numerous indicators representing information pertaining to the
module, some of which are: a duplicate or amended return was filed, taxpayer
claimed more or less ES credit on the return than appear in the module, refund is
being withheld, refund check was undelivered or redeposited, offsetting is being
attempted, taxpayer claim is pending, IRS suit filed, closing code, Accounts
Uncollectible, etc.
2.
Status History Section - This section contains the current status of the
module (i.e., current debit or credit balance of tax penalties); if collection or refund
action has been suspended, and if so why.
3.
Settlement Section - Contains data necessary for return settlement
such as AGI or total income, balance due or overpayment, tax liability per return,
self-employment tax, ES credits claimed, overpayment credit elected to be applied
to next year’s estimated tax, penalties, etc. This section is deleted after settlement
has been effected. The settlement section is not present for MFT 55.
4.
Transaction Section - contains a transaction representing the filing of a
return. This transaction contains only enough data to provide a historical record of
the filing of the return and of the liability reported, late payment start date, and
selected permanent audit data. In addition, the transaction section contains all
transactions pertaining to the Tax Module. They are derived from accounting input
documents (i.e., tax liabilities, payments, assessments, abatements) and nonaccounting transactions (i.e., Waivers, military deferment, etc.).
Each tax
transaction contains at least the Transaction Code, Cycle Posted, Document Locator
Number, Transaction Date and Transaction Amount.
This chapter will give you a decent idea of what those different codes mean in your
Individual Master File and its components. It’s not exhaustive by any means as an
entire encyclopedia could be written on the subject. In fact, you can order this
encyclopedia from the IRS by requesting each IRM. This is just a cursory overview.
The basic structure the IMF was defined in the previous chapter but I did not
mention the Non Master File (NMF) which is a component of the IMF. It’s a
transcript of an account that is not the master file, because the account has been
removed to the Retention or Non-Master file. The transcripts are hand written or
typed. You can request this component the same way as you would any other
record just by listing it in your FOIA request.
I’ll begin by explaining a few basic items found in just about any IMF. When an audit
has been completed, a component known as the AMDISA is created and posted to
your IMF. One of the items indicated on the record is the taxable activity code for
that particular year. You can obtain a copy of IRM 6209 from the IRS published for
that year and decode the meaning of the three digit activity code found in that
record.
The Form 5546, “Examination Return Charge-out,” or AIMS Weekly Update also
indicate whether or not your case is a collectible one, or worth pursuing.
On the face of your IMF entity module, you’ll find the title of the record, e.g., “IMF
MCC TRANSCRIPT SPECIFIC” centered, and to the right of that you’ll notice the
employee number of the agent who been assigned the duty to request or review
these records. Just below a few more coded lines you’ll see the dividing line of
asterisks. The entity module is just below this line but let’s look just above it for a
moment and find the account number next to the left hand margin. There, you will
see your social security number and just below that, the first four letters of your last
name encrypted into a filed known as the “NAME CONT.” Follow in a straight line
across to the right margin, past the cycle code and you might find the “illegal tax
protester” encryption, if you’ve been labeled as one. It would appear as “TC 148
HOLD IS P.” If it has an entity indicator of 7, it would identify a false refund case in
which there is a pending Taxpayer Delinquency Investigation (TDI). There are other
indicators but we don’t need to cover them at this time. The new IRS Restructure
and Reform Act of 1998 now prohibits this type of labeling and files containing it
must be corrected beginning in January of 1999. I believe they will then substitute
this term with “non-filer” and accomplish the same end.
Now let’s go below the line of asterisks which divide the header from the entity
module. You’ll find the same employee number appearing once again next to the
left margin, with another agent’s number and a date. I think this is the date when the
records were generated from the computer because of your request. One tab
further to the right you’ll find the tax period encrypted as YYMM, where the month
means the last month of the tax period so it’s usually 12. On the second line below
this you’ll find a reference to the tax module. If it’s a requested record from a period
which has been archived or if no return was filed, you’ll see an encryption that reads
“REQUESTED TAX MODULE NOT ON MF.” A quick look at the bottom of the entity
module (about the middle of the page) will tell you where this record has moved or if
it has been requested from archives. It should read something like “MODULES
MOVED TO RETENTION REGISTER… A MICROFILM REQUEST HAS BEEN
GENERATED.”
On the right side of the middle of the page, just below and opposite your mailing
address, you’ll find the encryption for Mail Filing Requirement, “MFR- “ with a two
digit number. There are a series of two digit numbers that signify types of returns
which must be filed and one of them 01 which translates to “1040 not required for
the IMF File, or Return not required to be mailed [to you by the IRS] or filed, for
Form 1040 - U. S. Individual Income Tax Return. This usually happens when you
stop filing. This code usually reflects the types of returns you’ve been filing over the
years. Remember, you’re not required to file until you actually file a return. The
agency then just takes your word for it and makes it a matter of record so that if you
change your pattern of filing, they will be able to track it.
The next item will require a little bit of time to understand. It’s known as the
Document Locator Number, or DLN. It has fourteen digits which are divided into
seven groups. The first group a has two digits and identifies the Filing Location
Code (FLC) of the particular service center or district office assigning the number to
the particular return or document input through the Automated Data Processing
(ADP) System. The fourteenth digit, or seventh group g, is the last digit of the year
of processing and is assigned by the service center computer at the time of the
original input.
The second group b, or the third digit, is the tax class which identifies the type of tax
each transaction involves. The categories are: 0 - Employee Plans Master File
(EPMF), 1 - Withholding and FICA, 2 - Individual Income Tax, Fiduciary Income Tax,
Partnership return, 3 - Corporate Income Tax, 990C, 990T, 4 - Excise Tax, 5 Information Return Processing (IRP), 6 - Non-Master File (NMF), 7 - CT-1, 8 FUTA, and 9 - Mixed - Segregation by tax class not required.
note:
The IRP is now identified as the Information Returns Master File (IRMF)
The fourth and fifth digits, Group c, are the document codes and I’ve listed the most
commonly used here: 17 - Subsequent payment input by Service Center, 18 Subsequent payment input by District Office, 47 - Examination Adjustment, 54 - DP
Adjustment, and 63 - Entity changes.
The sixth, seventh and eighth digits, Group d, is the Julian (day in serial) date as
measured against the nth day of the particular year for the creation of that
document. A true Julian date is the nth day from the beginning of the millennium;
but apparently, it has been truncated for use in these computer files. On occasion,
you may find that the Julian date in any one DLN exceeds the number of days in a
year. If you need to know the nth day of that year, just subtract 400.
The ninth, tenth and eleventh digits, Group e, are the block numbers, or blocking
series. This bit of information is quite involved but I’ll just summarize it here. The
blocking series 600-699 represents a non-taxable transaction, as does the 200-299
series. The blocking series 000-199 represents taxable transactions while the
portion under this series from 190-199 represents penalties resulting from
examinations where abusive tax shelters, aiding and abetting and frivolous incomes
tax returns were discovered. The blocking series 420-424 represents child support
assessments. The series 000-099 represents documents showing where an audit
return preparer submitted a case closing document. The blocking series 960-989
represents the EP (5500 series) penalty assessments, for things like filing amended
returns to claim all the taxes withheld during a tax period as a refund.
An example is from an IMF in which a notice of lien has been filed, in which a TC
code appears with DLN 29254-638-98064-4 which translates to the following
information: The File Location Code for the service center or district office assigning
the DLN is 29, the tax class is 2 “Individual Income Tax, Fiduciary Income Tax,
Partnership return”, the 54 is the document code for “DP Adjustment”, the 638 is the
Julian date, the 980 is the penalty for filing a frivolous return (amended return, $500
penalty), the 64 is the serial number and the 4 represents that the lien was filed in
1994.
I’ll review just a few more encryptions. “ASED” means Assessment Statute
Expiration Date, “CSED” means Collection Statute Expiration Date and “RSED”
means Refund Statute Expiration Date. Also, “FZ>” means Freeze Code and if it is
followed by nothing, there is no freeze on your file. There are many reason why a
freeze code may be entered but it’s usually because there’s some type of
investigation taking place. You can check your IMF for a TC 606 which means
you’ve met the “TC 606 criteria” for being labeled as an “illegal tax protester.” Those
criteria are reviewed in the next chapter, “Effective Letter Writing.”
One other code you may find useful for those of you having the initiative, or at least
interesting to those of you who don’t, is the Collectibility Indicator Codes. A
collectibility indicator will be placed in the entity section of the Master File whenever
there has been collection field activity (Collection Status 26). This information will be
communicated to AIMS (reflected on Form 5546 or AIMS Weekly Update), along
with any subsequent updates to bankruptcy or currently not collectible status. (AIMS
is Audit Information Management System)
Additionally, whenever any taxpayer (not limited to CS26) is updated to bankruptcy
or currently not collectible status AIMS will reflect that action and place an indicator
either on the Charge-Out (Form 5546) or on an AIMS Weekly Update Report.
Indicator Code Order of Precedence
Indicators
B=Bankruptcy
N=Currently Not Collectible
C-Collection Status 26
Weekly AIMS Update Reports Changes in
28=Bankrupt
29=Currently Not Collectible
30=Collection Status 26.
You can test to determine if you are suspected of fraud by following these
steps:
1.
If agent does not solicit tax returns - ask the agent: “Are you asking
me to file tax returns?”
2.
Ask agent which course of action he would recommend following. The
agent should refuse to give this type of advice.
3.
Ask the agent what types of penalties may be involved under the
circumstances. Ask the agent if he suspects fraud. Ask the agent if there is a
possibility of referral.
If the agent does not discuss these questions with you, your case will
probably be referred to the Criminal Investigation Division (CID).
Under the IRM 5200, the agent is required to “establish firm indications of
fraud” by taking the following actions:
1.
Interview you to determine the reason or the intent of your alleged
“non-compliance.” Ask the agent what he means by “non-compliance.” Ask the
agent which specific conduct would be considered “compliance.”
2.
The agent will record your statements verbatim.
personal characteristics such as:
b.
a.
your age
physical and mental health
c.
educational level
d.
occupation
He will identify
These are considerations to help the agent determine “a taxpayer’s ability to
comply,” whatever that means.
The agent will verify income from sources such as TDI Supplements, CC
TSIGN D, CC SUPRQ and copies of W-2s and 1099s. The agent will review your
records pertaining to personal income and expenses. The agent will also review
previous returns to verify income sources to be used in tax computations.
The agent will also review public records and make a physical inspection of
your home, or place of business. He will use this information to determine if you are
“prospering” and have the ability to pay.
If this information leads the agent to believe fraud exists, that is, gives him
“firm indications” of fraud, he will prepare Form 3212 which is a Referral Report used
in a potential fraud case.
Here are some other forms you might find useful:
Form 3449, contains verification of actual income received - will not be estimated or
based on previous filing - prepared for referral case
Form 3212, Referral Report of Potential Fraud Case
Form 5604, Section 6020(b) Action Sheet contains information on wages paid,
income tax withheld and FTDs
Form 4443, Summons Referral used on summons follow-up action when there is a
refusal to comply with summons
Form 3198, Special Handling Notice attached to each delinquent return to
determine if delinquency penalty should be assessed
Document 6469, Expedite Processing Cycle for each period in which delinquent
return is filed - attached to front of each BMF return submitted.
The two most important records you can ask for at the very beginning of a dispute
appear on my sample FOIA request form. They are:
1.
Information Returns Master File (IRMF) Transcript
2.
Form 4340, Certificate of Assessments and Payments.
Every 1099, W-2, K-1, 1098 and other income reporting form is posted to the
IRMF Component. This will tell you exactly which records the IRS has about you
and those are the only records you’ll want to bring with you to any summons,
especially if you’re a non-filer.
The Certificate of Assessments and Payments is what the government uses to
certify that an assessment was made against you. There is no record of
assessment, it does not exist. But by their own manuals it’s known as the 23C, yet
they will never produce it. This 23C “document” has a creation date and it’s specific
to a certain day of the week. I’ll quote from their own manual:
“(7) The Assessment ’23C’ date will ordinarily be the Monday of the
2nd week following the week in which these transactions are
processed and posted to the IMF Accounts, unless otherwise
designated by Accounts Division in appropriate publications.”
In other words, the assessment date is always on a Monday. And every
certificate I’ve seen over the years has complied with this procedure. You will want
to review these four cases regarding the assessment process: Brewer v. U.S., 764
F.Supp. 309, Curley v. U.S., 791 F.Supp. 52, Robinson v. U.S., 920 F.2d 1157 and
Portillo v. Commissioner, 932 F.2d 1128. These are “must read” cases if you want
to understand this aspect of the tax collection process.
The United States will provide a Certificate of Assessments and Payments when
compelled to do so under court process or the Freedom of Information Act. They
will use this record in lieu of any actual assessment, or 23-C, because they never
create this record. The court will presume the certificate to be sufficient unless
challenged as to its failure to be supported by any investigate history documents,
affidavits completed by revenue officers, or other records substantiating the
correctness of the certificate. Treasury regulations require that the Form 23-C
contain the taxpayer’s name, social security number and address, the name of the
corporation, the character of the liability assessed, the amount of tax, the taxable
period involved, and the signature of a responsible officer (26 CFR § 301.6203-1).
An incorrect amount stated on the actual 23-C, if produced, is not sufficient to
invalidate the assessment, nor will it be insufficient if the objection fails to show the
assessment to be entirely arbitrary. As long as the procedures and evidence upon
which the government relies to determine the assessment have a rational
foundation, the court will not look beyond the assessment. The inquiry focuses on
the merits of the tax liability, not on the IRS procedures.
The Certificate of Assessments and Payments must be completed and signed by an
assessment officer and contain the actual 23C assessment dates which would allow
the court to conclude that a Form 23C was signed on the date alleged.
SFR Assessments
The authority granted to the Commissioner of Internal Revenue, by 26 CFR
301.6020-1(b) and 26 CFR 301.7701-9 to execute returns required by any internal
revenue law or regulation made thereunder when the person required to file such
return fails to do so, is delegated to: 1. Revenue Agents; 2. Tax Auditors; 3.
Revenue Officers, GS-9 and above; 4. Collection Support function managers, GS-9
and above; 5. Automated Collection Branch managers, GS-9 and above; and 6.
Service Center Collection Branch manager, GS-9 and above. The authority
delegated herein may not be redelegated. This is found in Delegation Order No.
182 which became effective on January 8th, 1987. The agents are authorized to file
many different kinds of substitute returns such as the 1120 series, 720 series and
other business returns; however, no agent has ever been authorized to file a Form
1040 substitute for anyone. This information was obtained from IRS Manual 1229,
Handbook of Delegation Orders.
To continue what I’ve mentioned before about IRM 5200 relating to substitute
returns, Section 5290 “Refusal to File – IRC 6020(b) Assessment Procedure”
establishes the scope of the procedure. Section 5291 establishes that “…The
procedure applies to employment, excise and partnership tax returns. Generally,
the following returns will be involved. (a) Form 940, Employer’s Annual Federal
Unemployment Tax Return; (b) Form 941, Employer’s Quarterly Federal Tax Return;
(c) Form 942, Employer’s Quarterly Tax Return for Household Employees; (d) Form
943, Employer’s Annual Tax Return for Agricultural Employees; (e) Form 11-B,
Special Tax Return – Gaming Devices; (f) Form 720, Quarterly Federal Excise Tax
Return; (g) Form 2290, Federal Use Tax Return on Highway Motor Vehicles; (h)
Form CT-1, Employer’s Annual Railroad Retirement Tax Return, (i) Form 1065, U.S.
Partnership Return of Income. You should immediately make a request for records,
under the Freedom of Information Act, and ask for Substitute For Return (SFR)
forms prepared under authority of 6020(b) with the “Form 5604, Section 6020(b)
Action Sheet.” The Form 5604 is generated when a taxpayer fails to file any of
these returns and contains a complete explanation of the basis for the “assessment.”
The explanation should appear in Section 1 of the completed Form. When you
obtain these records, you might consider drafting a criminal complaint to the FBI,
based on what you find, as instructed in this book.
On October 1, 1986, the collection branch was delegated the authority to assess an
“IMF tax” (appears like that in IRM) and the Service Center Collection Branch began
substitute for return (SFR) processing. An SFR “assessment” is an audit process
where the initial action by SCCB (Service Center Collection Branch) is to file, what’s
technically known as, a dummy return for the taxpayer for -0- amount and then
assess the tax with a TC 290. This assessment is based on IRMF (Information
Return Master File, formerly IRP) information from the TDI Supplement file or the
IRMF transcripts. These particular agency records can be obtained using the FOIA
process. To learn more, you should obtain a copy of IRM 5200. This is easily
obtained from any official reading room. A list of locations for the reading rooms can
be obtained from your local IRS office or the regulations.
The CP 22E is currently the notice of assessment and it is dated the same as the
purported assessment. Most people receive the Notice the Thursday, Friday or
Saturday before the assessment is alleged to have occurred (i.e. when the RACS
006 or 23C is signed by the assessments officer). It does not seem to alert anyone,
despite the fact that the law, Section 6303 provides that the Notice will be sent after
the assessment and not later than 60 days after.
Collectively, we have seen hundreds of "We Changed Your Account" notices (CP
22E) that are dated the same date as the TC 300 or 290 Code in the IMF (Note: the
MF Stat 21 (first notice) date is the same as the assessment date). Many times the
postmark on the envelope was the Tuesday or Wednesday before the assessment
date. Each time those Notices were received on the Thursday, Friday or Saturday
and even on the day of the assessment, I had the people go down and open the
envelop in front of a Notary and notarize that the Notice was dated a particular date
and was received before the date. Still doesn't concern the court.
One of our subscribers even received his IMF that was generated on 9-17-90 that
showed a TC 300 date of 9-28-90. The transaction was obviously posted to the IMF
at least 11 days prior to the actual event. This still does not seem to have any
adverse affect on a collection proceeding. There are also problems in the
accounting under the Generally Accepted Accounting Principles.
Looking at the Individual Master File as the accounts receivable, consider the RACS
006 or the 23C as the general ledger. The IRS can go from the IMF on a particular
"taxpayer" to the RACS 006 or the 23C; however, there appears to be no way, at
least as far as anyone has been able to explain it satisfactorily to me, to go from the
RACS 006 or the 23C.
My recollection of general accounting was that you must be able to go from the
accounts receivable/payable to the general ledger and then take the general ledger
standing alone and work back and find particular accounts receivable/payable, that
would fall within the general ledger entries for that particular time period.
In order for there to be an accounts receivable, there must be an original billing. The
assessment certificate amounts to the original billing. It has to meet criteria of the
regulation to create the liability. If the original instrument that creates the liability
was never executed, the ledger is in error. This poor record keeping may give rise
to a federal question, lack of due process.
The IRS's failure to employ a specific agent to accept responsibility and liability for
claiming that someone owes a certain amount of taxes does not provide the
individual a fair opportunity to question the purported liability. The IRS has
developed a ruse to overcome the possibility of having to argue these challenges on
the merits by created a "Certificate of Assessments and Payments" or Form 4340.
I think "4340 presumption" is insufficient to allow a fair opportunity for hearing. I
would say that the fact that no officer certified the purported assessment prior to the
collection (CP 501-504 & levy/lien notices) has worked to deny the individual the
opportunity to question the responsible officer, because there is no responsible
officer. It denies the individual a fair opportunity for a meaningful hearing.
In a case called United States v. Dixon, 672 F.Supp. 503 (M.D. Ala), aff'd 849 F.2d
1478 (11th Cir., 1988), the government got the 4340's admitted under the secondary
evidence rules. What happened was the government filed a suit to reduce the taxes
to judgment and foreclose its tax lien. At the time the Collection Statute Expiration
Date (CSED) was six years (now it is ten) from the date of the assessment, not the
tax year, but the date of assessment.
If the IRS fails to provide the assessment certificate, the regulation provides the
remedy and a cause of action. The problem we've been confronted with is shifting
the burden of proof.
The Form 4340 and other such secondary documents still constitute "presumptive"
rather than "conclusive" evidence of liability so we have to have the means to get
around pandering judges who accommodate the fraud. From the offensive position,
the due process issue becomes the cause of action rather than a tax issue.
Several years ago, I did an IMF translation and a 4340 translation and comparison.
One of the ways to overcome the presumption on the 4340 is to show that no Notice
of Deficiency ever posted to it. TC 494 would be the NOD. Another way is to show
the discrepancies between the "description' provided for the transaction codes on
the 4340 against the definition in the 6209 manuals. TC 300 / 290 will generally post
on the 4340 as collection of a default on a 90-day letter as opposed to the definition
provided in the 6209. There are several ways to show errors.
Another way to attack it is on the 'best' evidence rule. The IMF being the 'master
file' from whence the 4340 is extrapolated, you can show that the certification on the
4340 is merely that it is a 'true and correct copy of the record' and the IMF is the
record. It says so in the manuals.
In a bankruptcy proceeding, a subscriber lost on the FRCP Rule 12(b)(6) dismissal,
but the government wouldn't submit the order to the court. We pulled certified
copies of the docket once a month, checked it weekly to be certain they didn't slip
one in on us. The case sits in the dead file at the court, they don't collect and she
doesn't pay. We told the US Attorney we'd go for sanctions if they tried any more of
this crap in court. It worked.
The following is the model letter we are using to obtain disclosure assessment
Certificates.
[Sender]
[Address]
[City state zip]
SSN: [000-00-0000]
Assessment Officer
Austin Region Service Center
Internal Revenue Service
P.O. Box 934
Austin, Texas 78767
[Date]
Re
records request under 26 CFR § 301.6203-1 and 5 USCS § 552a
Greetings:
This request is being made under authority of 26 CFR § 301.6203-1, which states
that, "If the taxpayer requests a copy of the record of assessment, he shall be
furnished a copy of the pertinent parts of the assessment which set forth the name
of the taxpayer, the date of assessment, the character of the liability assessed, the
taxable period, if applicable, and the amounts assessed," and the Privacy Act at 5
U.S.C. § 552a for support documents for assessment certificates.
This request pertains to the years [year] through [year].
following records:
Please send me the
1. Procedurally proper assessment certificates for the principal for each class of tax
assessed;
2. Procedurally proper assessment certificates for the interest for each class of tax
assessed;
3. Procedurally proper assessment certificates for the penalty for each class of tax
assessed;
4. Any and all jeopardy assessments;
5. Any and all deficiency assessments;
6. Procedurally proper non-tax penalty assessments for such things as frivolous
filing, etc.;
7. Procedurally proper assessments for non-tax penalty interest;
8. Support documents for each assessment.
If classified, you may redact information on each assessment certificate not required
to be disclosed by 26 CFR § 301.6203-1 other than the assessment officer
signature, certification and date of execution.
Your response may be used in official forums. Therefore, please certify all
documents with the Form 2866 Certificate of Official Record, or in the event there
are no assessments for any given calendar year specified above, certify your
response with the Form 3050 Certificate of Lack of Records. You have my firm
promise that I will pay the cost of certification and/or photocopying, up to an amount
not to exceed $50 without prior written agreement. The requested documents are
for my own use.
The current edition of the Internal Revenue Manual posted on the Internal Revenue
Service website verifies the necessity of procedurally proper assessments for seven
of the eight classes of tax administered by the Internal Revenue Service. Item #2 for
each class stipulates, "All penalty [or principal or interest] assessments must be
recorded on summary Records of Assessment (Assessment Certificate). The
Assessment Certificate is the legal document that permits collection activity."
Radinsky v. United States of America and United States of America v. Miller address
the necessity of procedurally proper assessment certificates sufficiently to resolve
any question concerning the lawful requirement for assessment certificates. Do not
send documents other than actual assessment certificates and support documents
as computer-generated compilations and other secondary documents are merely
presumptive evidence where only procedurally proper assessment certificates
constitute conclusive evidence of liability.
Please send the requested documents, or certification that the requested documents
do not exist, within twenty (20) days.
Best regards,
[Sender]
I hereby certify that on the ___ day of [month] [year], [Sender], known to me,
endorsed this request for assessment certificates and other documents.
______________________
Signature of Notary
(ls)
A list of the different types of transcripts maintained in any given Inividual Master File
1.
SPECIFIC
2.
OPEN
3.
COMPLETE
4.
ENTITY
5.
STEX (B Freeze)
6.
RFND LIT (TC 520)
7.
REFUND (TC 846)
8.
REFUND-E (TC 846)
9.
$1,000,000 Refund Transcript
10.
TDI-REFUND
11.
Refund-S (TC 846)
12.
TRANS-844 (TC 844)
13.
LITIGATION (TC 520)
14.
EXES-TC 840
15.
OIC (TC 480)
16.
NMFL (TC 480)
17.
KITA (TC 480)
18.
COMBAT ZON
19.
UNREVTC 520 (TC 520)
20.
TDI RESRCH (See Project 720)
21.
INTEL (See Project 735)
22.
REACT NMF (TC 130)
23.
CSED
24.
MARRIED FILED SEPARATELY
25.
MULTIPLE FILER (TC 424)
26.
Cr El Decd (See Project 439)
27.
TRFPENACT
28.
VIRGIN IS (TC 150)
29.
STAT TRANSCRIPT
30.
QUEST W-4 (See Project 411)
31.
FOLLOW-UP W-4 (See Project 411)
32.
AMRH (See Project 712)
33.
AM-X (See Project 712)
34.
CV PN CRED
35.
SC ADDRESS
36.
Hostage
(TC 424)
37.
NRPS
38.
DECDESCR
39.
STIM
40.
UNP 71 REL
41.
RSED
42.
A/R Clean-Up (See Project 713)
43.
LPCANCEL
44.
PMTOVERCAN
45.
OICDEFAULT
46.
DEFAULTFSC
48.
TDIFRZ-150
49.
TDI-EXAM
50.
HighRisk
51.
Deferral
52.
HighDollar
I don’t know why item number 47 is missing; this is just the way it appeared in the
manual. Don’t be too concerned about the meanings of these other components;
you’ll probably never need them to actually solve a problem. The most important
ones are those that I’ve already indicated.
PINEX
I was unpleasantly surprised on one case when I thought I could get an abatement
for a math error and then was informed by the agent that the subscriber owed
interest and penalties which were not reflected in the IMF we requested. They did
appear on the PINEX Component and I’ll explain what this is here:
The Taxpayer Correspondence Study recommended that the IRS provide
explanations of all penalty and/or interest charges to the taxpayer when a balance
due notice or a refund is issued. This recommendation resulted in the development
of the Penalty and Interest Notice Explanation (PINEX) Project.
PINEX provides the capability to generate a notice of explanation to the taxpayer
upon request. This notice includes a computation of selected computer generated
penalties, debit interest charged and credit interest paid. The notice generation
capability was made available in all Service Centers and District Offices in July
1989, except for computations and explanations of failure to deposit penalty. PINEX
notices will be reviewed by the tax examiner requesting the notice and, if correct, will
be mailed to the taxpayer.
PINEX also provides the ability to obtain screen displays of penalty and interest
computations for an immediate response to telephone inquiries or walk-in requests
made to the District Offices. IRS personnel may also find the screen displays helpful
in analyzing penalty and interest transactions in general. You can request that a
PINEX Notice be mailed to you or you can obtain one at your local IRS Office.
I’m not going to get into too much detail on decoding. This should be more than
sufficient information for you to use in the course of applying what you learn in this
text toward resolving any disputes you might have with the IRS.
Analysis of Form 5546:
This internal form is also known as the Examination Return Charge-Out form. It’s
generated when a taxpayer’s return, or IMF, is selected for examination. According
to the IR Manual under AIMS - Use of Forms and Special Handling Procedures, this
Form has the following item of data. This is also an important record to request and
you can include it in your first one. There may be none available however, it just
depends on whether or not any of your returns were selected for audit, or where
your IMF was selected for audit because you didn’t file.
Item 1 on Form 5546 contains the EIN or SSN of the taxpayer. Line 2, Element 2
contains the Master File Tax Account Codes and Form Numbers. The form
numbers include the CT-1, 11 (obsoleted), 11-C, 706, 706GS(D), 706GS(T), 706NA,
709, 709A, 720, 730, 940, 940-EZ, 940-PR, 941, 941E, 941PR, 941SS, 942, 943,
943PR, 1040, 1040NR, 1040PR, 1040SS, 1040A, 1040EZ, 1040NR, 1040PR,
1040SS, 1040EZ, 1041, 1042, 1065, 1066, 1120, 1120F, 1120S, 1120L, 1120M
(obsoleted), 1120A, 1120PC, 1120REIT, 1120RIC, 1120FSC, 1120POL, and 2290.
I did not include the two digit MFT Codes.
For the Non-Master File Tax Account Code and Form Numbers, I’ve include again,
only the form numbers: CT-1, CT-2, 11 (obsoleted), 11-B, 11-C, 678, 706, 706A,
706NA, 709, 720, 730, 940, 941, 941SS, 941PR, 942, 943, 943PR, 957 (obsoleted),
958 (obsoleted), 959 (obsoleted), 1040, 1040C, 1040PR, 1040SS, 1040A, 1040NR,
1040PR, 1040SS, 1041, 1042(1), 1065, 1066, 1120, 1120F, 1120S, 1120L, 1120M
(obsoleted), 1120DISC (obsoleted)/IC, 2290, 2438, 3780 (2) (obsoleted), 3845
(obsoleted) 4638 (obsoleted), and 8288. The (1) designation means that the form is
centrally processed at the Philadelphia Service Center (PSC) and (2) means that the
form is centrally processed at the Andover Service Center (ANSC).
There are other account codes and form numbers but they are not worth mentioning
at this time. The next chart is the District and Service Center Codes and appear on
Form 5546 in Line 3, Element 54 and Line 5, Element 69 and so on AMDISA. They
are most helpful when decoding a Document Locator Number (DLN).
Code
District
01
Augusta (Maine)
Numerical Listing
SC
Code
District
ANSC 52
Baltimore (Md.)
PSC
02
Portsmouth (N.H.) ANSC 54
Richmond (Va.)
03
Burlington (Vt.)
ANSC 55
Parkersburg (W Va.)
04
Boston (Mass.)
ANSC 56
Greenboro (N.C.)
MSC
05
Providence (R.I.)
ANSC 57
Columbia (S.C)
ATSC
06
Hartford (Conn.)
ANSC 58
Atlanta (Ga.) ATSC
07
Atlanta SC
08
Andover SC ANSC 61
09
Kansas City SC
KCSC 62
Nashville (Tenn.)
MSC
11
Brooklyn (N.Y.)
BSC 63
Birmingham (Ala.)
MSC
13
Manhattan (N.Y.)
BSC 64
Jackson (Miss.)
MSC
14
Albany (N.Y.)ANSC 65
16
Buffalo (N.Y.)
ANSC 66
Puerto Rico PSC
17
Cincinnati SC
CSC 68
Sacramento (Ca.)
18
Austin SC
19
Brookhaven SC
BSC 72
New Orleans (La.) MSC
22
Newark (N.J.)
BSC 73
Oklahoma City (Okla.)
23
Philadelphia (Pa.)
PSC 74
Austin (Tex.) AUSC
25
Pittsburgh (Pa.)
PSC 75
Dallas (Tex.) AUSC
28
Philadelphia SC
PSC 76
Houston (Tex.)
29
Ogden SC
31
Cincinnati (Ohio)
33
Laguna Niguel (Ca.)FSC
34
Cleveland (Ohio)
CSC 83
Cheyenne (Wyo.)
OSC
35
Indianapolis (Ind.)
CSC 84
Denver (Colo.)
OSC
36
Chicago (Ill.) KCSC 85
37
Springfield (Ill.)
KCSC 86
Phoenix (Ariz.)
38
Detroit (Mich.)
CSC 87
Salt Lake City (Utah)
39
Milwaukee (Wis.)
KCSC 88
Las Vegas (Nev.)
41
St. Paul (Minn.)
KCSC 89
Fresno SC
42
Des Moines (Ioaw) KCSC 91
Seattle (Wash.)
43
St. Louis (Mo.)
Anchorage (Alaska) OSC
ATSC 59
AUSC 71
OSC 77
Jacksonville (Fla.)
ATSC
Louisville (Ky.)
CSC
Fort Lauderdale (Fla.)
Little Rock (Ark.)
San Jose (Ca.)
CSC 81
82
PSC
CSC
ATSC
OSC
MSC
AUSC
AUSC
FSC
Helena (Mont.)
OSC
Boise (Idaho)OSC
Albuquerque (N. Mex.)
KCSC 92
SC
AUSC
OSC
OSC
FSC
OSC
OSC
45
Fargo (N. Dak.)
OSC 93
Portland (Oreg.)
OSC
46
Aberdeen (S. Dak.) OSC 94
San Francisco (Cal.)
47
Omaha (Nebr.)
OSC 95
Los Angeles (Cal.) FSC
48
Wichita (Kans.)
AUSC 98
International PSC
49
Memphis (Kans.)
AUSC 99
Honolulu (Hawaii)
51
Wilmington (Del.)
PSC
FSC
FSC
Special Messages appear on Line 11, Element 16 as the Examination Information
Report. This field just indicates if returns have or have not been requested, or if
another record is on the AIMS file for the same TIN and file source of taxpayer. DIF
Selection Codes appear for item 19. There appear to be no DIF codes for a 1040,
but are for BMF activities only.
The next line is the most interesting and it’s the reason why I’m including this
discussion at all. It displays Activity Codes on Line 14, Element 20 of Form 5546.
These activity codes are categorized by taxable activity. According to the IR
Manual, here is a list of all the taxable activities identified by their respective codes:
Taxable Activity
Code
Form 1040A 530
Form 1040, 1040C, 1040NR, 1040PR,
1040SS, 1040 with Form 2555
Form 1041
Form 1065 480, 481, 483
Form 1066
531, 532, 533, 534, 535, 536, 537,
538, 539
495, 496
489
Form 1120 DISC
224
Form 1120 (including 1120L, 1120M, 1120PH) 203, 209, 213, 215, 217, 219,
221, 223, 225
Form 1120-F
259, 263, 265
Form 1120-FSC
241
Form 1120S 202
Form 1120S 287, 288, 289, 290
Estate 415, 417, 419, 420, 421
Gift
435, 437, 439
Employment
464, 465, 466, 467, 468, 469,
470, 471, 472
Excise000 - 198
Miscellaneous
501 - 510, 588, 591 - 599
Other Taxes 991, 992
The reason for the different codes in each category under the Form 1040, 1041,
1065, 1066 and 1120 series is because of levels of income. Higher levels of income
categories have higher activity codes.
Answering the question of what constitutes income, or a source of income, is not
sufficient to determine whether or not someone has a filing requirement. The
government taxes benefits, and they do it in such a way as to make it appear as if
the benefit can be traced back to the government, as if the government can be
credited with your intellect or labor. There is a firm indication that it’s the filing of a
tax return that is the taxable activity. Everywhere I turn, this realization strikes me.
When you read the actual manual from which this information was obtained, you’ll
find that for activity codes 531 through 539, there is no description as to the actual,
real activity or business enterprise as there is for all the other forms under Estate,
Gift, Employment and Excise. It appears as if the government has categorized
levels of income, assigned them activity codes under the Form 1040 series, and
when you file, you become a taxpayer under that particular category relative to what
you report.
You can also review Section 861 of the tax code and 1.861 of the federal regulations
you’ll find a list of income sources which are taxable. I would think these are
mandatory taxes and that when you receive compensation for non-government work
within any of the fifty states, it’s not taxable income because it’s not recognized by
the tax code. This is true even though your pay is defined as a gain that has been
realized; it’s just not recognized, the third requirement before any tax liability can
attach.
Under 26 CFR § 861-8(f)(1), these sources include foreign source items of tax,
foreign mineral income, foreign oil and gas extraction income, citizens entitled to the
benefits of section 931 and the section 936 tax credit, resident of Puerto Rico,
income tax liability incurred to the Virgin Islands, income derived from Guam, China
Trade Act corporations, income of a controlled foreign corporation, income from the
insurance of U.S. risks, international boycott factor … attributable taxes and income
under section 999 and income attributable to the operation of an agreement vessel
under section 607 of the Merchant Marine Act of 1936.
On Line 15, Element 22 of this Form 5546, you’ll find one of many Source Codes
indicating various types of information about a taxpayer or what usually posts to the
IMF or BMF for a particular taxpayer. It includes the following codes and
explanations: 01 for Automatics, 02 DIF (Discriminate Function), 03 Unallowable
Items, 04 Multiple Filers, 05 Related Pick-Up—DIF Related, 06
DIF—CORR—Returns, 07 Type B Claims—Medium Examination Potential, 08 SelfEmployment Tax Returns, 09 Type C Claims—Low Examination Potential, 10 DIF
Related Multi-Year Examination, 11 Studies, Tests and Research, 12 Delinquent
Return—DIF Related, 13 Married Taxpayers Filing Separately, 14 High
Underreporter, 15 Math/Clerical Error Abatement, 16 DEA Class 1/Other Narcotics,
17 Tax Shelter Program, 20 Regular Classification, 23 IRA Recovery, 24 Known
Nonfiler—Examinations initiated to known nonfilers, 26 Minimum Tax Program.
It’s interesting to note how they keep track of married couples filing separately, DEA
cases, non filers, late filers and so on. There are at least thirty-three other source
codes of a similar nature, but I don’t see listing them as being all that helpful to your
further understanding of this Form 5546. You can obtain the IR Manual relating to
AIMS—Use of Forms and Special Handling Procedures, probably through the
Freedom of Information Act or at any Reading Room. Mine was obtained from a
subscriber who visited the IRS Reading Room in DC. These source codes are also
grouped by category as you’ll find if you do further research.
Item 25 deals with sort keys that indicate the sequence in which the charge-out
documents are sorted for computer printing. Item 26 deals with form numbers and
legends; for example, this item would display 424 when there is an examination
request for any of the forms. The form number corresponds to a legend which
describes the charge-out account status of IMF or BMF.
Items 27 and 28 reflect prior examination results. If Master File has a record of a
prior examination action, a record of the most recent tax period will appear in Item
27 and the next most recent in Item 28. Item displayed are month and year of tax
period, disposal code, and the amount of examination results. A minus sign
indicates over-assessment.
Elements 27 through 28, Lines 19 through 20 reflect disposal codes which indicate
file status such as whether or not it’s an agreed case, if a tax court petition was filed,
if the taxpayer is in default, etc. Organization Codes appear on Line 19, Element 29
and represent returns filed by revenue agents. Item 30 is a table of status codes
telling where the IMF or its records are physically located with regard to the service.
Project Codes appear on Line 23, Element 34 and are assigned at National Office
Examination (EX:F:O) for use in monitoring Examination programs. I’ll just list a few
of them here: Code 001 is described as “Drug Enforcement Task Force”, 009 is
described as “Foreign Controlled Corporation”, 101 is described as “Oil and Gas”,
and 149 is described as “Nonfiler—Fraud”. There are about 250 of these codes.
Push Codes and Special Handling Message Codes appear on Line 23, Element 34
on Form 5546. A push code is used to generate a Transaction Code (TC) 424,
Examination Request Indicator at Master File to bring the account under AIMS
control even though no record of filing is present. When push codes are used,
requests for returns and assemblies will not be immediately rejected even when no
record of filing has posted to Master File.
When a TC 150 (Return Filed and Tax Liability Assessed) is posted, these push
codes automatically establish the full account on AIMS. All codes are erased from
the AIMS data base as soon as a full AIMS record is established.
Because the purpose of the push code is to keep the request at Master File until the
return has had a chance to be processed, it can be used for current year pick-ups,
delinquent returns or substitute for returns, but should not normally be used for prior
year tax returns. A listing of all skeletal records is generated quarterly.
All push codes remain on the AIMS data base for 26 months after the input of the
request unless replaced by a full record.
A notice is generated at the service center when no record that a return,
requisitioned using a push code, has posted at Master File. A CP 187 is also issued
if Push Codes 010, 109-041, or 121 posts and a TC 590/591 is present in the
module. A Notice CP 87 is issued for an IMF return, a Notice CP 187 for a BMF
return. These notices are titled “No Return Posted, TC 424 Request Posted.” The
push code number is printed on the CP Notice. Procedures for processing these
notices are in text (10)42 of IRM 48(13)2. AIMS—District Office and Service Center
Processing Handbook.
If a TC 150 is not posted to the module, the CP 87/187 will generate the same cycle
as the TC 424 if a Push Code 010 is used. One copy of the CP notice resulting from
Push Code 010 is routed to the related return district as notification that no return
has been processed. One copy is sent to the principal entity district.
If TC 150 is not posted within 12 cycles of the TC 424 transaction date, CP-87 or
CP-187 is generated.
If the TC 150 is not posted to the module within 8 cycles of the return due date as
extended, CP—87 or CP—187 is generated.
Push code 039 (Item 8) is used to intercept file subsequent year filed returns. When
the return is filed, it will be associated with Form 5346, Examination Information
Report. Organization code 1000 or 2000 must be used with this push code.
Push code 037 (Item 9) is used to establish AIMS control of returns that have
potential of being referred to CID. A TC 424 will post to Master File which will alert
other District Offices that an examination is being conducted. A CP 187 will be
generated for BMF account only. The record will age off to AIMS after 26 months.
If code 041 was used to requisition the return, CP 87 is generated after 20 cycles
and CP 187 is generated after 22 cycles.
Push code 049 is used to establish AIMS control of returns with a 91X freeze. CID’s
approval should be secured before establishing the case on AIMS. The return may,
however, be closed as nonexamined or protested to Appeals before the 91X freeze
is reversed.
Push code 121 is used for BMF accounts only, by the Tax Shelter Prefiling
Notification Program. This code freezes refunds and generates subsequent year
returns to examination.
Requests containing special handling message codes generate processing
instructions on Form 5546. These codes are used in the service center in the
association of requests for multi-year case files before delivery to examiners and
also to indicate that the attached return requires special handling. These codes are
specified by the Chief, Service Center Classification.
Exemption – Accepted for Value
I'd like to begin this explanation by defining the title of the chapter. The
“settlement of claims” refer to what most people term “payment of debt”. I'm going to
introduce you to some facts and history that should match with some things you
already know and then force you to rethink some things you thought you knew about
money and the United States.
At this time in history, the United States is bankrupt, it is not going to be, but
has been operating in bankruptcy since 1791. It was reorganized in 1861 (70 years
later) and then again in 1931 (another 70 years later) and then once again, exactly
on September 11th 2001 (another 70 years later).
The Federal Reserve Act of 1913 and the Internal Revenue Act of 1913 is
each “a head of the same monster” and did not come into full operation until 20
years after their enactment. Twenty years is the time needed for objection by the
people who would be adversely affected (us), but since no one objected, the
bankruptcy continued. It's my belief that the American Civil War was only about
taking the property of the southern farmers to satisfy claims being made upon the
United States by the Rothschilds. The farmers refused to give up their rights so they
were taken by force and this is the reason we now have “deed ownership” to our
land, what they know call “property”. I also believe the purpose of the 1931
bankruptcy was take add to the taxation scheme with entitlement programs such as
social security and you can see how this bankruptcy reorganization plan appears in
Title 5 of the United States Code, Section 552(a), The Administrative Procedures
Act, now known mostly as Homeland Security.
Technically, there can be no payment of any debts in the United States
economy every since FDR's “New Deal” (1933-1936). Literally there is no money,
and you cannot “purchase” anything in this economy. We are left with only being
able to “discharge” debts, that is, transfer the liability of the debt from “person” to
“person”. Please also see House Joint Resolution 192. The medium through which
we do this is the Federal Reserve Note, it's not a dollar, it's a note, an IOU or
technically, a perpetual annuity bond (debt).
Instead of purchasing, we are conducting our business through transactions
known as “bailments”. It is the same type of transaction involved with exchanging
an item of value with a pawn shop for a receipt and cash, it's a bailment, not a
purchase. And everything in our economy is a bailment and not a purchase unless
you are paying in gold or silver or trading items or services of like value that are not
denominated in Federal Reserve Notes.
I know this is probably enough to make your head spin, but if you can follow
along, I'll introduce you to a new world of economic freedom.
Because there is no money, and because the United States has pledged your
property, the land, resources and your life's labor (birth certificate or foreign situs
trust) for the debts of the United States, the supreme court held in 1936 that the
United States must provide you with a remedy, or a means to settle claims using the
same type of money that the banks use, “money of account”. Right now, we are
paying our debts using money we earned, money with equity or value. The banks
pay with money of account, they just create it from our signatures, and up until
recently, this put you at a huge economic disadvantage to those few bankers who
created this system and understand it.
The remedy is provided through what is technically known as a cestui que
trust (ses'-tu-kay), or your social security account. The social security account
includes a pension fund, but we are not talking about this at all. The aspect of the
account I'm talking about here is commonly known as a “pre-paid” or “set-off”
account. Many times this is referred to as your “exemption”. It is used for the
settlement of claims, or debt “in the public”. Normally, we use our personal checking
account (represents our equity or labor) to set off claims or debts. But this “pre-paid”
account allows us to make an order (accounting instruction) to settle claims of debt
from banks, tax collectors, courts, traffic tickets, debt collectors, insurance
companies, student loans, any debt that is registered in the public forum. The prepaid account cannot be used for “buying” items or services; it can only be used for
the settlement of existing debts.
One example is that while you cannot use your pre-paid account to “pay” your
cable bill, you can pay your cable bill with a credit card and use your pre-paid
account or exemption to settle that claim. I'm going to walk you through the method
and then show you an example.
First, this is an accounting procedure, and it involves making a restrictive
endorsement on a bill. We should all be familiar with endorsing a check for deposit;
this is the same thing except we're now going to add some terms to it, or to our
signature on the endorsement. The endorsement should be written in blue ink, but
I've heard red and combinations, but you are safe using only blue. You want to write
at a 45 degrees angle on the top center two-thirds of the page where the balance
owed appears. Try to write in the white space and legibly.
This endorsement allows the claim to “pass through” to your pre-paid account
so you can access the funds, or so the IRS can settle the claim for you. This is the
language: “Accepted for Value, Exempt from Levy, Deposit to The U.S. Treasury
and Charge the Same to: FIRST M. LAST 000-00-0000”, where the name you print
here should be identical to how it appears on the social security card.
Next, you need to write what is known as a “Money Order”, it tells them how
much to transfer or at least gives them a “blank check” so that they can enter the
correct amount. There are many technical names for this, a note, a check, a bill of
exchange, but let's just call it a “money order” for now. In most cases you will find a
payment coupon or voucher as the bottom third of the page, many times with a
perforation or indication to cut across the line. There is no need to separate this
section although some people do. Instead, you will need to locate the best space in
the top center where you can write “MONEY ORDER”. Then if the date does not
appear on the top right corner of that section, write it in that location. There is
sometimes an amount of money stated already, if you want to use that, use it. Or,
sometimes the amount is left blank, so you can write in an amount up to the limit of
the total debt. Keep in mind that if the total debt is settled this way on a credit card
debt it might result in your account being closed.
Many people make the money order for just under the total debt. If there is
not payment voucher demarcated on the last third of the page, the entire page or
document then becomes the money order and you can prepare it just the same.
Next, find a good spot to write out the “Pay to” line. It should read “Pay to:"
and then the name of your creditor or the claimant, such as “Bank of America”. And
then underneath the amount write out the amount in words just like in a check, “so
many dollars and so many hundredths of a dollar” (or cents or xx/100).
At the very bottom of this money order, in the right corner, you want to write
“By:” in blue ink and then sign your name in blue ink. Then write “EIN” in blue and
write out your social security number again with no dashes, 000000000.
Underneath this line and in the last possible space of the money order, write
“Authorized Representative”. Everything is written in blue ink and signed in blue ink.
If the back of the billing statement is not part of the bill showing how much is
due, write (SEE REVERSE) and nothing more. Do this for every page of the bill, but
what I prefer is to take only the portion of the bill with the total balance and place the
endorsement on that.
Finally, you will need to create a voucher order using IRS Form 1040-V. You
can download the most recent for from www.google.com by searching on “Form
1040-V” and you should find the one for the previous year, for example, if this is the
year 2012, look for the 2011 revision.
You will need to include another set of instructions just above the document
title “1040-V” and be sure to use all capital letters and write in blue ink only. Of
course this is an example, so put the current date and correct information for your
situation.
ACCEPTED FOR VALUE
EXEMPT FROM LEVY
PAY TO: THE U.S. DEPARTMENT OF TREASURY
EXCLUSION ID: 000000000
06/29/2012
In box 1, write your SSN with no dashes, 000000000, draw a line in box 2,
leave box 3 blank so that the IRS c an determine the correct amount and then in box
4, enter your first name and middle initial in all capital letters and then your last
name in all capital letters in the next box.
Draw another line for the spouse name and then enter your address, city,
state, ZIP and “USA” where indicated. At the very bottom right corner, sign just like
you did on the money order, but omit your SSN this time. Remember to flip it over
and endorse the 1040-V just like a check. You can cut off the top part showing the
instructions first or last, but just remove them either way before you mail it. It will
look like a check that you can attach to the bill/money order.
This is legally sufficient to create a security, or today's definition for “money of
account”. In many cases you may need to resubmit the money order, some people
have reported having to send this a dozen times and I believe that “the system”
doesn't want people to use this remedy, so the IRS deliberately refuses to process
the settlement claims. This is the same as unlawfully withholding your money, but
we'll learn more about that later.
You can use a new bill with a different date or amount without a problem, but
if you are using a certified copy of your original, it must be noted in some kind of
sequence number on the face of the instrument so as to avoid being considered a
forgery. Keep a copy for your records so you can log which debt you settled with
your exemption and follow up if necessary.
I prefer to send these via certified mail in a 9” x 12” white envelope. The
accounting function is the Internal Revenue Service, it's their responsbility to ensure
that all accounts and claims presented and filed with them are settled. The IRS
manages the accounting for the bankruptcy of the United States and the Canadian
tax system. The IRS is subordinate to the International Monetary Fund (IMF). The
IMF is the accounting function for the world. If the IRS fails to perform or fulfill its
duties for the accounting under the bankruptcy provision, the IMF will impose
penalties and enforce the obligations.
The are the addresses where you can mail your exemption claims.
recommended is Ogden Utah.
IRS Technical Support Division
C/o Treasury UCC Contract Trust Stop 4440
The most
Internal Revenue Service
Internal Revenue Service P. O. Box 9036
1500 Pennsylvania Avenue, NW Ogden, UT 84201
Washington, DC 20220
Internal Revenue Service
Criminal Investigation Division
Box 192
Covington, Kentucky 41012
Choose one address and send all of your settlement claims at the same time
to that one address. Many of the people I've spoken with use the Ogden address,
so do I. It's your choice however. The IRS is required to process these claims
within sixty days, and typically it has been known to complete them within two to six
weeks. If you're using this for a credit card or mortgage, request a payoff statement
and continue making your regular payments (unless you've chosen to default).
Make them online, or via phone or with a copy of the original bill so that you can use
the original bill for the set off instrument (money order). That way, if the settlement
extends beyond the payment due date, you won't be late. And eventually you can
expect a refund check or credit for an overpayment once the debt is settled. Expect
to make two more payments before you receive some indication of the settlement
having been completed. This is not a friendly process so be patient, sometimes
you'll have to resubmit several times. Many times the IRS will try to intimidate you or
discourage you from filing the settlement claim, remember that the system wants to
take your equity and it doesn't like to let you out, and more than likely your creditor is
using your exemption, stealing it I should say. I'll explain how to respond if the IRS
sends you a frivolous return notice.
Keep a black and white copy for your records. I like to keep a color image on
my computer and make a notation on the copy that it is in fact a copy of the original,
using the date as the sequence number.
Once the settlement is completed, the IRS will post the amount to your
Individual Master File incorrectly as taxable income. The banks do this all the time
and we never hear about it, but as for the IRS, you can correct the file by including a
Form 1099 A Corrected and a voucher with your tax return. This is not necessary if
you want to simply use your exemption to settle whatever claims the IRS wants to
send you. I prefer to do things the right way, so I recommend correcting the record
with the 1099 A Corrected Form.
What happens if the set off claim is not processed within sixty days? The
only thing I can suggest at this point is to continue to send the claims until the
account is settled. I am not aware of any legal action you can take to force the IRS
to perform its accounting as required under HJR 192 and the bankruptcy provisions
of Title 5, Section 552(a).
If you do receive a frivolous return penalty notice (LTR 3175 & 3176C),
respond with a Form 843, Claim for Abatement and Refund. Enter your SSN as
indicated, legal name, and enter your SSN as an EIN in the space following as
indicated, e.g. 000-00-0000 and then 00-0000000.
For line 1, enter “none” to “none” and line 2 is “$5,000” or whatever the
proposed penalty is, and notice that the first 3175 is just a warning. Skip line 3 for
Type of tax and on 4, “none identified”. On line 5a, select “Reasonable cause or
other...” and for b, “LTR 3175C is not relevant, sent in error”. Skip line 6, and for
Line 7, put “Your notice fails to identify specific frivolous arguments and fails to
respond or pertain to any tax return or identify any applicable penalty statute.
Please review IRS Bulletin 2007-14. Your letter is erroneous as it appears to
respond to an exemption claim for settlement and closure of an accounting. Please
refer this matter to trained personnel who understand how to process exemption
claims pursuant to HJR 192. Please also be advised that failure or refusal to settle
claims is against public policy and constitutes the unlawful withholding of funds.
Please note also that I received your letter around _______ but your letter is dated
__________.”
Remember to put the relevant dates you received the notice and when it's
dated in the blank lines and remove the lines. Include a copy of their letter and keep
copies for your records.
Effective Letter Writing
This chapter will show you how to write a letter to the IRS, ask a question and get an
answer every time! I’ve had the most success in working through the Problem
Resolution Office and they never question my standing to assist a subscriber. They
don’t bother me about any power of attorney and they always call and respond in
writing in response to my inquiries and complaints.
This office will assist you when you can present a factual dispute to them meeting at
least one of the following criteria:
1.
Refund - a second or subsequent refund inquiry received 90 days after
the first filing of an original or amended return or a claim. NOTE: An inquiry
received prior to the 90 days should not be counted in applying the criteria. Both the
first and second inquiries must be received after the 90 days to be counted in
applying the criteria.
2.
Inquiry - A question (except a refund inquiry) received in person, by telephone
or correspondence, requiring assistance or information on the same issue and (a)
the taxpayer has not received a response by the date promised in the
acknowledgment, or (b) as least 45 days have passed since the initial inquiry and
the taxpayer has not received an acknowledgment or final response.
This also includes inquiries or complaints received in response to Service-generated
correspondence or notices, if action or response to the taxpayer would be required
and the Service’s failure to do so would adversely affect the taxpayer.
3.
Notice - an inquiry in response to a third (such as 503, 517 IMF or 504,
517 BMF) or subsequent notice, which indicates a problem with incorrect action or
lack of action by the service to resolve a complaint with a prior notice or notices.
You will find that when you receive a CP 515, 516, 517 or 518, and request a
determination letter as I’ve explained in this book, the PRO will be able to assist you
if you don’t get the answer or if they realize they’ve been caught and try and avoid
making the determination.
4.
Administrative Recourse - a taxpayer is unable to discuss the
recommendations or actions of a Service employee with that employee’s manager
(or higher level manager), or, having had the discussion, the situation remains a
problem for the taxpayer and there are no established formal appeals procedures, or
the taxpayer’s right may have been abridged.
5.
Other - a contact indicating that the use or normal channels, established
systems or procedures has not been successful in resolving the complaint or inquiry
of the taxpayer; or it is in the best interest of the Service to include the complaint or
inquiry in the PRP program. For example: failure to deal with an extreme hardship
or a gross Service error.
Any complaint that satisfies the above criteria, and meets any one of the following
criteria would be excluded from requiring a response from the Problem Resolution
Office.
1.
2.
if an established administrative or formal procedure should be used;
if an appropriate response has previously been provided to the taxpayer;
3.
if the resolution of the problem is solely the responsibility of another Federal,
state or local agency;
4.
if a nontax administrative matter with the Service is involved, such as,
Inspection, Disclosure or Personnel;
5.
if the case is under the jurisdiction of the Criminal Investigation Division;
6.
if a tax protester related issue is involved;
7.
if a resolution was achieved and the taxpayer advised the same day the
inquiry meets the PRP criteria;
8.
if the taxpayer indicates he or she cannot or will not pay (except for requests
to make arrangements to pay).
In categories 1, 4, 5 and 8 above, which must be handled by another IRS office, the
employee receiving the inquiry will immediately put the taxpayer in touch with the
proper office. In category 4 above, which must be handled by another IRS office,
the employee receiving the inquiry will immediately put the taxpayer in touch with the
proper office. In category 3 above, where the taxpayer must be referred to the
proper agency, the taxpayer must be advised of the referral. In category 6 above,
the taxpayer must be referred to the illegal tax protester function.
Items meeting the PRP criteria may be discovered at any point in the processing
cycle. If the item or case meets any of the above criteria, the case should be
referred to the supervisor for referral to PRP.
There are other avenues in which you can get a response when the Problem
Resolution Office is not the proper one to assist you. I contacted the IRS in Texas
and asked how I could request a letter ruling or determination letter on particular
questions of law and they sent me a manual! It was called Revenue Procedure 98-1
(Rev. Proc. 98-1) and gave instruction on how to write a letter asking questions to
the IRS and make them answer within thirty days. The reality however is that they
will answer, but it takes about twice as long as the manual allows.
Here is an example of how we recently replied to an IRS form letter titled “Please
Call Us About Your Overdue Taxes or Tax Returns.” This is a “Letter 2050” and
allows only ten days in which to respond. I have included several examples of
responses. One of the agents asked for records and other information and this was
our response.
[Sender]
[Address]
[City state]
District Director
PROBLEM RESOLUTION OFFICE
Attn. E:PRO:DN
P.O. Box xxxx
Ft. Lauderdale, FL 33318
954-111-1111
Fax: 954-111-1111
[Date]
Re
your reply dated [date]
entity module- SSN000-00-0000
Dear Mr. [Agent]:
Thank you for assisting me in this matter. This correspondence involves an
unanswered inquiry or complaint requiring administrative recourse resulting from
your agency’s failure or refusal to answer my previous inquiry concerning a servicegenerated notice I received from “W. H. Gregory” dated [date].
No resolution has yet been reached and there are no other established
administrative or formal procedures that could be used in the resolution of this
dispute, nor has your agency previously responded to this particular matter. Its
resolution is not the sole responsibility of another federal, state or local agency. This
dispute does not involve any non-tax administrative matter with your agency such as
inspection, disclosure or personnel. The CID is not involved and this dispute is not
concerned with any “tax protester” issues. I have not indicated that I cannot or will
not pay any alleged tax liability.
The records you’ve requested from me are maintained under the IMF component
known as: “Information Returns Master File” (IRMF) Transcripts. All returns have
been properly filed and all taxes have been paid in full for the entity module
identified herein. Please correct your records and inform me as to when you have
satisfied this request.
Best regards,
[Sender]
[Subscriber]
[Address]
[City state zip]
[IRS]
[Address]
[City state zip]
[Date]
Re
[identify related correspondence]
Hello [Agent's first name]:
Thanks for your [date] response (see attached) to my correspondence. I do
not challenge nor disagree with the tax code. As confusing as it might be at times,
the application of its provisions is the reason you have a job and the government's
sole means of support. I am an advocate of the federal income tax code. It is
responsible for protecting citizens against abusive collections and allowing the
government the necessary authority to collect public revenues to repay the national
debt to the Federal Reserve Bank.
In response to your frivolous penalties for [year] and [year], I have requested copies
of the returns alleged to be frivolous yet you have failed or refused to provide them
to me at every occasion. These penalties cannot be enforced against me absent
proof that these purported frivolous returns were filed. Also, please send me copies
the IMF, IRMF and all "Substitute for Returns" filed in connection with this collection.
If you fail to produce these returns again but pursue the collection of these penalties,
I will file a formal complaint against you with the Inspector General.
In response to your claim that I owe more taxes for [year] than I already paid, please
review this brief explanation of my previous correspondence. I have included an
explanation as to the basis for my argument that an "SFR" is insufficient to support
your notices of lien and levy for 1995.
The authority granted to the Commissioner of Internal Revenue, by 26 CFR
301.6020-1(b) and 26 CFR 301.7701-9 to execute returns required by any internal
revenue law or regulation made thereunder when the person required to file such
return fails to do so, is delegated to: 1. Revenue Agents; 2. Tax Auditors; 3.
Revenue Officers, GS-9 and above; 4. Collection Support function managers, GS-9
and above; 5. Automated Collection Branch managers, GS-9 and above; and 6.
Service Center Collection Branch manager, GS-9 and above. This authority cannot
be re-delegated. This is found in Delegation Order No. 182 that became effective on
January 8th, 1987. The agents are authorized to file many different kinds of
substitute returns such as the 1120 series, 720 series and other business returns;
however, no agent has ever been authorized to file a Form 1040 substitute for
anyone. Please see IRS Manual 1229, Handbook of Delegation Orders.
Furthermore, the IRM 5200 relating to substitute returns, Section 5290
“Refusal to File – IRC 6020(b) Assessment Procedure” establishes the scope of the
procedure. Section 5291 establishes that “…The procedure applies to employment,
excise and partnership tax returns. Generally, the following returns will be involved.
(a) Form 940, Employer’s Annual Federal Unemployment Tax Return; (b) Form 941,
Employer’s Quarterly Federal Tax Return; (c) Form 942, Employer’s Quarterly Tax
Return for Household Employees; (d) Form 943, Employer’s Annual Tax Return for
Agricultural Employees; (e) Form 11-B, Special Tax Return – Gaming Devices; (f)
Form 720, Quarterly Federal Excise Tax Return; (g) Form 2290, Federal Use Tax
Return on Highway Motor Vehicles; (h) Form CT-1, Employer’s Annual Railroad
Retirement Tax Return, (i) Form 1065, U.S. Partnership Return of Income.
On October 1, 1986, the collection branch was delegated the authority to
assess an “IMF tax” (appears like that in IRM) and the Service Center Collection
Branch began substitute for return (SFR) processing. An SFR “assessment” is an
audit process where the initial action by SCCB (Service Center Collection Branch) is
to file, what’s technically known as, a dummy return for the taxpayer for -0- amount
and then assess the tax with a TC 290. This assessment is based on IRMF
(Information Return Master File, formerly IRP) information from the TDI Supplement
file or the IRMF transcripts.
"Taxpayers," as the term is applied under the Internal Revenue Code, are
individuals required to file a federal income tax return. The requirement to file a
federal income tax return falls upon those who file a federal income tax return for
any particular tax period. Those who do not file do not have the requirement. This
conclusion is supported by federal jurisprudence in that the United States is without
any power to compel the testimony of an individual, and is without any power to
compel an individual to disclose or apply for a social security number.
Likewise, agents of the Internal Revenue Service are not authorized to
substitute their own statements, or even testimony, for those of individuals who do
not voluntarily do so by filing a federal income tax return. This type of testimony is
incompetent and inadmissible under the hearsay rule. Similarly, an individual is not
authorized to perform an official government function by assessing himself a tax.
I have paid all of my taxes in full for each tax period and I will not pay any
more than the law requires. If you are aware of some law that either compels me to
pay more taxes than I owe or have paid, or compels my testimony, please cite it for
me. If I don't receive your response with the requested information within the next
thirty (30) days, I will construe your failure to respond to be a waiver of all claims
against me.
Best regards,
[Sender]
[Subscriber]
[Address]
[City state zip]
[IRS]
[Address]
[City state zip]
[Date]
Re
CP 540 dated [date] (TIN xxx-xx-xxxx) Form 1040 [year]
Greetings:
Thank you for your recent inquiry. Your records are correct with respect to a
[year] tax return. I did not file a federal income tax return for this year because I was
not required to file. The only time any one is required to file a federal income tax
return is when an individual files a particular federal income tax return. At the
moment the return is filed, the individual filing the return is required to file that return.
Otherwise, there is no law requiring that anyone, including myself, file a federal
income tax return.
Please admit or deny the following statements in writing and submit your
reply to me within thirty days. If you do not admit or deny these statements within
thirty days, they will be deemed admitted.
1.
Signing any document under penalty of perjury requires that I waive certain
rights, otherwise guaranteed by law.
2.
The government cannot compel me to waive any rights.
3.
The government cannot compel me to sign any document under penalty of
perjury, including a federal income tax return.
Your letter also alludes to a potential liability under the backup withholding
statute, Section 3406, of the Internal Revenue Code. Please be advised that
backup withholding applies only to the payment of interest of dividends when any of
the following four conditions are true:
1.
There has been payee underreporting, or
2.
The payee has failed to report income earned from interest or dividend
payments exceeding $10 for one tax period, or
3.
There has been a payee certification failure, or
4.
The payee has submitted an incorrect EIN.
A review of your Individual Master File and the component currently known as
the "Information Returns Master File (IRMF)" will clearly establish that none of these
conditions is true. You can review 26 CFR 31.3406(c)-1 if you need more
information.
Please feel free to contact me by mail or in writing only, if you have any
questions about the merits of my response.
Best regards,
[Sender]
[Address]
[City state zip]
[Phone]
Internal Revenue Service
Office of the Taxpayer Advocate
Attn: [sender]
1111 Constitution Avenue, N.W.
[Address]
Room 3017, C:TA
[City state zip]
Washington, DC 20224
[Fax]
fax: 202-622-4318
[Date] Certified Mail No.: _______________
Re
your recent inquiry
Greetings [agent]:
Thank you for your recent inquiry, a copy of which is attached. Because our
public school system does not teach law, for some suspicious reason, I have sought
the professional advice of several tax practitioners and attorneys on this matter.
Your letter accuses of me committing a crime for not filing federal income tax
returns for the years [year] through [year]. I do not have a tax liability for these years
beyond that which I have already satisfied. I have paid my taxes in full, for each of
these years, regardless of what your records indicate. I am not responsible for your
system of records management and I have fully complied with the law.
These tax professionals have informed me that there is no legal duty to pay a
tax until it has been assessed. I have also been advised that the method of paying a
tax liability once it has been assessed is to file an income tax return. Because I
have paid my taxes for these years, according to my records, no further tax liability
has been assessed against me by your agency. If you believe my records to be
incorrect, please explain to me in writing why they are incorrect. You have thirty
days to disclose these records.
Furthermore, the law does not require anyone, including myself, to perform a
duty beyond that which is required by law. If I have no legal duty, as an American,
to register my automobile with the government of Zimbabwe, then I cannot be
penalized for not doing so. Your inquiry appears to be based upon inaccurate
conclusions of fact. If you can produce a record showing a tax liability that has been
assessed in excess of that which I have already paid, and which would subsequently
impose a legal duty upon me to file these tax returns, then you have thirty days to
provide these records. I will file the appropriate income tax returns and pay the
correct amount of taxes when you can satisfy this request. I am not refusing to
comply with any law, as alleged in your letter. Your allegations are patently
frivolous.
If you think this is a game of intimidation, I suggest you review the testimony
given by your own IRS agents before the Senate Finance Committee in 1997 and
1998. I would also suggest, based upon the professional advice given to me by
these practitioners, that you review the federal criminal code regarding the sending
of threatening communications through the federal mail system. You may also wish
to apprise yourself of the new IRS Restructure and Reform Act of 1998.
I am not intimidated by your threats, but if you wish to pursue this without
providing the requested records in order to allow me to correct any possible
oversights, then make your claim; otherwise, please do not contact me about this
matter again. I do not interfere with your business, and I will not tolerate your
interference with mine.
We have the best government in the history of mankind, and I fail to
understand why your agency continues to bring it into public scrutiny and disrepute.
Best regards,
[Sender]
Ruling Request Letter
I’ve inserted another form letter I’ve created using the revenue procedure to get a
determination on a point of law involving the code of federal regulations. To obtain
your free copy of this manual, write to the address in Washington DC found within
the body of this sample letter.
You will also find examples of other types of letters we’ve used over the past five
years to get answers and communicate effectively with the IRS.
This first example is the Request for Letter Ruling and the first section is a checklist
that must be completed as per the manual and attached to the cover of the actual
letter. You will then see that it is followed by a deletions statement and then the
actual request as prescribed by their procedure. DO NOT attempt to use this
sample letter without first obtaining a copy of the most recent Revenue Procedure.
This was written under Rev. Proc. 98-1 but you’ll need to write to the Ben Franklin
Station in DC to obtain an updated one.
Let me make one more point about letter writing. Many of us have a tendency to
view government as this big monster and that we will need some huge machine or
weapon with which to destroy it or restore its purpose. Because of this, we have a
tendency to write letters that “bring the house down” or are aimed at exposing the
entire fraud behind the international bankers. This is not necessary. First of all,
these types of letters are never read and most people working for government don’t
understand them anyway. It’s not so bad that they are not understood; but, because
they are not understood, the writer is labeled as being some kind of “wacko,
protester, right-wing, extremist.” We just need to state the facts and address the
proper person with the proper issues. Give them only one problem at a time to help
you with and you’ll go much further at accomplishing your goal. When you can
change your perspective of a problem, you can increase your opportunities for being
able to resolve it. Professional comedians practice a similar technique as a matter
of course. They tell about tragic situations in such a way as to make them funny.
Taken about of context, you would indeed see the tragedy of events used in most
comic routines.
CHECKLIST
TAXPAYER’S NAME
__________
TAXPAYER’S I.D. NO.
DISTRICT HAVING AUDIT
JURISDICTION
ATTORNEY/P.O.A.
N/A
PRIMARY CODE SECTION
26 CFR 31.3121(b)-3(c)
Yes
1. Does your request involve an issue under the jurisdiction of the Associate
Chief Counsel (Domestic), the Associate Chief Counsel (Employee Benefits
and Exempt Organizations), the Associate Chief Counsel (International)?
See section 3 of Rev. Proc. 99-1, 1999-1 I.R.B. 15. For issues under the
jurisdiction of other offices, see section 4 of Rev. Proc. 99-1. (Hereafter, all
references are to Rev. Proc. 99-1 unless otherwise noted.)
No
2. Have you read Rev. Proc. 98-3, 1999-1 I.R.B. 100, and Rev. Proc. 98-7, 1999-1
I.R.B. 222, to see if part or all of the request involves a matter on which letter rulings are not
issued or are ordinarily not issued?
N/A
3. If your request involves a matter on which letter rulings are not ordinarily issued,
have you given compelling reasons to justify the issuance of a letter ruling? Before
preparing your request, you may want to call the branch in the Office of the Associate Chief
Counsel (Domestic), the Office of the Associate Chief Counsel (Employee Benefits and
Exempt Organizations), the Office of the Associate Chief Counsel (Enforcement Litigation),
or the Office of the Associate Chief Counsel (International) responsible for substantive
interpretations of the principal Internal Revenue Code section on which you are seeking a
letter ruling to discuss the likelihood of an exception. For matters under the jurisdiction of-(a) the Office of Associate Chief Counsel (Domestic) and the Office
of Associate Chief Counsel (Employee Benefits and Exempt
Organizations), the appropriate branch to call may be obtained by
calling (202) 622-7560 (not a toll-free call);
(b) the Office of the Associate Chief Counsel (International), the appropriate branch to call
may be obtained by calling (202) 622-3800 (not a toll-free call).
(c) the Office of the Associate Chief Counsel (Enforcement Litigation), the appropriate
branch to call may be obtained by calling (202) 622-3600 (not a toll-free call).
N/A
4. If the request deals with a completed transaction, have you filed the return
for the year in which the transaction was completed? See sections 5.01,
5.05, 5.06, 5.07, 5.08, and 5.09.
No
5. Are you requesting a letter ruling on a hypothetical situation or question? See
section 7.02.
No
6. Are you requesting a letter ruling on alternative plans of a proposed transaction?
See section 7.02.
No
7. Are you requesting the letter ruling for only part of an integrated transaction? See
sections 7.03 and 8.01(1).
No
8. Are you requesting the letter ruling for a business, trade, industrial association, or
similar group concerning the application of tax law to its members? See section 5.11.
No
9. Are you requesting the letter ruling for a foreign government or its political
subdivision? See section 5.12.
Yes
10. Have you included a complete statement of all the facts relevant to the
transaction? See section 8.01(1).
N/A
11. Have you submitted with the request true copies of all wills, deeds, and other
documents relevant to the transaction, and labeled and attached them in alphabetical
sequence? See section 8.01(2).
N/A
12. Have you submitted with the request certified English translations and a copy of
all applicable foreign laws? See section 8.01(2).
Yes
13. Have you included, rather than merely incorporated by reference, all material
facts from the documents in the request? Are they accompanied by an analysis of their
bearing on the issues that specifies the document provisions that apply? See section
8.01(3).
Yes
14. Have you included the required statement regarding whether the same issue in
the letter ruling request is in an earlier return of the taxpayer or in a return for any year of a
related taxpayer? See section 8.01(4).
Yes
15. Have you included the required statement regarding whether the Service
previously ruled on the same or similar issue for the taxpayer, a related taxpayer, or a
predecessor? See section 8.01(5)(a).
Yes
16. Have you included the required statement regarding whether the taxpayer, a
related taxpayer, a predecessor, or any representatives previously submitted a request
involving the same or similar issue but withdrew the request before the letter ruling or
determination letter was issued? See section 8.01(5)(b).
Yes
17. Have you included the required statement regarding whether the taxpayer, a
related taxpayer, or a predecessor previously submitted a request involving the same or
similar issue that is currently pending with the Service? See section 8.01(5)(c).
Yes
18. Have you included the required statement regarding whether, at the same time
as this request, the taxpayer or a related taxpayer is presently submitting another request
involving the same or similar issue to the Service? See section 8.01(5)(d).
Yes
19. Have you included the required statement of relevant authorities in support of
your views? See section 8.01(6).
Yes
20. Have you included the required statement regarding whether the law in
connection with the request is uncertain and whether the issue is adequately addressed by
relevant authorities? See section 8.01(6).
No
21. Does your request discuss the implications of any legislation, tax treaties, court
decisions, regulations, notices, revenue rulings, or revenue procedures that you determined
to be contrary to the position advanced? See section 8.01(7), which states that taxpayers
are encouraged to inform the Service of such authorities.
Yes
22. If you determined that there are no contrary authorities, have you included a
statement to this effect in your request? See section 8.01(7).
N/A
23. Have you included in your request a statement identifying any pending
legislation that may affect the proposed transaction? See section 8.01(8).
Yes
24. Is the request accompanied by the deletions statement required by § 6110?
See section 8.01(9).
Yes
25. Have you (or your authorized representative) signed and dated the request?
See section 8.01(10).
N/A
26. If the request is signed by your representative or if your representative will
appear before the Service in connection with the request, is the request accompanied by a
properly prepared and signed power of attorney with the signatory’s name typed or printed?
See section 8.01(12).
Yes
27. Have you included, signed, and dated the penalties of perjury statement in the
form required by section 8.01(13)?
N/A
28.
8.01(14).
Are you submitting your request in duplicate if necessary?
See section
N/A
29. If you are requesting separate letter rulings on different issues involving one
factual situation, have you included a statement to that effect in each request? See section
8.02(1).
N/A
30. If you want copies of the letter ruling sent to more than one representative, does
the power of attorney contain a statement to that effect? See section 8.02(2)(a).
N/A
31. If you want the original of the letter ruling to be sent to a representative, does
the power of attorney contain a statement to that effect? See section 8.02(2)(b).
N/A
32. If you do not want a copy of the letter ruling to be sent to any representative,
does the power of attorney contain a statement to that effect? See section 8.02(2)(c).
N/A
33. If you are making a two-part letter ruling request, have you included a summary
statement of the facts you believe to be controlling? See section 8.02(3).
N/A
34. If you want your letter ruling request to be processed ahead of the regular order
or by a specific date, have you requested expeditious handling in the manner required by
section 8.02(4) and stated a compelling need for such action in the request?
Yes
35. If you are requesting a copy of the letter ruling to be sent by facsimile (fax)
transmission, have you included a statement containing a waiver of any disclosure violations
resulting from the fax transmission? See section 8.02(5).
Yes
36. If you want to have a conference on the issues involved in the request, have you
included a request for conference in the letter ruling request? See section 8.02(6).
N/A
37. Have you included the correct user fee with the request and made your check or
money order payable to the Internal Revenue Service? See section 15 and Appendix A to
determine the correct amount.
Yes
38. If you qualify for the reduced user fee when gross income or gross receipts, as
applicable, is less than $150,000, have you included the required certification? See
paragraphs (A)(4) and (B)(1) of Appendix A.
N/A
39. If your request involves a business-related tax issue and you qualify for the
reduced user fee when gross income is less than $1 million, have you included the required
certification? See paragraphs (A)(4)(b) and (B)(1) of Appendix A.
N/A
40. If you qualify for the user fee for substantially identical letter rulings, have you
included the required information? See section 15.07(2) and paragraph (A)(5)(a) of
Appendix A.
N/A
41. If you qualify for the user fee for a § 301.9100 request to extend the time for
filing an identical accounting method change on a single Form 3115, have you included the
required information? See section 15.07(3) and paragraph (A)(5)(c) of Appendix A.
N/A
42. If your request is covered by any of the guideline revenue procedures or notices,
safe harbor revenue procedures, or other special requirements listed in section 9, have you
complied with all of the requirements of the applicable revenue procedure or notice?
Rev. Proc.
List other applicable revenue procedures or notices, including checklists,
used or relied upon in the preparation of this letter ruling request (Cumulative Bulletin
citation not required).
N/A
43. If you are requesting relief under § 7805(b) (regarding retroactive effect), have
you complied with all of the requirements in section 12.11?
Yes
44. Have you addressed your request to the Associate Chief Counsel (Domestic),
the Associate Chief Counsel (Employee Benefits and Exempt Organizations), the Associate
Chief Counsel (Enforcement Litigation), or the Associate Chief Counsel (International), as
appropriate, at:
Internal Revenue Service; Attn: CC:DOM:CORP:T; P.O. Box 7604; Ben
Franklin Station; Washington, DC 20044
The package should be marked: RULING REQUEST SUBMISSION. Improperly
addressed requests may be delayed (sometimes for over a week) in reaching
CC:DOM:CORP:T for initial processing.
__________________________
signature
________________
date
DELETIONS STATEMENT
Pursuant to § 8.01(9) of Revenue Procedure 01-1, I, ___________, request that only
my address, phone number and social security number be deleted from the published copy
of the letter ruling requested herein.
_____________________________
signature
________________
date
Internal Revenue Service
Associate Chief Counsel Domestic
Attn: CC:DOM:CORP:T
[Date]
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
Certified Mail No.: _____________
Greetings to the Secretary:
I, _______, request a ruling on the proper treatment of employment status under
section 26 CFR 31.3121.
A. STATEMENT OF FACTS
1.
Taxpayer information
a)
name:
address:
_______________________
_______________________
_______________________
telephone:
____________
facsimile:
(The undersigned hereby waives the right to pursue disclosure violations.)
social security number:
b)
_______________________
The annual accounting period is the tax year ending December 31, ____.
c)
The location of the district office that has or will have examination jurisdiction over
the return is the Fresno District Office.
2.
Description of Taxpayer’s Business Operations:
d)
I am a private citizen living in ___________.
e)
The complete transaction includes the involuntary signing of a voluntary withholding
agreement (Form W-4) OMB No. 1545-0010. The company with which previously
contracted for my livelihood told me that signing this voluntary withholding agreement is a
condition of contract. There are no business reasons for this transaction. This is a
complete description of the transaction and is not part of some larger integrated transaction.
3.
The facts relating to this transaction are that the company for which I previously
contracted for my livelihood was located in ___________. I received compensation for my
labor in ___________. The work in which I was involved was not effectively connected with
any trade or business within the United States, nor did it involve activities which might be
construed as affecting any aspect of interstate or intrastate commerce.
There were no contracts, wills, deeds, agreements, instruments, trust documents,
proposed disclaimers, or other documents pertinent to the transaction. There are no
applicable foreign laws to this transaction.
This request does not concern a corporate distribution, reorganization, or similar
transaction, or any prospective transaction.
B. RULING REQUESTED
“______________ was not an employee earning taxable wages for the tax
period ending December 31, _____.”
C. STATEMENT OF LAW
Index of Authorities
Exhibit 1:
26 CFR Part 31.3121(b)-1
Exhibit 2:
26 CFR Part 31.3121(b)-3
Exhibit 3:
26 CFR Part 31.3121(b)-4
Exhibit 4:
26 CFR Part 31.3121(d)-2
Exhibit 5:
26 CFR Part 31.3401(c)-1
Exhibit 6:
26 CFR Part 31.3401(a)-1
Exhibit 7:
26 CFR Part 31.3401(d)-1
Exhibit 8:
26 CFR Part 31.3121(e)-1
ARGUMENT
This request does not question nor relate to the legality of the tax code or the federal
income tax system.
Compensation for services is taxable as wages. Wages are recognized by the Internal
Revenue Code of 1986 as being taxable. Wages are defined to mean “remuneration for
employment,” Exhibit 6.
Title 26 CFR 31.3401(c)-1 defines “wages” to mean all
remuneration for services performed by an employee and it defines “employee” to include
“every individual performing services if the legal relationship between him and the person for
whom he performs such services is the legal relationship of employer and employee.” And
finally, the term “employer” is clearly defined under 26 CFR Part 31.3401(d)-1 to mean “any
person for whom an individual performs or performed any service, of whatever nature, as
the employee of such person.”
If one is receiving wages, he is also an employee receiving wages from an employer.
Under these definitions, one becomes an employee performing services for an employer
when he receives wages and his compensation is recognized by the tax code and being
taxable.
The term “employment” is further defined more clearly under Part 31.3121(b)-3 to
mean services performed after 1954 within the United States by an employee for his
employer, unless specifically excepted. It goes on to state that the employee and employer
may be citizens and residents of a foreign country and the contract of service may be
entered into in a foreign country, and yet, if the employee under such contract performs
services within the United States, there may be to that extent employment. This regulation
refers to § 31.3121(e)-1 for the definition of United States.
Paragraph c of this same part states that services performed outside the United
States as defined under Part 31.3121(e)-1 do not constitute employment. In other words,
services performed outside the United States and wages resulting therefrom are not
recognized by the Internal Revenue Code of 1986 as being taxable. Part 31.3121(e)-1
defines State, United States and citizen as follows:
“(a) When used in the regulations in this subpart, the term ‘State’ includes
the District of Columbia, the Commonwealth of Puerto Rico, the Virgin
Islands, the Territories of Alaska and Hawaii before their admission as
States, and (when used with respect to services performed after 1960) Guam
and American Samoa.
(b) When used in the regulations in this subpart, the term ‘United States’, when used in a
geographical sense, means the several states (including the Territories of Alaska and
Hawaii before their admission as States), the District of Columbia, the Commonwealth of
Puerto Rico, and the Virgin Islands. When used in the regulations in this subpart with
respect to services performed after 1960, the term ‘United States’ also includes Guam and
American Samoa when the term is used in a geographical sense. The term ‘citizen of the
United States’ includes a citizen of the Commonwealth of Puerto Rico or the Virgin Islands,
and, effective January 1, 1961, a citizen of Guam or American Samoa.”
As you can see, if one is receiving compensation for services performed within
Hawaii and Alaska, after their admission as states, his pay is not recognized as being a
taxable “wage.” Likewise, he would not be considered an employee because wages can
only be paid to employees; and, the company for which he performed services would not be
considered an “employer” simply because his pay is not recognized as a taxable wage.
Thanks to the late admission of these states and the Alaska and Hawaii Omnibus
Acts which changed all the federal legislation regarding the definition of the United States,
we can clearly see that pay received within any of the fifty states is not recognized as a
taxable “wage”
Part 31.3121(d)-2(c) and 31.3121(b)-3 state the following:
“(c) Although a person may be an employer under this section, services
performed in his employ may be of such a nature, or performed under such
circumstances, as not to constitute employment (see § 31.3121(b)-3).”
So it’s true. There are some contractual arrangements for which people receive
payment for their labor that are not considered employer/employee relationships within the
tax code because of one fact, their pay is not recognized by the tax code as a taxable wage.
E. CONCLUSION
There are three basic requirements which must be satisfied before income is
considered taxable income.
These requirements are gain, realization, and recognition.
Although I had realized a gain in compensation for my services under the circumstances
described herein, this gain has not been recognized by the Congress, nor by the income tax
code.
This is a factual matter and does not raise any questions of law, except those
involving jurisdiction.
In conclusion of the foregoing, it must be agreed that the compensation for my labor,
received by me for this tax period, is not by any means, recognized by the tax code as a
taxable wage; because, federal regulations promulgated by the Secretary define wages to
be compensation for services performed within the District of Columbia, Guam, the
American Samoa, the Commonwealth of Puerto Rico, the Virgin Islands and the territories
of Hawaii and Alaska before their admission as states. I did not perform services within the
United States, 26 CFR 31.3121(e)-1, and because of this fact, I could not possibly have
earned “wages” for this tax period under these circumstances. Because I did not earn
“wages” as recognized by the tax code, I was not an employee, nor was I engaged in any
employer/employee relationship as recognized by the tax code.
F. PROCEDURAL MATTERS
1.
Statement regarding whether same issue is in an earlier return.
a)
This issue, to the best of my knowledge, is unique and not contained in an earlier
return, nor in any return for any year of a related taxpayer within the meaning of § 267, nor
of a member of an affiliated group of which I might be a member within the meaning of §
1504. I am not a member of any such group. This statement is not affirmative.
b)
This issue, to the best of my knowledge, has not previously been ruled upon by the
Secretary for me or a related taxpayer within the meaning of § 267, or any member of an
affiliated group of which I may be a member within the meaning of § 1504 or a predecessor.
I am not a member of any such group. This statement is not affirmative.
c)
This issue, to the best of my knowledge, has not been previously submitted for a
determination or letter ruling by either myself, any related taxpayer, a predecessor, nor have
any representatives previously submitted a request involving the same or similar issue to
the Service, withdrawing the request before a letter ruling or determination letter was issued.
This statement is not affirmative.
d)
This issue, to the best of my knowledge, has not been previously submitted for a
determination or letter ruling by either myself, any related taxpayer, a predecessor, nor have
any representatives previously submitted a request involving the same or similar issue to
the Service, which is currently pending with the Service. This statement is not affirmative.
e)
This issue, to the best of my knowledge, is not currently being submitted by any
related taxpayer involving the same or a similar issue to the Service. This statement is not
affirmative.
f)
I advocate the position stated in my Statement of Law, Analysis and Conclusion as
set forth herein. The law in connection with this request is absolutely clear and has no
indication of being ambiguous. My explanation of the grounds for this conclusion is that I
have an absolute right to rely upon the laws and legal determinations of Congress, the rules
established by the United States Supreme Court and the federal courts and I have a right to
rely upon the authority of the rule making powers conferred upon the Secretary by the
United States Congress under its authority, which has been well established and respected
by virtually every citizen and nation in the world for more than two centuries.
g)
After careful review of the Internal Revenue Code and numerous rules established
by our courts, I have found absolutely no contrary authority to the position which I have
taken in this request.
h)
I would like to have a conference on the issues involved in this request.
i)
I would like a facsimile of the letter ruling sent to me upon its completion. My fax
number is indicated in the Statement of Facts.
j)
I am not requesting separate letter rulings on multiple issues.
k)
I am not seeking to obtain the user fee provided in paragraph (A)(5)(a) of Appendix
A of Revenue Procedure 99-1.
2.
Administrative
a)
The deletions statement and checklist required by Rev. Proc. 99-1 are enclosed.
b)
I am exempted from the user fee under § 15.04(2) of Revenue Procedure 99-1.
c)
There is no power of attorney enclosed as I am requesting this ruling myself.
Very truly yours,
_____________________________
signature
________________
date
DECLARATION
Under penalties of perjury, under the laws of the United States of America, I declare
that I have examined this request, including accompanying documents, and, to the best of
my knowledge and belief, the request contains all the relevant facts relating to the request,
and such facts are true, correct, and complete.
By:
_____________________________
signature
________________
date
Sec. 31.3121(b)-1 Employment; services to which the regulations in this subpart
apply.
(a) The provisions of the regulations in this subpart relating to the term ``employment'' apply
with respect to services performed after 1954. Certain provisions also apply with respect to
services performed before 1955 for which the remuneration is paid after 1954 (see
paragraph (b) of Sec. 31.3121(b)-2. For provisions relating generally to services performed
before 1955, see paragraph (a) of Sec. 31.3121(b)-2. For provisions relating to the
circumstances under which services which do not constitute employment are nevertheless
deemed to be employment, and relating to the circumstances under which services which
constitute employment are nevertheless deemed not to be employment, see Sec.
31.3121(c)-1. For provisions relating to who are employees and who are employers see
Secs. 31.3121(d)-1 and 31.3121(d)-2, respectively.
(b) The taxes apply with respect to remuneration paid after 1954 for services performed
before 1955, as well as for services performed after 1954, to the extent that the
remuneration and services constitute wages and employment. See Secs. 31.3121(a)-1 to
31.3121(a)(13)-1 relating to wages.
[T.D. 6516, 25 FR 13032, Dec. 20, 1960, as amended by T.D. 6983, 33 FR 18015, Dec. 4,
1968]
Exhibit 1
Sec. 31.3121(b)-3 Employment; services performed after 1954.
(a) In general. Whether services performed after 1954 constitute employment is determined
in accordance with the provisions of section 3121(b).
(b) Services performed within the United States. Services performed after 1954 within the
United States (see Sec. 31.3121(e)-1) by an employee for his employer, unless specifically
excepted by section 3121(b), constitute employment. With respect to services performed
within the United States, the place where the contract of service is entered into is
immaterial. The citizenship or residence of the employee or of the employer also is
immaterial except to the extent provided in any specific exception from employment. Thus,
the employee and the employer may be citizens and residents of a foreign country and the
contract of service may be entered into in a foreign country, and yet, if the employee under
such contract performs services within the United States, there may be to that extent
employment.
(c) Services performed outside the United States—
(1) In general.
Except as provided in paragraphs (c)(2) and (3) of this section, services performed outside
the United States (see Sec. 31.3121(e)-1) do not constitute employment.
(2) On or in connection with an American vessel or American aircraft. (i) Services
performed after 1954 by an employee for an employer ``on or in connection with'' an
American vessel or American aircraft outside the United States (see Sec. 31.3121(e)-1)
constitute employment if:
(a) The employee is also employed ``on and in connection with'' such vessel
or aircraft when outside the United States; and
(b) The services are performed under a contract of service, between the employee and the
employer, which is entered into within the United States, or during the performance of the
contract under which the services are performed and while the employee is employed on
the vessel or aircraft it touches at a port within the United States; and
(c) The services are not excepted under section 3121(b).
(ii) An employee performs services on and in connection with the
vessel or aircraft if he performs services on such vessel or aircraft which are
also in connection with the vessel or aircraft. Services performed on the
vessel by employees as officers or members of the crew, or as employees of
concessionaires, of the vessel, for example, are performed under such
circumstances, since such services are also connected with the vessel.
Similarly, services performed on the aircraft by employees as officers or
members of the crew of the aircraft are performed on and in connection with
such aircraft. Services may be performed on the vessel or aircraft, however,
which have no connection with it, as in the case of services performed by an
employee while on the vessel or aircraft merely as a passenger in the general
sense. For example, the services of a buyer in the employ of a department
store while he is a passenger on a vessel are not in connection with the
vessel.
(iii) If services are performed by an employee ``on and in connection with'' an American
vessel or American aircraft when outside the United States and the conditions listed in
paragraph (c)(2)(i) (b) and (c) of this section are met, then the services of that employee
performed on or in connection with the vessel or aircraft constitute employment. The
expression ``on or in connection with'' refers not only to services performed on the vessel or
aircraft but also to services connected with the vessel or aircraft which are not actually
performed on it (for example, shore services performed as officers or members of the crew,
or as employees of concessionaires, of the vessel).
(iv) Services performed by a member of the crew or other employee whose contract of
service is not entered into within the United States, and during the performance of which
and while the employee is employed on the vessel or aircraft it does not touch at a port
within the United States, do not constitute employment under this subparagraph,
notwithstanding services performed by other members of the crew or other employees on or
in connection with the vessel or aircraft may constitute employment.
(v) A vessel includes every description of watercraft, or other contrivance, used as a means
of transportation on water. An aircraft includes every description of craft, or other
contrivance, used as a means of transportation through the air. In the case of an aircraft, the
term ``port'' means an airport. An airport means an area on land or water used regularly by
aircraft for receiving or discharging passengers or cargo. For definitions of ``American
vessel'' and ``American aircraft'', see Sec. 31.3121(f)-1.
(vi) With respect to services performed outside the United States on or in connection with an
American vessel or American aircraft, the citizenship or residence of the employee is
immaterial, and the citizenship or residence of the employer is material only in case it has a
bearing in determining whether a vessel is an American vessel.
(3) By a citizen of the United States as an employee for an American employer.
Services performed after 1954 outside the United States by a citizen of the United States as
an employee for an American employer constitute employment provided the services are
not specifically excepted under section 3121(b). For definitions of ``citizen of the United
States'' and ``American employer'', see Secs. 31.3121(e)-1 and 3121 (h)-1, respectively.
(4) By a citizen of the United States as an employee for a foreign subsidiary corporation. For
provisions relating to the extension of the Federal old-age, survivors, and disability
insurance system established by title II of the Social Security Act to certain services not
constituting employment which are performed outside the United States by citizens of the
United States in the employ of a foreign subsidiary of a domestic corporation, see section
3121(1) and Part 36 of this chapter (Regulations Relating to Contract Coverage of
Employees of Foreign Subsidiaries).
[T.D. 6516, 25 FR 13032, Dec. 20, 1960, as amended by T.D. 6744, 29 FR 8309, July 2,
1964]
Exhibit 2
Sec. 31.3121(b)-4 Employment; excepted services in general.
(a) Services performed by an employee for an employer do not constitute
employment for purposes of the taxes if they are specifically excepted from
employment under any of the numbered paragraphs of section 3121(b). Services so
excepted do not constitute employment for purposes of the taxes even though they
are performed within the United States, or are performed outside the United States
on or in connection with an American vessel or American aircraft, or are performed
outside the United States by a citizen of the United States for an American employer.
If not otherwise provided in the regulations relating to the numbered paragraphs of
section 3121(b), such regulations apply to services performed after 1954.
(b) The exception attaches to the services performed by the employee and
not to the employee as an individual; that is, the exception applies only to the
services in an excepted class rendered by the employee.
Example. A is an individual who is employed part time by B to perform services which are
specifically excepted from employment under one of the numbered paragraphs of section
312(b). A is also employed by C part time to perform services which constitute employment.
While no tax liability is incurred with respect to A's remuneration for services performed in
the employ of B (the services being excepted from employment), the exception does not
embrace the services performed by A in the employ of C (which constitute employment) and
the taxes attached with respect to the wages (see Sec. 31.3121(a)-1) for such services.
(c) For provisions relating to the circumstances under which services which are excepted
are nevertheless deemed to be employment, and relating to the circumstances under which
services which are not excepted are nevertheless deemed not to be employment, see Sec.
31.3121(c)-1.
[T.D. 6516, 25 FR 13032, Dec. 20, 1960, as amended by T.D. 6744, 29 FR 8310, July 2,
1964]
Exhibit 3
Sec. 31.3121(d)-2 Who are employers.
(a) Every person is an employer if he employs one or more employees. Neither the number
of employees employed nor the period during which any such employee is employed is
material for the purpose of determining whether the person for whom the services are
performed is an employer.
(b) An employer may be an individual, a corporation, a partnership, a trust, an estate, a
joint-stock company, an association, or a syndicate, group, pool, joint venture, or other
unincorporated organization, group, or entity. A trust or estate, rather than the fiduciary
acting for on behalf of the trust or estate, is generally the employer.
(c) Although a person may be an employer under this section, services performed in his
employ may be of such a nature, or performed under such circumstances, as not to
constitute employment (see Sec. 31.3121(b)-3).
Exhibit 4
Sec. 31.3401(c)-1 Employee.
(a) The term employee includes every individual performing services if the relationship
between him and the person for whom he performs such services is the legal relationship of
employer and employee. The term includes officers and employees, whether elected or
appointed, of the United States, a State, Territory, Puerto Rico, or any political subdivision
thereof, or the District of Columbia, or any agency or instrumentality of any one or more of
the foregoing.
(b) Generally the relationship of employer and employee exists when the person for whom
services are performed has the right to control and direct the individual who performs the
services, not only as to the result to be accomplished by the work but also as to the details
and means by which that result is accomplished. That is, an employee is subject to the will
and control of the employer not only as to what shall be done but how it shall be done. In
this connection, it is not necessary that the employer actually direct or control the manner in
which the services are performed; it is sufficient if he has the right to do so. The right to
discharge is also an important factor indicating that the person possessing that right is an
employer. Other factors characteristic of an employer, but not necessarily present in every
case, are the furnishing of tools and the furnishing of a place to work to the individual who
performs the services. In general, if an individual is subject to the control or direction of
another merely as to the result to be accomplished by the work and not as to the means and
methods for accomplishing the result, he is not an employee.
(c) Generally, physicians, lawyers, dentists, veterinarians, contractors, subcontractors,
public stenographers, auctioneers, and others who follow an independent trade, business,
or profession, in which they offer their services to the public, are not employees.
(d) Whether the relationship of employer and employee exists will in doubtful cases be
determined upon an examination of the particular facts of each case.
(e) If the relationship of employer and employee exists, the designation or description of the
relationship by the parties as anything other than that of employer and employee is
immaterial. Thus, if such relationship exists, it is of no consequence that the employee is
designated as a partner, coadventurer, agent, independent contractor, or the like.
(f) All classes or grades of employees are included within the relationship of employer and
employee. Thus, superintendents, managers and other supervisory personnel are
employees. Generally, an officer of a corporation is an employee of the corporation.
However, an officer of a corporation who as such does not perform any services or performs
only minor services and who neither receives nor is entitled to receive, directly or indirectly,
any remuneration is not considered to be an employee of the corporation. A director of a
corporation in his capacity as such is not an employee of the corporation.
(g) The term employee includes every individual who receives a supplemental
unemployment compensation benefit which is treated under paragraph (b)(14) of Sec.
31.3401(a)-1 as if it were wages.
(h) Although an individual may be an employee under this section, his services may be of
such a nature, or performed under such circumstances, that the remuneration paid for such
services does not constitute wages within the meaning of section 3401(a).
[T.D. 6516, 25 FR 13096, Dec. 20, 1960, as amended by T.D. 7068, 35 FR 17329, Nov. 11,
1970]
Exhibit 5
Sec. 31.3401(a)-1 Wages.
(a) In general. (1) The term ``wages'' means all remuneration for services performed by an
employee for his employer unless specifically excepted under section 3401(a) or excepted
under section 3402(e).
Exhibit 6
Sec. 31.3401(d)-1 Employer.
(a) The term employer means any person for whom an individual performs or performed any
service, of whatever nature, as the employee of such person.
(b) It is not necessary that the services be continuing at the time the wages are paid in order
that the status of employer exist. Thus, for purposes of withholding, a person for whom an
individual has performed past services for which he is still receiving wages from such
person is an employer.
(c) An employer may be an individual, a corporation, a partnership, a trust, an estate, a jointstock company, an association, or a syndicate, group, pool, joint venture, or other
unincorporated organization, group or entity. A trust or estate, rather than the fiduciary
acting for or on behalf of the trust or estate, is generally the employer.
(d) The term employer embraces not only individuals and organizations engaged in trade or
business, but organizations exempt from income tax, such as religious and charitable
organizations, educational institutions, clubs, social organizations and societies, as well as
the governments of the United States, the States, Territories, Puerto Rico, and the District of
Columbia, including their agencies, instrumentalities, and political subdivisions.
(e) The term employer also means (except for the purpose of the definition of wages) any
person paying wages on behalf of a nonresident alien individual, foreign partnership, or
foreign corporation, not engaged in trade or business within the United States (including
Puerto Rico as if a part of the United States).
(f) If the person for whom the services are or were performed does not have legal control of
the payment of the wages for such services, the term employer means (except for the
purpose of the definition of wages) the person having such control. For example, where
wages, such as certain types of pensions or retired pay, are paid by a trust and the person
for whom the services were performed has no legal control over the payment of such
wages, the trust is the employer.
(g) The term employer also means a person making a payment of a supplemental
unemployment compensation benefit which is treated under paragraph (b)(14) of Sec.
31.3401(a)-1 as if it were wages. For example, if supplemental unemployment
compensation benefits are paid from a trust which was created under the terms of a
collective bargaining agreement, the trust shall generally be deemed to be the employer.
However, if the person making such payment is acting solely as an agent for another
person, the term employer shall mean such other person and not the person actually
making the payment.
(h) It is a basic purpose to centralize in the employer the responsibility for withholding,
returning, and paying the tax, and for furnishing the statements required under section 6051
and Sec. 31.6051-1. The special definitions of the term employer in paragraphs (e), (f), and
(g) of this section are designed solely to meet special or unusual situations. They are not
intended as a departure from the basic purpose.
[T.D. 6516, 25 FR 13096, Dec. 20, 1960, as amended by T.D. 7068, 35 FR 17329, Nov. 11,
1970]
Exhibi
t7
Sec. 31.3121(e)-1 State, United States, and citizen.
(a) When used in the regulations in this subpart, the term ``State'' includes the District of
Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, the Territories of Alaska
and Hawaii before their admission as States, and (when used with respect to services
performed after 1960) Guam and American Samoa.
(b) When used in the regulations in this subpart, the term ``United States'', when used in a
geographical sense, means the several states (including the Territories of Alaska and
Hawaii before their admission as States), the District of Columbia, the Commonwealth of
Puerto Rico, and the Virgin Islands. When used in the regulations in this subpart with
respect to services performed after 1960, the term ``United States'' also includes Guam and
American Samoa when the term is used in a geographical sense. The term ``citizen of the
United States'' includes a citizen of the Commonwealth of Puerto Rico or the Virgin Islands,
and, effective January 1, 1961, a citizen of Guam or American Samoa.
[T.D. 6744, 29 FR 8314, July 2, 1964]
Exhibit 8
The IRS will attempt to overlook the issues raised in this type of correspondence
and use the following factors to claim that you are an employee, even if you are not
as determined by this request for letter ruling:
EMPLOYEE OR INDEPENDENT CONTRACTOR? IRS GUIDELINES
The IRS has established 20 guidelines to help employers determine whether a
worker should be treated as an employee or an independent contractor for tax
purposes. Those 20 guidelines are:
1. Instructions. Employees comply with their employer's instructions about when,
where and how to work, or the employer has the right to control how a worker's work
results are achieved. Independent contractors have more flexibility.
2. Training. Employees may receive training from their employers to perform
services in a particular manner. Independent contractors usually use their own work
methods and receive no training from those purchasing their services.
3. Integration. Employees' services are usually integrated into the business's
operations because they are key to the success or the continuation of the business.
Independent contractors are independent of the business's operation.
4.
Services Rendered Personally.
Employees render services personally.
Independent contractors render services as contractors.
5. Hiring Assistants. Employees work for an employer. Independent contractors
can hire, supervise and pay assistants under a contract that requires them to
provide materials and labor and to be responsible for the results.
6. Continuing Relationship. Employees generally have ongoing relationships with
their employers. Independent contractors' relationships will usually be more
sporadic.
7. Set Hours of Work. Employers usually set their employees' work hours.
Independent contractors usually set their own hours.
8. Full-Time Required. Employees may be required to work or to be available fulltime. Independent contractors may work when and for whom they choose.
9. Work Done on Premises. Employees usually work on their employers' premises
or on a route or at a location approved by their employers.
10. Order or Sequence Set. Employees may be required to perform services in the
order or sequence set by their employers. Independent contractors can establish
their own sequence.
11. Reports. Employees may be required to submit reports to their employers.
Independent contractors are not required to submit reports to their subscribers.
12. Payments. Employees are paid by the hour, week or month. Independent
contractors are usually paid by the job or through a commission.
13. Expenses. The business and travel expenses of employees are generally paid
by their employers. Independent contractors are responsible for paying their own
expenses.
14. Tools and Materials. Employers normally furnish their employees with the key
tools, materials and other materials they need to do their jobs. Independent
contractors normally furnish their own tools and materials.
15. Investment. Employees normally do not invest in the facilities. Independent
contractors have a significant investment in the facilities they use to perform
services for someone else.
16. Profit and Loss. Employees do not experience a profit or loss; independent
contractors can.
17. Works for More Than One Person or Firm. Employees usually work for one firm
at a time. Independent contractors may work for multiple persons or firms at the
same time.
18. Offer Services to the General Public. Employees usually work for one
employer. Independent contractors make their services available to whomever they
want.
19. Right to Fire. Employees can be fired by their employers. Independent
contractors cannot be fired as long as they produce a result that meets the
specifications of their contract.
20. Right to Quit. Employees have the right to quit a job at any time without
incurring liability. Independent contractors usually agree to carry out specific tasks or
series of tasks and are responsible for completing those tasks satisfactorily, or are
legally obligated to make good for failing to do so.
It is important to remember that when trying to obtain information from the IRS
(outside of FOIA procedures) or get an answer to a legitimate question, they may
attempt to evade your efforts by just not answering. You have a better chance of
getting an answer by either going through the Problem Resolutions Office or
Taxpayer Advocate. If it is a question that, when answered, will expose the fraud or
defeat an abusive attempt to get your property, they might respond to a third party
such as your congressman, advocate, or Problem Resolutions Officer saying that
your request is frivolous.
It is possible to avoid this problem by not making legal conclusions in your
correspondence and not citing case law or statutes. Requests where this type of
information is necessary can be made using the revenue procedure governing
requests for information letters.
Here is an example:
[Sender]
[Address]
[City state zip]
Secretary of the Treasury
Internal Revenue Service
Attn: CC:DOM:CORP:T
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
[Date]
Re
request for information letter, Rev. Proc. 99-1 §2.04
Greetings:
Thank you for taking a moment to issue the requested information letter. This
request is made to satisfy a need for general information and does not meet the
requirements of the applicable revenue procedure for requesting letter rulings or
determination letters. The subject of this request is under the exclusive jurisdiction
of the Associate Chief Counsel, Domestic.
According to 26 CFR 1.863-1(c), a taxpayer’s taxable income, whether it be from
sources within or without the United States, is determined under the rules of 1.861-8
through 1.861-14T. These regulations determine taxable income from sources
within the United States. My question is, do these regulations limit or exclude all
other categories of income, not specifically defined in these regulations, from being
defined as taxable income?
Best regards,
[Sender]
Elements Of An Effectively Written Letter:
In order to accomplish the objectives for which your letter is written, it must first meet
certain criteria and contain certain elements. Most of the letters I’ve used with great
success are letters of complaint and letters of inquiry. The remedy sought in a letter
of complaint is usually some action to be taken by its receiver. If I received poor
service from an airline, and there was some incident that was “the last straw” behind
my inclination to write them a letter of complaint, then I will demand that they take
some action to remedy my complaint.
A letter of inquiry, on the other hand, is essentially a complaint letter, but it’s written
in such a way so as to create less controversy. Remember that because you’re
corresponding in writing, you cannot rely upon facial expressions or verbal
intonations to convey your message; therefore, a letter of inquiry may go much
further to accomplishing your objective simply because it appears to be more
friendly.
Suppose that I wanted to return a product to the store because I was not satisfied
with it for some reason. I could walk in and talk to someone at the customer service
desk and explain that I have a complaint about one of the store’s products.
However, that might place the clerk in a defensive frame of mind. I might get much
better results by going to the same customer service desk and making an inquiry as
to the store’s return policies with the product in hand. The natural tendency for
people is to try and answer a question the moment it’s asked but to try and defend
themselves when confronted with a complaint. If you put the clerk in a defensive
frame of mind before you even begin explaining the situation, you will have to work
that much harder to get the results you want. You would do much better going into
the store with the attitude that this is one of your favorite stores and you regret
having to return one of its products; however, it may benefit them in the future to
know which products have these types of results. You want to go into that store
thinking that you’re not just concerned about getting a remedy for yourself, but that
you’re also concerned that the store maintains its good image by correcting the
problem before it happens to someone else. You’re their friend, not their adversary.
The same is true when dealing with the real people who work for the Internal
Revenue Service. Remember that even though each of them is holding a public
office, they are still human beings, many of whom have children and families to go
home to. They bleed just like anyone else, although sometimes I have my doubts.
In general, the most effectively written letter, when dealing with the IRS, is a letter of
inquiry.
The letter of inquiry is usually distinguished from a letter of complaint by the “Re” line
just below the date and above the greeting. You might write something like:
“Re
inquiry concerning your recent correspondence dated [date]”
Or you might write something like:
“Re
inquiry concerning procedure for requesting an extension”
This type of letter is enough to bring a matter to someone’s attention who can help
you resolve a potential conflict. If you direct it to the right office, a letter of complaint
will almost never be necessary. Once you understand that government is a
machine, or that it operates mechanistically, and that each component functions one
way, you will realize that many times, if you just bring the right person’s attention to
a problem, he will take steps to help you resolve it.
This is not always true with the IRS because I can tell you from experience that
many of my letters have gone unanswered until I called meetings with their agents in
person. Sometimes we must take that route; but in general, you should first give
them a fair chance to answer you. I recently met with an agent who answered an
inquiry that was six months old. Even under the statutory guidelines of the Privacy
Act, Freedom of Information Act and Revenue Procedure 98-1, they consistently
exceed the time allowed for an answer by double what is permitted.
A letter of inquiry must contain only one or two questions relating to a factual subject
matter. Do not send a letter demanding them to confess that you’re not required to
file a return, or to interpret the significance of how federal regulations govern the
implementation of statutes. The letter must be written to someone with an eighth
grade reading level and an attention span of no more than sixty seconds. Therefore,
it should be no longer than one page in just about every case. Don’t give the agent
too much to answer on any one inquiry and be fair with your expectations for results.
Before you begin writing the letter, take a moment to write down the essential
elements of your concern on a piece of notebook paper. Give them to someone
else and ask that person to restate these elements as they understand them. If the
person is accurate in restating the points that you wanted to make, then number
them in order of importance. Then ask yourself whether or not the agent to whom
you’re addressing the inquiry would be capable, or have the authority to provide you
with answers or a solution, or at least work with you to reach that end. Many times
the auditor or examiner is just not able to address your concerns so you may need
to involve the agent’s supervisor, a problem resolution officer or someone else in the
taxpayer advocate’s office.
If the inquiry concerns a recent summons or a discussion you had with the agent
about something like this in which he was directly involved, you may only need to
correspond to that agent. If you rationally believe you were treated unfairly or that
the agent exceeded a guideline that is supposed to be followed under the agency’s
own policies or statutory guidelines; and, if this adversely affected the conclusion of
the summons or your tax liability, then you may need to involve the taxpayer
advocate. After reviewing the sample letters of inquiry and complaint included in this
book, you should get a better idea of how this works.
Timing is important, don’t be presumptuous, and make an effort to avoid attacking
the agent or his work performance unless he is just unable to be communicated
with, belligerent or disruptive to your efforts to resolve a conflict. You must use your
best judgment and remember to be fair to the agent. Give them the benefit of the
doubt, maybe the agent was having a bad day from dealing with someone else. But
make sure that your inquiry (or complaint) is relevant to one issue and justified by
the facts surrounding it.
Your complaint should be based only on a set of facts, and based on those facts,
you should be asking for assistance to remedy the problem. The time to raise points
of law are when you’re at an appeals conference or tax court. Don’t believe an
auditor will even consider answering these types of concerns, let alone be
competent or have the authority to do so if he even did. Always begin your letter by
showing your gratitude for the time taken to review it. Then begin by stating the date
on which the problem or concern began. Include the names of the agents involved
and make a clear and concise statement of only the facts relating to that particular
issue. It will help you to write your letter within the subject matter identified in your
“Re” line. Use it for that purpose and it will help you write an effective letter which
does not raise irrelevant issues to its purpose.
If you are unable to write this letter in one page, you should review it to further
extract only the most important points and begin again. Trust me, it’s well worth the
time in preparation compared with the wasted time in waiting for the IRS to respond,
especially when there’s an increased chance that they will not understand what you
want. Sometimes I cheat by changing the font size of my word processor document
to eleven-point and this is enough to squeeze it on one page. Just be reasonable.
The timing of your letter means that you normally don’t need to file a complaint with
the PRO from your first correspondence with an auditor. Try and work with the
auditor to help him do his job and if you are placed in a situation that you feel might
be prejudicial to you, then explain that to the agent. Ask if he can help you in some
way. I’ll give you an example: Every agent wants you to file a tax return, regardless
of whether or not you actually have a tax liability. Remember, it’s not about the
money; it’s about regulating human behavior. Try and give the agent all the
information he already has about you. You can find out what this information is by
requesting your IRP, IRMF and IMF Transcript Complete records before the
interview. If you received a Form 1099, 1098 or W-2 during any year being
examined, you can be sure that the agent already has a record of it. The conflict
would occur when the agent wants more information than he already has. It’s your
call but you have certain rights when it comes to disclosing information about
yourself. Sometimes the agents will threaten you or indicate that you’ll receive some
kind of punishing assessment if you don’t “comply.” You’ll find more about this
process in the next chapter called “The Sky Is Falling.”
Once you determine that you are not making any progress with the agent, you might
consider other alternatives. Remember that it’s not necessarily the agent’s fault
because you can’t resolve a dispute. He is simply a part of the machine and
auditors and examiners are not authorized to assist you with legal questions or when
you don’t file. Their only function is to get you to file and collect information relating
to tax liabilities. If the solution you seek is not something which can be addressed
by this level agent, then you must reevaluate the circumstances.
Ask yourself what is in jeopardy. If you don’t file but someone has reported a Form
W-2 about you stating you earned an amount of wages, the agent will refer your
case to an examiner and create a substitute return on your behalf. We all know this
is illegal in a Form 1040 case, but we need to focus on the reality of what may
follow. The property that is in jeopardy of being taken by the IRS is anything in your
name, including your paycheck (in W-2 or 1099 situations), houses, cars, bank
accounts, insurance, annuities, interest or dividend payments, &c.
The agent or his superior may create a substitute return under 26 USC 6020(b) and
most of us know that there is no authority for this. No delegation of authority has
ever been issued authorizing an IRS Agent to file a substitute 1040 on your behalf.
But that information by itself is not sufficient to accomplish anything. IRM 5200
states that “…If the taxpayer fails to file employment, excise and partnership tax
returns by the specified date, the return should be prepared under the authority of
IRC 6020(b) using Form 5604, Section 6020(b) Action Sheet….”, (see IRM Section
5293.1)
After the examination, the agent may decide to send you a notice of proposed
assessment. If you do not respond properly and request an appeals conference, a
notice of deficiency will then be generated. At that point, you will have at least
ninety days to respond. During this time, you can ask for an appeals conference as
well, just as if you had done before; however, if you don’t at this stage and you do
not file an appeal in tax court, an assessment will be made against you. Once the
assessment has been filed, your case will be processed through their Automated
Collection System (ACS) and you will begin receiving notices of intent to levy. Any
property you have in your name is a potential target for levy at this point. And
depending upon the amount of assessment as weighed against the value of your
property, they may send notices of levy to the holders or payers of such property.
We also know that a notice of levy is not a valid levy but everyone is so afraid of the
IRS that they will quickly turn over the property without question. I’ve only had two
cases to date in which the payers of compensation had enough fortitude to
challenge the IRS on a notice of levy against a worker, and the IRS backed down
both times.
During the ACS process, you can request that a local agent review your case and
they might move it off track into a slower process. But this rarely happens because
the agents may determine that you showed bad faith at the early stages of their
assessment and collection efforts. I have been able to do it before but only when
there were glaring errors made by the IRS. One good example is when an older
gentleman and his wife were reaching their retirement years and began doing less
business because they wanted to shut it down instead of selling it. They were also
unable to continue doing all the work at their age. They were filing every year and
their income went from about $80,000 to $12,000 over a reasonable period of time.
The IRS decided that even though they submitted these returns under penalty of
perjury, that they would be taxed as if their income was still at the $80,000 mark!
They assessed higher amounts based on statistics obtained from the Bureau of
Labor. I did an analysis of their IMF and showed the IRS that they were being taxed
for approximately 115% of their income! This put a stop to the levy process and we
are still waiting for a determination from the Problem Resolution Office. In this case,
they may just let it go without any confirmation; they don’t like to admit a
wrongdoing.
Notice one important element of this next letter. It’s called the analogy, and greatly
overlooked today. I stated that:
“It’s difficult for me to believe that in view of all the scrutiny your
agency is under these days, that you still employ agents who would do
these things. Is it any wonder why so many people are choosing not to
file tax returns in recent years?
I compared this problem to those experienced by other people around the
nation to show that our complaint was not just spurious or unfounded. There
are many other analogies that I’ll cover later.
We followed it with a certified letter in the mail. This was the first correspondence I
sent in the case and it received immediate attention. The IRS froze the collection
process and we are now working through it with that Office. The only reason I took
this action was because I was not given the case until it reached the levy process
and the subscribers’ social security payments were in jeopardy. This was the
correct timing and the proper forum in which to make this type of complaint.
It’s equally important to choose the proper forum in which to make your case. You
would not do well to tell an auditor that there is no implementing regulation requiring
you to keep records, he doesn’t care. He just wants the records. The whole system
is a well-designed scheme to limit your control in dealing with the IRS. You need to
know the extent of the authority for each officer during each stage of an
administrative proceeding, not so you can harass him or challenge his authority to
talk to you, but so you know what remedies are available if you should have a
problem.
Another tack in a levy situation is to file a Form 911, (Application for Taxpayer
Assistance Order) with the Office of the Taxpayer Advocate. You can obtain the
appropriate forms from the Internet under http://www.irs.ustreas.gov. Read the
instructions carefully before submitting this form. You must be able to show that a
particular levy action will cause an undue hardship. That’s the only controlling
information that will allow the advocate’s office to help you. Once you’re in a levy
situation, it’s already assumed that you owe, so don’t be concerned about making
arguments as to why you believe you don’t owe. Just state the facts behind your
hardship situation. The advocate will assign an agent to assist you if he finds good
cause based on your assertions and they will usually ask you to complete Form 433A or 433-B. You should do this in advance and attach it behind the Form 911. This
will assist the agent in better helping you.
If you’re not willing to disclose this type of information as requested on these forms,
then don’t bother applying for an assistance order. The IRS cannot help you unless
you give it enough information to exercise its discretion.
Problem Resolution Office:
An Application for a Taxpayer Assistance Order (ATAO) can be used to relieve a
hardship situation (Form 911). An ATAO may be initiated by an IRS employee on
behalf of the taxpayer to request that an account be reviewed because (a) the
taxpayer is experiencing or about to experience a “significant hardship”; and, (b) the
non-PRP employee dealing with the problem cannot or will not relieve that hardship
immediately.
Cases that qualify for an ATAO may be received (a) directly from the taxpayer or the
taxpayer’s authorized representative on Form 911; or, (b) through telephonic contact
or correspondence. Normal procedures and appeal processes should be used
before resorting to an ATAO. However, if these procedures or processes are not
appropriate because they will not be timely in resolving the hardship or were not
followed and a “significant hardship” exists, the ATAO should be considered. It is
never incorrect to invoke the stop and review aspect of an ATAO. You letter might
tell them that your dispute requires the exercise of their discretion and the invoking
of the “stop and review” aspect of the ATAO process.
“Significant hardship” is a highly subjective determination. A number of factors are
considered when making a determination of “significant hardship”. Enforcement
action, in and of itself, is not a hardship without additional factors. For this reason,
the PRO is required to use good judgment after reviewing the pertinent facts and
circumstances. They are trained to regard these facts as being the most important
in making their finding. The following points may be relevant in determining if a
hardship exists. The Problem Resolution Office will make the final decision on
significant hardship. This determination must always be determined on a case by
case basis:
1.
Hardships could include, but are not limited to, exceptional emotional
stress experienced by taxpayers in dealing with tax problems, the threat of a poor
credit rating by erroneous enforcement action, gross disservice to the taxpayer,
pending eviction, possible loss of job, the refusal to rescind a Statutory Notice of
Deficiency when the statute is not in jeopardy, significant personal emergencies, or
other situations of similar magnitude to the taxpayer.
2.
In addition, imminent bankruptcy and failure to meet payroll could be
considered hardship in specific circumstances. An example of a hardship causing
imminent bankruptcy could be in the situation where a delay occurs in processing a
refund causing a poor cash flow situation that will force the taxpayer into bankruptcy.
An example of a hardship causing failure to meet payroll could be a situation where
a levy is served on a payroll account when there are alternative sources of
collection.
Here are some examples of potential “significant hardship” cases:
1.
A wage levy that impaired the taxpayer’s ability to purchase needed
medical care. The Service’s unawareness causes an unintentional negative impact
and would qualify for an ATAO if the employee contacted cannot or will not relieve
the hardship.
2.
A payment is not property applied to a taxpayer’s account, thus prohibiting
the taxpayer’s receipt of a refund. After numerous contacts with the Service,
supplying dates, the taxpayer is suffering emotional stress and files a Form 911 for
relief. An ATAO is appropriate to request action to substantiate the credit and
authorize the refund.
3.
If a taxpayer is experiencing a hardship in full paying an outstanding liability
but is able and willing to enter into a part-pay agreement while dealing with the
Service, an ATAO would not be appropriate. If the taxpayer is facing impending
enforcement action but is able to resolve the problem with the functional contacted,
the case does not warrant an ATAO.
The agents are supposed to take the following actions, whether or not they are
working on the Problem Resolution Office:
Immediately prepare Form 911 upon receipt of telephone calls, correspondence, or
claims which indicate an ATAO is needed and the non-PRP employee cannot or will
not provide relief, even if the taxpayer does not specifically ask for an ATAO. Attach
the source document for Form 911. The agents are permitted to have the matter
reviewed by functional management, but should not delay for Form 911 in getting to
the PRO. If functional management decides to provide the relief requested for
internally identified Forms 911, they need not go to the PRO. All other Forms 911
must be sent to the PRO.
The agents are required to route all Forms 911 (including statute imminent cases) to
the PRP office. They cannot advise any taxpayer that his case is being made an
ATAO. The PRP staff will acknowledge the cases as necessary. They also have
requirements relating to acknowledging and responding to those submitting
complaints and inquiries to be handled by the PRO.
The PRO is required to respond to all correspondence received from the taxpayer
requesting research, information or adjustment action. The response should identify
the date of the taxpayer’s correspondence. It should also indicate the tax form,
period and the action taken. EXCEPTION: If a notice to the taxpayer will be
generated as a result of the adjustment the taxpayer has requested, do not write the
taxpayer an additional letter.
The PRO’s Office will not send an acknowledgment letter if the taxpayer is only
submitting information that has been requested by the PRO. Acknowledgment
letters are no longer required, per the Action 61 Executive Committee
recommendations (11-90). Correspondence must be answered and a quality
response mailed within thirty calendar days of the initial IRS received date (counting
the date received). If it is not possible to resolve the taxpayer inquiry and respond
with a final response within this prescribed time limit, the taxpayer must be send an
interim response within thirty days of the initial IRS received date (counting the date
received).
A quality acknowledgment letter or interim response must indicate a reason for
delayed response and a date when final action can be expected.
All
correspondence to taxpayers requesting further information should indicate the
following:
1.
a response is needed within the applicable time frame, not to exceed
30 days from the date of the correspondence;
2.
the action IRS will take if a timely response is not received;
3.
request for taxpayer’s phone number and the most convenient time for IRS to
call for further information;
4.
they will also enclose a bar-coded envelope and inform the taxpayer of their
mail stop number, asking taxpayer to reference the stop number if unable to use the
envelope provided;
5.
inform the taxpayer of any balance due, including penalty and interest,
remaining on the module. They will always inform the taxpayer to what date the
balance is due, including penalty and interest, and when it was computed.
In summary, there is a proper time, place and method of corresponding with the IRS
so as to resolve particular disputes. If you do not choose them well, you will not
obtain the assistance you need. Here are the elements of an effectively written
letter:
1)
it’s no longer than one page
2)
it’s addressed to the proper person who has the capacity to assist you
3)
it’s mailed within time limits imposed by the administrative procedure or other
statute or reasonable time period
4)
it’s dated properly, and clearly identifies the person it concerns, whether by
SSN or some other important information in the “Re” line
5)
it’s opening statement thanks the reader for taking a moment to review it
6)
it states a clear account of the facts surrounding the subject and the dates
and names which are pertinent.
7)
it states your complaint in one or two sentences
8)
it makes an analogy about the circumstances
9)
it requests that a particular course of action be taken to effect a remedy
10)
it’s signed by the one having the problem or his official representative
11)
you’ve attached only the important documents necessary for the reader to be
assisted in understanding your claim.
The Analogy:
An analogy enables someone to easily compare what he knows to a new concept by
his understanding of how the two might be related. I believe this is the most
important technique because it’s helped me to win or successfully resolve more
disputes than anything else. By following my instructions in this chapter, you will lay
the groundwork necessary for making a good analogy in a letter, an argument or
presentation to a court.
It was Arthur Hogue’s, Origins of the Common Law in which he cites an English
principle of court about the analogy: “…the courts will grasp at a mere analogy to
conceal the fact that they are pouring new wine into old bottles.” This is not an exact
quote but it will suffice to give you an understanding of the idea so you can put it into
practice. It functions as a psychological diversion and serves the purpose of gaining
a tactical advantage over the listener or reader by evoking an emotional response or
discreetly clouding the issue.
An analogy can be used a distraction that appeals to someone's emotion. One of
the more effective ways to present an analogy is in a question. A question
automatically prompts the one to whom it is directed to begin thinking about the
answer. The analogy takes the person’s thoughts out of his normal perceptual
paradigm and nearly compels him to briefly analyze the issue in a different
perspective. What about pink elephants? See, you started thinking about pink
elephants and then my stupid question, "what about them." It happens so quickly
that we don't realize it so easily. It can be a simple question such as one directed to
a collection agent, "Would your parents approve of what you're doing?"
Here is an example using a simile: "Our interstate system today is very much like
the human circulatory system. It has volume and circulation and an ambulance
rushing to a collision is not unlike a white blood cell finding its way to an injury."
How can someone apply this in real life, like resolving an IRS collection problem?
Believe it or not, the IRS seems to be quite responsive to hand written letters. In
general, they are not very cooperative with people sending form letters or protest
letters that have been circulated for years with the information.
The trick with doing this under practical circumstances is that you need to make an
analogy in one sentence. I’ve already listed many examples in “Life Without The
Number.” This is easily done when you use information, or a paradigm, which you
believe the recipient is fairly certain to be familiar with. For example, most people
understand what is meant by the word “street gang.” We know it as a group of
people who organize themselves together and identify with similar interests. They
usually have their own set of metaphorical or encrypted slang, colloquialisms or
other language. They sometimes wear similar types of clothing, jewelry or other
indicia signifying their membership in the gang.
While arguing a traffic case in Arizona, we actually had a definition of “street gang”
in the criminal code and I used it to accuse the officer of being a member of a
criminal street gang as defined by the statute. In fact, I tricked him into admitting it
himself. You could hear a pin drop for a few moments when I made the point after
setting him up for it. I won the case by the way.
Would a corporation meet the criteria for a gang? It uses a corporate seal, is
organized for a common purpose, maintains a hierarchy, and uses its own set of
rules and acronyms. It also uses its size as a strength in society to obtain political
advantages over other organizations not so well organized or financed, very similar
to how a gang functions on the street. The only distinction between the two might
be that the state authorizes the existence of one by charter and regulates the other
by the criminal code, isn’t that interesting? Would the state government qualify as
well? How about the federal government? How about any nation or other
organization?
I thought you’d like that method of analogy. I like to make an analogy with current
events published on C-SPAN or national newspapers. The IRS is such a good
target these days that I don’t hesitate to compare the events of a particular case with
those testified to by IRS agents before the Senate Finance Committee. You’ve got
to realize that the IRS is a wounded animal; in fact, it’s a dying animal. I like to
recognize some of the antics taken by certain agents as thrashing. It’s what a dying
animal does just before it takes its last breath. This can be seen in their idle threats
and attempts to coerce people into filing or signing agreements, or their ambiguous
replies to letters.
You should place your one sentence analogy in the last third of your letter, just after
you state the facts and make your complaint and just before requesting a particular
remedy. It would sound something like this: Thank you for reviewing this, on May
1st, agent Bob miscalculated my deductions and it cost me a bunch of money. How
would you react when one man’s mistake causes you or your family a detriment and
he refuses to correct it? I would like this mistake corrected by another agent. Thank
you.
I made the analogy by asking the reader to think about how he would be affected by
this careless and costly mistake. This pulls the reader in and evokes an emotional
response because he becomes personally involved by the question. It changes the
perspective from which he will view the problem facing you by causing him to put
himself in your place.
There are many types of analogies that I’ve used with great success and some are
beyond the subject matter of this book. Here is a list of analogies you might
consider using or modifying for use in some of your correspondences to the Problem
Resolution Offices of the IRS:
1.
“This is not unlike the abuses testified to during the Senate
investigations.”
2.
“If I were your mother, would you do these things under the guise of “doing
your job?””
3.
“Can you honestly say to yourself that you’ve been fair and impartial in this
matter?”
4.
“Would you have conducted an audit for the President of the United States in
the same manner of you’ve conducted your audit of my tax returns?”
5.
“Does it make sense that we pay 115% of our income in taxes because
you’ve based your estimate on an aggregate of national labor statistics when even
the President pays less than 20% in taxes each year?”
6.
“In regard to your refusing our Offer in Compromise for 75% of what you say
we owe, how can you justify us paying what amounts to 47% of our income in taxes
because of your agency’s additions from interest and penalties? Don’t you think this
is rather discouraging compliance as opposed to your stated goals of encouraging
voluntary compliance?”
7.
“Is it good practice to destroy a taxpayer’s business in the name of collecting
overdue taxes, thereby leaving him without any source of income by which to pay
the balance of those taxes? Even loan sharks know better than to disable their
debtors, for what good is a debtor who is rendered unable to labor and pay his
debts?”
I hope this chapter has been informative. The next chapter deals with frivolous
arguments used by people over the years in fruitless efforts to forestall the IRS from
assessing and collecting taxes or other property. I’ve included a directory of IRS
Problem Resolutions Offices on the following pages to which you may address your
inquiries and complaints.
The Taxpayer Advocate Service is an IRS program that provides an independent
system to assure that tax problems, which have not been resolved through normal
channels, are promptly and fairly handled. The program is headed by the National
Taxpayer Advocate. Each state and service center has at least one local
Taxpayer Advocate, who is independent of the local IRS office and reports directly to
the National Taxpayer Advocate. The goals of the Taxpayer Advocate Service are
to protect individual taxpayer rights and to reduce taxpayer burden. The Taxpayer
Advocate independently represents your interests and concerns within the IRS. This
is accomplished in several ways:
The Taxpayer Advocate Service
If you have an ongoing issue with the IRS that has not been resolved through
normal processes, or you have suffered, or are about to suffer, a significant hardship
as a result of the application of the tax laws, contact the Taxpayer Advocate.
Generally, the Taxpayer Advocate can help if, as a result of the application of the tax
laws, you:
Who may use the Taxpayer Advocate Program?
Ensuring that taxpayer problems, which have not been resolved through normal
channels, are promptly and fairly handled. Identifying issues that increase burden or
create problems for taxpayers: bringing those issues to the attention of IRS
management and making legislative proposals where necessary. Making legislative
proposals where necessary in an annual report to Congress. Are suffering, or are
about to suffer, a significant hardship; Are facing an immediate threat of adverse
action; Will incur significant cost (including fees for professional representation);
Will suffer irreparable injury or long-term adverse impact; Have experienced a delay
of more than 30 days to resolve the issue; or Have not received a response or
resolution by the date promised. Hardship situations and other issues that are
referred to the Taxpayer Advocate are reviewed on the individual merits of each
case. The Taxpayer Advocate Service is not a substitute for established IRS
procedures or the formal Appeals process. The Advocate cannot reverse legal or
technical tax determinations. Additionally, you may contact the Taxpayer Advocate
if all established systems or procedures have failed to operate as intended to
resolve the problem or dispute.
How do I reach a Taxpayer Advocate?
TTY/TTD help is available by calling: 1-800-829-4059. OR File Form 911,
Application for a Taxpayer Assistance Order, Send a written request for assistance
(if Form 911 is not available), or Request that an IRS employee complete a Form
911 on your behalf (in person or over the phone). Call the telephone number listed
(at the end of this brochure) for the office closest to you - or the office with which you
have been dealing, Call the Taxpayer Advocate’s toll-free telephone number: 1-877777-4778 Call the general IRS toll-free number (1-800-829-1040) and ask for
Taxpayer Advocate assistance. Write or FAX - Addresses and FAX numbers for
local Taxpayer Advocate offices are listed at the end of this brochure. Form 911 is
available by calling the IRS forms-only number, 1-800-829-3676, or may be obtained
through the IRS internet web page: www.irs.gov.irs.gov
An Application for a Taxpayer Assistance Order requires the Advocate to determine
if significant hardship exists and to review the case to determine what action should
be taken to relieve the hardship. In certain situations, enforcement action may be
suspended while your case is being reviewed. The majority of cases are resolved
administratively by the Taxpayer Advocate. Even when hardship is not a factor, the
Advocate is often able to help resolve the taxpayer’s problem You may FAX a Form
911 (or written request) to your local Taxpayer Advocate.
What can I expect from the Taxpayer Advocate?
Your assigned personal advocate will listen to your point of view and will work with
you to address your concerns. You can expect the advocate to provide you with: A
“fresh look” at your problem; Timely acknowledgment; The name and phone number
of the individual assigned to your case; Updates on progress; Time frames for
action; Speedy resolution; and Courteous service.
What information should I provide to the Taxpayer Advocate?
If you want to authorize another person to discuss the matter or to receive
information about your case, send us Form 2848, Power of Attorney and Declaration
of Representative, or Form 8821, Tax Information Authorization. You can get these
forms at most local IRS offices or by calling the IRS forms-only number, 1-800-8293676. Your name, address, and social security number (or
employer identification number), Your telephone number and hours you can be
reached, Your previous attempts to solve the problem, and the office you contacted,
The type of tax return and year(s) involved, and Description of the problem or
hardship (if applicable). Address any correspondence to: Taxpayer Advocate,
Internal Revenue Service, using the P.O. box numbers, where provided. Street
addresses are provided if you wish to send correspondence by courier. FAX
numbers are also listed. Please note that addresses and telephone numbers may
change over time. The most current information is available on the Taxpayer
Advocate page of the IRS internet web page: .
To contact the Taxpayer Advocate, call the number listed for your local area, the
Service Center where you filed your return, or the last office your return with which
you were dealing. You may also call the Taxpayer Advocate toll-free phone number
(1-877-777-4778)
Office of the National Taxpayer Advocate
1111 Constitution Ave., NW
Rm 3031, C:TA
Washington, DC 20224
(202) 622-4300
(202) 622-6113-FAX
Congressional Liaison Contact (202) 622-4321
Alabama
801 Tom Martin Dr., Room 150-PR, Birmingham, AL 35211
(205) 912-5631
(205) 912-5091-FAX
Alaska
949 E 36th Ave., Stop A-405, Anchorage, AK 99508
(907) 271-6877
(907) 271-6824-FAX
Arizona
210 E. Earll Dr., Stop 1005 PHX, Phoenix, AZ 85012-2623
(602) 207-8240
(602) 207-8250-FAX
Arkansas
700 West Capitol St., Stop 1005 LIT, Little Rock, AR 72201
(501) 324-6269
(501) 324-5183-FAX
California (Laguna Niguel)
24000 Avila Rd., Room 3362, Laguna Niguel, CA 92677-3491
(949) 389-4804
(949) 389-5033-FAX
California (Los Angeles)
300 N. Los Angeles St., Room 5206, Stop 1005A,
Los Angeles, CA 90012
(213) 576-3140
(213) 576-3141-FAX
California (Oakland)
1301 Clay St., Suite 1540S, Oakland, CA 94612-5210
(510) 637-2703
(510) 637-2715-FAX
California (Sacramento)
4330 Watt Ave., North Highlands, CA 95660
(916) 974-5007
(916) 974-5902-FAX
California (San Jose)
55 S Market St., Rm. 710, San Jose, CA 95113
(408) 817-6850
(408) 817-6851-FAX
Colorado
600 17th St., Stop 1005, Denver, CO 80202-2490
(303) 446-1012
(303) 446-1011-FAX
Connecticut
135 High St., Stop 219, Hartford, CT 06103
(860) 756-4555
(860) 756-4559-FAX
District of Columbia (Maryland Office)
PO Box 1553, Rm. 940, Baltimore, MD 21203 or
31 Hopkins Plaza, Rm. 940, Baltimore, MD 21201
(410) 962-2082
(410) 962-9340-FAX
Florida (Ft. Lauderdale)
P.O. Box 17167, Plantation, FL 33318 or
7850 SW 6th Ct., Rm 285, Plantation, FL 33324
(954) 423-7677
(904) 665-1802-FAX
Florida (Jacksonville)
400 West Bay St., Stop TAS, Jacksonville, FL 32202
(904) 665-1000
(904) 665-1818-FAX
Georgia
401 W. Peachtree St., NW, Summit Bldg., Stop 202-D, Rm. 1520,
Atlanta, GA 30308-3539
(404) 338-8099
(404) 338-8096-FAX
Hawaii
300 Ala Moana Blvd., #50089, Room 1-214, Honolulu, HI
96850-4492
(808) 539-2870
(808) 539-2859-FAX
Idaho
550 W. Fort St., Box 041, Boise, ID 83724
(208) 334-1324
(208) 334-1977-FAX
Illinois (Chicago)
230 S Dearborn St., Rm. 2300, Stop 1005-CHI, Chicago, IL 60604
(312) 886-9183
(312) 886-1564-FAX
Illinois (Springfield)
320 W Washington St., Stop 1005SPD, Springfield, IL 62701
(217) 527-6382
(217) 527-6373-FAX
Indiana
PO Box 44976, Stop TA770, Indianapolis, IN 46244 or
575 N Pennsylvania St., Stop TA770, Indianapolis, IN 46204
(317) 226-6332
(317) 226-6222-FAX
Iowa
210 Walnut St., Stop 1005, Des Moines, IA 50309-2109
(515) 284-4780
(515) 284-6645-FAX
Kansas
271 W. 3rd St, North, Stop 1005-WIC, Wichita, KS 67202
(316) 352-7506
(316) 352-7212-FAX
Kentucky
P.O. Box 1735, Stop 120, Louisville, KY 40201 or
600 Dr. Martin Luther King Jr. Pl., Federal Bldg, Rm. 622,
Louisville, KY 40202
(502) 582-6030
(502) 582-6463-FAX
Delaware
409 Silverside Rd., Wilmington, DE 19809
(302) 791-4502
(302) 791-5945-FAX
District of Columbia (Maryland Office)
PO Box 1553, Rm. 940, Baltimore, MD 21203 or
31 Hopkins Plaza, Rm. 940, Baltimore, MD 21201
(410) 962-2082
(410) 962-9340-FAX
Florida (Ft. Lauderdale)
P.O. Box 17167, Plantation, FL 33318 or
7850 SW 6th Ct., Rm 285, Plantation, FL 33324
(954) 423-7677
(904) 665-1802-FAX
Florida (Jacksonville)
400 West Bay St., Stop TAS, Jacksonville, FL 32202
(904) 665-1000
(904) 665-1818-FAX
Georgia
401 W. Peachtree St., NW, Summit Bldg., Stop 202-D, Rm. 1520,
Atlanta, GA 30308-3539
(404) 338-8099
(404) 338-8096-FAX
Hawaii
300 Ala Moana Blvd., #50089, Room 1-214, Honolulu, HI
96850-4492
(808) 539-2870
(808) 539-2859-FAX
Idaho
550 W. Fort St., Box 041, Boise, ID 83724
(208) 334-1324
(208) 334-1977-FAX
Illinois (Chicago)
230 S Dearborn St., Rm. 2300, Stop 1005-CHI, Chicago, IL 60604
(312) 886-9183
(312) 886-1564-FAX
Illinois (Springfield)
320 W Washington St., Stop 1005SPD, Springfield, IL 62701
(217) 527-6382
(217) 527-6373-FAX
Indiana
PO Box 44976, Stop TA770, Indianapolis, IN 46244 or
575 N Pennsylvania St., Stop TA770, Indianapolis, IN 46204
(317) 226-6332
(317) 226-6222-FAX
Iowa
210 Walnut St., Stop 1005, Des Moines, IA 50309-2109
(515) 284-4780
(515) 284-6645-FAX
Kansas
271 W. 3rd St, North, Stop 1005-WIC, Wichita, KS 67202
(316) 352-7506
(316) 352-7212-FAX
Kentucky
P.O. Box 1735, Stop 120, Louisville, KY 40201 or
600 Dr. Martin Luther King Jr. Pl., Federal Bldg, Rm. 622,
Louisville, KY 40202
(502) 582-6030
(502) 582-6463-FAX
Louisiana
600 South Maestri Pl., Stop 2, New Orleans, LA 70130
(504) 558-3001
(504) 558-3492-FAX
Maine
68 Sewall St., Rm. 313, Augusta, ME 04330
(207) 622-8528
(207) 622-8458-FAX
Maryland
PO Box 1553, Rm. 940, Baltimore, MD 21203 or
31 Hopkins Plaza, Rm. 940, Baltimore, MD 21201
(410) 962-2082
(410) 962-FAX
Massachusetts
JFK PO Box 9112, Room 775, Boston, MA 02203 or
25 New Sudbury St., Room 775, Boston, MA 02203
(617) 316-2690
(617) 316-2700-FAX
Michigan
PO Box 330500, Stop 7, Detroit, MI 48232-6500 or
McNamara Federal Bldg., 477 Michigan Ave., Rm 1745,
Detroit, MI 48226-2597
(313) 628-3670
(313) 628-3669-FAX
Minnesota
316 N. Robert St., Stop 1005 STP, St. Paul, MN 55101
(651) 312-7999
(651) 312-7872-FAX
Mississippi
100 W. Capitol St., Stop JK31, Jackson, MS 39269
(601) 292-4800
(601) 292-4821-FAX
Missouri
PO Box 66776, Stop 1005-STL, St. Louis, MO 63166 or
Robert A. Young Bldg., 1222 Spruce St., Stop 1005-STL,
St. Louis, MO 63103
(314) 612-4610
(314) 612-4628-FAX
Montana
Federal Bldg., 301 S. Park, Helena, MT 59626-0023
(406) 441-1044
(406) 441-1045-FAX
Nebraska
1313 Farnam Street, 2 nd Floor, Stop 1005OMA, Omaha, NE
68102-1836
(402) 221-4181
(402) 221-3051-FAX
Nevada
4750 W. Oakey Blvd., Stop 1005LVG, Las Vegas, NV 89102
(702) 455-1241
(702) 455-1216-FAX
New Hampshire
PO Box 6667, Portsmouth, NH 03802 or
T.J. McIntyre Building, 80 Daniel St., Portsmouth, NH 03801
(603) 433-0571
(603) 430-7809-FAX
New Jersey
P.O. Box 745, Springfield, NJ 07091 or 955 S. Springfield Ave.,
Springfield, NJ 07081
(973) 921-4043
(973) 921-4355-FAX
New Mexico
5338 Montgomery Blvd., NE, Stop 1005 ALB,
Albuquerque, NM 87109
(505) 837-5505
(505) 837-5519-FAX
New York (Albany)
Leo O’Brien Federal Bldg., Rm 354, 1 Clinton Square, Albany,
NY 12207
(518) 427-5413
(518) 427-5494-FAX
New York (Brooklyn)
GPO Box R 10, Brooklyn, NY 11202 or
10 Metro Tech Center, 625 Fulton St, Brooklyn, NY 11201
(718) 488-2080
(718) 488-3100-FAX
New York (Buffalo)
PO Box 219, Buffalo, NY 14255-0219 or
201 Como Park Blvd., Buffalo, NY 14227-1416
(716) 686-4850
(716) 686-4851-FAX
New York (Manhattan)
PO Box 408, Church Street Station, New York, NY 10008 or
290 Broadway, 7th Fl., New York, NY 10007
(212) 436-1011
(212) 436-1900-FAX
North Carolina
320 Federal Pl, Rm. 125, Greensboro, NC 27401
(336) 378-2180
(336) 378-2495-FAX
North Dakota
657 2nd Ave., N. Stop 1005-FAR, Fargo, ND 58102
(701) 239-5141
(701) 239-5323-FAX
Ohio (Cincinnati)
PO Box 2057, Cincinnati, OH 45201 or
550 Main St., Rm. 3530, Cincinnati, OH 45202
(513) 263-3260
(513) 263-3257-FAX
Ohio (Cleveland)
PO Box 99709, Cleveland, OH 44199-0709
1240 E. Ninth St., Room 423, Cleveland, OH 44199-2001
(216) 522-7134
(216) 522-2947-FAX
Oklahoma
55 N. Robinson, Stop 1005OKC, Oklahoma City, OK 73102-9229
(405) 297-4055
(405) 297-4056-FAX
Oregon
1220 SW 3rd, Stop O-405, Portland, OR 97204
(503) 326-2333
(503) 326-5453-FAX
Pennsylvania (Philadelphia)
600 Arch St., Room 7426,Philadelphia, PA 19105
(215) 861-1304
(215) 861-1613-FAX
Pennsylvania (Pittsburgh)
PO Box 705, Pittsburgh, PA 15230 or
1000 Liberty Ave, Rm 1102, Pittsburgh, PA 15222
(412) 395-5987
(412) 395-4769-FAX
Rhode Island
380 Westminster St., Providence, RI 02903
(401) 525-4200
(401) 525-4247-FAX
South Carolina
1835 Assembly St., Room 466, MDP 03, Columbia, SC 29201
(803) 253-3029
(803) 253-3910-FAX
South Dakota
115 4th Ave. SE, Room 114, Aberdeen, SD 57401
(605) 226-7248
(605) 226-7246-FAX
Tennessee
P.O. Box 1107, MDP 22, Nashville, TN 37202 or
801 Broadway, Room 481, Nashville, TN 37202
(615) 250-5000
(615) 250-5001-FAX
Texas (Austin)
300 E. 8th St., Stop 1005-AUS, Austin, TX 78701
(512) 499-5875
(512) 499-5687-FAX
Texas (Dallas)
1114 Commerce St., 10 th floor, MC1005DAL,
Dallas, TX 75242
(214) 767-1289
(214) 767-0040-FAX
Texas (Houston)
1919 Smith St., Stop 1005-HOU, Houston, TX 77002
(713) 209-3660
(713) 209-4779-FAX
Utah
50 South 200 East, MS1005, Salt Lake City, UT 84111
(801) 799-6958
(801) 779-6957-FAX
Vermont
Courthouse Plaza, 199 Main St., 1 ST Floor,
Burlington, VT 05401-8309
(802) 860-2089
(802) 860-2006-FAX
Virginia
PO Box 10113, Rm.916, Richmond, VA 23240 or
400 North 8th St., Room 916, Richmond, VA 23240
(804) 916-3501
(804) 916-3535-FAX
Washington
915 2nd Ave., Stop W-405, Seattle, WA 98174
(206) 220-6037
(206) 220-6047-FAX
Wisconsin
310 W. Wisconsin Ave., Stop 1005-MIL, Milwaukee, WI 53203
(414) 297-3046
(414) 297-3362-FAX
Wyoming
5353 Yellowstone Rd., Rm. 206A,
Stop 1005CHE, Cheyenne, WY 82009
(307) 633-0800
(307) 633-0918-FAX
Taxpayers Living Abroad or in US Territories
(A/C International) (A/C International) (A/C International) (A/C International) (A/C
International)
P.O. Box 193479
San Juan, P.R. 00919
Or
San Patricio Office Center
Room 200
7 Tabonuco St.
Guaynabo, P.R. 00966
Service Centers
Andover
PO Box 9055, Stop 121, Andover, MA 01810-9055 or
310 Lowell Street, Stop 121, Andover, MA 01812
(978) 474-5549
(978) 691-6961-FAX
Atlanta
PO Box 48-549, Stop 29A, Doraville, GA 30362 or
4800 Buford Hwy., Stop 29-A, Chamblee, GA 30341
(770) 936-4500
(770) 234-4443-FAX
Austin
PO Box 934, Stop 1005, Austin, TX 78767 or
3651 S Interregional Hwy., Stop 1005, Austin, TX 78741
(512) 460-8300
(512) 460-8267-FAX
Brookhaven
PO Box 960, Stop 102, Holtsville, NY 11742 or
1040 Waverly Ave., Stop 102, Holtsville, NY 11742
(631) 654-6686
(631) 447-4879-FAX
West Virginia
425 Juliana St., Room 3012 , Parkersburg, WV 26101
(304) 420-6616
(304) 420-6682-FAX
Kansas City
PO Box 24551, Stop 1005, Kansas City, MO 64131 or
2306 E. Bannister Rd., Stop 1005, Kansas City, MO 64131
(816) 926-2493
(913) 696-6390-FAX
Memphis
PO Box 30309AMF, Stop 13, Memphis, TN 38130 or
5333 Getwell Rd, Stop 13, Memphis, TN 38118
(901) 395-1900
(901) 395-1925-FAX
Ogden
PO Box 1640, Stop 1005, Ogden, UT 84402 or
1160 W. 1200 South St., Stop 1005, Ogden, UT 84201
(801) 620-7168
(801) 620-3096-FAX
Philadelphia
PO Box 16053, DP 1300, Philadelphia, PA 19114 or
11601 Roosevelt Blvd., DP 1300, Philadelphia, PA 19154
(215) 516-2499
(215) 516-2677-FAX
Operating Division
Taxpayer Advocate
401 W. Peachtree St. N.W.
Room 600, Stop 143-R
Atlanta, GA 30308-3539
(404) 338-8677
(404) 338-8689-FAX
Cincinnati
PO Box 1235, Cincinnati, OH 45201-1235 or
201 W River Center Blvd., Stop 11-G, Covington, KY 41019
(859) 292-5316
(859) 292-5405-FAX
Fresno
PO Box 12161, Stop 01, Fresno, CA 93776 or
5045 East Butler Ave. Stop 01, Fresno, CA 93888
(559) 443-7590
(559) 443-7809-FAX
CIVIL DAMAGE CLAIMS
The Treasury Inspector General’s Office for the Internal Revenue Service is
responsible for reviewing and investigating any complaints for violations of the Fair
Debt Collection Practices Act by IRS employees. I have included what is probably
the first report to Congress from that office (TIGTA) on violations of the FDCPA for
the purpose of commenting and suggesting future courses of action that can be
taken against IRS employees for violations of the Act.
TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
Management Advisory Report: No Violations of the Fair Debt Collection Practices
Act Resulted in Administrative or Civil Actions (Fiscal Year 2001)
July 2001
Reference No. 2001-10-081
Executive Summary
The Fair Debt Collection Practices Act (FDCPA) includes provisions that restrict
various collection abuses and harassment in the private sector that did not apply to
the United States (U.S.) Government at the time the FDCPA was enacted. However,
the Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (RRA 98)
requires the IRS to comply with certain provisions of the FDCPA and to be at least
as considerate to taxpayers as private creditors are required to be with their
customers. In addition, taxpayers who believe their FDCPA rights were violated can
file a civil action against the U.S. Government under the Civil Damages for Certain
Unauthorized Collection Actions statute.
Section 1102 (d)(1)(G) of the RRA 98 requires the Treasury Inspector General for
Tax Administration (TIGTA) to include in one of its semiannual reports to the
Congress information regarding any administrative or civil actions related to FDCPA
violations. The semiannual report must provide a summary of such taxpayer actions
and include any judgments or awards granted. Accordingly, the objective of this
review was to obtain information on IRS administrative and civil actions resulting
from violations of the FDCPA by IRS employees. The TIGTA reviewed cases coded
as FDCPA violations on IRS computer systems opened after July 22, 1998, and
closed during the period April 1 through December 31, 2000.
Results
Based on a review of information coded as potential FDCPA violations on the IRS’
computer systems, there were no violations that resulted in the IRS taking an
administrative action against an employee. In addition, the IRS did not have any
closed civil actions involving FDCPA violations. Accordingly, the IRS did not pay any
money to taxpayers for civil actions resulting from FDCPA violations.
No Fair Debt Collection Practices Act Violations Resulted in Administrative Action
To determine if any FDCPA violations resulted in an administrative action, the
TIGTA reviewed cases coded as FDCPA violations on the Automated Labor and
Employee Relations Tracking System. Review of all 28 cases coded as FDCPA
during the audit period did not identify any FDCPA violations that resulted in an
administrative action being taken against an IRS employee. These 28 cases were
either miscoded as FDCPA violations (19) or closed without administrative action
(9).
No Civil Actions Coded as Fair Debt Collection Practices Act Violations Were Closed
During Our Audit Period
Civil actions filed by taxpayers against the IRS are input to the Counsel Automated
System Environment (CASE) for tracking. During the audit period, the CASE did not
contain any closed civil actions coded as FDCPA. As a result, the IRS did not pay
any money to taxpayers for civil actions resulting from FDCPA violations during the
period of this review.
Case information from the Department of Justice’s (DOJ) Tax Division was obtained
to better ensure civil actions involving FDCPA violations were captured on the
CASE. Because the DOJ does not track FDCPA violations separately, the TIGTA
reviewed the cases filed under Civil Damages for Certain Unauthorized Collection
Actions, which allows taxpayers to sue the IRS for violations of the Internal Revenue
Code related to collection actions. Seven cases were opened on or after July 22,
1998, and closed during the period April 1 through December 31, 2000. None of the
seven cases involved FDCPA violations.
Management’s Response: IRS management agreed with the observations in the
draft report. Management’s complete response to the draft report is included as
Appendix IV.
This is actually a summary of the report, but it is sufficient for our purposes. It just
seems like it is a record of what happens when “the fox is left to guard the hen
house.” If you are going to file a complaint against an IRS employee with the
TIGTA, be sure to send a copy to your Congressman and let the IRS know that you
did send a copy somewhere on the first page of your complaint.
The Internal Revenue Code requires the IRS to comply with certain sections of the
Federal Fair Debt Collection Practices Act (FDCPA). These deal with contacts
regarding unpaid tax, and harassment and abuse of taxpayers.
The Fair Debt Collection Practices Act (FDCPA) applies to communication with all
taxpayers, including corporations and partnerships. Specifically 26 USC § 6304
requires the IRS to comply with certain sections of the Act in the course of
communicating with taxpayers to collect unpaid taxes, and issues involving
harassment and abuse of taxpayers.
Section 7433 of the Internal Revenue Code permits the district court to take
jurisdiction over claims arising because of violations of the FDCPA and impose
sanctions against responsible agents or the agency itself.
Some communications require the taxpayer's consent and include the following
possible situations: a. contacting the taxpayer at work, if there is reason to believe
the employer does not allow it, b. contacting the taxpayer at any unusual time or
place, or a time or place an employee knows or should know, is inconvenient to the
taxpayer, or directly contacting a taxpayer who has a known, authorized
representative or one that can be readily identified. There are exceptions to these
requirements. If the representative does not respond within a reasonable time, they
can be bypassed or the taxpayer can be contacted directly with the consent of the
representative. The communication may also be authorized by a court.
Employees can generally assume that it is convenient to contact the taxpayer after
8:00 a.m. and before 9:00 p.m. local time at the taxpayer's location, unless there is
reason to know otherwise.
An IRS employee is considered to know about the representative if the taxpayer
says there is one. This can be written or oral. If the taxpayer is represented, this
requires the employee to ask for a written power of attorney or disclosure
authorization form, or ask the taxpayer to provide the name and address of the
representative. There may be doubt whether a person still represents the taxpayer
or an issue is covered. If so, contact the representative and ask.
You should know that if the IRS employee does have the power of attorney or some
other written authorization, the representative may be contacted, but no more can be
disclosed than what is authorized in IRC 6103(k)(6).
It is IRS policy not to use methods which are threatening or harassing to the public.
Policy Statement P-1-1. IRC 6304 prohibits employees from harassing, oppressing,
or abusing any person in connection with the collection of any unpaid tax. The
following actions are considered violations: a. the use or threat of use of violence or
other criminal means to harm the physical person, reputation, or property of any
person, b. the use of obscene or profane language to abuse the hearer or reader, c.
causing a telephone to ring or engaging any person in telephone conversation with
the intent to annoy, abuse or harass any person at the called number, d. placing
telephone calls without meaningful disclosure of the caller's identity, except as
similar to rules in Section 804 of the FDCPA.
There are exceptions to this rule. If the telephone call is only for the purpose of
acquiring location information about the taxpayer, the employee cannot: tell any third
party that they are an employee of the IRS, or provide their title (R/O, TE, etc.) to the
third party unless , that information is requested by the third party. "Location
information" is defined as the taxpayer's place of abode and phone number at such
place, or place of employment.
IRS employees can assume that, in absence of knowledge of circumstances to the
contrary, a taxpayer may be contacted between the hours of 8 a.m. and 9 p.m., local
time at the taxpayer's location.
IRS employees cannot, without prior consent of the taxpayer or the express
permission of a court, communicate with a taxpayer in connection with the collection
of any unpaid tax (1) at an unusual place or time or a time or place known or which
should be known to be inconvenient to the taxpayer; (2) if the Service knows that the
taxpayer is represented by any person authorized to practice before the Service with
respect to such unpaid tax or can readily ascertain such person's name and
address, unless such person fails to respond within a reasonable period of time to a
communication from the Service or unless such person consents to direct
communication with the taxpayer; or (3) at the taxpayer's place of employment if the
Service knows or has reason to know that the taxpayer's employer prohibits the
taxpayer from receiving such communication. The IRS cannot engage in conduct the
natural consequence of which is to harass, oppress, or abuse any person in
connection with the collection of any unpaid tax. Such conduct specifically includes
(but is not limited to ) the use or threat of violence or harm, the use of obscene
language, causing a telephone to ring continuously with harassing intent, and the
placement of telephone calls without meaningful disclosure of the caller's identity.
It should also be emphasized that this provision, as distinguished from the FDCPA,
is not limited in application to individual taxpayers, but applies to all taxpayers with
respect to any unpaid tax-- i.e., including corporate or partnership tax.
TIGTA
Another function of the TIGTA Office is to receive and investigate reports of fraud,
waste and abuse. If you are aware of fraud, waste, mismanagement, and abuse in
the IRS programs and operations, it can be reported to the TIGTA. The kinds of
things you should report include mismanagement or violations of law, rules, or
regulations by the IRS employees or contractors. The office keeps your report or
complaint confidential if it is received on the phone, through the mail, or in person,
but not if you send it via email).
If you submit your complaint online (through e-mail), it is possible - though unlikely that others could read it since the internet is not secure. You can make your report
via telephone by calling toll free: 1-800-366-4484 or via fax: 202-927- 7018 or via
mail addressed to: Treasury Inspector General for Tax Administration; P.O. Box
589; Ben Franklin Station; Washington, DC 20044-0589
The following pages show an example of how a complaint may be written for the
district court to hear a claim arising from violations of the Fair Debt Collection
Practices Act. It should be modified to match your particular circumstances. You
must attached affidavits and other evidence to your complaint.
IN THE UNITED STATES DISTRICT COURT
COUNTY, STATE
[CITIZEN]
PLAINTIFF,
Case No. ____________
v.
INTERNAL REVENUE SERVICE AND
[NAME OF RESPONSIBLE AGENT OR AGENTS]
DEFENDANT(S).
___________________________________________/
COMPLAINT FOR UNAUTHORIZED COLLECTIONS
AND CIVIL DAMAGES, 15 USC §1692
Plaintiff, [Name] sues Defendant, [Name of Agent], and alleges:
1.
Jurisdiction and venue are proper and sovereign immunity has been
waived under 26 USC § 7433.
2. This is an action for unauthorized collections that does not exceed the
jurisdictional limit for this court, excluding interest, costs and attorneys fees.
3. Plaintiff requested a validation of the purported debt verbally from the counter
defendant on the following dates: __________. An affidavit stating the facts about
such requests is attached.
4. Plaintiff requested a validation in writing from the defendant on the following
dates: __________. Copies of such request or requests are attached.
5. The Fair Debt Collection Practices Act imposes an obligation upon the defendant
to validate its claim within thirty days or a reasonable time following the request for
validation.
6. Defendant failed to validate its claim as required by the Fair Debt Collection
Practices Act.
7. Defendant has made threatening and harassing phone calls to plaintiff at his
home and place of business.
8. Defendant has defamed plaintiff’s good name and reputation by telling his
neighbors and business colleagues that plaintiff does not pay his fair share of taxes.
9. Defendant has made false statements and representations regarding the
collection attempts.
10. [state other violations]
11. [state other violations]
12. [state other violations]
13. [state other violations]
14. [state other violations]
15. Plaintiff demands a jury trial.
WHEREFORE plaintiff demands judgment for damages against defendant.
DATED this ___ day of [month] [year]
______________________________
[Counter plaintiff]
[Address]
[City state zip]
[Phone number]
Taxpayer Advocate
Office of the Taxpayer Advocate
1111 Constitution Ave NW,
Room 3017, C:TA
Washington, DC 20224
FAX 202 622-4318
PROBLEM
RESOLUTION
PROGRAM
DIRECTORY
The Office of the Taxpayer Advocate will consider your problem or review your Form
911 and advise you of the action taken. If you write, please address your
correspondence to:
Taxpayer Advocate, Internal Revenue Service. Street addresses are provided if
you wish to send correspondence by courier. FAX numbers are also listed if you
prefer to send information by facsimile transmission.
OFFICE
OF
1111
Constitution
Washington,
FAX 202 622-4318
THE
Ave
TAXPAYER
NW,
Room
DC
ADVOCATE
3017,
C:TA
20224
SERVICE CENTER PROBLEM RESOLUTION OFFICES
ANDOVER SERVICE CENTER
310 Lowell Street, Stop 120
Andover, MA 05501
FAX 508 474-5640
ATLANTA
PO
Box
Doraville,
or
4800
Chamblee,
FAX 770 455-2527
Buford
SERVICE
48-549,
GA
Highway,
GA
Stop
Stop
CENTER
29A
30362
29-A
30341
AUSTIN
PO
Box
Austin,
or
3651
S
Austin,
FAX 512 460-1930
SERVICE
934,
Stop
TX
Interregional
Hwy,
TX
1005
Stop
1005
CENTER
AUSC
78767
AUSC
78741
BROOKHAVEN SERVICE CENTER
PO Box 960, Stop 102
Holtsville, NY 11742
or 1040 Waverly Avenue, Stop 102
Holtsville, NY 11742
FAX 516 447-4879
CINCINNATI
333
Scott
Covington,
FAX 606292-5405
SERVICE
Street,
KY
FRESNO
PO
Fresno,
or
5045
Fresno,
FAX 209456-5272
SERVICE
Box
CA
East
CA
KANSAS
CITY
PO
Box
Kansas
City,
or
2306
E.
Kansas
City,
FAX 816 823-1932
MEMPHIS
5333
Getwell
Memphis,
FAX 901546-2181
OGDEN
PO
Box
Ogden,
or
1160
W
Ogden,
FAX 801 620-6319
PHILADELPHIA
PO
Box
Philadelphia,
FAX 215 516-2677
24551,
CENTER
11
41019
Stop
CENTER
12161
93776
Avenue
93888
Butler
SERVICE
Stop
MO
Bannister
MO
Rd,
Stop
SERVICE
Road,
CENTER
13
38118
Stop
TN
SERVICE
9941,
UT
1200
South
UT
SERVICE
16053,
PA
DISTRICT PROBLEM RESOLUTION OFFICES
Stop
St,
Stop
DP
CENTER
1005KSC
64131
1005
64131
CENTER
1005
84409
1005
84201
CENTER
111
19114
Alabama BIRMINGHAM OFFICE
801 Tom Martin Drive, RM-268-PR
Birmingham, AL 35211
205 912-5631
FAX 205 912-5632
Alaska
949
East
Anchorage,
907
FAX 907 271-6824
Arizona
210
E.
Phoenix,
602
FAX 602 207-8250
Arkansas
700
West
Little
501
FAX 501 324-5183
California
PO
Laguna
or
Laguna
714
FAX 714 360-2463
36th
ANCHORAGE
Avenue,
AK
Earll
LITTLE
Capitol
Rock,
PHOENIX
Drive,
AZ
Street,
LAGUNA
Niguel,
24000
Niguel,
Stop
ROCK
Stop
AR
NIGUEL
Box
CA
Avila
CA
OFFICE
A-405
99508
271-6877
Stop
OFFICE
1005
PX
85012-2623
207-8240
1005
OFFICE
LIT
72201
324-6269
OFFICE
30207
92607-0207
Road
92656-3491
360-2175
California
LOS
PO
Los
Angeles,
or
300
N
Los
Los
Angeles,
213
FAX 213 894-6365
ANGELES
OFFICE
531791
90053-1791
Room
4352
90012
894-6111
Box
CA
Angeles
St,
CA
California SACRAMENTO OFFICE
PO Box 2900, Stop SA 5043
Sacramento, CA 95812
or 4330 Watt Avenue
North Highlands, CA 95660
916 974-5007
FAX 916 974-5902
California
1301
Clay
Oakland,
510
FAX 510 637-2715
SAN
Street,
CA
FRANCISCO
Suite
California
SAN
PO
Box
100,
San
Jose,
or
55
S
Market
San
Jose,
408
FAX 408 494-8065
Colorado
600
17th
Denver,
303
FAX 303 446-1011
DENVER
Street,
CO
Connecticut
135
High
Hartford,
860
FAX 860 240-4023
HARTFORD
Street,
CT
JOSE
Stop
CA
St,
CA
OFFICE
1540S
94612-5210
637-2703
Room
Stop
Stop
OFFICE
HQ0004
95103
900
95113
494-8210
OFFICE
1005
80202-2490
446-1012
OFFICE
219
06103
240-4179
Delaware
409
Wilmington,
302
FAX 302 791-4511
WILMINGTON
Silverside
DE
OFFICE
Road
19809
791-4502
District of Columbia BALTIMORE OFFICE
PO Box 1553, Room 620A
Baltimore, MD 21203
or 31 Hopkins Plaza, Room 620A
Baltimore, MD 21201
410 962-2082
FAX 410 962-9340
Florida
PO
Plantation,
or
One
Plantation,
954
FAX 954 423-7685
FT.
FL
University
FL
N
Florida
PO
Box
Jacksonville,
or
400
West
Jacksonville,
904
FAX 904 232-2266
Georgia
PO
Stop
Atlanta,
or
401
Summit
Bldg,
Atlanta,
404
FAX 404 730-3438
Hawaii
300
Stop
Honolulu,
808
FAX 808 541-3379
LAUDERDALE
Box
Dr,
JACKSONVILLE
35045,
Stop
Florida
Bay
Street,
FL
Room
Room
ATLANTA
Box
202-D,
GA
West
Stop
GA
Ala
H-405
HI
Room
Peachtree
202-D,
HONOLULU
Moana
Room
Street,
Room
OFFICE
17167
33318
A-312
33324
423-7677
OFFICE
D:PRO
32202
116
32202
665-1000
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&
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Rm
Southeast,
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Stop
Stop
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Broadway,
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Abroad
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I’m No Fool, No Siree!
I remember clearly those reel to reel films we were shown in elementary school
during the mid seventies. Jimminy Cricket would narrate an ongoing cartoon for a
cartoon character that would get himself in all kinds of trouble because he didn’t use
common sense. He would go swimming in the ocean in spite of a notice indicating
that rip tides would pull him out to sea. He was known as the fool and when he’d
suffer the consequences, Jimminy Cricket would sing his song, “I’m no fool, no siree!
I’m gonna live to be 23.” And for each incident, he would add ten years, finishing the
film by singing, “I’m no fool, no siree! I’m gonna live to be 103! I play safe for you
and me ‘cause I’m no fool!” Many can learn a great deal from the fool when it
comes to not following instructions, not doing our homework and failing to plan.
This chapter should put a rest to many of the frivolous arguments used by tax
protesters that wages are not taxable or that those who earn wages or other gross
income defined under Section 61 of the Code do not have to file a tax return. In the
Hicks case, found on the next several pages, it may have been true that Hicks had
no obligation to file a tax return; however, he did not properly present his case to the
court and I believe he waited too long to hire an attorney.
The Court correctly found that the OMB requirement does not apply to the Form
1040 and that the form itself is not a “rule” requiring publication in the federal
registry. The Paperwork Reduction Act regarding OMB numbers applies to forms
created by the agency under rules promulgated by the agency, for example, the
Form 9358 used to collect information from taxpayers falls under this requirement
while the tax return form does not.
OMB
U.S. 9th Circuit Court of Appeals
U.S. v. HICKS, 947 F.2d 1356 (9th Cir. 1991)
UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
ROBERT W. HICKS, DEFENDANT-APPELLANT.
No. 90-10564.
United States Court of Appeals, Ninth Circuit.
Submitted July 16, 1991. Decided October 16, 1991.
Argued and
Donald W. MacPherson, MacPherson & McCarville, Phoenix, Ariz., for defendantappellant.
Robert L. Miskell, Tucson, Ariz., and Darcy A. Cerow, Phoenix, Ariz., Asst. U.S.
Attys., for plaintiff-appellee.
Appeal from the United States District Court for the District of Arizona.
Before CHOY and SNEED, Circuit Judges, and KELLEHER,*
District Judge.
[Footnote *] Honorable Robert J. Kelleher, District Judge for the Central District of
California, sitting by designation.
SNEED, Circuit Judge:
Robert W. Hicks appeals his conviction for willful failure to file tax returns for the
four years 1983 through 1986. Hicks argues that the Internal Revenue Service's
alleged failure to comply with the Paperwork Reduction Act precludes his being
penalized for failing to file a return, that the charges against him must be dismissed
because the IRS did not publish the 1040 tax return form as a rule in the Federal
Register pursuant to the Administrative Procedure Act, that he was not granted jury
panel tax information to which he was entitled, and that venue was improper. The
district court found no merit to Hicks' arguments. We agree, and affirm.
I.
FACTS AND PROCEEDINGS BELOW
Hicks, an Arizona resident, was charged in the district of Arizona with four counts of
willful failure to file tax returns, one count for each of the years 1983 through 1986,
in violation of 26 U.S.C. 7203. Before trial, Hicks represented himself. He retained
court-appointed counsel at trial.
Hicks filed a pretrial motion that we interpret as a motion to dismiss the charges for
lack of proper venue. The district court denied this motion.
Hicks also filed a pretrial motion seeking a list of prospective jurors, so that he might
obtain tax information about the jurors pursuant to 26 U.S.C. 6103(h)(5).1 Rather
than furnishing Hicks with the juror list, the district court responded to Hicks's motion
by ordering the list to be sent directly to the IRS, along with an inquiry whether any
of the prospective jurors had ever been subject to a criminal investigation or had
been subject to a civil investigation within the last six years. Hicks did not object to
the form of the court's order. On the morning of trial, the court supplied Hicks and
the prosecution with the IRS inquiry responses. During voir dire, the court asked the
panel whether they or their family members had ever been audited or investigated
by the IRS. The record does not indicate how many prospective jurors, if any,
responded affirmatively to these questions. One prospective juror who said his son
had been investigated for failure to pay payroll taxes was not selected for the panel.
At the conclusion of voir dire, Hicks remained silent when given the opportunity to
raise any problems he might have had with the list he received. He also never
requested a continuance.
At the close of the prosecution's case in chief, Hicks filed motions for judgment of
acquittal, arguing, as he does here, that the IRS violated the Paperwork Reduction
Act by its failure to display Office of Management and Budget (OMB) control
numbers and expiration dates on Form 1040 and associated instruction booklets
and regulations, and that the IRS violated the Administrative Procedure Act by failing
to publish Form 1040 and associated instruction booklets and regulations in the
Federal Register. The district court denied these motions.
The jury found Hicks guilty on all four counts. The court sentenced Hicks to three
consecutive one-year sentences for the first three counts, followed by five years'
probation for the fourth count. The court also levied a $10,000 fine for each count.
On appeal, Hicks does not contest the finding that he did not file personal income
tax returns for the years in question. However, he renews the legal arguments he
raised in his motions, and asserts that he should be acquitted as a matter of law, or,
alternatively, that his case should be reversed and remanded for a new trial.
II.
JURISDICTION AND STANDARD OF REVIEW
This court has jurisdiction pursuant to 28 U.S.C. 1291. Hicks raises only issues of
law, which this court reviews de novo. See United States v. McConney, 728 F.2d
1195, 1201 (9th Cir.) (en banc), cert. denied, 469 U.S. 824, 105 S.Ct. 101 (1984).
III.
ANALYSIS
A. From 1040: Compliance with the Paperwork Reduction Act (PRA)
The public protection provision of the Paperwork Reduction Act of 1980, Pub.L. No.
96-511, 94 Stat. 2812 (codified at 44 U.S.C. 3501 et seq.), states: "Notwithstanding
any other provision of law, no person shall be subject to any penalty for failing to . .
. provide information to any agency if the information collection request involved . .
. does not display a current [OMB] control number. . . ." 44 U.S.C. 3512. The
PRA and regulations promulgated under the PRA require that federal government
agency information collection requests display OMB control numbers and, when
appropriate, expiration dates. 44 U.S.C. 3504(c)(3)(A); 5 C.F.R. 1320.4; see 5
C.F.R. 1320.7 (defining "display"). Hicks argues that the IRS failed to comply with
the PRA by not putting control numbers on the regulations associated with tax return
Form 1040 in 1983. He argues further that the public protection provision of the
PRA should be read together with OMB regulations to require that expiration dates
as well as control numbers be displayed, and points out that Form 1040 and its
associated regulations dates.2 Therefore, Hicks believes that while he may be made
to pay his back taxes, he cannot be fined or imprisoned for his violations.
We cannot agree. The IRS, like any federal agency, must comply with the PRA and,
in particular, must display OMB control numbers on its tax return forms and on its
regulations. See Dole v. Steel-workers, 494 U.S. 26, 110 S.Ct. 929, 933, 108
L.Ed.2d 23 (1990) (tax forms are typical of the information requests subject to the
PRA). But even assuming without deciding that the IRS failed to comply with the
PRA here, its failure does not prevent Hicks from being penalized.
The legislative history of the PRA and its structure as a whole lead us to conclude
that it was aimed at reining in agency activity. See S.Rep. No. 930, 96th Cong.2d
Sess., reprinted in 1980 U.S.C.C.A.N. 6241 (legislative history of PRA). Where an
agency fails to follow the PRA in regard to an information collection request that the
agency promulgates via regulation, at its own discretion, and without express prior
mandate from Congress, a citizen may indeed escape penalties for failing to comply
with the agency's request. See, e.g., United States v. Hatch, 919 F.2d 1394 (9th
Cir. 1990); United States v. Smith, 866 F.2d 1092 (9th Cir. 1989). But where
Congress sets forth an explicit statutory requirement that the citizen provide
information, and provides statutory criminal penalties for failure to comply with the
request, that is another matter. This is a legislative command, not an administrative
request. The PRA was not meant to provide criminals with an all-purpose escape
hatch. See United States v. Burdett, 768 F.Supp. 409 (E.D.N.Y.1991); see also
United States v. Wunder, 919 F.2d 34, 38 (6th Cir. 1990) ("Defendant was not
convicted of violating a regulation but of violating a statute which required him to file
an income tax return.").
Moreover, the provision of the tax code under which Hicks was convicted predates
the PRA by over 25 years. If, in enacting the PRA, Congress had intended to repeal
26 U.S.C. 7203, it could have done so explicitly. Repeals by implication are not
favored. Morton v. Mancari, 417 U.S. 535, 549, 94 S.Ct. 2474, 2482, 41 L.Ed.2d
290 (1974). Congress enacted the PRA to keep agencies, including the IRS, from
deluging the public with needless paperwork. It did not do so to create a loophole in
the tax code.
We hold that the public protection provision of the PRA, 44 U.S.C. 3512, constitutes
no defense to prosecution under 26 U.S.C. 7203. To hold otherwise - to interpret
the PRA without reference to Congress' purpose - would be to elevate form over
substance.
B. Form 1040: Compliance with the Administrative Procedure Act (APA)
Hicks argues that IRS Form 1040 is a "rule" under the Administrative Procedure Act,
5 U.S.C. 551-559, and must, therefore, be published in the Federal Register
according to 5 U.S.C. 552(a)(1). The IRS's failure to publish, he argues, eliminates
any legal duty that might have required him to file income tax returns. Further,
because the IRS did not promulgate Form 1040 according to the APA notice and
comment procedures, 5 U.S.C. 553, the "rule" is invalid and there is no duty for any
taxpayer to file a tax return.
Hicks's argument is meritless. It confuses law with regulations with respect to such
law. It is the tax code itself, without reference to regulations, that imposes the duty
to file a tax return. See United States v. Bowers, 920 F.2d 220, 222 (4th Cir. 1990)
(upholding defendants' conviction under 26 U.S.C. 7201). However, even if we
suppose that the duty to file tax returns can be understood only with reference to
regulations, the IRS has duly promulgated sufficient regulations, e.g., 26 C.F.R.
1.6011-1, 1.6012-1, to make that duty clear. The meaning of "willful failure to make
a tax return" is apparent without reference to the contents of Form 1040 or its
instructions. Hicks cannot complain that he did not know what was expected of him.
He had a duty to make a tax return, and chose to ignore that duty.
Hicks's reliance on United States v. Reinis, 794 F.2d 506 (9th Cir. 1986), is
misplaced. As the Fourth Circuit noted in Bowers, Reinis involved unpublished rules
(specifically, instructions for a Currency Transaction Report Form) that imposed
"substantive obligations beyond those created by the statute itself." Bowers, 920
F.2d at 222 n. 2. Only by publication could this obligation become known. The
1040 form, by contrast, did not add to Hicks's basic substantive obligation. That
obligation is to comply with the applicable provisions of the Internal Revenue Code.
The code requires that persons such as Hicks make a return. 26 U.S.C. 6012.
While it is true that the regulations state that filing a Form 1040 is the preferred
manner of making a return, it is by no means the only manner of filing. 26 C.F.R.
1.6012-1(a)(6). Knowing the code and the regulations, and no more, is enough to
enable Hicks to attempt to comply with the obligation to file a return. He did not
need to consult a 1040 form or its instructions. See also 26 C.F.R. 1.6011-1(b)
(taxpayer is not penalized for filing a makeshift return pending the filing of a proper
return). It follows that Form 1040 is not a "rule" subject to the complicated
publication, notice, and comment requirements of the APA.
C. Disclosure of Juror Information Under 26 U.S.C. 6103(h)(5)
Hicks argues that it was improper for the trial court, rather than a party, to issue the
request for juror tax information to the IRS. He argues further that the trial court
improperly limited the scope of its request to a term of years, citing in support United
States v. Sinigaglio, 942 F.2d 581, 583 (9th Cir. 1991) (as amended) (holding that
trial court erred when it limited audit history request to last six year).
This court has recognized that the trial court may need to issue a 6103 request to
assure the IRS that the request is legitimate. See United States v. Hashimoto, 878
F.2d 1126, 1132 (9th Cir. 1989). As long as each side receives the prospective list
with the relevant answers in a timely manner, there is no error.
Hicks is correct in his assertion that the trial court improperly limited the scope of its
request. However, Hicks failed to allege any prejudice arising from the trial court's
decision, and cannot demonstrate that he was prejudiced in any way. In contrast to
the situation in Sinigaglio, no serious discrepancy arose between the information
received from the IRS and the information elicited in voir dire. We find that any error
by the trial court was harmless. United States v. Hardy, 941 F.2d 893, 896 (9th Cir.
1991) (adopting a harmless error analysis for this type of case).
D. Venue
Hicks asserts that his motions regarding improper venue were erroneously denied.
He argues that as an Arizona resident, he was required to file his tax returns with the
IRS service center in Ogden, Utah, and that therefore the site of his offenses was
Utah. Because he is entitled to be prosecuted in the district where his offenses were
committed, he says, venue properly lay in Utah, not Arizona. This argument,
although superficially plausible, is meritless. "Failure to file a tax return is an offense
either at the defendant's place of residence, or at the collection point where the
return should have been filed." United States v. Clinton, 574 F.2d 464, 465 (9th Cir.
1978) (per curiam), cert. denied, 439 U.S. 830, 99 S.Ct. 106, 58 L.Ed.2d 124
(1978); see 18 U.S.C. 3237. Hicks's place of residence is Arizona, and the
collection point for his returns was the IRS center in Utah. Thus Hicks's offenses
could be deemed to have occurred in either Arizona or Utah. Venue was proper in
Arizona.
AFFIRMED.
Footnotes
[Footnote 1] This section states:
In connection with any judicial proceeding described in paragraph (4) [tax
proceedings] to which the United States is a party, the Secretary shall respond to a
written inquiry from an attorney of the Department of Justice (including a United
States attorney) involved in such proceeding or any person (or his legal
representative) who is a party to such proceeding as to whether an individual who is
a prospective juror in such proceeding has or has not been the subject of any audit
or tax investigation by the Internal Revenue Service. The Secretary shall limit such
response to an affirmative or negative reply to such inquiry.
[Footnote 2] Hicks makes much of the fact that 5 C.F.R. 1320.4, 1320.7 state that
an expiration date is required "unless" the OMB says otherwise. He argues that this
should be interpreted to mean that an expiration date must be present unless the
agency receives an explicit dispensation from OMB. We note that Hicks ignores the
language of the statute itself, which says that an expiration date is to be displayed
"when appropriate" rather than "unless inappropriate." However, in view of our
holding that IRS noncompliance with the PRA cannot exonerate Hicks from his 26
U.S.C. 7203 violation, we need not decide whether a "when" or "unless"
interpretation is preferable.
Sixteenth Amendment
So many people are stuck on the idea that because the Sixteenth Amendment
allegedly was not properly ratified, that the income tax is not enforceable. Here is
what the United States Supreme Court said in Stanton v. Baltic Mining Co., 240 US
103 (1916):
"...by the previous ruling, it was settled that the provisions of the 16th Amendment
conferred no new power of taxation but simply prohibited the previous complete and
plenary power of income taxation possessed by Congress from the beginning from
being taken out of the category of INDIRECT taxation to which it inherently
belonged.."
The Sixteenth Amendment did not change the Constitution in any way, so stop
beating a dead horse. If you are promoting this frivolous argument, you're wasting
everyone's time, especially those who are just learning about the system.
The only thing to be changed by repealing this amendment is the public's perception
of the federal income tax system. The source of the taxing power is not the 16th
Amendment; it is Article I, Section 8, of the Constitution. Penn. Mutual Indemnity
Co. v. Commissioner, 32 T.C. (1959), CCH at page 659
Tax Return Is Not A Contract
"Federal income tax is not contractual or otherwise
nature." McLaughlin v. C.I.R., 832 F.2d 986 (7th Cir.1987).
consensual
in
"The notion that the federal income tax is contractual or otherwise
consensual in nature is not only utterly without foundation but... has
been repeatedly rejected by the courts." Id., at 987.
Wages
The District Court had a field day with two other tax protesters, Norman Coleman
and Gary Holder; and thank goodness for these idiots because if we can learn from
them, their sacrifice is well justified. Consider the case of Coleman v. C.I.R., 791
F.2d 68 (7th Cir. 1986). After looking at the record, it appears that the court could
have declined jurisdiction and been done with Coleman; however, I think they
wanted to set an example for everyone else headed on that same path. After filing
twelve amended complaints, the court finally considered Coleman’s last amended
complaint which raised the following issues, among others, numbered accordingly:
1)
“Wages are ‘income’ for purposes of internal revenue. 26 U.S.C.A. § 61”
2)
16.”
“Tax on wages is constitutional. 26 U.S.C.A. § 61; U.S.C.A. Const. Amend.
3)
“General tax levy by Internal Revenue Code does not offend Fifth
Amendment taking clause. U.S.C.A. Const. Art. 1, § 2, cl. 3; Art. 1, § 8, cl. 1;
Amends. 5, 16.”
10)
“Taxpayers’ contentions that wages may not be taxed because they come
from taxpayer’s person, which is depreciating asset, and because Sixteenth
Amendment authorizes only excise taxes, were objectively frivolous, so that tax
court and Internal Revenue Service were entitled to impose sanctions. U.S.C.A.
Const. Amend. 16; 26 U.S.C.A. § 6702.”
Circuit Judge Easterbrook began the court’s ruling with the following opening
statement:
“Some people believe with great fervor preposterous things that just
happen to coincide with their self-interest. ‘Tax protesters’ have
convinced themselves that wages are not income, that only gold is
money, that the Sixteenth Amendment is unconstitutional, and so on.
These beliefs all lead – so tax protesters think – to the elimination of
their obligation to pay taxes. The government may not prohibit the
holding of the beliefs, but it may penalize people who act on them.”
The rest of the ruling follows this same vain and I highly recommend that you
copy and read it, following each of its references.
Another protester, Leonard A. Peth, tried to represent himself in Wisconsin
and this is what the court found. Peth v. Breitzmann, 611 F.Supp. 50:
2)
“Taxpayer, who claimed that only federal officers and employees were
subject to levy of income taxes, failed to state a claim for relief. 26 U.S.C.A. §
6331.”
3)
“Taxpayer was a person liable to pay taxes, although he contended that any
tax under the Internal Revenue Code [26 U.S. C.A. § 1 et seq.] was an indirect tax
upon some right, privilege or corporate franchise and that taxpayer was not a
privileged person nor had he taken any corporate franchise. 26 U.S.C.A. § 6001.”
4)
“Wages constitute taxable income.”
5)
“Taxpayer was an ‘employee’ under Internal Revenue Code liable for income
taxes, although he contended he was not a federal officer, employee, elected
official, or corporate officer, since definition of employee does not exclude all other
wage earners. 26 U.S.C.A. § 3401(c).”
6)
“Taxpayer’s wages were not excluded from withholding under statute
excluding remuneration for services rendered to nonfederal employer by United
States citizen within United States possession since Wisconsin, where taxpayer
worked, was not a United States possession. 26 U.S.C.A. § 3401(a)(8)(B).”
There were many more ludicrous assertions made by Peth and you can read
them for yourself. They are exhaustive. He even sued the Clerk of the Court for
issuing a summons allowing the government sixty days to respond to his complaint.
Of course the sixty-day answer time was proper for the United States! It’s
unscrupulous people like this who make it more difficult for those of us who want to
use the courts in legitimate claims. In that sense, I am an advocate of the
government’s status of immunity. On the other hand, I would like to see the
Congress waive sovereign immunity for just four years so as to allow the few of us,
who bring claims against the IRS in good faith, to fix some big problems. This idiot
even filed common law liens against the agents. The court properly found that “…
The so-called ‘Notices of Common Law Lien’ are worthless scraps of paper and
have no legal effect.”
We should all do our homework before making claims against the government.
Going back to the Hicks case, the “OMB argument” can be properly used for forms
such as 9358 that is a form promulgated by the agency and is subject to the
Paperwork Reduction Act.
In summary, the OMB and Federal Register arguments are wrong, the “wages are
not taxable” argument is wrong, the lawful money argument is wrong, the Sixteenth
Amendment argument is wrong, “UCC refused for cause” is stupid, and “the tax only
applies to federal employees” argument is wrong, so do your homework and don’t
be a stupid patriot. We don’t have time for it. Here is an example of how to correctly
apply the “OMB argument” which was used in a response to the IRS in December of
1997.
“And finally, Form 9358 does not display an approved control number and I cannot
be required to complete this form with this reply.”
It really did nothing toward resolving anything, but I just wanted to show you
an example of the correct application.
Summons
915 F.Supp. 1227 UNITED STATES of America
Petitioner, v. Larry A. HARTMAN and Marguerite C. Hartman
Respondents. No. 95-3-CIV-OC-10
United States District Court
M.D. Florida, Ocala Division. Jan. 10, 1996
Charles R. Wilson, United States Attorney, Bonnie Glober, Assistant United States
Attorney, United States Attorney's Office, Jacksonville, FL, Benjamin A. de Luna,
District Counsel, Internal Revenue Service, Jacksonville, FL, for United States of
America. Larry A. Hartman, Floral City, FL, pro se. Marguerite C. Hartman, Floral
City, FL, pro se. ORDER HODGES, District Judge.
This case is before the Court on the United States' petition to enforce summonses
(Doc. 1). The petition was considered by the United States Magistrate Judge
pursuant to the general order of assignment, who has filed his report (Doc. 9)
recommending that the petition be granted and the summonses enforced. The
Hartmans, who style themselves as "Non-Consenting Persons," have filed
objections (Doc. 10) to the report, the primary thrust of which is that the payment of
income taxes to the United States is voluntary, and they have not consented to
make such payments. Accordingly, upon this Court's independent examination of
the file and upon due consideration of the Magistrate Judge's report and
recommendation, the report and recommendation is adopted, confirmed and made a
part hereof.
The petition (Doc. 1) is GRANTED, and the summonses which are the subject of
the petition shall be enforced as issued, and the Hartmans are directed to forthwith
comply with those summonses as directed by the issuing Revenue Officer. IT IS SO
ORDERED. DONE and ORDERED.REPORT AND RECOMMENDATION [FN1]
FN1. Specific, written objections may be filed within ten (10) days after service of
this document. Rule 6.02, Local Rules, United States District Court, Middle District
of Florida. Failure to timely serve objections shall bar the party from a de novo
determination by a district judge and from attacking factual findings on appeal.
Status SNYDER, United States Magistrate Judge.
This cause is before the Court on the United States' Petition to Enforce Internal
Revenue Service Summonses (Doc. # 1; hereinafter Petition), filed on August 23,
1995. According to the Declaration of C. Little, Revenue Officer, Internal Revenue
Service (hereinafter Declaration), attached to the Petition as Exhibit A, two Internal
Revenue Service (hereinafter IRS) summonses were issued by the revenue officer
to Larry A. Hartman and Marguerite C. Hartman. The summonses were issued as
part of an IRS investigation into the Respondents' tax liability and required them to
appear on July 1, 1994, and provide testimony as well as books, records, papers or
other data. An Order to Show Cause (Doc. # 2) was entered by the under signed on
August 30, 1995, directing the Respondents to appear and answer why they should
not be compelled to obey the IRS summonses served. It also ordered them to
respond to the Petition. On October 4, 1995, at the show cause hearing,
Respondents filed their Court Order Refused for Cause Without Dishonor (in
affidavit form) (Doc. # 5; hereinafter Response).
In their Response Mr. and Mrs. Hartman indicated they were refusing to "accept the
Court's Show Cause Order." Id. at 1. Respondents' refuse always based upon the
following claims: (1) the summonses did not provide the required implementing
regulations; (2) the summonses did not grant use immunity for the testimonies
sought; (3) that C. Little is not an individual authorized to perform functions listed in
26 U.S.C. s 7608; and (4) several arguments that the regulations applicable to the
Internal Revenue Code do not require them to pay taxes. The show cause hearing
on this matter was continued until October 20, 1995, at which time the Respondents
argued they were not required to comply with the summonses because the payment
of income taxes in the United States is voluntary. Summons Enforcement Title 26,
United States Code, ss 7402(b) and 7604(a), provide jurisdiction to the district courts
to issue appropriate process for enforcement of Internal Revenue Service
summonses.
To obtain judicial enforcement of a summons, the Internal Revenue Service must
establish: (1) the investigation is being conducted for a legitimate purpose; (2) the
inquiry may be relevant to that purpose; (3) the information sought is not already in
the IRS' possession; and (4) the administrative steps required by the Internal
Revenue Code have been followed. United Statesv. Medlin, 986 F.2d 463, 466
(11th Cir.), cert. denied, 510 U.S. 933, 114S.Ct. 347, 126 L.Ed.2d 311 (1993);
United States v. Leventhal, 961 F.2d936, 939 (11th Cir.1992) (per curiam). "The
IRS may satisfy its minimal burden 'merely by presenting the sworn affidavit of the
agent who issued the summons attesting to those facts.' " Medlin, 986 F.2d at 466
(quoting La Mura v. United States, 765 F.2d 974, 979 (11th Cir.1985)).
Once the IRS has made this showing, "the burden shifts to the party contesting the
summons to disprove one of the four elements of the government's prima facie
showing or convince the court that enforcement of the summons would constitute an
abuse of the court's process." La Mura, 765 F.2d at 979-80. The United States has
made a prima facie showing Revenue Officer Little declares under penalty of perjury
that an investigation is being conducted "to determine the tax liability of the
respondents, Larry A. and Marguerite C. Hartman, for the years 1986 through 1993,
for which years no individual income tax returns have been filed." Declaration at 1.
Such a purpose is specifically endorsed in the statute giving rise to the power to
issue summonses. See 26 U.S.C. s7602(a). It is further declared the instant
summonses were issued in furtherance of the investigation and that they are
necessary to obtain the Hartmans' testimony and examination of the requested
documents to properly determine the Respondents' tax liability. Declaration at 1, 3.
Therefore, the proposed inquiry is relevant to the revenue officer's investigation.
Revenue Officer Little avers: Except for some Forms W-2, Wage and Tax
Statement, and Forms 1099, which may already be in the possession of the [IRS],
but which are not readily accessible without undue administrative burden and
expense, the information, books, records, papers and other data sought by the
summonses are not already in the possession of the [IRS] for the years 1986
through 1993. The [IRS], is however, in possession of some wage income
information for Marguerite Hartman for the years 1991 and 1992. Declaration at 2-3.
It is stated "[a]ll administrative steps required by the Internal Revenue Code for
issuance of... summons[es] have been taken," id. at 3, and that "[a] Justice
Department referral, as defined by Section 7602(c)(2) of the Internal Revenue Code
of 1986, is not in effect with respect to Larry A. Hartman or Marguerite C. Hartman
for the years under investigation." Id.
Because Revenue Officer Little's Declaration addresses each of the elements
outlined above, the United States, on behalf of the IRS, has met its burden of
making a prima facie showing the summonses were properly issued and should be
enforced.
Respondents' Arguments:
Voluntariness
Respondents, a gospel minister and his wife, contend they are neither tax evaders
nor tax protesters. They state it remains their wish "to comply with all laws which
apply to us, and pay any and all taxes for which we are liable." Response at 5. The
Hartmans assert, however, that "[t]hrough our years of study of the U.S. Constitution
and the IRS Code, we have come to understand and fully believe that 'voluntary
compliance 'to the tax code is without obligation or mandatory requirement.
Therefore, we have no tax liability or requirement to file a 1040 return." Id. Stated
another way, in one of the exhibits Respondents presented to the Court, "[s]ince [the
income tax system] is based on 'voluntary compliance', we choose not to
'volunteer'."
Exhibit G, attached to Response. Any assertion that the payment of income taxes is
voluntary is without merit. It is without question that the payment of income taxes is
not voluntary. United States v. Gerads, 999 F.2d 1255, 1256 (8thCir.1993) (per
curiam); Wilcox v. Commissioner of Internal Revenue, 848F.2d 1007, 1008 (9th
Cir.1988). The assertion that the filing of an income tax return is voluntary is,
likewise, frivolous. Title 26, United States Code, Section 6012(a)(1)(A), "requires
that every individual who earns a threshold level of income must file a tax return."
United States v. Pottorf, 769 F.Supp. 1176, 1183 (D.Kan.1991). Failure to file an
income tax return subjects an individual to criminal penalty. Id.(citing 26 U.S.C. s
7203).
Lack of Implementing Regulations
Respondents argue the summonses are deficient because they do not provide "the
required implementing regulations." Response at 1. It is asserted the only regulation
corresponding with the Internal Revenue Code sections authorizing summonses to
be issued "deal[ ] exclusively with taxable alcohol, tobacco, or firearm activities. The
IRS records show, or should show, that we are not involved in any taxable alcohol,
tobacco or firearm activities." Id. at 3. The Internal Revenue Code authorizes the
Secretary of the Treasury to issue administrative summonses for the purpose of
ascertaining the correctness of any return or determining the liability of any person
for any internal revenue tax. 26 U.S.C. s 7602.
The Internal Revenue Service is not required to make any showing of tax liability as
a prerequisite to the issuance of an administrative summons. The authority to issue
administrative summonses is part of the Secretary's broad statutory charge to
"inquire after and concerning all persons ... who may be liable to pay any internal
revenue tax." Id. s 7601. Respondents' contention that the summonses cannot be
enforced because no implementing regulations have been promulgated concerning
the issuance of IRS summonses is incorrect. Madgev. United States, Consolidated
Misc. File No. 3-94-34, 1995 WL 313653,1995 U.S.Dist. LEXIS 2355 (D.Minn.
February 13, 1995) ("With respect to the assertion that no regulations have
implemented the statute, the Court finds as a matter of law that no implementing
regulations are necessary for a statute empowering the IRS to issue summonses");
see also Cocozza v. United States, Case No. 95-2529, 1995 WL 610684, 1995
U.S.Dist. LEXIS12660 (E.D.Pa. August 14, 1995); United States v. Stoecklin,
848F.Supp. 1521, 1525-26 (M.D.Fla.1994).
Revenue Officer's Authority to Issue Summonses
The contention that the revenue officer lacked the authority to issue the summonses
in this matter is likewise without merit. Revenue officers of the Internal Revenue
Service are authorized to serve summonses under the authority of the United
States. 26 U.S.C. s 7608(a); Stoecklin, 848 F.Supp. at 1527. Use Immunity The
Response filed by Respondents states: [T]he U.S. Supreme Court has established
that the act of producing information by way of testimony or documents cannot be
compelled without a (bona fide) grant of use immunity by the agency of the U.S.
Government making the request, and that it was proper for the Court to reject the
Government's attempt to compel delivery of documents when the Government failed
to make a formal request for use immunity under 18 U.S.C. Sections 6002 and
6003 (U.S. v. Doe, 465U.S. 605 [104 S.Ct. 1237, 79 L.Ed.2d 552] (1984)). No
grant of use immunity was included with the Summons, nor was there any evidence
that a formal request was made by C.L. Little to a person competent to provide such
immunity. Response at 4. Respondents' argument misses the mark.
The determination of whether to request use immunity is within the discretion of the
United States under 18 U.S.C. ss 6002 and 6003. Absent a grant of use immunity,
the Hartmans must assert, if they reasonably believe it to be applicable, their Fifth
Amendment privilege if they wish not to provide self-incriminating information.
Furthermore, "a blanket refusal to produce records or to testify will not support a fifth
amendment claim.
"United States v. Argomaniz, 925 F.2d 1349, 1356 (11th
Cir.1991) (citing United States v. Roundtree, 420 F.2d 845, 852 (5th Cir.1969)).
Instead, the taxpayer must respond to the summons and " 'present himself with his
records for questioning, and as to each question and each record elect to raise or
not to raise the defense.' " Id. (quoting Roundtree, 420 F.2d at852). Despite their
apparent knowledge of this rule, see Exhibit I, attached to Response, at
[unnumbered] 3- 4, Respondents have yet to assert specifically their Fifth
Amendment privilege against self-incrimination; thus, the Court need not address
this issue at present.
RECOMMENDATION Based on the foregoing, it is recommended: (1) the Petition
(Doc. # 1) be GRANTED; (2) the summonses which are the subject of the Petition
be ENFORCED as issued, and that Respondents be directed to comply with same
forthwith.
ENTERED at Jacksonville, Florida, this 8th day of December 1995.
Fifth Amendment Return
United States v. Edelson, 604 F.2d 232 (3rd Cir. 08/22/1979)
UNITED STATES COURT OF APPEALS, THIRD CIRCUIT
No. 79-1209
604 F.2d 232 decided: August 22, 1979.
UNITED STATES OF AMERICA
v.
EDELSON, JOSEPH, APPELLANT
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEW JERSEY
Michael J. Mella, Fair Lawn, N. J., for appellant.
Robert J. Del Tufo, U. S. Atty., Kenneth N. Laptook, Asst. U. S. Atty., Maryanne T.
Desmond, Asst. U. S. Atty., Chief Appeals, Div., Newark, N. J., for appellee.
Before Adams, Rosenn and Higginbotham, Circuit Judges.
Author: Per Curiam
Opinion OF THE COURT
[12] In recent years an increasing, if still small, number of our citizens have placed
themselves in open defiance of the Internal Revenue Code, justifying their positions
on the basis of a variety of legal theories that have, for the most part, been rejected
by the courts. The present appeal may be fairly classified as such a case and, just
as our sister courts of appeals that have considered similar arguments have done,
we reject appellant's position.
[13]
Joseph Edelson was convicted by a jury on three counts of willful failure to
file tax returns in violation of 26 U.S.C. § 7203. On this appeal Edelson urges that
his signed income tax forms containing only identifying data, with the balance of the
requested information answered with bald assertions of Fifth Amendment privilege
constitute legitimate tax returns. Edelson inserted only his name, address,
occupation, and social security number on the forms. He also provided a figure for
his total income computed on the basis of his interpretation of "constitutional dollars"
by which he meant those dollars backed by silver. All other requested information
was refused, with assertions of a Fifth Amendment privilege. Inasmuch as he filed
such documents, he argues, he may not be convicted of willful failure to file income
tax returns.
[14]
Further, even if such a use of the Fifth Amendment privilege is found to be
invalid, Edelson insists that he was entitled to have the question of his subjective
"good faith" exercise of the privilege put to the jury. Edelson claims that a good faith
finding in this respect would provide a legal justification for his act, and that the trial
judge's charge was inadequate in this regard.
[15]
We will affirm the judgment of the district court.
[16]
First, it is now well established that tax forms that do not contain financial
information upon which a taxpayer's tax liability can be determined do not constitute
returns within the meaning of the Internal Revenue Code. Florsheim Bros. Dry
Goods Co. v. United States, 280 U.S. 539, 50 S. Ct. 17, 74 L. Ed. 600 (1930);
United States v. Johnson, 577 F.2d 1304, 1311 (5th Cir. 1978); United States v.
Daly, 481 F.2d 28 (8th Cir. 1973); 10 Mertens, The Law of Federal Income Taxation,
§ 55.22 (1964 revision).
[17]
Second, contrary to Edelson's apparent belief, there is no Fifth Amendment
privilege negating one's duty to file a tax return. A tax form requires disclosure of
routine information necessary for the computation of tax liability and does not
ordinarily compel testimony about facts that might lead to a criminal prosecution.
Federal income tax information is sought in a non-accusatorial setting and is not, as
a general matter, extracted from a "highly selective group inherently suspect of
criminal activities." California v. Byers, 402 U.S. 424, 430, 91 S. Ct. 1535, 1539, 29
L. Ed. 2d 9 (1971). That such filings or the information contained therein may later
appear in court to the detriment of the declarant does not, Ipso facto, justify an
assertion of the Fifth Amendment privilege. As the Supreme Court noted in Byers :
[18]
"Information revealed by these reports could well be "a link in the chain' of
evidence leading to prosecution and conviction. But under our holdings the mere
possibility of incrimination is insufficient to defeat the strong policies in favor of a
disclosure called for . . . ." Id., 428, 91 S. Ct. at 1538.
[19]
Edelson relies on cases recognizing a Fifth Amendment privilege to refuse to
answer questions on a tax return. See U. S. v. Garner, 424 U.S. 648, 96 S. Ct. 1178,
47 L. Ed. 2d 370 (1976); U. S. v. Sullivan, 274 U.S. 259, 47 S. Ct. 607, 71 L. Ed.
1037 (1927). In order to claim this privilege, however, the taxpayer must have a real
basis for fearing that he would be subject to criminal prosecution if he were to
answer the question in response to which he asserted the privilege. Edelson, in
contrast, states only in a generalized manner that, absent his use of the Fifth
Amendment, he may be prosecuted for tax fraud.
[20]
We find no justification for Edelson's blanket invocation of the Fifth
Amendment privilege. One who uses the Fifth Amendment to protect his refusal to
provide the disclosures required in a tax return should confine that use to specific
objections to particular questions on the return for which a valid claim of privilege
exists. He may not use the Fifth Amendment extravagantly to draw a "conjurer's
circle" around the obligation to file a return. United States v. Sullivan, 274 U.S. 259,
264, 47 S. Ct. 607, 71 L. Ed. 1037 (1927). Of course, the mere fact that the privilege
is asserted as to many, most or almost all of the questions on a return, does not
deprive the taxpayer of his right to an opportunity to show that the privilege really
was properly asserted as to all these questions. But Edelson had the requisite
opportunity to submit his claim of privilege to the court for a determination of validity.
Hoffman v. United States, 341 U.S. 479, 486-87, 71 S. Ct. 814, 95 L. Ed. 1118
(1951). See Garner, supra, 424 U.S. 659, n.11, 96 S. Ct. 1178, citing Marchetti v. U.
S., 390 U.S. 39, 61, 88 S. Ct. 697, 19 L. Ed. 2d 889 (1968). He did so by means of a
Fed.R.Crim.P. 12(b) motion seeking dismissal of the indictment, and the broad
assertion of a Fifth Amendment privilege was rejected by the trial judge. This was
not error. Even if a case should arise in which very broad assertions of the privilege
might be justifiable, one seeking such protection must provide the trial judge with
more than mere averments of possible tax-related prosecutions. Edelson does not
appear to have done so before the district court, nor has he indicated to this Court
any substantial non tax-related reasons that might have justified his actions. A
vague possibility of prosecution for tax fraud may not properly be used as an excuse
for engaging in a course of conduct that itself amounts to tax fraud.
[21]
Edelson also challenges the jury instructions on the question of his "good
faith" reliance on his Fifth Amendment rights. Even if he is adjudged to have gone
beyond any legitimate assertion of the constitutional privilege, he argues, he may
not be convicted of willful failure to file tax returns inasmuch as he sincerely believed
that his actions were consistent with the law. In fact, the trial judge appears to have
put this question to the jury with considerable precision:
[22]
In the context of § 7203, the element of willfulness is established by proving
that the defendant had knowledge of his legal obligation to file that tax return but,
nevertheless, he voluntarily, deliberately and intentionally chose not to do what the
law required.
[23]
The defendant maintains because of his beliefs, his actions were justified.
[24]
It is not a defense that the failure to furnish tax information required by the
internal revenue law was done for the purpose of protesting government policies,
even if such protest is with good motive.
[25]
I further instruct you, the term "willful" in the context of this case is the
intentional violation of a known legal duty.
[26]
The defendant's conduct is not willful if he acted through negligence,
inadvertence or mistake or due to his good faith misunderstanding of the
requirement of the law.
[27]
I further instruct you that the defendant's statement of defense in this case is
that . . . he did not willfully and knowingly fail to file said returns in violation of a
known legal duty, but rather, failed to submit said returns in the good faith belief that
he had the legal right to submit a Fifth Amendment return . . .
[28]
If you find the defendant believed in good faith that he was acting within the
law, that the defendant's conduct was not marked by careless disregard as to
whether he had the right to so act, you must find the defendant not guilty for lack of
willfulness.*fn1
[29]
We can find no error in this charge. The definition of "willfulness" set forth
therein is in accord with the Supreme Court's pronouncement in United States v.
Pomponio, 429 U.S. 10, 97 S. Ct. 22, 50 L. Ed. 2d 12 (1976). Insofar as the
defendant may be said to rely on a "good motive" defense,*fn2 the district court's
instruction is in accord with this Court's opinion in United States v. Malinowski, 472
F.2d 850, 855 (3d Cir.), Cert. denied, 411 U.S. 970, 93 S. Ct. 2164, 36 L. Ed. 2d 693
(1973).*fn3 As for his "good faith" argument, the trial court correctly reasoned that if
Edelson truly believed he was under no legal obligation to provide the Internal
Revenue Service with anything more than the returns he filed, he could not be guilty
of Willful failure to file that is, he could not have intentionally violated a known legal
duty. See United States v. Pohlman, 522 F.2d 974, 976 (8th Cir. 1976). As we read
the instruction, this was the precise question that was put to the jury, and it was
resolved against the defendant.
[30]
Accordingly, the judgment of the district court will be affirmed.
Opinion Footnotes
[31]
*fn1 A-32-A-38.
[32]
*fn2 "The only good faith defense to a charge of failure to file a required
return is one where the defendant alleges "a bona fide misunderstanding as to his
liability for the tax, as to his duty to make a return, or as to the adequacy of the
records he maintained . . .' United States v. Murdock, 290 U.S. 389, 396, 54 S. Ct.
223, 226, 78 L. Ed. 381 (1933)". United States v. Matosky, 421 F.2d 410, 413 (7th
Cir. 1970), Cert. denied, 398 U.S. 904, 90 S. Ct. 1691, 26 L. Ed. 2d 62.
Defendant's motives in failing to file are immaterial so long as the government
proves beyond a reasonable doubt that defendant was required to file a return; that
he knew this obligation; and that he willfully or purposely failed to file such return.
Thus defendant's arguments of good motive, i. e. protest against taxation or
government use of paper money not backed by silver, or good faith but mistaken
belief in the law of Fifth Amendment are material and relevant only to the statutory
element of "willfulness", the specific intent which the government must establish.
United States v. Johnson, supra. United States v. Silkman, 543 F.2d 1218 (8th Cir.
1976), Cert. denied, 431 U.S. 919, 97 S. Ct. 2185, 53 L. Ed. 2d 230 (1977); United
States v. Jordan, 508 F.2d 750 (7th Cir. 1975); United States v. Ming, 466 F.2d 1000
(7th Cir. 1972), reh. denied, Cert. denied, 409 U.S. 915, 93 S. Ct. 235, 34 L. Ed. 2d
176; United States v. Hawk, 497 F.2d 365, 368 (9th Cir. 1974), Cert. denied, 419
U.S. 838, 95 S. Ct. 67, 42 L. Ed. 2d 65; United States v. Pohlman, 522 F.2d 974,
976 (8th Cir. 1975) (en banc).
[33]
*fn3 In Malinowski, defendant was a college professor who had provided
false information on his tax return because his taxes were used, in part, to fund the
war in Vietnam, which he opposed. Malinowski reasoned that his good faith exercise
of what he considered to be a First Amendment right of symbolic protest immunized
him for prosecution because of his good purpose. Nonetheless, the trial court's
refusal to give such a "good purpose" instruction was affirmed by this Court.
No Immunity for State Citizens or Fifth Amendment Returns
Sochia v. Commissioner of Internal Revenue, 23 F.3d 941 (5th Cir. 06/24/1994)
UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
Nos. 93-5601, 93-8805, Summary Calendar
23 F.3d 941
decided as corrected: June 24, 1994.
MAURICE H.
APPELLANTS,
SOCHIA
AND
BEATRICE
M.
SOCHIA,
PETITIONERS-
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT-APPELLEE.
MAURICE H. SOCHIA AND BEATRICE M. SOCHIA, PLAINTIFFS-APPELLANTS,
V. UNITED STATES OF AMERICA, ET AL., DEFENDANTS-APPELLEES.
Appeal from the Decision of the United States Tax Court. Appeal from the United
States District Court for the Western District of Texas. TC # 14176-93
Maurice H. Sochia, (Pro Se), San Antonio, TX.
Beatrice M. Sochia, (Pro Se), San Antonio, TX.
For Respondent-Appellee: David L. Jordan, Acting Chief Counsel, IRS, WA/DC.
Gary R. Allen, Chief, Sally J. Schornstheimer, Atty., Richard Farber, Robert L.
Baker, Appellate Section, Tax Division, DOJ, WA/DC.
For Defendants-Appellees: A. Ellouise Niblo, Dept. of Justice, Tax Div., Dallas, TX.
For USA, IRS Et Al: Gary R. Allen, Chief, Sally J. Schornstheimer, Richard Farber,
Robert L. Baker, Appellate Sec., Tax Div., Dept. of Justice, WA/DC.
Before Politz, Chief Judge, Jolly and Duhe, Circuit Judges.
Author: Politz
POLITZ, Chief Judge:
[14] These two appeals are consolidated for today's Disposition. In docket number
93-5601, Maurice H. and Beatrice M. Sochia appeal the decision of the Tax Court
dismissing their action and affirming the Commissioner's determination of a tax
deficiency and additions thereto. In docket number 93-8805 the Sochias appeal the
summary judgment dismissal by the district court of their action seeking a refund of
a $500 penalty imposed for filing a frivolous tax return. For the reasons assigned we
affirm the Tax Court and district court in the actions appealed, and impose sanctions
for these patently frivolous appeals.
[15]
Background
[16]
On their 1989 federal income tax return the Sochias supplied only their
names and those of their dependent children, address, signatures, and amount of
federal tax withheld. They failed to provide any information about their income and
expenses. Instead, they inserted the phrase "Object--5th Amend" on each line of the
Form 1040 that called for specific financial information. The Internal Revenue
Service assessed taxes at $16,013, imposed $2,793 and $720 as additions to the
tax for failure to file a return and for failure to pay estimated taxes respectively, and
penalized the Sochias $500 under 26 U.S.C. § 6702 for the filing of a frivolous
return.
[17]
The Sochias filed suit in the Tax Court seeking a redetermination of the
federal income tax deficiency and additions to tax determined by the Commissioner.
After the Sochias refused to follow the court's order directing an amendment of their
pleadings, the Tax Court dismissed for failure to state a claim upon which relief
could be granted and sustained the Commissioner's determination of the deficiency
and additions thereto. The Sochias timely appealed.
[18]
The Sochias also filed a complaint seeking the refund of a $500 penalty
assessed against them for filing a frivolous tax return for 1989.*fn1 The IRS moved
for summary judgment; the magistrate Judge recommended granting the summary
judgment. Over the objections of the Sochias the district court adopted that
recommendation. The Sochias timely appealed. We consolidated the two appeals.
[19]
Analysis
[20]
A. Tax deficiency and additions to tax
[21]
Relying upon the Federalist Papers and invoking natural law, the Sochias
allege in their pro se petition to the Tax Court that a " "Fifth Amendment Return' is a
valid, legal, legitimate, proper, and correct tax return," that they had filed the "Fifth
Amendment Return" in good faith, that the Commissioner wrongfully ignored their
"Fifth Amendment Return" and issued notice of deficiency in violation of their due
process rights, and that "being State Citizens of the sovereign State of Texas, they
were not subjected to the jurisdiction of the Internal Revenue Code produced by the
United States Congress, and therefore, ... could not legally report on Form 1040 ...
what the Commissioner had alleged is "Income'." The Commissioner moved to
dismiss the petition for failure to state a claim upon which relief can be granted
under Rule 34(b)(4) of the Rules of Practice and Procedure of the United States Tax
Court for failure to set forth justiciable allegations of error and, under Rule 34(b)(5)
for failure to allege any facts in support of such allegations. The Tax Court ordered
the Sochias to file an amended petition setting forth with specificity each claimed
error of the Commissioner and a specification of the facts upon which they based
each claim of error. The Sochias, however, responded to the court order contending
that the facts set forth in their petition were sufficient to satisfy the Tax Court's rules
and they reiterated the contentions set forth in their petition.
[22]
The Tax Court held a hearing on the Commissioner's motion to dismiss; the
Sochias opted not to attend. Following the hearing the Tax Court issued an order of
dismissal and decision affirming the Commissioner's assessment of deficiency and
additions to tax. The Tax Court concluded that the Sochias failed to allege any
justiciable error in the determinations upon which the notice of deficiency was based
or any facts tending to support any such error. We agree. Deficiency determinations
of the Commissioner enjoy a presumption of correctness; the burden of proof rests
upon the taxpayer to demonstrate error.*fn2 The pleadings by the Sochias clearly
fail to satisfy the requirements of Tax Court Rule 34(b). The remaining issues raised
by the Sochias on appeal from the Tax Court decision totally lack merit and require
no comment. That decision is affirmed in all respects.
[23]
B. Frivolous filing penalty
[24] The Commissioner assessed a $500 frivolous return penalty under 26 U.S.C.
§ 6702 for the filing of the 1989 tax return. The Sochias filed a pro se complaint
seeking a refund, claiming that in declaring their return frivolous the Commissioner
violated their fifth amendment rights. Under section 6702, the IRS may impose a
$500 penalty on any individual filing what purports to be a tax return when the filing
(1) does not contain information on which the substantial correctness of the selfassessment may be Judged, and (2) is based on a frivolous position.*fn3 We have
upheld penalty assessments for "protest returns" filed with blanket fifth amendment
objections.*fn4 Further, the Sochias' challenge to the validity of the sixteenth
amendment has been rejected repeatedly by the courts.*fn5 We now uphold the
penalty assessed under section 6702.*fn6
[25]
As the income tax form as filed is frivolous within the meaning of section
6702, the IRS lawfully assessed a $500 penalty. Accordingly, the district court
properly granted summary judgment in favor of the government.
[26]
C. Sanctions
[27]
The government seeks sanctions for frivolous appeals, underscoring the
waste of time and effort by the judicial officers and support personnel and by staff
and counsel for the government in response to these appeals. We find the
government's argument persuasive. More than a decade ago,*fn7 we repeated a
warning given three years before*fn8 that frivolous challenges to the sixteenth
amendment and income tax legislation and regulations would result in the imposition
of the full range of sanctions provided by Rule 38 of the Federal Rules of Appellate
Procedure. Apparently our caution has gone unheeded. Sanctions are warranted
herein. We therefore impose upon Maurice H. Sochia and Beatrice M. Sochia
double costs in these appeals plus the sum of $500 in damages in each appeal, this
total of $1000 being payable to the Treasury of the United States.
[28]
The judgments challenged in these consolidated appeals are AFFIRMED in
all respects.
[29]
Disposition
[30]
AFFIRMED.
Opinion Footnotes
[31]
*fn1 The Sochias' federal court action sought the following:
(1) a statement from defendants that there is such a thing as a "Fifth Amendment
Right"; (2) a statement from defendants that there is such a thing as a "Fifth
Amendment Return"; (3) a statement from defendants that a "Fifth Amendment
Return" is not a frivolous return because a "Fifth Amendment Return" must be
examined and analyzed under standard Constitutional law and not Tax law; (4) a
statement from defendants that the "Fifth Amendment Right" may be invoked by
both the guilty individual and the innocent individual; (5) a statement claiming that
the United States Constitution is still the Supreme Law of the Land; (6) a statement
that a person claiming the "Fifth Amendment Right" does not need to demonstrate
how a particular question could incriminate that person; (7) a statement that
statutory and administrative law must not violate the Constitution; (8) a permanent
injunction; (9) actual, special, and punitive damages; and (10) costs.
[32]
*fn2 Sandvall v. C.I.R., 898 F.2d 455 (5th Cir.1990).
[33]
*fn3 Mosher v. I.R.S., 775 F.2d 1292 (5th Cir.1985), cert. denied, 475 U.S.
1123, 106 S. Ct. 1645, 90 L. Ed. 2d 189 (1986).
[34]
*fn4 See Parker v. C.I.R., 724 F.2d 469 (5th Cir.1984) (penalty under 26
U.S.C. § 6653(a)).
[35]
*fn5 See Knoblauch v. C.I.R., 749 F.2d 200 (1984), cert. denied, 474 U.S.
830, 106 S. Ct. 95, 88 L. Ed. 2d 78 (1985) (noting that every court that has
considered this argument has rejected it).
[36]
*fn6 See Miller v. United States, 868 F.2d 236 (7th Cir.1989).
[37]
*fn7 Parker v. C.I.R.
[38]
*fn8 Lonsdale v. C.I.R., 661 F.2d 71 (5th Cir.1981).
The Sky Is Falling
As we all learned by reading the fairy tale about "Chicken Little" the sky is not
falling. This is analogous to real-life experiences our people have with their
perception of an IRS collection. Many of us are simply not familiar enough with the
collection process to think anything but that our lives will be ruined forever or that
our assets and fortunes cannot be protected.
This chapter describes the entire collection process, from the audit and
examination and through the collection; post collection and claim for refund stages.
I have found that many people don't understand or don't know what to expect from
the IRS during an examination or collection process and this exaggerates their fears
and decreases their ability to effectively resolve the problems normally associated
with an IRS collection.
Pre-Audit Notices:
This chapter will help you understand how to respond to an audit summons,
whether you are a non-filer or not. We'll look at it from the perspective of the nonfiler. After a few years of not filing, the IRS will send you inquiries as to why you
have not filed. You should first receive a Computer Paragraph notice such as a CP
515. About one hundred twenty days later, you should receive a CP 518. The
reason you don’t receive a CP-516, CP 517 or CP 519 and why they are not in
sequence is because when you don’t file a return, the IRS categorizes you as a
“non-filer.” This term is now being used to replace the former “illegal tax protester”
designation. To my knowledge, the CP 519 is the fifth notice under 26 CFR
31.3406(c)-1 but is never sent because only four are required to meet the obligation
of notified payee underreporting.
The issuing of a computer paragraph letter is governed by 26 USC 3406
which relates to backup withholding. This section relates to a requirement to
withhold when a) a payee fails to furnish his TIN properly, or b) when notice is
received that the TIN is incorrect, or c) there has been underreporting with respect to
dividends and interest, or d) when there has been a payee certification failure. It’s
more or less a penalty measure enforced against payees or business entities having
an Employer Identification Number (EIN).
You’ll definitely want to answer and inquire as to the source of these notices but you
need an extension of time because each notice only gives you ten days. Here is a
sample of this type of request. Remember to address and send it to the office which
sent you the notice and keep a copy for your records. Where you see “AAAA”
below, it should be replaced with the first four letters of the entity module’s last
name.
[Sender]
[Address]
[City state zip]
[Phone]
Internal Revenue Service
[_____] Service Center
[City state zip]
[Date]
Re
CP-515 Notice dated ______
ENTITY MODULE: AAAA000-00-0000
Greetings:
I received your CP-515 (and/or 518) Notice(s) dated [date], for tax period
ending December 31, [year], please see attached. Please grant me a thirty-day
extension of time in which to answer. No reply is necessary if extension is granted.
Best regards,
[Sender]
You will never receive a reply to this because your request creates an
automatic thirty-day extension. This will give you time to follow this administrative
procedure:
“A payee can stop backup withholding once it has started, by showing
that there was no underreporting, correcting any underreporting,
showing that backup withholding will cause undue hardship and that
it’s unlikely he will underreport again, or showing that a bona fide
dispute exists as to whether there has been any underreporting. (Reg
§ 35a. 3406-2(g)(1) Reg § 31.3406(c)-1(g)). If [the] IRS determines
that backup withholding should stop, it will give the payee a written
certification to that effect and notify payors and brokers to stop
withholding (Reg § 35a. 3406-2(h)(1); Reg § 35a. 3406-2(d)(1); Reg §
31.3406(c)-1(g)(1))”
Chapter 12 / 1998 RIA Federal Tax
Handbook
At this time I see no advantage or disadvantage to completing Form 9358; however,
most people would only be answering the first question which states: “If you are not
required to file, please complete this section.” I would assume that the IRS already
knows your filing status, so I wouldn’t foresee any problems by telling them you’re
not required to file and indicating your previous filing status. They might even
change the MFR in your IMF. I just don’t like signing things under penalty of perjury
because of the jurisdiction issue.
While this excerpt from the RIA Federal Tax Handbook focuses on the stopping of
backup withholding, if you were a non-filer for the year in question and make a
timely response as this book instructs, you will be stopping the audit and
examination process.
The request is made under 26 CFR 35a.3406-2(g) and I’ve attached a template of
the actual request for determination letter that was obtained from the IRS.
REQUEST FOR DETERMINATION LETTER INSTRUCTIONS
(DO NOT INCLUDE THESE INSTRUCTIONS WITH YOUR
REQUEST)
1.
This request must only be used when responding to a CP 515, 516, 517 or
518 notice from the IRS, and it will only be effective if the request is made within
thirty (30) days of when the request for an extension of time was made.
2.
You have first requested an extension of time within ten (10) days of the date
of the CP notice.
3.
The request must be mailed to the district director’s address for your area.
4.
The order of the pages of the request must not be altered in any way. It is
important that the checklist precede the other pages and that the answers to the
checklist statements not be changed.
5.
The request is made for the entity module, not you. If the notice was mailed
to BILL SMITH, the request must be made for that entity. If the request was made
for BILL SMYTHE, and the individual’s name is spelled “Bill Smith,” the request must
still be made for “BILL SMYTHE.”
6.
Remember to include the date on which the request is mailed via certified
mail, along with the certified mail number.
7.
Each blank must be completed with the appropriate information.
8.
Telephone and fax numbers are not important.
9.
Paragraph 2(e) must be edited to correctly identify which notices were sent,
by number. A copy of each notice must be attached with the request.
10.
Section B must identify the taxpayer entity and the tax period.
11.
The first paragraph of Section D must be edited to correctly reflect the
circumstances, that is, which notices were sent and on which dates.
12.
Keep a copy of your completed request for your records.
13.
The user fee for this request, as of the year 2000, is $275 but it is not
necessary to pay it to get the results. In over sixty cases out of about sixty-five, the
IRS never continued the examination after receiving this request.
The following is a list of the mailing addresses for district directors' offices around
the United States. You should verify whether or not the address you select is
correct by telephone is possible. The “district posts of duty” line appearing as the
second line of each address may be eliminated for purposes of requesting the
determination letter.
Paul Beene
Pacific-Northwest
Duty
District Director
District
Posts
of
District Director
210 E Earll Dr.
Phoenix, AZ 85012-2623
Phone: (602) 207-8289
915 Second Ave.
Seattle, WA 98174
Pamela C. Bigelow
Phone: (206) 220-6010
South Texas District Posts of Duty
District Director
Robert D. Ah Nee
300 E Eighth St.
Northern California District Posts of
Duty
Austin, TX 78701
District Director
Phone: (512) 499-5201
1301 Clay St., South Tower, 16th Fl.
Oakland, CA 94612
Phone: (510) 637-2700
Marilyn Soulsburg
Southern California District Posts of
Duty
District Director
Paul Cordova
Houston District Posts of Duty
District Director
1919 Smith St., MS 1000HOU
Houston, TX 77002-8049
Phone: (713) 209-3704
24000 Avila Rd.
Laguna Niguel, CA 92677
Phone: (949) 360-2069
Jack B. Cheskaty
Rocky Mountain District Posts of Duty
District Director
600 17th St.
Denver, CO 80202-2490
Phone: (303) 446-1000
James J. Walsh
Southwest District Posts of Duty
Richard Auby
Arkansas-Oklahoma District Posts of
Duty
District Director
55 N Robinson Ave.
Oklahoma City, OK 73102
Phone: (405) 297-4411
David B. Palmer
Kansas-Missouri District Posts of Duty
District Director
1222 Spruce St.
St. Louis, MO 63103
Phone: (314) 612-4004
Kentucky-Tennessee District Posts of
Duty
Tom Palmer
District Director
North Central District Posts of Duty
801 Broadway
District Director
Nashville, TN 37203
316 N Robert St., Federal Bldg. &
Court House
Phone: (615) 250-5731
St. Paul, MN 55101
Richard F. Moran
Phone: (651) 312-7777
Gulf Coast District Posts of Duty
District Director
Lenda M. Pappillion
600 S Maestri Pl., MS 6
Midwest District Posts of Duty
New Orleans, LA 70130
District Director
Phone: (504) 558-3344
310 W Wisconsin Ave.
Milwaukee, WI 53203-2221
James E. Donelson
Phone: (414) 297-3321
Georgia District Posts of Duty
District Director
Roger Burgess
Virginia-West Virginia District Posts of
Duty
District Director
401 W Peachtree St., NW, Peachtree
Summit Bldg.
Atlanta, GA 30365
Phone: (404) 338-8100
400 N Eighth St.
Richmond, VA 23240
Edward Weiler
Phone: (804) 771-2255
Upstate New York District Posts of
Duty
District Director
James E. Rogers Jr.
111 W Huron St.
Indiana District Posts of Duty
Buffalo, NY 14202
District Director
Phone: (716) 551-5500
575 N Pennsylvania St.
Indianapolis, IN 46204
Ellen Murphy
Phone: (317) 226-6016
Brooklyn District Posts of Duty
District Director
Gayle Morin
625 Fulton St., 10 MetroTech Ctr.
Brooklyn, NY 11201
Delaware-Maryland District Posts of
Duty
Phone: (718) 488-2000
District Director
31 Hopkins Plz., G. H. Fallon Federal
Bldg.
Benjamin F. Rogers
Pennsylvania District Posts of Duty
Acting District Director
600 Arch St.
Pennsylvania District Posts of Duty
Phone: (215) 597-4210
Acting District Director
600 Arch St.
Stephen L. Daige
New England District Posts of Duty
Dist. Dir.
JFK Federal Bldg.
Boston, MA 2203
Phone: (617) 565-1628
Deborah M. Nolan
Island
District
District Director
135 High St., MS 204
Hartford, CT 6103
Phone: (860) 240-4236
Charles R. Baugh
Manhattan District Posts of Duty
District Director
290 Broadway
New York, NY 10007
Phone: (212) 436-1000
Paul M. Harrington
Phone: (410) 962-3084
Benjamin F. Rogers
Philadelphia, PA 19106
Connecticut-Rhode
Posts of Duty
Baltimore, MD 21201
Philadelphia, PA 19106
Phone: (215) 597-4210
CHECKLIST
TAXPAYER’S NAME
___________________________
TAXPAYER’S I.D. NO.
_______________
DISTRICT HAVING AUDIT
JURISDICTION
____________
ATTORNEY/P.O.A.
N/A
PRIMARY CODE SECTION
26 USC 3406
Yes
1. Does your request involve an issue under the jurisdiction of the
Associate Chief Counsel (Domestic), the Associate Chief Counsel
(Employee Benefits and Exempt Organizations), the Associate Chief
Counsel (International)? See section 3 of Rev. Proc. 99-1, 1999-1
I.R.B. 15. For issues under the jurisdiction of other offices, see section
4 of Rev. Proc. 99-1. (Hereafter, all references are to Rev. Proc. 99-1
unless otherwise noted.)
No
2. Have you read Rev. Proc. 98-3, 1999-1 I.R.B. 100, and Rev. Proc. 98-7,
1999-1 I.R.B. 222, to see if part or all of the request involves a matter on which letter
rulings are not issued or are ordinarily not issued?
N/A 3. If your request involves a matter on which letter rulings are not ordinarily
issued, have you given compelling reasons to justify the issuance of a letter ruling?
Before preparing your request, you may want to call the branch in the Office of the
Associate Chief Counsel (Domestic), the Office of the Associate Chief Counsel
(Employee Benefits and Exempt Organizations), the Office of the Associate Chief
Counsel (Enforcement Litigation), or the Office of the Associate Chief Counsel
(International) responsible for substantive interpretations of the principal Internal
Revenue Code section on which you are seeking a letter ruling to discuss the
likelihood of an exception. For matters under the jurisdiction of-(a) the Office of Associate Chief Counsel (Domestic) and the
Office of Associate Chief Counsel (Employee Benefits and
Exempt Organizations), the appropriate branch to call may be
obtained by calling (202) 622-7560 (not a toll-free call);
(b) the Office of the Associate Chief Counsel (International), the appropriate branch
to call may be obtained by calling (202) 622-3800 (not a toll-free call).
(c) the Office of the Associate Chief Counsel (Enforcement Litigation), the
appropriate branch to call may be obtained by calling (202) 622-3600 (not a toll-free
call).
N/A
4. If the request deals with a completed transaction, have you filed the
return for the year in which the transaction was completed? See
sections 5.01, 5.05, 5.06, 5.07, 5.08, and 5.09.
No
5. Are you requesting a letter ruling on a hypothetical situation or question?
See section 7.02.
No
6. Are you requesting a letter ruling on alternative plans of a proposed
transaction? See section 7.02.
No
7. Are you requesting the letter ruling for only part of an integrated
transaction? See sections 7.03 and 8.01(1).
No
8. Are you requesting the letter ruling for a business, trade, industrial
association, or similar group concerning the application of tax law to its members?
See section 5.11.
No
9. Are you requesting the letter ruling for a foreign government or its political
subdivision? See section 5.12.
Yes 10. Have you included a complete statement of all the facts relevant to the
transaction? See section 8.01(1).
N/A 11. Have you submitted with the request true copies of all wills, deeds, and
other documents relevant to the transaction, and labeled and attached them in
alphabetical sequence? See section 8.01(2).
N/A 12. Have you submitted with the request certified English translations and a
copy of all applicable foreign laws? See section 8.01(2).
Yes 13. Have you included, rather than merely incorporated by reference, all
material facts from the documents in the request? Are they accompanied by an
analysis of their bearing on the issues that specifies the document provisions that
apply? See section 8.01(3).
Yes 14. Have you included the required statement regarding whether the same
issue in the letter ruling request is in an earlier return of the taxpayer or in a return
for any year of a related taxpayer? See section 8.01(4).
Yes 15. Have you included the required statement regarding whether the Service
previously ruled on the same or similar issue for the taxpayer, a related taxpayer, or
a predecessor? See section 8.01(5)(a).
Yes 16. Have you included the required statement regarding whether the
taxpayer, a related taxpayer, a predecessor, or any representatives previously
submitted a request involving the same or similar issue but withdrew the request
before the letter ruling or determination letter was issued? See section 8.01(5)(b).
Yes 17. Have you included the required statement regarding whether the
taxpayer, a related taxpayer, or a predecessor previously submitted a request
involving the same or similar issue that is currently pending with the Service? See
section 8.01(5)(c).
Yes 18. Have you included the required statement regarding whether, at the
same time as this request, the taxpayer or a related taxpayer is presently submitting
another request involving the same or similar issue to the Service? See section
8.01(5)(d).
Yes 19. Have you included the required statement of relevant authorities in
support of your views? See section 8.01(6).
Yes 20. Have you included the required statement regarding whether the law in
connection with the request is uncertain and whether the issue is adequately
addressed by relevant authorities? See section 8.01(6).
No
21. Does your request discuss the implications of any legislation, tax treaties,
court decisions, regulations, notices, revenue rulings, or revenue procedures that
you determined to be contrary to the position advanced? See section 8.01(7), which
states that taxpayers are encouraged to inform the Service of such authorities.
Yes 22. If you determined that there are no contrary authorities, have you
included a statement to this effect in your request? See section 8.01(7).
N/A 23. Have you included in your request a statement identifying any pending
legislation that may affect the proposed transaction? See section 8.01(8).
Yes 24. Is the request accompanied by the deletions statement required by §
6110? See section 8.01(9).
Yes 25. Have you (or your authorized representative) signed and dated the
request? See section 8.01(10).
N/A 26. If the request is signed by your representative or if your representative
will appear before the Service in connection with the request, is the request
accompanied by a properly prepared and signed power of attorney with the
signatory’s name typed or printed? See section 8.01(12).
Yes 27. Have you included, signed, and dated the penalties of perjury statement
in the form required by section 8.01(13)?
N/A 28. Are you submitting your request in duplicate if necessary? See section
8.01(14).
N/A 29. If you are requesting separate letter rulings on different issues involving
one factual situation, have you included a statement to that effect in each request?
See section 8.02(1).
N/A 30. If you want copies of the letter ruling sent to more than one
representative, does the power of attorney contain a statement to that effect? See
section 8.02(2)(a).
N/A 31. If you want the original of the letter ruling to be sent to a representative,
does the power of attorney contain a statement to that effect? See section
8.02(2)(b).
N/A 32. If you do not want a copy of the letter ruling to be sent to any
representative, does the power of attorney contain a statement to that effect? See
section 8.02(2)(c).
N/A 33. If you are making a two-part letter ruling request, have you included a
summary statement of the facts you believe to be controlling? See section 8.02(3).
N/A 34. If you want your letter ruling request to be processed ahead of the
regular order or by a specific date, have you requested expeditious handling in the
manner required by section 8.02(4) and stated a compelling need for such action in
the request?
Yes 35. If you are requesting a copy of the letter ruling to be sent by facsimile
(fax) transmission, have you included a statement containing a waiver of any
disclosure violations resulting from the fax transmission? See section 8.02(5).
Yes 36. If you want to have a conference on the issues involved in the request,
have you included a request for conference in the letter ruling request? See section
8.02(6).
N/A 37. Have you included the correct user fee with the request and made your
check or money order payable to the Internal Revenue Service? See section 15 and
Appendix A to determine the correct amount.
Yes 38. If you qualify for the reduced user fee when gross income or gross
receipts, as applicable, is less than $150,000, have you included the required
certification? See paragraphs (A)(4) and (B)(1) of Appendix A.
N/A 39. If your request involves a business-related tax issue and you qualify for
the reduced user fee when gross income is less than $1 million, have you included
the required certification? See paragraphs (A)(4)(b) and (B)(1) of Appendix A.
N/A 40. If you qualify for the user fee for substantially identical letter rulings, have
you included the required information? See section 15.07(2) and paragraph
(A)(5)(a) of Appendix A.
N/A 41. If you qualify for the user fee for a § 301.9100 request to extend the time
for filing an identical accounting method change on a single Form 3115, have you
included the required information? See section 15.07(3) and paragraph (A)(5)(c) of
Appendix A.
N/A 42. If your request is covered by any of the guideline revenue procedures or
notices, safe harbor revenue procedures, or other special requirements listed in
section 9, have you complied with all of the requirements of the applicable revenue
procedure or notice?
Rev. Proc. List other applicable revenue procedures or notices, including
checklists, used or relied upon in the preparation of this letter ruling request
(Cumulative Bulletin citation not required).
N/A 43. If you are requesting relief under § 7805(b) (regarding retroactive effect),
have you complied with all of the requirements in section 12.11?
Yes
44. Have you addressed your request to the Associate Chief Counsel
(Domestic), the Associate Chief Counsel (Employee Benefits and
Exempt Organizations), the Associate Chief Counsel (Enforcement
Litigation), or the Associate Chief Counsel (International), as
appropriate, at:
Internal Revenue Service
District Director, ACC Domestic
Federal Office Building
[Address]
[City state zip]
The package should be marked:
SUBMISSION.
DETERMINATION REQUEST
_____________________________
signature
________________
date
DELETIONS STATEMENT
Pursuant to the pertinent sections of the current Revenue Procedure, I,
_________, request that only my address, phone number and social security
number be deleted from the published copy of the determination letter requested
herein.
_____________________________
signature
________________
date
Certified Mail No.: ___________________
[Date]
Internal Revenue Service
District Director, ACC Domestic
Federal Office Building
[Address]
[City state zip]
Greetings to the District Director:
I, __________ request a determination that I am not subject to backup
withholding for the tax period indicated.
A. STATEMENT OF FACTS
1.
Taxpayer information
a)
Name:
Address:
__________________
Telephone:
Facsimile:
(N/A)
(N/A)
(The undersigned hereby waives the right to pursue disclosure violations.)
Social security number:
b)
____________
The annual accounting period is the tax year ending December 31, _______.
c)
The location of the district office that has or will have examination jurisdiction
over the return is the _________ District Office.
2.
Description of Taxpayer’s Business Operations:
d)
I am a private citizen living in __________.
e)
The complete transaction includes the receipt of one (or two) Computer
Paragraph Notice(s), CP ____. There are no business reasons for this transaction.
This is a complete description of the transaction and is not part of some larger
integrated transaction.
3.
The facts relating to this transaction are that the circumstances surrounding
these notices do not meet the requirements under 26 USC 3406 for backup
withholding.
There were no contracts, wills, deeds, agreements, instruments, trust
documents, proposed disclaimers, or other documents pertinent to the transaction.
There are no applicable foreign laws to this transaction.
This request does not concern a corporate distribution, reorganization, or similar
transaction, or any prospective transaction.
B. DETERMINATION REQUESTED
“
is not subject to backup withholding for tax period
ending December 31, _____.”
C. STATEMENT OF LAW
Federal regulations limit the government's authority to enforce backup
withholding to cases involving only payments of interest or dividends.
Index of Authorities
1:
26 CFR Part 35a.3406-2
2:
26 USC § 3406
3:
26 CFR Part 31.3406 et seq.
D. ANALYSIS
This request for determination is made pursuant to 26 CFR 35a.3406-2(g). I
received a Computer Paragraph (CP) 515 notice from the ________ Service Center
dated [date], and received another Computer Paragraph (CP) 518 notice dated
[date], both for tax period [year] (copies of which are attached). I made a timely
request for extension of time in which to answer and the service center granted me
an automatic thirty day extension of time in which to file this request.
Your CP 515 notice is the first in a series of five such notices provided by 26 CFR
31.3406(c)-1(b)(ii), only four of which are required to be mailed within a period of
120 days. These notices are numbered, 515, 516, 517, 518 and 519; however, you
will send, or have only sent, two of these notices to me because you have labeled
me a “non-filer,” the new term now being used to replace “illegal tax protester”
because of the IRS Restructure And Reform Act of 1998. As you can see, these
notices relate only to backup withholding under Section 3406 of the Internal
Revenue Code. Please see 26 CFR 31.3406(c)-1(a) for an overview of the correct
application of this procedure. It does not apply when there is simply no return filed,
it applies only when there is underreporting with respect to interest or dividend
payments.
I am not subject to backup withholding as indicated by these notices as I received no
reportable payments for the tax period in question, nor did I receive any interest or
dividend payments exceeding an amount which would require the filing of a tax
return.
There was no failure to furnish any TIN to any payor for this tax period in question.
The Secretary has failed to notify any payor that any TIN was furnished incorrectly.
There was never any notified payee underreporting as described in 26 USC §
3406(c). The Secretary has never complied with this subsection by mailing at least
four notices (over a period of at least 120 days) with respect to the alleged
underreporting for this tax period in question.
There has never been any payee certification failure as described in 26 USC §
3406(d). I had no new accounts or instruments requiring such certification for the
tax period in question.
There are no agency records maintained within my Individual Master File (IMF), nor
its NMF or IRMF components which indicate that I could be subject to backup
withholding for the tax period in question.
E. CONCLUSION
The Internal Revenue Service has made a mistake of record and it needs to
be corrected immediately.
This conclusion is based entirely on § 3406 and
applicable regulations promulgated by the Secretary.
F. PROCEDURAL MATTERS
1.
Statement regarding whether same issue is in an earlier return.
a)
This issue, to the best of my knowledge, is unique and not contained in an
earlier return, nor in any return for any year of a related taxpayer within the meaning
of § 267, nor of a member of an affiliated group of which I might be a member within
the meaning of § 1504. I am not a member of any such group. This statement is
not affirmative.
b)
This issue, to the best of my knowledge, has not previously been ruled upon
by the Secretary for me or a related taxpayer within the meaning of § 267, or any
member of an affiliated group of which I may be a member within the meaning of §
1504 or a predecessor. I am not a member of any such group. This statement is
not affirmative.
c)
This issue, to the best of my knowledge, has not been previously submitted
for a determination or letter ruling by either myself, any related taxpayer, a
predecessor, nor have any representatives previously submitted a request involving
the same or similar issue to the Service, withdrawing the request before a letter
ruling or determination letter was issued. This statement is not affirmative.
d)
This issue, to the best of my knowledge, has not been previously submitted
for a determination or letter ruling by either myself, any related taxpayer, a
predecessor, nor have any representatives previously submitted a request involving
the same or similar issue to the Service, which is currently pending with the Service.
This statement is not affirmative.
e)
This issue, to the best of my knowledge, is not currently being submitted by
any related taxpayer involving the same or a similar issue to the Service. This
statement is not affirmative.
f)
I advocate the position stated in my Statement of Law, Analysis and
Conclusion as set forth herein. The law in connection with this request is absolutely
clear and has no indication of being ambiguous. My explanation of the grounds for
this conclusion is that I have an absolute right to rely upon federal law and the
Internal Revenue Code which has been well established throughout the history of
this country.
g)
After careful review of the Internal Revenue Code and numerous rules
established by our courts, I have found absolutely no contrary authority to the
position which I have taken in this request.
h)
I would like to have a conference on the issues involved in this request.
i)
I would like a facsimile of the letter ruling sent to me upon its completion. My
fax number is indicated in the Statement of Facts.
j)
I am not requesting separate letter rulings on multiple issues.
k)
I am not seeking to obtain the user fee provided in paragraph (A)(5)(a) of
Appendix A of Revenue Procedure 99-1.
2.
Administrative
a)
The deletions statement and checklist required by Rev. Proc. 99-1 are
enclosed.
b)
I certify that my combined gross income, as defined under paragraph (B)(2) of
Appendix A (Rev. Proc. 99-1), as applicable, is less than $150,000 for the last full
(12 months) taxable year ending before the date this request is filed. I am seeking a
reduced user fee.
c)
There is no power of attorney enclosed.
Very truly yours,
_____________________________
Signature
________________
date
DECLARATION
Under penalties of perjury, under the laws of the United States of America, I
declare that I have examined this request, including accompanying documents, and,
to the best of my knowledge and belief, the request contains all the relevant facts
relating to the request, and such facts are true, correct, and complete.
By:
_____________________________
Signature
________________
date
Be sure to include the correct mailing address for the responsible district director.
The cost for requesting this determination letter is $275 under Rev. Proc. 99-1.
None of our subscribers have had to pay the user fee simply because properly filing
the request is sufficient to stop the audit and examination process. We have had the
exact same successful results in nearly fifty cases between March of 1998 and
October of 1999.
If you don’t file a timely request for a determination letter and establish that you are
not subject to backup withholding under those circumstances, the IRS will determine
that you, the “payee” had underreporting as defined under paragraph (a)(3) of Title
26 CFR § 35a.3406-2. In other words, the assumption will be made that the four
required notices were sent and that you are subject to backup withholding, even
though you may have not met none of the criteria for the penalty. Additionally, the
audit and examination process will proceed as if you had a W-2, failure to pay a tax
on wages, liability. Many subscribers and subscribers ask the reason for this, and I
can only guess that some agent or some automated system files a bogus Form
1040 in the IMF under your entity module. I think this generates the subsequent
notices.
The last paragraph of Section 3406 explains this, § 3406(h)(10). It states that “…
payments which are subject to withholding under this section shall be treated as if
they were wages paid by an employer to an employee (and amounts deducted and
withheld under this section shall be treated as if deducted and withheld under
section 3402).” It will be assumed that you are a payee who is subject to backup
withholding if you are unable to correct this problem with a determination letter. No
other response to a computer paragraph letter will be sufficient to resolve a mistake
of record. Like I’ve explained before, those “refused for cause” letters will be treated
as a non-response and you won’t get any answer; however, you will get levies, that’s
almost certain.
If you don’t respond to the IRS CP notices properly, you will begin receiving notices
of proposed changes to your tax returns (whether or not you filed) or notices of
proposed assessment. The IRS will send these collection notices unless 1) you
obtain a determination showing that there was no payee underreporting, 2) correct
any underreporting, 3) show that backup withholding will cause or is causing an
undue hardship and that such underreporting will happen again because of the
hardship, or 4) that a bona fide dispute exists as to whether any underreporting has
occurred. Read section (g) of 26 CFR § 35a.3406-2 for more information. Section
3406(c)(3)(D) of Title 26 directs the Secretary to prescribe procedures under which a
payee may request a determination under subparagraph (A), like I’ve explained
above, and how a payee may provide information with respect to such request. As
you’ve already learned, the procedure is to request a determination letter from the
district director. I’m not assuming you’re always a payee, that’s something you must
establish in your statement of facts with your request.
After working about sixty-five these cases, we noticed a peculiar trend in the nature
of responses our subscribers and subscribers were receiving from the IRS. At first,
the IRS was writing back saying that the subscribers had to pay a $5,000 user fee.
But this was coming from the same office of T. Wayne Thomas, who had previously
told me in writing that the cost was only $275. So this was not a problem to correct.
Another interesting point is that although the district director’s office is commissioned
with the responsibility of answering these requests, the DC office was telling us that
the copies we were sending them could not be process at the DC office and that
they were being forwarded to the district director’s office for answer. This tells us
that the IRS does not read its own procedures manual. We were not supposed to
be getting any reply from DC, only from the appropriate district director’s office. In
any case, they are now getting closer to the merits of the request. Since that time, I
have discussed this with Mr. Thomas and we have agreed to remove his office from
the distribution list.
The only exception to using this process successfully is when the requester has a
record with the IRS of earning more than ten dollars in interest or dividends for the
year in question. You can check your Information Returns Master File (IRMF) to
determine which records the IRS maintains about you.
One of our subscribers paid the user fee of $275 just to work the process to its
conclusion. In the process of convincing the IRS of the correct user fee, we
discussed the matter with a Problem Resolution Officer and she had the idea that
the notice was generated because the subscriber did not file a return for that year. I
explained to her that this was not the issue that it was exclusively limited to backup
withholding under the criteria stated in the request. Since June of 1999, the IRS has
never answered the request and we have had several other instances where the
IRS has made the same incorrect conclusion. I am including a sample letter, drafted
on Due Process letterhead, specifically addressing this problem. The referenced
regulation can be reviewed in Appendix A.
Internal Revenue Service
Problem Resolution Office
One North University Drive, Room A-312
Plantation, FL 33324
FAX: 954-423-7685
[Date]
Re
CP 515 for [subscriber] 000-00-0000, tax period [year]
Hello:
Thank you for reviewing this inquiry. This correspondence involves an
unanswered inquiry or complaint requiring administrative recourse resulting from
your agency’s failure or refusal to answer our subscriber’s previous inquiry
concerning a service generated notice he received from the Austin Service Center
dated on or about [date] and then a subsequent notice from C. E. Jones dated
[date]. [Subscriber] is not a “customer” of the IRS as implied in this last notice.
No resolution has yet been reached and there are no other established
administrative or formal procedures that could be used in the resolution of this
dispute, nor has your agency previously responded to this particular matter. Its
resolution is not the sole responsibility of another federal, state or local agency. This
dispute does not involve any non-tax administrative matter with your agency such as
inspection, disclosure or personnel. The CID is not involved and this dispute is not
concerned with any “tax protester” issues. [Subscriber] has not indicated that he
cannot or will not pay any alleged tax liability.
Agent C. E. Jones has compiled a proposed income tax assessment; however, this
would not have been generated had you not made the mistake of sending
[subscriber] a CP notice as if he had underreported interest or dividend payments.
This problem originated because of your mistake in sending him two CP notices and
failing or refusing to correct your records at his request.
If you’ll review the attached exhibit, you will clearly see that this conclusion is
incorrect. The filing of income tax returns, as it relates to resolving this type of issue,
is limited only to those set forth in your agency’s own regulations, 26 CFR
31.3406(c)-1. This regulation states very clearly that the problems responsible for
generating the CP notices can be resolved when the taxpayer files returns reporting
the correct amount of interest dividends received for the tax period in question. I’ve
attached a copy for your reference. [subscriber] had not received any interest or
dividend payments for the tax period in question and this can be verified upon a brief
review of your Information Returns Master File maintained under the entity module
identified with social security number 000-00-0000.
The four notices mentioned in the second bold/underlined portion of the attached
regulation identify your CP notice series; however, you have failed to submit your
second and third CP Notices 516 and 517. These are procedures that you should
already know, assuming you are performing the functions of your office with
competence and diligence as required by law.
[Subscriber] is not responsible for your agency’s mistakes and demands that you
correct them immediately, or a complaint to the commissioner will be filed against all
agents involved in this scheme to knowingly falsify records. Please notify him when
you have finished correcting this problem.
Best regards,
[Sender]
[Address]
[City state zip]
(Here is an example of another similar letter)
Internal Revenue Service
Internal Revenue Service
North Florida Taxpayer Advocate District Director
400 West Bay Street, Suite 35045
Jacksonville, FL 32202-4437
904-665-1009
Federal Office Building
400 W Bay ST, Suite 35045
Jacksonville, FL 32202
fax: 904-665-1801
[Date]
Re
CP 515/518 failure to answer request for determination letter for 1997
AAAA000-00-0000
Hello:
Thank you for reviewing this inquiry. This correspondence involves an
unanswered inquiry or complaint requiring administrative recourse resulting from
your agency’s failure or refusal to answer our subscriber’s previous inquiry
concerning a service generated notice recently received from your audit division.
Please review the attached records.
No resolution has yet been reached and there are no other established
administrative or formal procedures that could be used in the resolution of this
dispute, nor has your agency previously responded to this particular matter. Its
resolution is not the sole responsibility of another federal, state or local agency. This
dispute does not involve any non-tax administrative matter with your agency such as
inspection, disclosure or personnel. The CID is not involved and this dispute is not
concerned with any “tax protester” issues. I have not indicated that I cannot or will
not pay any alleged tax liability.
You sent our subscriber a CP 515/518 notice and a request for extension of time in
which to answer was timely filed. We subsequently prepared a request for
determination letter as directed by 26 CFR Section 35a.3406-2 and you have failed
or refused to answer the request on the merits as required by law.
Your CP 515 and 518 notices made under Section 3406 would require one or more
of the following conditions to be true:
1.
If our subscriber failed to file required returns with respect to reportable
interest or dividend payments, or
2.
If our subscriber failed to file a payee certification (Form W-9) with respect to
a taxpayer identification number, or
3.
If our subscribers underreported interest or dividend payments with respect to
any tax return, or
4.
If our subscriber failed to provide any taxpayer identification number to the
payor in the manner required.
None of these criteria are true and you can verify this for yourself upon a brief review
of our subscriber’s IRMF Transcript for this tax period.
This notice process is explained quite well under Section 3406 of the Internal
Revenue Code. Under the present circumstances, the IRS is wrong and has mailed
these notices in error, but apparently, refuses to correct this mistake. The law
requires the District Director to answer the submitted request for determination letter
on the merits, and discontinue the audit and examination process when this type of
mistake is present.
If this is not done immediately, we will file a complaint against the District Director for
proceeding upon false records or information, or for creating false records in an
attempt to collect more taxes than are actually owed.
Correct your records immediately and notify our subscriber, or we will proceed with
the complaint process under the new IRS Restructure and Reform Act of 1998. You
have thirty days in which to comply.
Best regards,
The Summons And Audit Process:
An audit summons may follow a computer paragraph notice if it is not answered
properly. Here are a few cases you will need to read in order to understand the
purpose of an audit:
1.
Reisman v. M. Caplin, 375 US 440
2.
Zimmer v. Connett, 640 F.2d 208
3.
Rafter v. Carrier Corporation, 309 F.Supp. 517
4.
McCrone v. United States, 307 US 61
5.
United States v. Hartman, 915 F.Supp. 1227 (M.D.Fla. 1996)
In summary, the purpose of an administrative audit has two functions. The first is to
allow the IRS to determine your tax liability and the second is to allow the individual
being audited to assert certain rights and privileges with respect to producing
records and disclosing other information in response to questions.
There are several ways you may be called into an audit. Sometimes you will receive
a simple, unofficial letter in the mail asking you to attend a meeting or interview at a
certain place and time. And other times, you will be summoned by an official
summons. The process happens like this; in the case of your choosing not to go for
each of them, you may first receive the unofficial letter, then, anywhere from a week
to six months, you may receive an official summons, then within thirty to ninety days,
you will receive another summons, this time signed by the district counsel. This is
the last step taken before the IRS files a claim in federal court asking the court to
order you to appear at the time set for the summons and produce records. If you
are summoned into court, you’ve done something wrong. This should not happen if
you understand the process of and follow my instructions.
If you do not attend at the time set by the court, you will be ordered to appear before
the court on a order to show cause as to why you should not be held in contempt of
the court. I know of one case where the IRS filed a “secret” complaint so the
individual did not even know he was being ordered by the court to appear and
answer the summons because it was never served or did not have a case number
on its face. If you are ever in this situation, you should go to the district court and
ask the clerk for a case number naming you as the defendant.
You should be smart about this and make the time to meet with the IRS at the first
chance you are given. Most of those reading this book are probably non-filers so I
can safely say that the audit will consist of the IRS asking you why you haven’t filed
tax returns. The agents always believe that everyone must file returns so expect
them to be recalcitrant when it comes to trying to get you to go along with their
scheme.
Absent any showing of a contumacious refusal to comply with the summons, the
auditor will simply refer your case to the examiner. If the district counsel believes
that the agency could obtain a district court order compelling you to testify before the
IRS, you might be subpoenaed to appear in court on a order to show cause. The
judge will order you to appear at the summons. If the agency still finds that you
have contumaciously refused to “comply” with the summons, the will move the court
to find you in contempt. Even though the federal courts only have civil contempt
jurisdiction, that is, to impose a fine, the judge will threaten you with confinement.
They will say you “failed or refused to comply” but will ever tell you what would meet
the requirements of compliance. They want you to guess that it means file returns,
not just assert your rights and attend the summons.
The purpose of an audit, when you haven’t filed, is to allow the agent to collect
information from you so that he can establish a tax liability and so that he can learn
what property you have for the taking, in the name of a tax. The second purpose of
the audit is to allow you a forum within which to assert your rights and privileges
about disclosing this information. Remember that the less records you have, the
less information you can be compelled to produce. In other words, I have heard of
judges tell individuals facing an audit summons that if they do not have possession
or control of the records sought, that they could not be compelled to produce them.
You should know that you have the right to remain silent when asked any question
or to produce records and the way to assert that right is for each particular question
that has been asked, one at a time. You cannot assert that right for all questions
that might be asked but you must specify as each one is asked. You cannot be
compelled to testify against yourself, even in a civil or administrative proceeding.
The reason for this protection is that information obtained voluntarily during a civil or
administrative proceeding may be used against you in a subsequent criminal
proceeding. If you are an officer of a corporation and the question is about that
corporation or your corporate capacity, you have certain privileges, but you will
probably have to produce the information at some point (read Hale v. Henkle, 201
US 43 for a better understanding).
Remember to answer only questions which pertain to the subject matter of the audit
as stated on the request or summons. Each of the agent’s questions must pass this
test. You should ask yourself the following questions before answering:
1.
Does the question pertain to the subject matter of the audit, summons or
meeting?
If you don’t believe it does, you can make that statement and ask the agent to clarify
it. An example would be if they summoned a husband but not his wife, and then
asked questions about his wife at the meeting. The husband cannot be compelled
to answer questions about his wife and the IRS is just being lazy and trying to collect
as much information as they can by playing upon your inexperience.
2.
Do you have possession or control of the information or records sought?
If you have no possession or control of the records sought, you cannot be held liable
for producing them.
3)
Could it be used against me in any civil or criminal proceeding?
You can choose to remain silent in response to those types of questions by stating:
“I choose to remain silent with regard to that particular question, this is not a ‘blanket
fifth amendment’ statement.”
4)
Does the agency already have that information, or at least have access to it?
If yes, you can explain this to the agent and also explain that you don’t have custody
of such information or records, but the information can be easily obtained from the
agency’s own records or from the public records.
A good way to prepare for the types of questions you may be asked is to complete
Form 433-A and 433-B. Don’t give these to the IRS agents, just use them for your
own preparation because they contain the closest approximation to the types of
questions you will be asked. It is good to be prepared because they even make a
record of the way in which you respond and record whether or not you hesitate to
answer.
They will ask you if you are a citizen of the United States. If you say no, which I
would, they may ask you why. I would respond to this question by stating that they
asked me so I gave them the answer. If they already have an answer, why ask?
They may also ask the following other questions:
2.
What is your occupation?
3.
Do you have any other means of employment?
4.
Do you or have you received compensation?
5.
Does your wife work?
6.
Do you or your wife have a bank account for which either of you are a signer?
7.
Do you have any foreign investments or deposits?
8.
Do you have a passport?
9.
Do you own property?
10.
Do you have safe deposit box?
11.
How much cash do you have on hand?
12.
Do you have any money tucked away in a mattress or in the yard?
13.
Do any friends keep money for you?
14.
Do you receive alimony?
15.
Do you receive any dividends or interest?
16.
Do you Gamble?
17.
Do you play the Lottery?
18.
Do you receive any Veteran’s benefits?
19.
Do you receive any welfare?
20.
Do you or have you received any pensions or annuities?
21.
Have you sold any business assets?
22.
Do you or have you sold any personal property such as a car, boat or
airplane?
23.
Have you received any compensation for any type of service?
24.
Do you or have you engaged in any form of bartering?
25.
Have you received any Insurance proceeds or settlements?
26.
Have you received any inheritance or large gifts?
27.
What other services have you been involved in for the last several years?
28.
Have you purchased real estate?
29.
Have you refinanced any loans?
30.
Have you filed any homestead exemptions?
31.
If yes, what was the latest year?
32.
Who pays the mortgage on the house in which you live?
33.
Do you pay rent?
34.
Who pays the utilities?
35.
In whose name are the utilities?
36.
Do you own any personal property such as a car, boat, truck or airplane?
37.
Do you have any employees?
38.
Do you lease any employees?
39.
If yes, for which years?
40.
And if yes, what was the purpose of leasing employees?
41.
Do you give customers a receipt or invoice for sales?
42.
Do you obtain permits for work you do?
42.
Are you a licensed subcontractor?
Be careful on questions like this, it implies you are personally under contract
for compensation at that time.
43.
Do you have a business license?
44.
Who prepares state sales tax returns for your business?
45.
Does your business have a state sales tax identification number?
46.
Does your business maintain a list of customers?
47.
How do you pay for supplies for your business?
48.
How are business expenditures recorded?
49.
Do you maintain any records of these expenditures?
The agent may then ask specific questions about third parties with whom he
believes you might have done business.
50.
How do you pay for groceries?
51.
How do you pay for meals at restaurants?
52.
How do you pay for laundry or dry cleaning?
53.
How do you pay for recreation and entertainment
54.
Do you visit a barber shop and pay for haircuts?
55.
Do you go hunting or fishing?
56.
If yes, who pays for travel expenses and bait and gun shells?
57.
Do you have any life, health or accident insurance?
58.
Have you bought any stocks or bonds?
59.
Have you purchased any furniture or appliances?
60.
Have you lent money?
61.
If yes, were there any large amounts loaned?
62.
What other records did you bring today?
Probably the most difficult question to answer is “Why have you not filed tax
returns?” The reason why I think it is the most difficult is because the IRS agent
already believes you are required to file, without exception, and that your answer
could be used against you, or may be the cause of a referral to the Criminal
Investigation Division. I can only tell you what my response would be to this
question and you might be able to better gauge your answer from mine.
The penalty of perjury clause puts me in a precarious situation. It is common
practice for the IRS to audit and re-examine a tax return and determine that the
amounts reported were either insufficient, overstated or that there is some other
error in reporting. Because the statements and facts reported are made under
penalty of perjury, and because examination findings may have more credibility than
those reported by an individual, I could very easily be accused of perjury. By filing a
federal income tax return, I must waive certain rights, I must testify against myself,
and this is the basis for the unreasonable risk associated with making statements
under penalty of perjury. No margin for error is allowed under the penalty of perjury
clause. This is true even if I have a return prepared by a tax professional. The one
filing the return assumes all the liability. Even the IRS escapes all liability under the
scheme because no agent ever makes an actual assessment.
Furthermore, there is no law requiring me to affix my signature to any federal form or
document. In order for me to file a federal income tax return, I must affix my
signature, testifying under penalty of perjury, as to the truth and correctness of the
information reported. There is no law requiring me a make any statements under
penalty of perjury. The filing of a federal income tax return requires me to waive
certain rights that are otherwise protected by law. The government cannot compel
me to waive any rights, and I must conclude that the government cannot therefore,
require me to file any federal income tax return.
Many people have been convicted of various crimes for not filing federal income tax
returns, and I personally know many people who do not file these returns, and some
who have been acquitted of indictments charging them with not filing. I think the
reason for the convictions is due in large part to the fear and prejudice people have
about the subject. Many jury members are chosen because of their ignorance of the
law. Many jury members maintain the prejudice that if one does not file that it is not
fair to those who file, and subsequently, agree that such conduct must be punished.
This has nothing to do with whether or not there is some law requiring an individual
to file a federal income tax return. It has everything to do with what circumstances a
prosecutor might convince a jury to be just. This is the basis for my position, but you
should seek a legal opinion from an attorney, CPA or enrolled agent to be sure for
yourself.
I would also explain that while there are many types of income that is taxable, my
labor and the product of my labor, is not. Wages are taxable, but I do not earn
wages. Interest and dividends are taxable, but I make it a point not to earn any
interest or dividends. I would go on to say that the belief of having to sign a
document to claim a tax liability is quite absurd. If I have a tax liability, then why
would I have to sign something claiming to have the tax liability when it’s already
been established?
In short, I am suspicious of the whole scheme. I am aware of how the IRS parades
some famous person around during tax time, April 15 each year, someone who may
have not paid enough taxes according to the IRS. I see how they indict that person
and I think the timing is important because it reminds everyone else of the possible
consequences of not doing what they are told… by the media, not by a law.
The fact that I appear to be educated, articulate and knowledgeable of the law, may
be used against me to claim that “I should know better” as if there really were some
legal duty for me to file a federal income tax return. The fact that I do not file for the
reasons I just stated is enough to show that an educated individual, such as myself,
can learn the truth and analyze the circumstances for himself. Essentially, I would
either have to be insane or stupid to file a federal income tax return. I am neither.
Before attending the audit, you should have already obtained your Information
Returns Master File (IRMF) Transcripts to determine what information they already
have about you. This will help you answer these types of questions with information
they already have.
After the interview, you have the right to receive a copy of the affidavit or transcript
of each question you answered and it should be furnished promptly upon your
request. This is established under Title 5 USC § 555(c) and is a matter of internal
policy under Section 663.4 of the Legal Reference Guide for Revenue Officers
(1991).
This is the information you want to disclose. You don’t really need it if you have
already received W-2 and 1099 Forms for the years in question because there’s a
very good chance they have records of that in your IRMF component, so that much
can be assumed. It may also help to prepare spreadsheets that restate this
information, just so you can hand the IRS something more than only these forms.
The reason why you want to disclose redundant information to them is so that you
will be able to meet the requirements of the audit summons and reduce the chance
that the agent will refer your case to the district counsel to pursue the case for a
contempt hearing. Even though the audit statute does not give the federal courts
criminal contempt jurisdiction, the judges will threaten you with jail time if you do not
act like a good slave and waive all your rights for the agency.
Depending upon some of the circumstances, it might be advantageous to ask the
agent to bring an action in the federal court so that you can go talk to the judge
about the situation. I don’t recommend that for everyone, but only for those who
really understand the law or have competent counsel who are not afraid to defend
you. As a general rule, you’ll want to avoid going to court. If you are summoned but
did not request it, you’ll need to get a copy of the Federal Rules of Civil Procedure
and learn how to respond. Generally, the court will order you to attend the
summons and answer questions and produce records unless there is an obvious
abuse of process or it is clearly not allowed by the rules. I would recommend that
you take advantage of legal advice from an attorney, but that you make the
appearance yourself. Generally, motions to dismiss will be denied under the rule
established in United States v. Hartman, 915 F.Supp. 1227 (M.D.Fla. 1996).
Third Party Summons, Form 2039:
A third party summons cannot be enjoined under almost every circumstance so
don’t waste your time and resources trying to stop one. If you follow the guidelines
set forth in this book properly, a third party summons will be of no consequence to
you.
Appeals Hearings:
If you have not exhausted your administrative remedies at an appeals conference,
the tax court will normally request that you attempt settlement with an appeals officer
prior to the time set for hearing in tax court. You can file a written protest and have
this conference scheduled by following the procedures in IRS publication 5, catalog
number 46074I. Here is an example of the language used in a written protest letter
requesting a conference with an appeals officer.
“This is my formal request for an appeals conference with the Regional
Office of Appeals in the matter involving year [year]. I agree with the
tax code and do not protest its validity or authority. My disagreement
under these circumstances is not based solely on moral, religious,
political, constitutional, conscientious, or similar grounds. It is based
upon my disagreement with the facts appearing on Form 4549OA-CG
for this year. I received no wages for this year; however, an amount of
“wages” exceeding $0.00 was incorrectly reported by [company]. I
earned no wages for this year. I have recently made a Request for
Letter Ruling, pursuant to the appropriate revenue procedure to
establish this fact and have not yet received an answer.
Please notify me within thirty days by mail as to when a conference will be
scheduled so that I may present my case in support of my disagreement.”
You should obtain a copy of this procedure from your local IRS office if you plan on
following this administrative appeals process.
Notices of Deficiency, or 90 day letters:
You can still avail yourself of an appeals conference after receiving a notice of
deficiency but you must be a little more diligent. It’s been my experience that most
people in this situation have already been labeled an “illegal tax protester” and their
requests for an appeals conference go unanswered. I believe the court has the
discretion to remand the case back to an appeals officer once your petition is filed so
you will have your opportunity if you follow the procedure.
U.S. Tax Court:
There are times when it appears tax court might helpful. I would assume you know
by now that tax court is not really a court, but an administrative hearing forum within
the agency of the Internal Revenue Service. The IRS cannot sue you from this court
because it has no powers to enforce a summons from this court.
Tax Court has a set of rules all by itself and if you plan on challenging a notice of
deficiency without first paying the tax, then that’s the place to start. You should
order a copy of the rules from the address stated on your petition if you plan on filing
one. I don’t like the idea of going there but if you can’t pay what they say you owe
and then sue for a refund in federal court, this is about your only option.
I have yet to be in this situation, but I believe you can go through the motions in tax
court, get your petition dismissed and appeal to the federal court of appeals for a
review on the tax court’s jurisdiction to hear a factual dispute over a W-2. If you can
get the federal court to force the tax court to hear that issue, you’ll probably get an
opportunity to have your case heard on its merits before the federal appellate court
on a second appeal. Remember that after your petition is dismissed, your property
may be subject to lien and levy at any time, without regard to your appeal.
If you’re a non-filer, just about the only argument you can make is that your pay was
not recognized by the tax code as being a taxable income. If you allege that no
assessment was made, the federal courts will not accept jurisdiction. The only two
purposes for which I would consider filing a petition in tax court, is 1. to get an
adverse agency ruling and appeal it to the federal court of appeals for a review
(complaint for review de novo) and 2. for delay.
If you’ve filed returns for the years in question, one argument that might have
standing is that the Secretary cannot make examination changes unless he first
reviews the returns. This type of case depends upon the facts but you would be left
with merely challenging the amount they say you owe.
I’m inclined to believe that it’s actually the filing of the tax form that is the taxable
activity. This is explained in my analysis of Form 5546. This goes back to what I
explained previously, they desperately need you to file because they cannot legally
impose a tax against you without your signed return. The authority for this was the
following ruling made in tax court, Toll v. Commissioner IRS (1991, CA9) 1991 US
App LEXIS 17529.
“Deficiency notice is fatally defective where it states that deficiency is
being assessed because taxpayer’s original return is unavailable,
since statement established that IRS failed to examine return, and
such failure is sufficient to make notice invalid; case is not remanded
to Tax Court since IRS cannot prove that it made proper determination
if it did not actually review return.”
I’ve included petition forms on the next several pages but still highly recommend that
you obtain a copy of the rules from which these forms originated in case you get into
the discovery process.
You also want to include an affidavit itemizing all of the income (federal excise)
taxes you've paid
[Sender]
[Address]
[City state zip]
United States Tax Court
400 Second Street, NW
Washington, DC 20217
[Date]
Re
petition and filing fee
Greetings:
Thank you for receiving this petition. Please find the enclosed payment for
the filing fee of $60, file this petition and notify me as to the docket number.
Best regards,
[Sender]
UNITED STATES TAX COURT
[Petitioner],
Petitioner
v.
Docket No. __________
COMMISSIONER OF INTERNAL REVENUE,
Respondent.
__________________________________/
DESIGNATION OF PLACE OF TRIAL
Petitioner hereby designates [city state] as the place of trial of this case.
____________________________
Signature of Petitioner or Counsel
Dated:
[The following locations are designated as places to hear original petitions:
Birmingham and Mobile Alabama; Anchorage Alaska; Phoenix Arizona; Little Rock
Arkansas; Los Angeles, San Diego and San Francisco California; Denver Colorado;
Hartford Connecticut; Washington, District of Columbia; Jacksonville, Miami and
Tampa Florida; Atlanta Georgia; Honolulu Hawaii; Boise Idaho; Chicago Illinois;
Indianapolis Indiana; Des Moines Iowa; Louisville Kentucky; New Orleans Louisiana;
Baltimore Maryland; Boston Massachusetts; Detroit Michigan; St. Paul Minnesota;
Biloxi and Jackson Mississippi; Helena Montana; Omaha Nebraska; Las Vegas and
Reno Nevada; Albuquerque New Mexico; Buffalo and New York City New York;
Winston-Salem North Carolina; Cincinnati, Cleveland and Columbus Ohio;
Oklahoma City Oklahoma; Portland Oregon; Philadelphia and Pittsburgh
Pennsylvania; Columbia South Carolina; Knoxville, Memphis and Nashville
Tennessee; Dallas, El Paso, Houston, Lubbock and San Antonio Texas; Salt Lake
City
Utah;
Richmond
Virginia;
Seattle
and
Spokane
Washington;
Charleston/Huntington West Virginia and Milwaukee Wisconsin.]
UNITED STATES TAX COURT
[Petitioner]
Petitioner
v.
Docket No. _________
COMMISSIONER OF INTERNAL REVENUE,
Respondent.
__________________________________/
PETITION
Petitioner disagrees with respondent’s Notice of Deficiency for the years
[xxxx, xxxx], dated [date of notice], a copy of which is attached. The basis for
petitioner’s disagreement is as follows:
1.
The petitioner is an individual with mailing address now at: [address] [city
state zip], and this petitioner does also reside at this address.
The taxpayer
identification number issued for petitioner’s use is 000-00-0000.
2.
The notice of deficiency or liability, a copy of which is attached as Exhibit 1-P,
was dated for [date of notice], and was issued by the Office of the Internal Revenue
Service at [address city state zip].
3.
The deficiencies or liabilities as determined by the Commissioner are excise
taxes.
4.
The determination of the tax set forth in the said notice of deficiency or liability
is based upon the following errors:
Form W-2 was reported incorrectly. This Form reports that petitioner
received wages; however, no wages were received by petitioner for tax period
[year(s)].
LEGAL ARGUMENT
5.
Petitioner’s income for [year(s)] was not recognized by the tax code as being
a wage [or taxable]. Petitioner has paid all income taxes for these years.
WHEREFORE petitioner requests judgment against Commissioner.
You should observe that there is no statement of facts in this petition. The Petition consists of statement of errors
and facts. You do not make a legal argument in the petition. -- Lv
By:
__________________
Petitioner
[Petitioner]
[Address]
[City state zip]
[Phone]
Filed: ___________
Abatements of Interest and Penalties:
This information was taken from the instructions attached to Form 843:
Department of the Treasury Internal Revenue Service
Instructions for Form 843 (Revised January 1997)
Claim for Refund and Request for Abatement
Section references are to the Internal Revenue Code.
Paperwork Reduction Act Notice We ask for the information on this form to
carry out the Internal Revenue laws of the United States. Internal Revenue Code
sections 6402 and 6404 state the conditions under which you may file a claim for
refund and request for abatement of certain taxes, penalties, and interest. Form 843
may be used to file your claim. Section 6109 requires that you disclose your
taxpayer identification number (TIN). Routine uses of this information include
providing it to the Department of Justice for civil and criminal litigation and to cities,
states, and the District of Columbia for use in administering their tax laws. You are
not required to provide the information requested on a form that is subject to the
Paperwork Reduction Act unless the form displays a valid OMB control number.
Books or records relating to a form or its instructions must be retained as long as
their contents may become material in the administration of any Internal Revenue
law. Generally, tax returns and return information are confidential, as required by
Code section 6103. The time needed to complete and file this form will vary
depending on individual circumstances. The estimated average time is: If you have
comments concerning the accuracy of these time estimates or suggestions for
making this form simpler, we would be happy to hear from you. You can write to the
Tax Forms Committee, Western Area Distribution Center, Rancho Cordova, CA
95743-0001.
DO NOT send Form 843 to this address. Instead, see Where To File below.
General Instructions
A Change To Note New rules apply in certain cases to abatement of interest accrued
on deficiencies or payments for tax years beginning after July 30, 1996. See Line 4
under Specific Instructions for more information.
Purpose of Form.— Use Form 843 to file a claim for refund of certain overpaid taxes,
interest, penalties, and additions to tax. For example, if on your employment tax
return you reported and paid more Federal income tax than you actually withheld
from an employee, use this form to claim a refund. Also use Form 843 to request
abatement of an over assessment (or the unpaid portion of an over assessment) if
more than the correct amount of tax (except income, estate, and gift tax), interest,
additions to tax, or penalties have been assessed. Do not use Form 843 to claim: A
A refund or to request an abatement of your income tax. Individuals must use Form
1040X, Amended U.S. Individual Income Tax Return. Corporations that filed Form
1120 or 1120-A must use Form 1120X, Amended U.S. Corporation Income Tax
Return. Other income tax filers should file a claim on the appropriate amended tax
return. A refund of excise taxes reported on Form 720, 730, or 2290. You must use
Form 8849, Claim for Refund of Excise Taxes. Form 8849 is also used to claim
refunds of excise taxes imposed on fuels, chemicals, and other articles used for
nontaxable purposes or for which there is a reduced rate of tax. A refund of the
required payment under section 7519. Instead, file Form 8752, Required Payment or
Refund Under Section 7519. Generally, you must file a separate Form 843 for each
tax period and each type of tax. Exceptions are provided for certain claims in the
Specific Instructions below.
Who May File.— You may file Form 843 or your agent may file it for you. If your
agent files, the original or a copy of Form 2848, Power of Attorney and Declaration of
Representative, must be attached. If you are filing as a legal representative for a
decedent whose return you filed, attach to Form 843 a statement that you filed the
return and you are still acting as the representative. If you did not file the decedent's
return, attach certified copies of letters of testamentary, letters of administration, or
similar evidence to show your authority.
File Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer,
with Form 843 if you are the legal representative of a decedent.
Where To File.— File Form 843 with the Internal Revenue Service Center where you
filed your return.
Specific Instructions Social Security Number.— If you are filing Form 843 to
request a refund or abatement relating to a joint return, enter social security
numbers for both you and your spouse.
Line 3
Line 3a.— Check the appropriate box to show the type of tax, penalty, or addition to
tax. If you are filing a claim for refund or request for abatement of an assessed
penalty, check the box and enter the applicable Internal Revenue Code (IRC)
section. Generally, you can find the IRC section on the Notice of Assessment you
receive from the service center.
Line 3b.— Check the appropriate box to show the type of return, if any, that you
filed.
Record keeping ........................... 26 min.
Learning about the law or the form ............................................. 7 min.
Preparing the form..................... 20 min. Copying,
assembling, and sending the form to the IRS ..... 28 min.
Cat. No. 11200I
Caution: You must attach Form 941c, Supporting Statement To Correct Information,
or an equivalent statement, if you are claiming a refund of taxes reported on Form
941, 941-M, 941-SS, 943, or 945.
Line 4 Requesting Abatement or Refund of Interest Under Section 6404(e) Section 6404(e)
gives the IRS the authority to abate interest when the additional interest is
attributable to IRS errors or delays. Section 6404(e) applies only if there was an
error or delay in performing a ministerial act (defined below) and only relates to
taxes for which a notice of deficiency is required by section 6212(a). This includes
income, generation-skipping, estate and gift taxes, and certain excise taxes imposed
by chapter 41, 42, 43, 44, or 45. Section 6404(e) does not allow abatement of
interest for employment taxes or other excise taxes. Get Pub. 556, Examination of
Returns, Appeal Rights, and Claims of Refund, for more information.
Ministerial Act.—The term “ministerial act” means a procedural or mechanical act
that does not involve the exercise of judgment or discretion and that occurs during
the processing of your case after all prerequisites of the act, such as conferences
and review by supervisors, have taken place. See Rev. Proc. 87-42, 1987-2 C.B.
589, for more information. If you are requesting an abatement of interest, write
“Request for Abatement of Interest Under Rev. Proc. 87-42” at the top of Form 843.
On line 1, state the tax period involved. Check the first box on line 4a. On line 4b,
show the dates of any payment of interest or tax liability for the tax period involved.
On line 5, state the type of tax involved, when you were first contacted by the IRS in
writing about the deficiency or payment, the specific period for which you are
requesting abatement of interest, the circumstances of your case, and the reasons
why you believe that failure to abate the interest would result in grossly unfair
treatment. Only one Form 843 is required if the interest assessment resulted from
the IRS's error or delay in performing a single ministerial act affecting a tax
assessment for multiple tax years or types of tax (for example, where 2 or more tax
years were under examination).
Tax Years Beginning After July 30, 1996 For interest accruing on payments or
deficiencies for tax years beginning after July 30, 1996, section 6404(e) will apply to
certain managerial acts as well as ministerial acts, but the errors or delays must be
unreasonable. Follow the instructions for line 1 through line 5 above, but do not refer
to Rev. Proc. 87-42.
Requesting Abatement or Refund of a Penalty or Addition to Tax as a Result of Erroneous
Written Advice
Section 6404(f) gives the IRS the authority to abate any portion of a penalty or
addition to tax attributable to erroneous advice furnished to you in writing by an
officer or employee of the IRS, acting in his or her official capacity. The penalty or
addition to tax will be abated only if:
1. You reasonably relied on the written advice;
2. The written advice was in response to a specific written request you made for
advice; and
3. The penalty or addition to tax did not result from your failure to provide the IRS
with adequate or accurate information. If you are filing a request for abatement or
refund of a penalty or addition to tax because of erroneous written advice, write
“Request for Abatement of Penalty or Addition to Tax Pursuant to Section 6404(f)” at
the top of Form 843. Complete lines 1 through 3. Check the appropriate box on line
4a. On line 4b, show the date of payment if the penalty or addition to tax has been
paid. Send Form 843 to the Internal Revenue Service Center where your return was
filed. If the erroneous advice does not relate to an item on a tax return, Form 843
should be sent to the service center where your return was filed for the tax year you
relied on the erroneous advice. You must attach copies of the following information
to Form 843:
1. Your written request for advice;
2. The erroneous written advice you relied on that was furnished to you by the IRS;
and
3. The report, if any, of tax adjustments identifying the penalty or addition to tax, and
the item(s) relating to the erroneous advice. An abatement of any penalty or addition
to tax under this section will be allowed only if you submit the request for abatement
within the period allowed for collection of the penalty or addition to tax or, if you paid
the penalty or addition to tax, within the period allowed for claiming a credit or refund
of such penalty or addition to tax.
Line 5 Explain in detail your reasons for filing this claim and show your computation
for the credit, refund, or abatement. Also attach appropriate supporting evidence.
This form neglects to explain the other conditions under which the Secretary
is authorized to abate the unpaid portion of an assessment of any tax or any liability.
The ones which might be of interest to you are listed under § 6404(a), (b) and (c) of
the Code. They include circumstances where the amount of tax is excessive, or is
assessed after the expiration of the period of limitation properly applicable or is
erroneously or illegally assessed. This would include situations where there is no
assessment. In every case I’ve handled, I can say with great certainty that no
assessment was ever made!
You’ll also find under paragraph b that no claim for abatement can be filed by
a taxpayer in respect of an assessment of any tax imposed under subtitle A or B.
Therefore, if it was a “withholding tax” under § 3402, subtitle C, you could make the
request. And the last condition which would most likely apply to readers of this book
are when the unpaid portion of the “assessment” of any tax, or any liability in which
the costs for collection would exceed the amount which might be collected, the
Secretary is authorized to make an abatement.
The penalty assessment and abatement issue was addressed as a problem
in the Taxpayer Advocate’s Annual Report to Congress for Fiscal Year 1996,
published in December of 1996. The Advocate, Lee R. Monks, made these findings:
7.
an
PROBLEMS IN THE ADMINISTRATION OF PENALTIES
Responsible IRS Official: Chief Compliance Officer
A large number of penalties are imposed and then abated each year, causing
unnecessary burden on both taxpayers and IRS.
The Chief Compliance Officer has indicated that it may be premature to conclude
that, because a large number of penalties are abated each year, an unnecessary
burden is being placed on taxpayer and the IRS. Generally, civil penalty statutes
require that penalties be imposed (for certain infraction of the law) unless the
taxpayer establishes ‘reasonable cause.’ In all such instances taxpayers must be
contacted, in some manner, to be provided an opportunity to establish reasonable
cause.
The vast majority of civil penalties are computer assessed. Computer generated
penalties, such as the failure to file and failure to deposit penalties, are assessed
when returns are processed and notices are generated affording to the taxpayer the
opportunity to request abatement for reasonable cause. In the absence of a
reasonable cause determination, the penalty stands. In the case of information
reporting penalties, a “proposed” assessment notice is sent, affording taxpayers an
opportunity to establish reasonable cause prior to the penalty assessment. In either
instance, the Service would be remiss if it did not afford the taxpayer the opportunity
to respond to the penalty assessment. If this opportunity results in the taxpayers
establishing reasonable cause and having the penalty removed, the Service has
reduced at least a portion of taxpayers’ burden attributable to cost.
It is acknowledged that the Service can improve its processing of penalties to
minimize the frequency of erroneous assessments (resulting in additional
abatements) due to such things as misapplied payments and other systemic errors.
Steps are being taken to improve our penalty management information system and
to better determine the reason penalties are removed. In 1993 IRS established
“penalty reason codes” which break down the reasons, to categories, such as
reasonable cause, taxpayer error, Service error, or Appeals settlement. These
codes were operational in service center processing in 1993 and in examination
processing in 1994. In 1996, these penalty reason codes were refined to provide
more meaningful data.
In 1993 the Service also introduced a cross-functional Penalty Internal Revenue
Manual (PIRM) to be used by all Service employees who handle penalties. The
objective of this manual was to improve the consistency with which penalties are
addressed. This PIRM is currently available on the Penalty Bulletin Board and on
the CARTS system.
My office believes the data derived from the PROMIS system, which indicates
penalties are a continuing source of taxpayer and PRP problems, clearly establishes
the need for more action in this area. We have sponsored an advocacy project in
the Northeast Region which will be looking at the Federal Tax Deposit penalties to
avoid or minimize instances of non-productive imposition. We are also working with
the Office of Small Business Liaison to initiate a more comprehensive review of
penalty policies and procedures and hope to report more in this area in our next
report.
8.
LACK OF UNDERSTANDING OF TAXPAYERS’ CONCERNS”
Responsible IRS Official: Chief Management and Administration
IRS does not fully understand the concerns taxpayers have with tax
administration and therefore cannot adequately address them.
The IRS recognizes the importance of identifying taxpayer concerns and creating
strategies to improve our services. To date, our efforts to explore taxpayer concerns
have been focused on opinion research; since 1989, we have devoted considerable
resources to taxpayer opinion data collection. Although exploring taxpayer opinions
has led to improved services, we recognized a need to examine concerns through
means other than opinions. We are in the process of expanding our efforts to
include the systematic capturing of taxpayer complaints. The Taxpayer Advocate’s
Office is currently developing a system to track complaints and actions taken to
respond to them. We believe that the analysis of this data will lead to a better
understanding of taxpayer concerns and will allow us to better meet the needs of our
customer.
Even before Executive Order 12862, requiring federal agencies to survey customers
about satisfaction levels with services, was enacted in September 1993 the IRS was
taking steps to systematically survey taxpayer opinions. Since 1992, the Service
has conducted five customer satisfaction surveys with individual taxpayers and three
with small business taxpayers. We have also trained employees to moderate
structured focus groups and have sponsored or conducted more than forty public
opinion and customer satisfaction surveys. The Value Tracking Core Business
System was created to centralize the collection of qualitative data on taxpayer
satisfaction. Recently, the section tasked with this responsibility was renamed the
Opinion Research Group, and this group currently resides in the Strategic Planning
Division.
One initiative that resulted from opinion research is the creation of a small business
assistance center, established as a three-year research test in the fall of 1993 in
Buffalo, New York. Since it opened, the Center has provided assistance to more
than 11,000 small business taxpayers and received the Hammer Award in April
1996 because of their new and innovative taxpayer services. Currently, an
evaluation is being conducted to measure the Center’s impact on compliance. Once
the evaluation is completed, decisions will be made on the continuation of the
Center in Buffalo and on the creation of centers in other locations.
To follow-up on the results of the 1993 customer satisfaction surveys, the Opinion
Research Group conducted focus group projects to gather in-depth information on
two issues: the burden of record keeping and taxpayers’ perceptions of the fairness
and integrity of the IRS.
The Opinion Research Group actively involves IRS executives in identifying and
prioritizing key issues of concern to taxpayers. The Opinion Research Group also
designs surveys for specific purposes at the request of individual executives. As a
part of a National Performance Review effort during fiscal year 1995, the Opinion
Research Group helped develop and conduct the “Out of Washington” events to
obtain direct feedback from the public. The Opinion Research Group is currently
partnering with IRS field offices on several data gathering efforts. They also have
conducted focus groups with individual and small business taxpayers to gather
opinion data concerning four processes identified by the Tax Settlement
Reengineering Project. Following is a list and description of the four processes:
•
Enable Taxpayers to Fulfill Their Tax Obligations (the process of proactively
educating the general public about the tax process and motivating taxpayers
to fulfill their tax obligations);
•
Provide Assistance (the process used by taxpayers to voluntarily fulfill their
tax obligations); and
•
Perform IRS Quality Control (the processing and perfecting of the taxpayers’
returns and pipeline documents).
Analysis of the data collected through these focus groups will assist the
reengineering project employees to achieve their objective of designing, prototyping,
and implementing a tax settlement process that reduces cost, and improves quality
and cycle time.
My office strongly endorse [sic] the actions being taken and in FY 1997 will sponsor
focus groups in conjunction with Strategic Planning Division on the problems
taxpayers experience with IRS. Information from these groups will be used in
developing our FY 1997 report.
Because this is an annual report, you might want to download your copy from
the internet (http://www.irs.ustreas.gov). It would be a good idea to request the
other reports and projects referred to in this publication.
I have a problem with the agency’s reference to taxpayers as “customers.”
Taxpayers are the employers of government, not its customers. You should also
review those last few objectives mentioned for the reengineering project. Why do
“taxpayers” need to be educated about the collection process and motivated to
voluntarily fulfill their tax obligations? The implication is that everyone has a tax
liability or that everyone must “comply,” whatever that means. They let your mind fill
in the blank because they can’t actually say, you must file some particular form. I
know because I’ve asked them before an could never get a direct answer.
When you make a claim for refund, you will need to wait until the six months
expire or until your claim is officially denied in writing before you can file a complaint
in federal court. More discussion on this in included under the Federal Court
subheading, “Can I Sue The IRS?” included later in this chapter.
Five Ways To Stop A Levy:
Many times I have the great fortune of getting a case right in the middle of a levy.
It’s like entering into a fistfight by first laying on your back with a large stone over
your chest and the opponent standing over you. Those types of cases are still
workable but with a little extra effort.
The first way to stop a levy is to request a Due Process Hearing or use the
Collection Appeals Program to obtain a hearing. This procedure can also be used to
forestall or stop the filing of a notice of lien as well as a levy.
Collection Appeals Program:
Under the IRS Restructure and Reform Act of 1998, the IRS has two more appeals
forums to hear arguments over levies and notices of lien. The first is available to
those against whom the notice was made who request a hearing within thirty days
after notice is served. This forum is known as the Collection Due Process Hearing.
Using this process, you can appeal many IRS collection actions if you receive any of
the following notices:
1.
Notice of Federal Tax Lien Filing & Your Right To a Hearing Under IRC 6320
(Lien Notice),
2.
Final Notice – Notice of Intent to Levy And Your Notice of a Right to A
Hearing, or
3.
Notice of Jeopardy Levy and Right to Appeal (Levy Notices).
The procedures are codified under 26 USC §§ 6320 and 6330. The Due
Process Hearing Program is one aspect of the Collection Appeals Program and
allows you to appeal any IRS collection action at any time with the IRS Office of
Appeals. You can also appeal that office’s determination to the Tax Court or U.S.
District Court of Appeals if you object to it. Appeals will attempt to give you a
decision within five business days after they receive the appeal on this type of case.
If a collection employee tells you that a Notice of Federal Tax Lien will be filed, you
can appeal that action under CAP but you must do it timely.
The law provides you the right to a fair hearing by the IRS Office of Appeals
after a Notice of Federal Tax Lien is filed and before a levy on your property is
issued. You also have the right to contest determinations made by the Appeals
Office in Tax Court of the U. S. District Court as appropriate. You may request a
hearing for each taxable period for one or both of the following IRS actions:
· LIEN Notice. IRS is required to notify you that a Notice of Federal Tax Lien has
been filed within five days after filing. You then have thirty days from the date of the
lien to request a hearing with the IRS Office of Appeals; however, they have been
known to schedule hearings well beyond this time period.
· LEVY Notice. IRS is required to notify you of its intention to collect a tax liability
by taking your property or rights to property. The IRS does this by sending you a
levy notice. No levy or seizure can occur within thirty days from the date of mailing
of the levy notice or the date the levy notice is given to you or left at your home or
business. During that thirty-day period, you may request a hearing with the IRS
Office of Appeals. There are two exceptions to this levy or seizure notice provision.
When the collection of tax is in jeopardy or when the IRS issues a levy to collect
from a state tax refund, the IRS may issue a levy without sending a levy notice or
waiting thirty days after it sends the notice.
You can request a Collections Due Process Hearing with the Office of Appeals by
completing Form 12153 and mailing it to the address shown on your lien or levy
notice within thirty days. Identify the IRS action(s) you disagree with (levy and/or
lien notice) and explain why you disagree. You may appeal both actions, if you
received both a lien and levy notice. You must identify all of your reasons for
disagreement with the IRS at this time. To preserve your right to file a claim in court,
you must send the IRS the completed Form 12153 within the thirty-day time limit.
You must also include a copy of you lien and/or levy notice. List all tax(es) and
taxable periods for which you are requesting a hearing under Due Process for each
taxable period. If you receive a subsequent lien or levy notice after you request a
hearing on a lien or levy notice, Appeals can consider both matters at the same
time. A facsimile of this Form is included in this section, and you can obtain the
actual Form 12153 from the IRS by calling 1-800-829-3676.
At the hearing, you may raise an relevant issue relating to the unpaid tax including 1.
Liability, provided that you have raised the issue at previous hearings such as a reexamination hearing and tax court; 2. Appropriateness of collection actions; 3.
Collection alternatives such as installment agreement, offer in compromise, posting
a bond or substitution of other assets; 4. Appropriate spousal defenses; 5. The
existence or amount of the tax, but only if you did not receive a notice of deficiency
or did not have an opportunity to dispute the tax liability.
You may not, however, raise an issue that was raised and considered at a prior
administrative or judicial hearing, if you participated meaningfully in the prior hearing
or proceeding. This is an important consideration because while you may have
raised the issue of liability at a previous hearing, whether a re-examination hearing,
tax court or in response to a Letter 2050, if the IRS refused to consider the merits of
your argument and claimed it to be frivolous, there is a chance for it to be re-heard.
By making another presentation of the argument within the Collection Appeals
Program, it will preserve your defense if you receive another adverse determination,
whether on the merits or not.
Before you formally appeal a lien or levy notice by sending us Form 12153, you may
be able to work out a solution with the Collection function that proposed the action.
To do so, contact the IRS employee whose name appears on the lien or levy notice
and explain why you disagree with the action. This contact, however, does NOT
extend the thirty-day period in which you can request an appeal.
Unless the IRS has reason to believe that collection of the tax is in jeopardy, they
will stop the collection action during the thirty days after the levy notice and, if you
appeal is timely, during the appeal process. They will also suspend the collection
statute of limitations, which is ten years, from the date they receive a timely filed
Form 12153, until the date the determination become final. Your appeal is timely if
you mail your request for a hearing on or before the thirtieth day after the date on
which the IRS lien or levy notice was postmarked.
If you appeal request is not timely, you will be allowed a hearing, but there will be no
statutory suspension of collection action and you cannot go to court if you disagree
with the determination reached at Appeals.
The Appeals Office will contact you to schedule a hearing, either in person or by
telephone.
At the conclusion of the hearing, Appeals will issue a written
determination letter. If you agree with the decision reached by the Appeals office,
both you and the IRS are required to comply with the terms of the decision. If you
do not agree with the decision reached at the appeals hearing, you may request
judicial review of the decision by initiating a claim in federal court (or Tax Court
depending on the circumstances) on or before the thirtieth day after the date of the
decision. If the decision issued by the IRS in tax court is adverse, you will have an
opportunity for judicial review provided that you were able to set the hearing on
Form 12153 (within the thirty day limit).
The appeal can be made to the federal district court for the circuit designated to hear
cases in your area, or to the United States Court of Appeals, each under Rule 15 of
the Federal Rules of Appellate Procedure. I have included a template of how the
appeal would appear if made to the United States Court of Appeals. You should
read the rules to decide whether to go to the district court first, or directly to the
United States Court of Appeals. The first is for tax court and the second is to the
federal court system.
[Petitioner]
[Address]
[City state zip]
Clerk of the United States Tax Court
400 Second Street, N.W.
Washington, DC 20217
[Date]
Re
petition for lien or levy action
To the Clerk:
Please file the enclosed petition. I have included a money order for the filing
fee of $60. Please let me know if this is sufficient.
Best regards,
[Petitioner]
UNITED STATES TAX COURT
In re
[Petitioner]
Petitioner,
Case No. ________
_________________________________________/
PETITION FOR LIEN OR LEVY ACTION
UNDER CODE SECTION 6320(c) OR 6330(d)
1.
Petitioner's name is [Petitioner] and mailing address of legal residence
is [Address]. The social security number issued for his use by the United States is
[SSN].
2.
The date of the determination made by the IRS is [date]. The City and
State of the Office from which such determination was made is [City state].
3.
The total amount of the purported tax liability is approximately $____ for
[year] and $____ for [year].
4.
The following errors were made in the determination:
Petitioner was accused of being a tax protester and the IRS refused to hear any
dispute on the merits for the above stated years.
WHEREFORE, petitioner requests a meaningful hearing on the merits of the
disputed amounts.
DATED this ___ day of [month] [year].
________________________________
[Petitioner]
[Address]
[City state zip]
INSTRUCTIONS FOR FILING REVIEW PETITION
Rules 15 - 21, Fed. Rules Civil Procedure
1.
Sign and date the petition and enter the mailing address on the certificate of
service.
2.
Attach a copy of the respondent’s letter denying your hearing along with all
other correspondences relating to the tax periods in question.
3.
File the original petition and three copies with the clerk of your local district
court of appeals. When the filing fee is paid ($105), the clerk will docket the petition
and submit it to the court.
4.
The clerk will issue the summons.
5.
Serve the United States Attorney for the district in which the court is located.
6.
File affidavits or proof of service with the clerk.
7.
The court may deny the petition without an answer, or it will order the
respondent to answer within a fixed time.
8.
The clerk will serve the order to respond on the respondent.
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF _________
In re
[Petioner]
PETITIONER,
Case No. ________
vs.
UNITED STATES OF AMERICA
DEFENDANT.
_________________________________________/
PETITION FOR REVIEW
Petitioner requests review of respondent’s order.
1.
The relief sought includes ordering respondent to hold a meaningful
hearing on the merits of the dispute involving tax period [year] and make an
objective review of relevant evidence, and issue an order based on the record made
at the hearing and the evidence presented.
2.
The issues presented by petitioner include the failure of respondent to hold a
meaningful hearing with petitioners on the merits of the disputed tax liability as
required by the IRS Restructure and Reform Act of 1998.
3.
The facts include respondent’s failure or refusal to give petitioner any
meaningful opportunity for a hearing on the issue liability.
4.
The reasons why this court should issue the writ is so that petitioner’s right to
be heard (due process) can be protected and the respondent can be compelled to
comply with the IRS Restructure and Reform Act of 1998.
DATED this ___ day of [month] [year].
___________________________
[Petitioner]
[Address]
[City state zip]
The IRS Office of Appeals will retain jurisdiction over its determinations and how
they are administered. You may also return to Appeals if your circumstances
change and impact the original decision; however, you must exhaust your
administrative remedies first. You may also represent yourself at your Due Process
hearing or an attorney, certified public accountant or a person enrolled to practice
before the IRS, may represent you. If you want your representative to appear
without you, you must provide a properly completed Form 2848, Power of Attorney
and Declaration of Representative.
Request for a Collection Due Process Hearing
Use this form to request a hearing with the IRS Office of Appeals only when you
receive a Notice of Federal Tax Lien Filing & Your Right To A Hearing Under IRC
6320, a Final Notice - Notice Of Intent to Levy & Your Notice Of a Right To A
Hearing, or a Notice of Jeopardy Levy and Right of Appeal. Complete this form and
send it to the address shown on your lien notice for expeditious handling. Include a
copy of your lien or levy notice(s) to ensure proper handling of your request.
(Print) Taxpayer Name(s):
__________________________________________________________________
(Print) Address:
__________________________________________________________________
Daytime Telephone Number: ______________ Type of Tax/Tax Form Number(s): _
Taxable Period(s):
__________________________________________________________________
Social Security Number/Employer Identification Number(s):
______________________
Check the IRS action(s) with which you do not agree. Provide specific reasons why
you don’t agree. If you believe that your spouse or former spouse should be
responsible for all or a portion of the tax liability from your tax return, check here [__]
and attach Form 8857, Request for Innocent Spouse Relief, to this request.
____ Filed Notice of Federal Tax Lien (Explain why you don’t agree. Use extra
paper if necessary.)
_________________________________________________________________
_________________________________________________________________.
____ Notice of Levy/Seizure (Explain why you don’t agree.
necessary.)
Use extra paper if
__________________________________________________________________
__________________________________________________________________.
I/we understand that the statutory period of limitations for collection is suspended
during the Collection Due Process Hearing and any subsequent judicial review.
Taxpayer’s or Authorized Representative’s Signature and Date: __________
Taxpayer’s or Authorized Representative’s Signature and Date: __________
IRS Use Only:
IRS Employee
______________
(Print):
_____________________
Employee Telephone Number: ______________
IRS
Received
Date:
Instructions for Completing Form 12153
Where to file your request
It is important that you file your request using the address shown on your lien or levy
notice. If you have been working with a specific IRS employee on your case, you
should file the request with that employee.
How to Complete Form 12153
1.
First, you should obtain the most recent version of this form from the Internet
by searching on “IRS Form 12153”. Enter your full name and address. If the tax
liability is owed jointly by a husband and wife, and both wish to request a Collection
Due Process Hearing, show both names.
2.
Enter a daytime telephone number where we can contact you regarding your
request for a hearing.
3.
List the type(s) of tax or the number of the tax form(s) for which you are
requesting a hearing (e.g., Form 1040, Form 941, Trust Fund Recovery Penalty,
etc.)
4.
List the taxable periods for the type(s) of tax or the tax form(s) that you listed
for item 3 above (e.g., year ending 12-31-98, quarter ending 3-31-98).
5.
Show the social security number of the individual(s) and/or the employer
identification number of the business(s) that are requesting a hearing.
6.
Check the IRS action(s) that you do not agree with (Filed Notice of Federal
Tax Lien and/or Notice of Levy/Seizure). You may check both actions if applicable.
7.
Provide the specific reason(s) why you do not agree with the filing of the
Notice of Federal Tax Lien or the proposed Notice of Levy/Seizure action. One
specific issue that you may raise at the hearing is whether income taxes should be
abated because you believe that your spouse or former spouse should be
responsible for all or a portion of the tax liability from your tax return. You must,
however, elect such relief. You can do this by checking the indicated box and
attaching Form 8857 to this request for a hearing. If you previously filed Form 8857,
please indicate when and with whom you filed the Form.
8.
You, or your authorized representative, must sign the Form 12153. If the tax
liability is joint and both spouses are requesting a hearing, both spouses, or their
authorized representative(s), must sign.
9.
It is important that you understand that we are required by statute to suspend
the statutory period for collection during a Collection Due Process Hearing.
Duties of the Hearing Officer
The hearing officer is required by law to be fair and impartial. Many are not,
especially when the appellant is a non-filer. We should have anticipated the types of
appeals as shown the example below:
Copyright 2000, Tax Analysts
2000 TNT 248-76, (CTS), Court Opinions
Court Documents
86 AFTR2d Par. 2000-5660
Docket: No. 00-B-851
MESA OIL, INC., Plaintiff, v. UNITED STATES OF AMERICA, Defendant.
Judge: Babcock, Lewis T.
Court: United States District Court for the District of Colorado
Name: Mesa Oil Inc. v. United States
Subject: Corporate taxation; Litigation and appeals; Practice and procedure
Code Section: Section 6320 -- Hearing on Filing Lien Notice;
Code Section: Section 6330 -- Hearing Before Levy
Court Remands Case Due to IRS Impartiality Violations
Summary
A U.S. district court has remanded a corporation's tax liability case to a new IRS
appeals officer, finding that the officer who initially heard the company's appeal
failed to meet the statutory requirements of officer impartiality. Mesa Oil Inc. fell
behind on its payroll taxes. The IRS issued a notice of intent to levy and a hearing
notice under section 6330. The IRS also issued a federal tax lien notice to Mesa and
a section 6320 hearing notice. Mesa's president requested a collection due process
hearing and proposed making installment payments so the lien could be released.
Mesa argued that any levy would shut down its business. The IRS's appeals
settlement officer (AO) held a due process hearing and concluded that the lien was
appropriate and that the collection action could proceed. Mesa appealed to the
district court.
Chief U.S. District Judge Lewis T. Babcock remanded the case, finding that the AO
failed to: make the proper balancing analysis in finding the lien valid and provide a
statement of facts, legal analysis, or an explanation of how or why the proposed levy
balanced the need for collection with Mesa's interests. The court held that even if a
proper analysis were conducted, the case would still require remand due to statutory
violations. Here, the determination letter indicated that the AO prejudged the case by
making conclusions before Mesa's statutorily mandated hearing. The court also held
that the AO failed to make an adequate record of the proceedings, depriving Mesa
of its right to judicial review. The court noted that, although hearings are meant to be
informal, informality does not obviate the need for a record. The court stated that
there must be enough information in the IRS's documentation to allow a court to
draw conclusions about compliance and whether the AO abused discretion. Such
information was absent here and the court ordered the case reheard by a new
appeals officer and that an adequate record be made.
Administrative Collection Appeal Rights:
The IRS Collection Appeal Program (CAP) is available under more circumstances
than the Due Process hearing procedure. It is important to note that you cannot
obtain judicial review of Appeals’ decision following a CAP hearing.
IRS Collection Actions You Can Appeal
· Notice of Federal Tax Lien – You may appeal before or after IRS files a lien. You
may also appeal denied requests to withdraw a Notice of Federal Tax Lien, and
denied discharges, subordinations, and non-attachments of a lien. If IRS files a
Notice of Federal Tax Lien, you may have additional Due Process appeal rights.
See the preceding information regarding Hearing Available Under Due Process.
· Notice of Levy – You may appeal before or after the IRS places a levy on your
wages, bank account or other property. Before a levy is issued, you may have
additional Due Process appeal rights. See the preceding information regarding
Hearing Available Under Due Process.
· Seizure of Property – You may appeal before the IRS makes a seizure. However,
if you request an appeal after IRS makes a seizure, you must appeal to the
Collection manager within ten (10) business days after the Notice of Seizure is
provided to you or left at your home or business.
· Denial or Termination of Installment Agreement – You may appeal when you are
notified that IRS intends to deny you an installment agreement or terminate your
installment agreement.
How to Appeal One of These IRS Collection Actions If Your Only Collection Contact
Has Been A Notice or Telephone Call
1.
Call the IRS at the telephone number shown on your notice. Be prepared to
explain which action(s) you disagree with and why you disagree. You must also
offer your solution to your tax problem.
2.
If you cannot reach an agreement with the IRS employee, tell the employee
that you want to appeal their decision. The employee must honor your request, and
will refer you to a manager. The manager will either speak with you then, or will
return your call with twenty-four hours.
3.
Explain which action(s) you disagree with and why you disagree to the
manager. The manager will make a decision on the case. If you do not agree with
the manager’s decision, the IRS will send your case to an Appeals Officer for review.
How to Appeal One of These IRS Collection Actions If You Have Been Contacted By
A Revenue Officer
1.
If you disagree with the decision of the revenue officer, and wish to appeal
under CAP, you must first request a conference with a collection manager.
2.
If you do not resolve your disagreement with the collection manager, you may
request Appeals consideration by completing Form 9423, Collection Appeal
Request.
3.
On the Form 9423, check the action(s) you disagree with and explain why
you disagree. You must also explain your solution to resolve your tax problem. The
IRS must receive your request for an appeal within two days of your conference with
the collection manager or they will resume collection action.
Normally, the IRS will stop collection action related to the IRS action(s) with which
you disagree until the Appeals Officer makes a determination, unless they have
reason to believe that collection of the amount owed is at risk. You may represent
yourself at your appeals conference or an attorney, certified public accountant or a
person enrolled to practice before the IRS, may represent you. If you want your
representative to appear without you, you must provide a properly completed Form
2848, Power or Attorney and Declaration of Representative. You can obtain Form
2848 from your local IRS office or by calling 1-800-829-3676.
Once the Appeals Officer makes a decision on your case, that decision is binding on
both you and the IRS. This means that both you and the IRS are required to accept
the decision and comply with its terms. You cannot obtain judicial review of Appeals
Officer decisions following a CAP hearing. If you provide false information, fail to
provide all pertinent information, or engage in fraud, the appeals’ decision will be
void.
Another process that requires a preliminary review by the collections manager may
be initiated by filing Form 9423 with the collections manager responsible for the
particular collection action being taken against you. We typically use Form 9423
with the following attachment in stopping levies after the thirty-day appeals time limit
has expired:
___________________________________________________________________
After a careful analysis your examination changes report, I find that it does
not include certain information requisite to the alleged tax liability. With respect to
(RRA98) Section 3401, I am questioning the report. I am requesting the production
of these documents, together with the missing information as listed herein.
1.
the full name and employee number of the assessment officer for these tax
periods
2.
a complete facsimile of the assessment certificate for each of these tax
periods.
3.
Furthermore, I am demanding that you produce the proper Form 23C in strict
compliance with 26 CFR 301.6203 for the tax periods included on your examination
changes report.
4.
I am demanding that you produce the Notice of Assessment (Form 2162) as
required by 26 USC 6303(a). This record must be certified and dated by an
authorized assessment officer.
5.
You must include all other supporting records as required by 26 CFR
301.6203-1 including the Proof of Claim completed Form 4490.
6.
I am also demanding that you produce each record of decisions amending,
revoking, rendering obsolete or otherwise affecting Form 23C, authority of “Account
6110 Tax Assessments” with respect to Internal Revenue Manual 3(17)(63)(14).1.
NOTICE: Do not substitute these documents with RACS 006 as it fails to include
the elements which would determine the character or kind of tax with respect to the
entity and tax modules maintained by your agency about me, individually. If you do
this, I will appeal this request.
7.
Furthermore, if you have filed a Notice of Federal Tax Lien against my
property, I demand that you produce a facsimile of any Treasure Decisions
amending, revoking, rendering obsolete or otherwise effecting Treasure Decision
1995 pertaining to “Assessed taxes—Notice and demand, Form 17.”
Please also be advised of the following:
INTERNAL REVENUE MANUAL 3(17)(63)(14).1
Account 6110 Tax Assessments
(2)
All tax assessments must be recorded on Form 23C Assessment Certificate.
The Assessment Certificate must be signed by the Assessment Officer and dated.
The Assessment Certificate is the legal documents that permits collection activity…
INTERNAL REVENUE MANUAL 3(17)(46)2.3
Certification
(1)
All assessments must be certified by signature of an authorized official on
Form 23C, Assessment Certificate. A signed Form 23C authorizes issuance of
notices and other collection action…
(2)
Some assessments are prescribed for expeditious action and can be certified
on a daily basis. These assessments will require immediate preparation of Form
23C from RACS…
Form 23C is described in Document 7130, IRS Printed Product Catalog as:
23C - Assessment certificate-Summary Record of Assessments
Form 23C is used to officially assess tax liabilities. The completed form is retained
in the Service Center case file as a legal document to support the assessment made
against the taxpayer. This status notice is reissued to update the status notice file.
TR:R:A Internal Use.
___________________________________________________________________
The following excerpt was taken from the October 1999 IRM.
“1.3.13.3.7 Requests for Form 23C, Form 4340, Computer Generated Notices, and
Delegation Orders
(2)
Responses to requests for Form 23C which merely advise the requester that
"there is no Form 23C with (his or her) name on it" open the door for the requesters
to utilize a "no assessment response" when challenging a statutory notice of
deficiency.
(a)
To avoid this problem, Disclosure Officers should be making the Forms 23C
or RACS Report-006, whichever is used (and related assessment records, such as
Form 4340, Certificate of Assessments and Payments, Form 8166, Revenue
Accounting Control System Input Reconciliation Sheet, etc.) available even though,
technically speaking, the requester's name does not appear on them.
Note: Records should be made available to requesters which show the same
information that would have been shown on Form 23C if one with the requester's
name on it had existed.”
The second way to stop a levy involves filing Form 911, Application for Taxpayer
Assistance Order. It is not necessary to use the official form if you indicate on your
correspondence that you are applying for a taxpayer assistance order.
This form is used to apply for relief from a significant hardship after your efforts to
get this relief from the collector have failed. This means that if you are unable to
provide the necessities of life for you or your family, you will have good chance of
getting an order after a hearing. You can submit this form to the Problem Resolution
Office in the district in which you live. These locations are provided earlier in this
book. You should receive a response within one week of your submission of this
completed form. You can also fax it to the phone number that I have listed with
each address.
The form must be attached to the front of whatever else you are sending into the
agency. The most important elements of this request are that you give a clear and
concise description of the actions taken by the agent that are causing you significant
hardship. If you know it, you should include the name of the person, office,
telephone number, and/or address of the last contact you had with the IRS regarding
this problem. Be specific. If your remaining income after paying expenses is too
little to meet an IRS payment, give the details, then describe the action you want the
IRS to take. This is one way to arrange to make an installment agreement, but the
IRM 5200 requires the agents to refuse to accept the agreement until you file
returns. It’s been my experience that this is not always true, so I would guess that
not all agents have read their manual. Also, the chapter on Effective Letter Writing
will give you a great deal of detail about the best way to make your application. I’ve
included guidelines found in the agency’s own internal operating manual.
The third way to stop a levy is by filing a bankruptcy. It is enough to merely file the
petition to create an automatic stay of collections. The filing fee can even be paid in
fourths. The notice to creditors will cause the IRS to stop collections and suspend
your IMF from that date and six months following your withdrawal from bankruptcy.
I.R.C. § 6503(b) suspends the collection statute until six months after dismissal of
the proceeding. You can withdraw your petition sometime before the creditors
meeting so as to preserve your right to file again if you need more time.
If you do this with the intention of not following through, you should work diligently at
preparing, either an Application for Taxpayer Assistance Order or an Offer In
Compromise as explained next. Either way, you must have filed tax returns (unless
you are just submitting the application for taxpayer assistance order). That’s not to
say that you are required or not, but when you ask for a privilege, you have to play
the game. Don’t waste your time or the court’s time thinking that you can go into
bankruptcy court and expose the entire fraud and get the court to allow you to
proceed without filing returns.
The purpose of having the debtor file tax returns is so that the government can make
a meaningful determination of any tax liabilities and file appropriate proofs of claim.
It’s also so that the court can determine tax claims litigation, if need be, before the
confirmation hearing. If the debtor fails to file his tax returns and thereby delays
confirmation, the taxing authority is prejudiced because the automatic stay prevents
it from collection activities despite the fact that the debtor is delaying the resolution
of his dispute with the IRS or other taxing authority. The delay in the resolution of
the dispute inhibits payment to the taxing authority if there is a tax liability. This
delay will prejudice all other creditors, as well, because no distribution to any creditor
may be made until a plan is confirmed, 11 U.S.C. § 1326(a)(2). If you don’t intend
to file returns, you can use the court to forestall the enforced collection until you can
get some help, but that is the limit.
If the rules of bankruptcy were amended to protect the government from being
prejudiced, we could force the bankruptcy court to discontinue its policy of requiring
the filing of tax return.
The fourth way to stop a levy is to submit a good faith Offer In Compromise. In fact
expect to have to include this along with your initial Form 12153 once the IRS
responds. An agent will be assigned and send you a notice along with Form 656
and its inserts 433-A and 433-B. Keep in mind that in almost every situation, unless
the IRS determines you are indigent and they cannot collect anything at this time,
you will be expected to make some kind of payment arrangement. So while you
may begin the collection due process hearing request and question the liability,
ultimately your best chance of dealing with the IRS is an offer in compromise based
on doubt as to collectibility. The two criteria under which it might be accepted are 1)
doubt as to collectibility and 2) doubt as to liability.
The easiest claim of course is to establish facts supporting doubt as to collectibility.
Most people don’t know enough to argue doubt as to liability so the first option may
get better results. Generally, I have found that when someone knows this subject
well enough, he’s usually able to avoid the situation of having to file an offer in the
first place.
Keep in mind that with the submission, there is a waiver to the statute of limitations
normally imposed against the IRS, which tolls the time pending the review of the
submission Section 462 of the Legal Reference Guide for Revenue Officers (1991)
states that:
“… An offer submitted by a taxpayer on Form 656 to compromise
his/her liabilities contains a collection waiver provision which suspends
the normal statute of limitations for collection of taxes included in the
offer for the period of time that the offer is pending and for one year
thereafter. The period commences to run on the date the acceptance
of the waiver is signed by the District Director, not the date of receipt of
the offer. In situations involving cumulative offers, or other statute
problems involving offers, the advice of District Counsel may be
sought.”
I don’t recommend this unless you’ve already filed returns. This is governed by
Section 6305(i) of the Code.
When you make an offer based upon doubt as to liability, you will be required to
submit a statement supporting your conclusions as to why you doubt having a
liability. Don’t try and be a legal historian or scholar, just make an ambiguous
statement which makes no sense but satisfies the requirement. If you try and
expose the fraud, it will more than likely cause the agent to deny your offer just
because he can or because he simply may not agree with you. In other words, be
smart and act ignorant. Remember that the IRS is in the record keeping business
and the only reason for requesting your “opinion” is to make a record of it for future
reference. They may use it against you, maybe in court or by labeling you a tax
protester, even though this practice is now illegal. The new term now being used by
the IRS for people they would have called “tax protesters” is “non-filer.”
The fifth way to stop a levy involves writing letter of inquiry or complaint directed to
the Problem Resolution Officer, first by facsimile, and then by certified mail the same
day. This however is dependent upon whether or not your dispute warrants their
attention, it must be a legitimate inquiry. Therefore, your ability to make your
problem known in the least number of words is crucial. Please review the chapter
on Effective Letter Writing for better detail on these elements. The following
language contains the criteria necessary to cause the Problem Resolution Office to
take some action.
No resolution has yet been reached and there are no other established
administrative or formal procedures that could be used in the
resolution of this dispute, nor has your agency previously responded to
this particular matter. Its resolution is not the sole responsibility of
another federal, state or local agency. This dispute does not involve
any non-tax administrative matter with your agency such as inspection,
disclosure or personnel. The CID is not involved and this dispute is
not concerned with any “tax protester” issues. I have not indicated that
I cannot or will not pay any alleged tax liability.
Here is an excerpt from the Internal Revenue Manual explaining the
internal operating procedures for levy situations:
Part 34: General Litigation
Chapter 7, Suits to Collect
Section 7, Enforcing the Levy
Contents
34.7.7 Enforcing the Levy
34.7.7.1 (Reserved)
34.7.7.2 (Reserved)
34.7.7.3 (Reserved)
34.7.7.4 (Reserved)
34.7.7.5 Writs of Entry
1. Liability for Failure to Comply with Levy.
Failure to comply with a levy imposes upon the person served a liability equal to the
value of the property, or equal to the tax liability, whichever is less. The liability
bears interest from the date of levy, and includes costs. This liability is not
assessable but must be collected by suit.
2. When to Resort to Suit A.A suit for failure to honor a levy should not be
recommended if use of an administrative process to collect the tax would be
adequate. Due consideration should be given to the amount involved, the reasons
for failing to honor the levy, if the failure to comply is one of open defiance to the
United States or if the failure to follow the levy through may cause difficulty in
effecting collection from other taxpayers in a community. B.As a general rule, suit
under I.R.C. § 6332 will be required when the party in possession of the taxpayer's
property disposes of it subsequent to the levy. If the property is still in possession of
the party, consideration should be given to a suit to enforce the Government's lien
against the property under I.R.C. § 7403. The two counts can be recommended in
one letter. Some advantages of the levy action are that the taxpayer is not a
necessary party and the merits of tax cannot be raised. However, a foreclosure suit
should resolve questions of title.
If the notice of levy was duly and timely served prior to the expiration of the period of
limitations on collection, under I.R.C. § 6502(a) the personal liability arising from a
dishonor of that notice of levy may be enforced at any time notwithstanding the
subsequent expiration of the statute of limitations on collection against the taxpayer.
3. Specific Requirements of Suit Letter
A. In addition to the usual tax documents and copies of the levy, the following
points should be discussed:
1. The circumstances of the service of the notice of levy;
2. The nature of the taxpayer's interest that was attempted to be seized by the levy
and the reason given for non-compliance;
3. The name and address of the person levied upon, as well as the names of any
other claimants to the property;
4. What other defenses might be urged; and
5. How these defenses are not proper in response to the levy.
B. The person levied upon cannot raise any question as to the merits of the tax,
validity of assessment, or statute of limitations. Furthermore, the taxpayer need not
be named a party defendant to this action.
One of the two defenses permitted in an action to enforce a levy is that the person
levied upon was not in possession of any property of the taxpayer. The other is prior
judicial attachment or execution under a judicial process. Accordingly, the letter
should set forth the facts and the law to support the assertion that a debt was owing
from the person levied upon or that the property was held in possession of the party.
D. All letters recommending suits for failure to honor a levy must affirmatively
state whether the 50% penalty is being recommended and must be pre-reviewed in
General Litigation. See (34)613. If the penalty is being recommended the letter
should specifically state why and contain as much evidence as possible to support it.
In cases where the penalty is not being recommended suit letters should state
specifically that the 50% penalty under I.R.C. § 6332(c)(2) is not recommended.
These later cases may be sent directly to the Department of Justice.
34.7.7.1 (8-22-97)(Reserved)
34.7.7.2 (8-22-97)(Reserved)
34.7.7.3 (8-22-97)(Reserved)
34.7.7.4 (8-22-97)(Reserved)
34.7.7.5 (8-22-97)Writs of Entry
1. As a result of the holding in G.M. Leasing v. United States, 429 U.S. 338 (1977),
the service adopted procedures and guidelines for levies or seizures of property
located on private property. If a proposed target of a search for distrainable assets
exhibits a reasonable, objective expectation of privacy that society is willing to
recognize, the Fourth Amendment will be implicated and the revenue officer must
either obtain consent or obtain a court order permitting entry, i.e. a writ of entry,
before entering the premises or object. A writ should only be used to seize property
belonging to the taxpayer that the Service intends to sell. A writ enables to Service
to enter premises or property in order to carry out its administrative collection
powers under I.R.C. § 6331 et. seq. When the revenue officer determines that a
court order is needed, he will forward the matter to district counsel.
2. District counsel should counsel revenue officers to seek legal advice in
questionable cases before the officers decide whether a writ is necessary to enter
taxpayer's property. A writ will usually be required where there are reasonable
expectation of privacy - i.e., entry into the home, private portions of commercial
offices and buildings. IRM 56(12)4.1(1). Seizure of assets located outside of
taxpayer's personal and business premises may in certain limited circumstances
require a writ because of the expectation of privacy. Seizure of a motor vehicle
parked in an unobstructed driveway or front yard is permissible without consent or
writ. IRM 56(12)4.8(3)(a).
3. In order to obtain a writ of entry from a court, the service must establish probable
cause. While the law in different jurisdictions varies, the standard or probable
cause for obtaining a writ of entry is generally not the same as the standard of
probable cause for conducting a search or obtaining a search warrant in a criminal
case. Matter of Carlson, 580 F.2d 1365 (10th Cir. 1978). To establish probable
cause, the revenue officer generally must show in his affidavit that the Service has
complied with the Code provisions for levy and distraint (i.e., a liability for tax, the
issuance of notice and demand, and the notice of intent to levy) and that there is
reason to believe assets of the taxpayer are located in or on the property for which
the revenue officer is seeking the writ of entry.
4. Upon receipt of the matter from the revenue officer, district counsel should open
a file and review the documents to ensure that the facts support a writ of entry and
the submitted affidavits meet the requirements imposed by the local district courts.
The pleadings and affidavit must provide the court with sufficient information to
support the issuance of a writ. Although jurisdictions vary in the degree of
specificity concerning the facts that must be in the application for a writ, each
jurisdiction requires essentially the same information to issue a writ. Internal
Revenue Manual at Exhibit 5600-28 contains a sample affidavit. See Also Chief
Counsel Macros General Litigation User Guide. Writ of Entry Documents - GA at
11 and 14 (October 1, 1996). District counsel should closely review the affidavit of
the revenue officer to assure that it includes all the following information. See IRM
56(12)4.5.
The affidavit should contain specific information concerning the amount and
taxable periods of the liability, the dates of assessment and notice and demand, and
the date notice of intent to levy was given. The affidavit should also contain a
description of the taxpayer's business, the taxpayer's interest in and the address or
location of the premises to be searched, and a description of the assets expected to
be found on the premises. After review, district counsel should refer the case to the
U.S. Attorney for handling (within 24 hours if practicable).
The letter to the U.S. Attorney should include the following documents: revenue
officer's data sheet; the affidavits of the revenue officer; a proposed order; where
required under local rules, a proposed application for such order; and any other
items required under local procedures. See Chief Counsel Macros General
Litigation User Guide, Writ of Entry Documents - GA as 2, 4, 5, and 9 (October 1,
1996). District counsel should monitor the case to make sure the order is quickly
presented to the court and signed.
5. The court's authorization governs the revenue officer's authority to search for and
seize distrainable assets once his is lawfully on premises pursuant to a writ of entry.
This includes both the explicit language of the writ and what the court, based on the
application and the government's communication with the court, understood was the
authorized scope of the search. Once the revenue officer is lawfully on the
premises, the authority to seize assets is governed by I.R.C. § 6331.
6. Once the order is granted and the revenue officer has completed his search,
district counsel's involvement is terminated and the legal file may be closed. If the
order is denied, the matter should be reviewed by district counsel to determine
whether an appeal is warranted or whether, in the alternative, a writ of mandamus
might be sought.
7.Writ of entry procedures may be used to obtain access to safe deposit boxes (see
(34)7(13)2).
Internal Revenue Manual
I have included a template to further assist you in preparing this type of
correspondence:
[Sender]
[Address]
[City state zip]
PROBLEM RESOLUTION OFFICE
Internal Revenue Service
[Contact name]
[See address list]
[Phone]
[Fax]
[Date]
Re
[state issue in dispute]
Greetings:
Thank you for reviewing this inquiry. This correspondence involves an
unanswered inquiry or complaint requiring administrative recourse resulting from
your agency’s failure or refusal to answer my previous inquiry concerning a service
generated notice I received from [agent or office] dated [________].
No resolution has yet been reached and there are no other established
administrative or formal procedures that could be used in the resolution of this
dispute, nor has your agency previously responded to this particular matter. Its
resolution is not the sole responsibility of another federal, state or local agency. This
dispute does not involve any non-tax administrative matter with your agency such as
inspection, disclosure or personnel. The CID is not involved and this dispute is not
concerned with any “tax protester” issues. I have not indicated that I cannot or will
not pay any alleged tax liability.
[Briefly state the problem and what you want as a resolution]
Please correct your records and inform me as to when you have satisfied this
request.
Best regards,
[Sender]
Federal Court:
I’ve only sued the IRS twice in the last five years, and both times the government’s
motions to dismiss were denied. The second one was accomplished by filing a
complaint focused on defeating the government’s expected motion to dismiss. Their
motion was filed under Rule 12(b)(1), lack of subject matter jurisdiction. I then
requested leave of court to amend the complaint, alleging that I was certain to be
able to overcome the government’s motion to dismiss. The judge granted my
request and denied the government’s motion to dismiss.
Remember that you cannot sue the government (or at least maintain an action) for
an injunction against the assessment or collection of a tax. I filed this claim for an
injunction anyway, and didn’t quite state my claim very clearly because I wanted to
beat their motion to dismiss first. Well, it worked. I submitted an amended
complaint which sought an injunction, not to enjoin the collection or assessment of
any tax; but rather, to enjoin the government from refusing to make an assessment
and proceed under normal statutory guidelines. Under this cause, the government
cannot avail itself of the Anti-Injunctive Act. I served the amended complaint and
then my first set of interrogatories and requests for production of documents the
following day.
On a motion to dismiss for failure to state a claim, Rule 12(b)(6), the court will
sometimes make its ruling as if it was considering a motion for summary judgment.
This is a tricky situation and you must be cautious as to how you respond or argue.
A motion for summary judgment undergoes two tests: the first is whether or not the
complaint, or the record, shows any genuine issues of material fact, and the second,
whether or not the moveant is entitled to judgment as a matter of law. You can
object or make an oral argument based on defeating this motion in any of several
ways. You must either show that there are, on the record, genuine issues of
material fact. This can be accomplished by filing an affidavit. The next matter is to
show that the moveant is not entitled to judgment as a matter of law.
In the Davis v. United States case I prepared in April, I demonstrate how to
approach this situation that is more completely explained in the Chapter Due
Process Case Histories.
If you read the Radinsky v. United States, 622 F.Supp. 412 case, you’ll find
where the court ruled that there was no requirement for the Radinskys to be
taxpayers as a condition upon suing to recover the payment of any tax, penalty or
sum alleged to have been wrongly collected under the Internal Revenue Code. This
is an incredible case because the IRS argued that the Radinskys were not taxpayers
because they had not filed returns. The purpose of them raising this argument was
to try and get the court to refuse assuming jurisdiction under 28 USC § 1346(a)(1).
The court’s memorandum states the following:
“The IRS insists that only ‘taxpayers’ have recourse against the United
States under 28 U.S.C. § 1346(a)(1), and that the plaintiffs are not
‘taxpayers’ because no tax has been assessed.”
The record of assessment is the key to collecting a tax but the IRS never compiles
one until they are ordered to produce it for evidence in court, and then they only
produce a “certificate of assessments and payments.”
The problem with this is that the court will presume that this is a valid replacement
for an actual assessment. If you can get the IRS to admit on the record that the
supporting documents for this certificate were destroyed, you might be able to have
it stricken as being immaterial. Please study the annotations to 26 USCS § 7422 if
you want to have a clearer understanding of this.
In the Radinsky case, the court further found that it was too late for the government
to argue that the plaintiffs were not taxpayers because everything in the record
indicated that the IRS attempted to collect, and succeeded in collecting, the disputed
money as a “tax.” The court even referred to a letter from the IRS addressed to
“Dear Taxpayer” which used the Radinsky’s TIN. I believe this shows beyond all
question that the whole fraud is dependent upon your participation by filing a tax
return. Once you file the return, you become a taxpayer and subsequently, have the
legal duty to file. This is also discussed later in this chapter dealing with tax court
and the rule under Toll v. Commissioner.
Let me cover this again; most people are not required to file until they actually file!
The reason for this is because once you file, you create the record of assessment
and become a taxpayer. Only taxpayers are required to file! It’s like the
requirement to have a driver's license. You’re not required to have one until you
become a resident driver of a particular state. I won two cases for myself on the
right to travel without registration in Arizona in 1996 basing my defenses on this
principle. The first judge told me I wasn’t required to have registration because I had
no valid drivers license, even though he imposed a fine against me for not having a
valid license (noting the humorous irony on the record); and the second judge didn’t
even appear for the hearing which he scheduled! The way you become a resident is
by applying for a license! So you’re not required to have a drivers license until you
have one; just like, most people are not required to file until they actually file!
In Robinson v. United States, 920 F.2d 1157, the court found that the assessment
must be created when certain circumstances occur. If the taxpayers do not file a
petition in the Tax Court within the specified ninety-day time limit given with a notice
of deficiency, the IRS is supposed to make an assessment. A duly designated
official for the district or regional tax center does this by signing the summary record
of the assessment, which identifies the taxpayers, the type of tax owed, the taxable
period and the amount of the assessment. The court cited 26 U.S.C. § 6203 and 26
CFR 301.6203-1.
Here are some examples of what other notable people have had to say about the
tax system over the years:
"In a recent conversation with an official at the Internal Revenue Service, I was
amazed when he told me that ‘If the taxpayers of this country ever discover that the
IRS operates on 90% bluff the entire system will collapse’". – Henry Bellmon,
Senator (1969)
"...the key question is: can we define ‘income’ in a fair and reasonably
straightforward manner? Unfortunately we have not yet succeeded in doing so." –
Shirley Peterson, former IRS Commissioner, April 1993
"I don’t like the income tax. Every time we talk about these taxes we get around to
the idea of ‘from each according to his capacity and to each according to his needs’.
That’s socialism. It’s written into the Communist Manifesto. Maybe we ought to see
that every person who gets a tax return receives a copy of the Communist Manifesto
with it so he can see what’s happening to him". – T. Coleman Andrews,
Commissioner of Internal Revenue, May 25, 1956 in US. News & World Report
"Our federal tax system is, in short, utterly impossible, utterly unjust and completely
counterproductive [it] reeks with injustice and is fundamentally un-American...it has
earned a rebellion and it’s time we rebelled." – President Ronald Reagan, May 1983,
Williamsburg, VA
"If no information or return is filed, [the] Internal Revenue Service cannot assess
you." – Gary Makovski, Special IRS Agent, testifying under oath in US. v. Lloyd
"Our tax system is based upon voluntary assessment and payment, not upon
distraint." – United States Supreme Court, in Flora v. United States
"Our tax system is based on individual self-assessment and voluntary compliance."
– Mortimer Caplin, Internal Revenue Audit Manual (1975)
"The United States has a system of taxation by confession." – Hugo Black, Supreme
Court Justice, in U.S.A. Kahriger
"Only the rare taxpayer would be likely to know that he could refuse to produce his
records to IRS agents...Who would believe the ironic truth that the cooperative
taxpayer fares much worse than the individual who relies upon his constitutional
rights." – Judge Cummings, U.S. Federal Judge, in US. v. Dickerson (7th Circuit
1969)
"Let me point this out now. Your income tax is 100 percent voluntary tax, and your
liquor tax is 100 percent enforced tax. Now, the situation is as different as night and
day. Consequently, your same rules just will not apply..." – Dwight E. Avis, former
head of the Alcohol and Tobacco Tax Division of the IRS, testifying before a House
Ways and Means subcommittee in 1953
"The purpose of the IRS is to collect the proper amount of tax revenues at the least
cost to the public, and in a manner that warrants the highest degree of public
confidence in our integrity, efficiency and fairness. To achieve that purpose, we will
encourage and achieve the highest possible degree of voluntary compliance in
accordance with the tax laws and regulations..." – Internal Revenue Manual,
Chapter 1100, section 1111.1
"Fear is the key element for the IRS in achieving its mission. Without fear, the IRS
would have a difficult time maintaining our so-called system of voluntary
compliance...". "Given the opportunity, the IRS will take the easy way out and grab
whatever it can...the IRS does not really care about you and what your future...may
be." – Santo Presti, former IRS Criminal Investigation Agent and author of "IRS In
Action"
"The IRS is an extraordinary example of the end justifying the means. The means of
this agency is growth. It is interesting that the revenue officers within the IRS refer to
taxpayers as ‘inventory’. The IRS embodies the political realities of the selfish
human desire to dominate others. Thus the end of this gigantic pretense of
officialdom is power, pure and simple. The meek may inherit the earth, but they will
never receive a promotion in an agency where efficiency is measured by the number
of seizures of taxpayers’ property and by the number of citizens and businesses
driven into bankruptcy." – George Hansen, Congressman and author of "To Harass
Our People"
"I have sat on many a promotion panel where the first question of panel members
was ‘How many seizures have you made?’". Joseph R. Smith, eighteen-year IRS
agent, testifying before Congress
"The agency that is so strict on the way Americans keep their books cannot even
pass a financial audit." – Ted Stevens, Republican Senator from Alaska
"Eight decades of amendments...to [the] code have produced a virtually
impenetrable maze...The rules are unintelligible to most citizens...The rules are
equally mysterious to many government employees who are charged with
administering and enforcing the law." – Shirley Peterson, former IRS Commissioner,
April 14, 1993 at Southern Methodist University
"some techniques can be used only in connection with a full-scale program due to
the nature of the tax situation and the need to avoid unnecessary taxpayer reaction.
An example would be income tax returns compliance efforts aimed at the nonbusiness taxpayer." – Internal Revenue Service Manual, section 5221 "Returns
Compliance Programs"
"This [audit] was made extremely difficult because [IRS] existing Systems were not
designed to provide reliable financial information...on their operations." – Comptroller
Bowsher, Government Accounting Office, on the first-ever audit of the IRS in 1993.
"The wages of the average American worker, after inflation and taxes, have
decreased 17% since 1973, the only Western industrial nation to so suffer." – Martin
Gross, author of "The Tax Racket: Government Extortion >From A to Z"
Notices of Federal Tax Lien and Tax Liens:
There is a clear distinction between a tax lien and a notice of federal tax lien. “The
federal tax lien is not valid against persons falling within these categories until notice
thereof has been properly filed,” page 57(16)0-22, Legal Reference Guide for
Revenue Officers. The District Counsel is responsible for answering inquiries about
the lien process. This manual contains specific procedures governing the lien
process and a separate set of specific procedures governing the “notice of lien”
process. It further states that “Even though a notice of lien has been filed, the
federal tax lien is not valid as against certain interests.” The notice is filed only for
the purpose of protecting the government’s right of priority as against a purchaser,
holder of a security interest, mechanic’s lienor or judgment lien creditor. The lien
can exist, even without any notice of lien having been filed. The filing of the notice
of lien merely establishes the date of the government’s claim in the event another
competes with it; the filing dates will lend superiority to the oldest notice filed.
If you’re thinking about a way to attack the filing of a Notice of Federal Tax Lien, my
advice, keep in mind that your options are limited. Unless you can show that it
would be in the government’s best interests to delay the filing of the notice or to
release it, you will suffer the problems cause by such filing. Supposing you actually
get a notice released, it will remain on your credit history and will not prevent the IRS
from enforcing any levies. It is usually not worth the effort or expense.
If you are willing and able to get into some payment arrangement, provided you
have the proper form of agreement, the IRS will be required to delay or remove
notices of federal tax liens while you are current on the payments.
Another way to begin resolving problems caused by the government’s filing of a
Notice of Federal Tax Lien against your name is to do a “file segregation” on your
credit history.
I have seen a trend in Florida recently where someone figured out how to get nearly
fifty default judgments canceling notices of federal tax lien in state court under the
mechanics lien statute. Some of them are under appeal by the Department of
Justice at this time. My question is whether or not those orders canceling the
notices of federal tax lien will have the expected effect of clearing the title to real
property once they are filed. That is, will the title company understand and
acknowledge them or just ignore them. Remember that because the IRS has never
responded to these complaints, they have been defaulted, so we don't know if the
complaint would withstand a motion to dismiss or a notice of removal to district court
and subsequent motion to dismiss. The fortunate aspect of a default judgment is
that it is a judgment on the merits as viewed by the rules. I've included an edited
sample of the complaint here, but I have not had the opportunity to try it myself:
IN THE ____ COURT
IN AND FOR ________ COUNTY, STATE OF _______
[Plaintiff],
PLAINTIFF,
v.
Case No. _________
[IRS agent], a/k/a IRS
DEFENDANT.
______________________________/
COMPLAINT TO SHOW CAUSE FOR CLAIM OF LIEN
AND TO DISCHARGE BY CANCELLATION
Plaintiff __________ sues defendant _________ and alleges:
1. This is an action to show cause for a claim of lien and to discharge it by
cancellation, exclusive of costs and fees.
2. Jurisdiction is under [state statute] and [state statute]. The actions of the
defendant that give rise to this complaint include official filings in the official records
within this county that are unsupported by the required order from the court.
Plaintiff's property is adversely affected by defendant's filing.
3. Upon information and belief, there exists no equitable or legal basis for
defendant's actions. Defendant has failed or refused to respond or answer to
plaintiff's Notice of Contest of Lien (see attached copy).
4. Plaintiff contests the purported validity of defendant's actions claims such to be
void from inception.
5. Plaintiff relies upon the attached Certificate of No U.S. Tax Liens on Record as
being true, correct and complete and applies to this court to show cause why
defendant's actions should not be cancelled or set aside.
WHEREFORE plaintiff respectfully requests judgment against defendant to
have defendant show cause as to why said claims of lien or debt should not be
cancelled and an ordering discharging, canceling or setting aside said claims of lien
or debt if defendant fails to show cause why they should not.
DATED this ___ day of [month] [year]
_______________________
[Plaintiff]
[Address]
[City state zip]
[Phone]
IN THE ____ COURT
IN AND FOR ________ COUNTY, STATE OF _______
[Plaintiff],
PLAINTIFF,
v.
Case No. __________
[IRS agent], a/k/a IRS
DEFENDANT.
______________________________/
AFFIDAVIT
STATE OF ____________ )
)
SS
COUNTY OF __________ )
I _____ hereby solemnly affirm that the statements herein are true and
correct in substance and in fact to wit:
1. I am competent and qualified to testify.
2. On [date] I applied received a Certificate of No U.S. Tax Lien on Record from the
Office of Tax and Revenue in Washington, D.C. (see attached copy)
3. On [date] [IRS agent] filed a claim of lien against me on book ____, page ___ of
the county records.
4. On [date] I filed a Notice of Contest of Lien in response to this claim of lien
5. [IRS agent] has failed or refused to respond with sixty (60) days as required
under [state statute]. No action to enforce this claim of lien has been filed within the
one-year limit imposed under [state statute].
STATE OF ____________ )
)
SS
COUNTY OF __________ )
Subscribed and sworn to before me a notary public this ___ day of [month]
[year].
______________________
Signature of notary
[ls]
File Segregation Defeats Notices of Federal Tax Lien
The least expensive way to defeat a Notice of Federal Tax Lien is to create a new
credit history under a different identification. Most of the time, you only need to stop
using your social security number. The safest way to do this is to apply for a U. S.
Passport without a social security number. Use all zeroes in the social security
number field and Customs will issue you a different number but with the same
format. In other words, you won’t have the risk of using someone else’s social
security number and it will be on an official document so you won’t be questioned
about it. By the way, the 6039E IRS notice on the back of the application, which
states that if you don’t use your social security number you’ll be fined, has never
been enforced in any the cases I’ve worked nor has it been enforced against anyone
to my knowledge.
I do not encourage a credit file segregation for the reason that it can be perceived as
fraudulent depending upon your circumstances. The Federal Trade Commission
has published several informative articles, one of which appears at:
http://www.ftc.gov/opa/1999/9902/consumerweek2.htm
The FTC explains that applying for a new taxpayer identification number and using it
to create a new credit history may be construed as fraud using the mail system or
telephone fraud depending upon the methods used.
If you do this for yourself, you must be cautious about using the United States Mail
and telephone system; but more importantly, do not apply for a new taxpayer
identification number for the purpose of using it in place of the government’s social
security number issued for your use. If you wish to withdraw from the social security
system, simply discontinue the use of a social security number. If you wish to
continue your use of the credit and banking system without a social security number,
but are having difficulty, it is important to make your disputes publicly known. Filing
complaints with the responsible Federal Reserve Bank or the Comptroller of the
Currency where national banks are concerned can do this. It is also important to
sue companies for denying you rights for refusing to disclose a social security
number.
I also recommend seeking opinion letters from attorneys, namely criminal defense
attorneys, stating which particular elements of fraud or other crimes would be
present in a proposed activity. An example of using this type professional of advice
would be, if you want to open a bank account in person, and intend on using an
alternative number in place of your social security number on the application without
informing the bank. You may ask the attorney to explain in writing how this might be
construed as criminal behavior, or how it could be changed to avoid the accusation.
There is no certain method of boycotting the use of the social security number, but
you must use discretion and prudence to reduce the risk of being penalized for doing
something which is morally right.
Several of our subscribers have questioned whether or not opening a bank account
without a social security number would constitute fraud. Some have accused me of
working for the IRS or the government to publish misinformation. It is my hope that
this portion of the chapter will dispel these fears and paranoia, not for the purpose of
convincing anyone to open such an account, but to demonstrate that it is not illegal.
The elements of fraud include false representation of a present or past fact made by
the defendant, action in reliance thereupon by the plaintiff, and damage resulting to
the plaintiff from such misrepresentation. The authority for this is Citizens Standard
Life Insurance Company vs. Gilley, Tex.Civ.App., 521 S.W.2d 354, 356.
This is the reason I encourage those using this type of strategy in the course of
removing yourselves from the social security system, to use accounts where there is
no substantial monetary gain; not that it would be a problem, but it would be an
element in a case of fraud. Another element is to prove intent, and that is very
difficult.
Due Process has done this for many subscribers and their personal banking
accounts, and for business trust accounts where the business was not one having
any filing or employer identification number requirements.
When I did a file segregation in 1996, I stopped using my middle name, so that also
helped to further separate my current activities from my former credit history. You
may also consider renting a private mail drop for a year and use that address on
your bank applications for the account and secured credit card. The fact that some
creditors can check a database of private mail drops to see if yours is one of them
should not really affect you because you’ll be applying for a secured credit card.
Once you receive your passport, submit an application for credit. You should
apply in person to a large, well known national bank. You will be denied and in the
process and your new credit file will be created. Then take a second form of official
identification, which does not have a social security number on its face, into a bank
and open a checking account with it. Use your passport number as your social
security number.
Deposit enough money to use as collateral for a secured credit card. The quickest
and simplest way to apply for this secured credit card is through the Internet. If you
don’t have access at home, use the one at your local public library. Just use your
checking account number on the application so that the card issuer can freeze your
checking account and use it for collateral on the credit account. The last step is to
just use your credit card frequently. This credit reporting process to begin restoring
your credit history takes between six and nine months to complete.
It will give you a new credit history and the Notices of Federal Tax Lien should not
attach to your credit history any longer, but they will remain against any real estate
or other property you had titled in your name in the county and at the time the notice
was filed. This same result can be accomplished using business trust organizations.
It is possible to buy and sell as a trustee for a business entity using that entity’s
identification.
Can I Sue The IRS?
The answer to this question is yes, of course you can sue the IRS. Anyone can sue
anyone in this country and you don’t even need an attorney. However, suing
someone, or the filing of a lawsuit, is accomplished by simply paying the filing fee,
having your complaint accepted by the Clerk of Court and having your complaint
properly served on the defendant. This alone will not win your case. The question
you want to entertain is, can I maintain a suit against the United States for the
recovery of property taken? Good news, the answer is still yes, but with a clause.
That clause is, you must be able to state a claim for relief which would give the court
jurisdiction to hear your case on its merits; otherwise, your complaint will be
dismissed on a motion by the government known as an affirmative defense. Stating
a claim involves alleging certain facts in your complaint. These allegations
determine what type of jurisdiction the court will assume. If you state them properly
in a claim for refund (damage claim), you will be in a court of law. If you state them
correctly in a claim for injunctive relief, you will give the court equity jurisdiction. It’s
very unlikely that you would prevail in this type narrow jurisdiction (equity), which is a
good indication that you should be filing a claim for refund instead.
In a damage claim, or claim for refund, you must allege that the court has jurisdiction
while citing your authority, that you are the plaintiff, that the United States is the
defendant, that you are seeking recovery of taxes paid, that an assessment was
done, that you filed tax returns and paid the tax allegedly owed and that you timely
filed a claim for refund which was denied or expired after six months. You also
have to bring the lawsuit within two years of either the denial of your administrative
claim for refund, or within two years following the date on which you filed a notice of
waiver of disallowance on Form 2297. This notice must be either filed with your
claim or sometime thereafter, within the six month period. There is a possibility of
getting by the issue of not filing, provided that you pay what they say you owe, if you
use the rule in Radinsky v. United States, 622 F.Supp. 412 as I’ve previously
explained. Your best source for instruction on this process is 11 Federal Forms §§
43:221 through 43:277.
The problem we have today in suing the IRS is not the court system, it’s the
legislatures and the Congress. They have written laws that have made seeking a
remedy in court conditioned upon filing a tax return, paying the “tax” and claiming
that a proper assessment was made when it was not. If you wish to bring a damage
claim against the IRS, these are the conditions which must be met or the court will
not accept jurisdiction to hear your case.
The Congress legislated away our refund remedy in federal court, making it a
necessary element of invoking the jurisdiction of the federal court to allege that a
correct assessment has been made, even though this is not usually true. I’ve
included the language that must appear in a claim for refund made in federal court.
If you cannot complete the blanks, you will not be able to invoke the court’s
jurisdiction, except for the filing of returns issue covered by Radinsky, supra.
COMPLAINT
COUNT I
Plaintiff sues defendant and alleges:
1.
This is a claim for refund made pursuant to 26 USC § 7422; 28 USCS §
1346(a)(1) and FRCP 8(a).
2.
___
Plaintiff is an American Citizen and of adult age who resides in ___ County
3.
The Defendant is the United States.
4.
This is an action for the recovery of internal revenue taxes. This Court has
jurisdiction of the matter by reason of 28 USC § 1346(a). This is not a claim for
abatement of interest.
5.
Recovery is sought for federal income taxes for the years ended December
31, [year(s)]. On or about [date], plaintiff filed federal income tax returns for such
periods with the Internal Revenue Service in [city state]. For each such year,
plaintiff paid income taxes on account of such returns as follows: [list amounts
levied or paid].
6.
On or about [date], the Director of the Internal Revenue Service Center in
______ _____, assessed against this Plaintiff additional taxes and the interest for
the years and in the amounts as follows: ________.
7.
On or about [date], plaintiff paid to the Internal Revenue Service at the
Internal Revenue Service in [city state], on account of such assessments, the
foregoing sum of tax deficiencies and interest.
8.
Such additional income taxes and interest were erroneously and illegally
assessed and collected.
9.
On [date], plaintiff filed with the Internal Revenue Service Center in [city
state], the location at which plaintiff filed his original returns, claims for refund for
each period ending December 31, [year(s). Copies of such claims for refund are
attached, marked Exhibit _____ and made a part of this complaint. ______ [six
months have elapsed since plaintiff filed such claims for refund, and the Internal
Revenue Service has taken no action on them. Or, if action taken and claims
disallowed, outline proceedings that took place.]
10.
Plaintiff has overpaid his federal income taxes for the taxable years ended
December 31, [year(s)]; are the sole owners of the aforementioned claims for
refund, and have no assignment of such claims.
11.
For plaintiff’s statement of claim for relief, plaintiff’s incorporate herein each
and every allegation of facts set out in claims for refund attached as Exhibit ___.
WHEREFORE, the Plaintiff requests judgment in the amount of $ ____,
together with such interest and costs as are allowed by law and such other relief as
the Court may deem just and equitable.
Respectfully submitted this ____ day of _______, [year].
______________________________
[plaintiff]
If you stop filing returns, there are two types of possible liability, civil and criminal.
You should be prepared to lose any property you might have in your name when the
government decides that you owe a tax. If you decide to stop filing, you can reduce
your risk of losing property by divesting yourself of ownership rights through trust
systems. It’s very important however that you understand how to operate the trusts
and what to expect the IRS to do when you’re being questioned. The only property
that I’ve not been able to remove from liability is any “W-2 income” and any social
security or pension payments. Just about everything else can be conveyed out of
your name and into the title of a trust. This is the reason behind my request for letter
ruling that compensation received for non-government employment in the fifty states
is not recognized by the tax code as taxable income. Sometimes we have no choice
but to get to the merits of the issue, but the best way to beat the IRS is to avoid the
fight.
You can avoid the criminal liability by getting an attorney or CPA to answer the
following types of questions for you in writing:
1. Which law penalizes me for not producing statements under penalty of perjury?
2. Which law would compel or penalize me for not using a social security number as
a condition for working?
3. Does making statements under penalty of perjury requires that I waive certain
rights?
You probably will not get answers such as, "No, you're not required to file a return."
The question and response should relate to a specific year or tax period, and your
questions should lead to answers, non-responses or confusing responses that would
lead a reasonable person to conclude he had no filing requirement. Do not send
any of these letters to the IRS, keep them in a safe place.
Business Reorganizations And Estate
Planning
Did you know that the largest and most successful business organization in
the history of mankind is an unincorporated business organization? Did you know
that the name of its trust document is the Constitution of the United States of
America? It is true. And because this organization affects so many people and was
foreseen to have that potential, it was designed to be political in its very indenture. It
was defined as having a republican form of government because of the large
amount of land over which it was anticipated to govern. Democracies have long
since shown themselves to be the most destructive form of government as was
agreed among the creators of this nation and as was recorded in the Federalist
Papers, and so this is the reason for the structure of our republic.
Unincorporated Business Organizations
A growing trend in America, but not around the world or in history, is to create
business organizations outside the framework of statutes.
Most business
organizations are doing this to avoid tax and other liabilities associated with
ownership of property. The United States of America is a businesses trust in which
fiduciary obligations were created under three branches of its government for the
two-fold purpose of furthering its international commercial activities and for
protecting the citizens from invasion and from the intrusion against certain natural
rights. Remember that any organization of people, whether it be a family, team,
company, or gang, must have be a government unto itself in order to secure its
survival. The most basic system of government is the family.
The creation of the United States of America was a political and business
reorganization, the necessity of which was brought about by the tyrannical acts of
King George III.
These reasons are well defined in the Declaration of
Independence. No other document, aside from possibly The Federalist Papers, is
more expositive as to the reasons behind the creation of this new enterprise.
Basically, he monopolized trade with the colonists, thereby inhibiting them from
trading with other nations by taxing them out of existence. Does this sound familiar?
Let’s not doubt the genius and brilliance with which our Constitution was written. It
can only be likened to the greatness of J. S. Bach’s canons and fugues. To this
day, we can avail ourselves of its protections once we understand the foundations of
our government. We have the right to organize and reorganize our affairs in such a
way as to avoid the intrusions of an oversized government.
Remember that the people who wrote the tax code were and are still the ones
controlling the majority of the wealth in this country and around the world. The major
limitation of the code is that it cannot tax a right; essentially, the tax code can never
regulate the right to contract. Therefore, two people can enter into an agreement
and then appoint others to represent that agreement in a fiduciary capacity, the
purpose of which could be to engage in business or simply hold title to property.
This is known as a trust arrangement and these types of contracts are not permitted
to become eligible for federal or state benefits. The reason for this is because the
state is not involved and has no interest in the agreement. You’ll find that the United
States Supreme Court clearly establishes this in Hale v. Henkle, 201 US 43, 74 and
in Elliot v. Freeman, 220 US 178.
Here is a description of the criteria for a non-taxable, non-statutory business trust: It
is an unincorporated business trust organization, not classified as a trust for
purposes of the Internal Revenue Code. It’s an arrangement to protect or conserve
any property for beneficiaries, does not have associates and is not organized to
carry on business, dividing any gains resulting therefrom. It has no associated
holders of beneficial interests and the board has exclusive control over electing and
appointing board members. It cannot be organized as an association, nor a
corporation, and does not file tax returns. Read 26 CFR Part 301.7701-4(b) and
you’ll find that in its definition of business trusts, it states that “… There are other
arrangements which are known as trusts because the legal title to property is
conveyed to trustees for the benefit of beneficiaries, but which are not classified as
trusts for purposes of the Internal Revenue Code, because they are not simply
arrangements to protect or conserve the property for the beneficiaries.”
You cannot write this trust agreement for yourself. You must be appointed to an
existing business trust by at least two individuals who can never again be have a
fiduciary obligation to the business and this cannot be accomplished through any
pre-arranged agreement. It is also legal to have the trust created for the sole
purpose of avoiding a tax liability and there is plenty of case law to establish this
point.
Limited Partnerships
A limited partnership is another example of an unincorporated business. They are
very simple to create and can be done by an attorney or by the actual partners
themselves. This type of agreement is used primarily to divest ownership and
liabilities that would normally attach to ownership.
Many people call me and explain that they deeded over their property or titled their
cars in the name of their wife or children or some other relative or friend (assignee)
for the purpose of avoiding liability. This does nothing to eliminate the liabilities that
might be incurred by the assignees to which the ownership was transferred. A
partnership agreement effectively transfers liability in a closed system. In our
previous example, if we are only concerned about limiting the liability of one person
by transferring property out of his name, it necessarily increases the liabilities of
others to which the property is transferred. A limited partnership is a new entity that
incurs the entire liability of the ownership unless liability can be attached to all
partners at the same time.
In nearly every jurisdiction, the best standing any creditor can obtain against the
assets of a limited partner is that of an assignee. In other words, if it were the IRS or
a judgment creditor, the partners would decide payment in satisfaction of their
claims collectively. In other words, no creditor could enforce a collection unless all
the partners agreed to pay. I like to consider asset protection from the worst
possible situation, an IRS levy.
The Congress has given the IRS the power to levy on property and rights to property
of taxpayers when the IRS claims the liability. The levy or seizure can be
accomplished with no court action; it's an administrative taking of property. If the
individual they purport to have the liability has no assets to satisfy the taxes claimed
to be owed, then the IRS takes nothing. This level of protection can be reached
when the individual's property is contributed, sold or conveyed into the collective
ownership of partners in a limited partnership. This is true only before the filing of a
notice of lien for the particular individual levied against, and in the particular county
where the notice is filed. The assets cannot be seized or levied upon provided that
no one partner has exclusive rights to sell the property owned by the partnership.
That is the key to using this tool effectively. No one individual partner can have the
exclusive rights to sell, transfer or assign any assets owned by the partnership and
this must be established in writing.
If a notice of lien were filed against "Bob" in County A, any assets owned by Bob
and transferred in that county after the date of recording in the public record would
still be attached to the levy or seizure action and collectible by the IRS. This would
be true only in County A where Bob had any exclusive rights to sell, assign or
transfer property. The IRS could not collect in any other counties where the notice
of lien was not filed, or did not encumber the property or rights to property. Further,
the IRS could not collect on Bob's property if he had previously sold, assigned or
transferred to the ownership of a partnership where he no longer had exclusive title
or rights to sell, assign or transfer the property. It is very important to make these
types of arrangements well before any anticipated levy actions by the IRS.
The No EIN Business Checking Account:
To make matters simple, obtain a foreign mailing address for your trust or
partnership but use a second mailing address in your area as its secondary mailing
address. The bank will then accept your Certificate of Foreign Status on Form W-8
as long as you use these two addresses accordingly. Remember to avoid telling the
bank that it’s a “trust” account. You just want them to understand that the board of
trustees has hired you to maintain a business account for them in the states.
The trust indenture can maintain a trust identification number (TIN) that can be
created by the exchanger and creator. This may lead to problems or conflicts with
another business that might have the same number, but as a real taxpayer
identification number (TIN). It’s your call. I can’t ever remember having any of these
types of conflicts but there is a possibility.
If you wish, have an adverse trustee apply for an EIN on behalf of the
business trust. The IRS does not have a category under which to assign a taxpayer
identification number to this type of business structure, so it will always be an
incorrect assignment. But at least you’ll know it’s a unique number. Once you use
this number to open your account, send a complaint into the Problem Resolution
Office like the sample one below and you should be able to get it canceled. You
may have to be persistent because the IRS doesn’t always like to admit that you’re
correct.
Because a trustee is an agent, he can manage a bank account for the trust in
his own name with a "doing business as" or "trading as" designation. Some banks
will ask for a state business license for this type of account, but try and avoid this
because the state licensing authority will give you a problem about requesting a
social security number. You might also try opening a personal account using the
business name as your "nominee." In any case, it really doesn't matter because you
are acting as an agent for the trust or the partner in a partnership when accepting
deposits or doing business for your company. The bank doesn't really need to know
the nature of your involvement with any business.
[sender]
[address]
[city, state]
problem resolution office
IRS
[address]
[city, state]
(date)
certified mail no. _______
Re
incorrect assignment of EIN
Greetings:
Thank you for reviewing this inquiry. Agent Schmidt had instructed me to
write you this letter explaining the problem we have.
You assigned an EIN to an unincorporated business trust which is identified
under 26 CFR Part 301.7701-4(b) as not being an entity requiring a taxpayer
identification number nor having any filing requirements. This is an error because
this business structure is not one having a requirement to file any of the following
forms:
(a) Form 940, Employer’s Annual Federal Unemployment Tax Return; (b)
Form 941, Employer’s Quarterly Federal Tax Return; (c) Form 942, Employer’s
Quarterly Tax Return for Household Employees; (d) Form 943, Employer’s Annual
Tax Return for Agricultural Employees; (e) Form 11-B, Special Tax Return – Gaming
Devices; (f) Form 720, Quarterly Federal Excise Tax Return; (g) Form 2290, Federal
Use Tax Return on Highway Motor Vehicles; (h) Form CT-1, Employer’s Annual
Railroad Retirement Tax Return, (i) Form 1065, U.S. Partnership Return of Income.
It is not simply an arrangement to protect or conserve any property for
beneficiaries, does not have associates and is not organized to carry on business,
dividing any gains resulting therefrom. It has no associated holders of beneficial
interests and the board has exclusive control over electing and appointing board
members.
This business trust was never organized as an association, nor a corporation,
or any other form of limited liability company, and it is not an entity ever having filed
tax returns. To the best of our knowledge, no entity module has ever been created
for this trust organization.
It is not a nominee or a grantor trust having any principals or owners. It is its own
principal as recognized by your regulations.
Please correct your records accordingly and we will expect your response
within thirty (30) days.
Best regards,
Sales Tax Reduction Strategies:
This part of the book will probably be very useful for those not having any problems
with the taxing authorities. If you’re a real estate agent, you will be able to use this
information to beat your competition hands down. If you’re about to sell your car, or
manage a dealership, you will probably have the same interest. And if you’re just an
average citizen wanting to reduce your liabilities and save a few dollars, this
information should help you go a long way toward that end.
I’m going to demonstrate a simple business structure so that you can grasp the idea,
and then you will be able to expand on it as you learn more. There are many types
of complex business structures, but the ones described here operate to accomplish
the same end as all of them.
An unincorporated business trust organization can be used to hold title to your
property. But “your” property can no longer be yours. You might maintain fiduciary
control over it through the trust, but you must divest yourself of all legal right, title
and interest you might have otherwise maintained. In my opinion, all corporate
structures such as corporations, limited liability companies, non-profits, “dba”s and
most trust structures have a tax liability and most of them create tax liabilities for the
owners and principles, because they need owners and principles to be valid. A true
unincorporated business trust organization that is created for profit and gain, for the
benefit of beneficiaries, and is conveyed property by its trustees in an irrevocable
agreement, is a business trust which is not owned, but is the owner. This type of
structure is not a grantor when created by third parties who relinquish all future
rights to accept fiduciary obligations for that particular trust arrangement.
An irrevocable trust arrangement that is not created by the trustees is a non-grantor
trust as long as it is created for the purpose of deriving profit and gain and for the
benefit of beneficiaries. A grantor trust arrangement, or nominee, is one created by
the trustees, does not meet these requirements relating to profit and beneficiaries
and is taxable under federal and state law. You can learn more about these terms in
any good law dictionary.
As the fiduciary for an unincorporated business trust organization, you are an agent.
An agent incurs no tax liability while acting in that capacity. In other words, you can
enter into agreements by signing your name as trustee instead of just signing your
name like you have been taught all of your life. If you are signing as trustee for a
this type of trust, then the trust is the principal and incurs all of the liability. That is
the purpose for which this type of organization is created. The Internal Revenue
Service issued Internal Revenue Ruling 76-479 that states that:
“The Internal Revenue Service has recognized that amounts received
by an Agent on behalf of a Principal and turned over to the Principal
are not taxable to the Agent, under Sec. 61(A) of the code.”
Other revenue rulings dealing with this subject matter include 69-274, 65-282, 58515, 58-220 and 74-581. You’ll also find this principle of law recognized in Volume
33A Am Jur 2d ¶ 13352.
Using trust arrangements, it is possible to reduce or eliminate taxes on the sale of
certain property. The principal behind this is to change what would be a sale, to a
mere conveyance of property where there is no sale, but a simple assignment and
reassignment of trustees. This is not taxable in most cases, and where there might
be a “conveyance tax” you can still create a situation where the conveyance is
simply “not able to be taxed.”
The simplest way to “sell” your car or boat for example, without telling anyone and
without incurring any tax liability, is to register the property in the name of a trust. As
long as the trust indenture is valid, the property will never change ownership until it
is conveyed from the ownership of the trust. You can be the trustee who conveys
title to the trust and maintains fiduciary control over that property; however, without
ownership rights, you have none of the liabilities associated with an ownership
status. The trust can then be operated privately and no member of the public nor
the state can ever have knowledge of the fiduciaries unless under court order, and
even that can be avoided.
Instead of selling the property, you can sell an appointment to the board of trustees
for the trust that own it. If you then resign, the new trustee will assume fiduciary
control over the property by contract and the owner will remain the same. This also
works for real estate or property of great value, but a little more planning is
necessary.
Not everyone has the financial ability to purchase real estate without involving a
mortgage lender or bank. The added complexity to involving trusts in these types of
transactions, that is, where there is a secured loan, is that the lender needs security
in the property before it will make the loan. If the trust you’re using has been around
for a long time, is well known, has good credit standing or a large amount of assets,
then the lender could easily involve the trust in the arrangement. This is usually not
the case but if we had learned these things when we were younger, it probably
would be true in many situations today.
As a real estate agent, you can have a third party who may or may not also work for
your firm, create a business or real estate trust with some other person who is not
related in the same capacity. These two people, the creator and exchanger for this
new trust arrangement, can then appoint the seller of the property to the board of
trustees for the trust, and they can resign. The title to the real estate can then be
conveyed in the ownership of the trust by the board of trustees, the “former seller” of
the property.
Supposing the “buyer” has the money, he can buy a position on the board of
trustees for the trust and the “seller” could then resign. If the “buyer” does not have
the money, one of two things is possible. Before the financing is available, the
“seller” can appoint the “buyer” to the board and they can both apply for a mortgage
with a lender as the board of trustees, and with the “former buyer” as co-signer on
the mortgage agreement. Or the lender can accept an appointment to the board for
a term equal to the life of the mortgage agreement. The only remaining problem
would be if the “seller” has an outstanding mortgage agreement, but that could be
resolved in the new mortgage contract. The real problem is trying to deal with
people who are not accustomed to doing business this way. You will also reduce
your liabilities to damage claims through the use of trust arrangements. The owner
usually has the liability in a damage claim so that liability would be reduced through
the proper use of trusts.
APPENDIX A
Code of Federal Regulations
Revised as of April 1, 1998
CITE: 26CFR31.3406(c)-1
TITLE 26--INTERNAL REVENUE
CHAPTER I
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
PART 31
EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
Table of Contents
Subpart E--Collection of Income Tax at Source
Sec. 31.3406(c)-1 Notified payee underreporting of reportable interest or dividend
payments.
(a) Overview. Withholding under section 3406(a)(1)(C) applies to any
reportable interest or dividend payment (as defined in section 3406(b)(2)) made with
respect to an account of a payee if the Internal Revenue Service or a broker notifies
a payor under paragraph (c) (1) or (2) of this section that the payee is subject to
withholding due to notified payee underreporting (as defined in paragraph (b)(1) of
this section), and the payor is required under paragraph (c)(3) of this section to
identify that account. After receiving the notice and identifying accounts, the payor
must notify the payee, in accordance with paragraph (d) of this section, that
withholding due to notified payee underreporting has started. Paragraph (e) of this
section describes the period for which withholding due to notified payee
underreporting is required. Paragraph (f) of this section provides rules concerning
notices that the Internal Revenue Service will send to a payee before notifying a
payor that the payee is subject to withholding due to notified payee underreporting.
Paragraph (g) of this section provides rules that a payee can use to prevent
withholding due to notified payee underreporting from starting or to stop it once it
has started. Paragraph (h) of this section provides special rules for joint accounts of
payees who have filed a joint return. See section 6682 for the penalties that may
apply to a payee subject to withholding under section 3406(a)(1)(C).
(b) Definitions--(1) Notified payee underreporting. Notified payee underreporting
means that the Internal Revenue Service has-(i) Determined that there was a payee underreporting (as defined in paragraph
(b)(2) of this section);
(ii) Mailed at least four notices under paragraph (f)(1) of this section to the payee
(over a period of at least 120 days) with respect to the underreporting; and
(iii) Assessed any deficiency attributable to the underreporting in the case of any
payee who has filed a return.
(2) Payee underreporting--(i) In general. Payee underreporting means that the
Internal Revenue Service has determined, for a taxable year, that-(A) A payee failed to include in the payee's return of tax under chapter 1 of the
Internal Revenue Code for that year any portion of a reportable interest or dividend
payment required to be shown on that tax return; or
(B) A payee may be required to file a return for that year and to include a
reportable interest or dividend payment in the return, but failed to file the return.
(ii) Payments included in making payee underreporting determination. The
determination of whether there is payee underreporting is made by treating as
reportable interest or dividend payments, all payments of dividends reported under
section 6042, all patronage dividends reported under section 6044, and all interest
and original issue discount reported under section 6049, regardless of whether
withholding due to notified payee underreporting applies to those payments.
(c) Notice to payors regarding backup withholding due to notified payee
underreporting--(1) In general. If the Internal Revenue Service or a broker notifies a
payor that a payee is subject to withholding due to notified payee underreporting, the
payor must-(i) Identify any accounts of the payee under the rules of paragraph (c)(3) of this
section; and
(ii) Notify the payee and withhold under section 3406 on reportable interest or
dividend payments made with respect to any identified account under the rules of
paragraphs (d) and (e) of this section.
(2) Additional requirements for payors that are also brokers--(i) In general. A
broker must notify the payor of a readily tradable instrument that the payee of the
instrument is subject to withholding due to notified payee underreporting if-(A) The broker (in its capacity as a payor) receives a notice from the Internal
Revenue Service under paragraph (c)(1) of this section that a payee is subject to
withholding due to notified payee underreporting and the broker is required to
identify an account of the payee under paragraph (c)(3) of this section;
(B) The payee subsequently acquires the instrument from the broker through the
same account; and
(C) The acquisition of the instrument occurs after the close of the 30th business
day after the date that the broker receives the notice (or on any earlier date that the
broker may begin applying this paragraph (c)(2) after receipt of the notice described
in paragraph (c)(1) of this section).
(ii) Transfer out of street name. For purposes of this paragraph (c)(2), an
acquisition includes a transfer of an instrument out of street name into the name of
the registered owner (i.e., the payee).
(iii) Method of providing notice. A broker must provide the notice required under
this paragraph (c)(2) to the payor of the instrument with the transfer instructions for
the acquisition. See Sec. 31.3406(d)4(a)(2).
(iv) Termination of obligation to provide information. The obligation of a broker to
provide notice to payors under this paragraph (c)(2) terminates simultaneously with
the termination of the broker's obligation to withhold (in its capacity as payor) due to
notified payee underreporting on reportable interest or dividends made with respect
to the account.
(3) Payor identification of accounts of the payee subject to backup withholding
due to notified payee underreporting--(i) In general--(A) Notice from the Internal
Revenue Service. If a payor receives a notice from the Internal Revenue Service
under paragraph (c)(1) of this section, the payor must identify, exercising reasonable
care, all accounts using the same taxpayer identification number for information
reporting purposes as the one provided in the notice. The notice may provide,
however, that the payor need only identify the account or accounts corresponding to
any account number or designation and related taxpayer identification number used
for information reporting purposes as that listed on the notice.
(B) Notice from a broker. If a payor receives a notice from a broker under
paragraphs (c) (1) and (2) of this section, the payor is not required to identify any
account other than the account identified in the notice.
(ii) Exercise of reasonable care. If an account identified pursuant to paragraph
(c)(3)(i)(A) of this section contains a customer identifier that can be used to retrieve
systemically any other accounts that use the same taxpayer identification number for
information reporting purposes, the payor must identify all accounts that can be so
retrieved. Otherwise, a payor is considered to exercise reasonable care in identifying
accounts subject to withholding under section 3406(a)(1)(C) if the payor searches
any computer or other recordkeeping system for the region, division, or branch that
serves the geographic area in which the payee's mailing address is located and that
was established (or is maintained) to reflect reportable interest or dividend
payments.
(iii) Newly opened accounts. (A) In general, a new account is not subject to
withholding under section 3406(a)(1)(C) if the payee provides to the payor a Form
W-9 (or other acceptable substitute) on which the payor may reasonably rely (within
the meaning of Sec. 31.3406(h)-3(e)(2) without regard to Sec. 31.3406(h)3(e)(2)(v)), unless the payor has actual knowledge (within the meaning of paragraph
(c)(3)(iii)(B) of this section) that the statements made on the form are not true.
(B) For purposes of paragraph (c)(3)(iii)(A) of this section, a payor is considered
to have actual knowledge that a payee's statement that the payee is not subject to
withholding under section 3406(a)(1)(C) is not true if-(1) The employee or individual agent of the payor who receives the payee's
certification knows that the statement is not true;
(2) In conducting the investigation, if any, required by paragraph (c)(3)(iii)(C) of
this section, the payor identifies any other accounts of the payee that are already
subject to withholding under section 3406(a)(1)(C); or
(3) In the course of processing the certification or in administering an account to
which a certification relates, the payor discovers that the payor was previously
notified by the Internal Revenue Service that the payee is subject to withholding
under section 3406(a)(1)(C) and no notice was received to stop withholding
pursuant to section 3406(c)(3) prior to the time of the discovery.
(C) Except as provided in this paragraph (c)(3)(iii)(C), a payor is not required to
investigate whether the statements made on the Form W-9 described in paragraph
(c)(3)(iii)(A) of this section are true. If, however, in opening a new account, the payor
relies on the same Form W-9 (or appropriate substitute) that it relied on previously in
opening another account, the payor must investigate whether any such existing
account is subject to withholding under section 3406(a)(1)(C). Similarly, if the payor
utilizes a universal account system described in the first sentence of paragraph
(c)(3)(ii) of this section, and in opening a new account the payor searches its records
to determine whether the new account should be identified under an existing
identifier (because the payee has existing accounts with the payor), the payor must
investigate whether any existing accounts identified with the same identifier are
subject to withholding under section 3406(a)(1)(C).
(d) Notice from payors of backup withholding due to notified payee
underreporting--(1) In general. If a payor receives notice from the Internal Revenue
Service or a broker under paragraph (c)(1) of this section and is required to identify
an account under paragraph (c)(3) of this section as an account of the payee, the
payor must notify the payee in accordance with paragraph (d)(2) of this section that
withholding due to notified payee underreporting has started.
(2) Procedures. The payor must send the notice required by paragraph (d)(1) of
this section to the payee no later than 15 days after the date that the payor makes
the first payment subject to withholding due to notified payee underreporting. The
payor must send the notice by first class mail to the payee at the payee's last known
address. The notice to the payee required by paragraph (d)(1) of this section must
state-(i) That the Internal Revenue Service has given notice that the payee has
underreported reportable interest or dividends;
(ii) That, as a result of the underreporting, the payor is required under section
3406(a)(1)(C) of the Internal Revenue Code to withhold 31 percent of reportable
interest or dividend payments made to the payee;
(iii) The date that the payor started (or plans to start) withholding due to notified
payee underreporting under section 3406(a)(1)(C);
(iv) The account number or numbers that are subject to withholding due to notified
payee underreporting;
(v) That the payee must obtain a determination from the Internal Revenue Service
in order to stop the withholding due to notified payee underreporting; and
(vi) That while the payee is subject to withholding due to notified payee
underreporting, the payee may not certify to a payor making reportable interest or
dividend payments (or to a broker acquiring a readily tradable instrument for the
payee) that the payee is not subject to withholding due to notified underreporting.
(e) Period during which backup withholding is required--(1) In general. If a
payor receives notice from the Internal Revenue Service or a broker under
paragraph (c)(1) of this section, the payor must impose withholding under section
3406(a)(1)(C) on all reportable interest or dividend payments with respect to any
account of the payee required to be identified under paragraph (c)(3) of this section
made after the close of the 30th business day after the day on which the payor
receives that notice and before the stop date (as described in paragraph (e)(2) of
this section). A payor may choose to start withholding under this paragraph (e)(1) at
any time during the 30-business-day period described in the preceding sentence.
(2) Stop withholding--(i) When no underreporting exists or undue hardship exists-(A) Stop date. In the case of a determination under paragraph (g)(3) (i) or (iii) of this
section that no underreporting exists or that an undue hardship exists, the stop date
is the day that is 30 days after the earlier of-(1) The date on which the payor receives written notification from the Internal
Revenue Service under paragraph (g) of this section that withholding is to stop; or
(2) The date on which the payor receives a copy of the written certification
provided to the payee by the Internal Revenue Service under paragraph (g) of this
section that withholding is to stop.
(B) Acceleration of stop date. A payor may choose to stop withholding at any time
during the 30-day period described in paragraph (e)(2)(i)(A) of this section.
(ii) When underreporting is corrected or bona fide dispute exists. In the case of a
determination under paragraph (g)(3) (ii) or (iv) of this section that the
underreporting has been corrected or that a bona fide dispute exists, the stop date
occurs on the first day of January (immediately following a period of at least twelve
months ending on October 15 of any calendar year in which the determination has
been made) or if later, the stop date determined under paragraph (e)(2)(i) of this
section.
(3) Dormant accounts. The requirement that a payor withhold under this
paragraph (e) on reportable interest or dividend payments made with respect to an
account terminates no later than the close of the third calendar year ending after the
later of-(i) The date that the most recent reportable interest or dividend payment was
made with respect to that account; or
(ii) The date that the payor received notice under paragraph (c)(1) of this section.
(f) Notice to payees from the Internal Revenue Service—
(1) Notice period. After the Internal Revenue Service determines under paragraph
(b)(2) of this section that payee underreporting exists, the Internal Revenue Service
will mail to the payee at least four notices over a period of at least 120 days (the
notice period) before payors will be notified under paragraph (c)(1) of this section
that the payee is subject to withholding due to notified payee underreporting. The
notices may be accompanied by, or incorporated in, other notices provided to the
payee by the Internal Revenue Service.
(2) Payee subject to backup withholding. After the Internal Revenue Service
provides the notices described in paragraph (f)(1) of this section, the Internal
Revenue Service will send notices to payors under paragraph (c)(1) of this section
unless--
(i) A payee obtains a determination under paragraph (g) of this section; or
(ii) In the case of a payee who has filed a tax return, the Internal Revenue Service
has not assessed the deficiency attributable to the underreporting.
(3) Disclosure of names of payors and brokers. Pursuant to section 3406(c)(5) the
Internal Revenue Service may require a payee subject to withholding due to notified
payee underreporting to disclose the names of all the payee's payors of reportable
interest or dividend payments and the names of all of the brokers with whom the
payee has accounts which may involve reportable interest or dividend payments. To
the extent required in the request from the Internal Revenue Service, the payee
must also provide the payee's account numbers and other information necessary to
identify the payee's accounts.
(4) Backup withholding certification. After a payee receives a final notice from the
Internal Revenue Service under paragraph (f)(1) of this section, the payee is not
permitted to certify to any payor or broker, under penalties of perjury, that the payee
is not subject to withholding under section 3406(a)(1)(C), until the payee receives
the certification from the Internal Revenue Service under paragraph (g) of this
section advising the payee that the payee is no longer subject to withholding under
section 3406(a)(1)(C). A final notice will contain the information described in this
paragraph (f)(4). See sections 6682 and 7205(b) for civil and criminal penalties for
making a false certification.
(g) Determination by the Internal Revenue Service that backup withholding
should not start or should be stopped—
(1) In general. A payee may prevent withholding due to notified payee
underreporting from starting, or stop the withholding once it has started, by
requesting and receiving a determination from the Internal Revenue Service under
one or more of the provisions of paragraph (g)(3) of this section. Following its review
of a request for a determination under paragraph (g)(3) of this section, the Internal
Revenue Service will either make the determination or provide the payee with a
written report informing the payee that the request for determination is being denied
and the reasons for the denial. If a determination is made during the notice period
(as defined in paragraph (f)(1) of this section), the payee is not subject to
withholding due to notified payee underreporting with respect to any taxable year for
which a determination was made. If a determination is made after the notice period,
the Internal Revenue Service will, at the time prescribed in paragraph (g)(2) of this
section, provide written certification to a payee that withholding is to stop, and will
notify payors who were contacted pursuant to paragraph (c)(1) of this section to stop
withholding. A broker who (in its capacity as payor) under this paragraph (g)(1)
receives a notice from the Internal Revenue Service or a copy of the certification
provided to a payee by the Internal Revenue Service is not required to provide a
corresponding notice to any payors whom the broker has previously notified under
paragraph (c)(2) of this section.
(2) Date notice to stop backup withholding will be provided--(i) Underreporting
corrected or bona fide dispute. If the Internal Revenue Service makes a
determination under paragraph (g)(3) (ii) or (iv) of this section during the 12-month
period ending on October 15 of any calendar year (as described in paragraph
(e)(2)(ii) of this section), the Internal Revenue Service will provide the certification
and the notices described in paragraph (g)(1) of this section no later than December
1 of that calendar year.
(ii) No underreporting or undue hardship. If the Internal Revenue Service makes a
determination under paragraph (g)(3)(i) or (iii) of this section, the Internal Revenue
Service will provide the notices described in paragraph (g)(1) of this section no later
than the 45th day after the day on which the Internal Revenue Service makes its
determination.
(3) Grounds for determination. The Internal Revenue Service will make a
determination that withholding due to notified payee underreporting should not start
or should stop once it has started if the payee-(i) Shows that there was no payee underreporting (as provided in paragraph (g)(4)
of this section) for each taxable year with respect to which the Internal Revenue
Service determined under paragraph (b)(2) of this section that there was payee
underreporting;
(ii) Corrects any payee underreporting (as provided in paragraph (g)(5) of this
section) for each taxable year with respect to which the Internal Revenue Service
determined under paragraph (b)(2) of this section that there was payee
underreporting;
(iii) Shows that withholding will cause or is causing an undue hardship (as defined
in paragraph (g)(6) of this section) and that it is unlikely that the payee will
underreport interest or dividend payments again; or
(iv) Shows that a bona fide dispute exists regarding whether any underreporting
has occurred (as provided in paragraph (g)(7) of this section) for each taxable year
with respect to which the Internal Revenue Service determined under paragraph
(b)(2) of this section that there was payee underreporting.
(4) No underreporting. A payee may show that no underreporting of reportable
interest or dividends payments exists by presenting-(i) Receipts or other satisfactory documentation to the Internal Revenue Service
showing that all taxes relating to the payments were reported; or
(ii) Evidence showing that the payee did not have to file a return for the taxable
year in question (e.g., because the payee did not make enough income) or that the
underreporting determination was based upon a factual, clerical, or other error.
(5) Correcting any payee underreporting--(i) Before issuance of a statutory notice
of deficiency. Before a statutory notice of deficiency is issued to a payee pursuant
to section 6212, the payee may correct underreporting-(A) By filing a return if one was not previously filed and including the unreported
interest and dividends thereon;
(B) By filing an amended return in the event a return was filed and including the
unreported interest and dividends thereon; or
(C) By consenting to the additional assessment according to applicable notices
and forms sent to the payee by the Internal Revenue Service with respect to the
underreporting, and paying taxes, penalties, and interest due with respect to any
underreported interest or dividend payments.
(ii) After issuance of a statutory notice of deficiency. After a statutory notice of
deficiency is issued to a payee-(A) The payee may correct underreporting at any time, by filing a return if one was
not previously filed and paying the entire deficiency and any other taxes including
penalties and interest attributable to any payee underreporting of interest or dividend
payments; or
(B) The payee may correct underreporting after the mailing of the statutory notice
of deficiency but before the expiration of the 90-day or 150-day period described in
section 6213(a) or, if a petition is filed with the United States Tax Court, before the
decision of the Tax Court is final, by making a remittance to the Internal Revenue
Service of the amounts described in paragraph (g)(5)(ii)(A) of this section. The
payee must specifically designate in writing that the remittance is a deposit in the
nature of a cash bond.
(iii) Special rules. For purposes of paragraph (g)(5)(ii) of this section, the payee
will not be deemed to have corrected the payee underreporting under paragraph
(g)(5)(ii)(B) of this section after the remittance is returned to the payee in the manner
described in any applicable administrative procedure. For further guidance on a
deposit in the nature of a cash bond, see subparagraph 2 of section 4.01 of Rev.
Proc. 84-58 (1984-2 C.B. 501). (See Sec. 601.601(d)(2) of this chapter.) Once the
remittance is returned to the payee, the rules of this section will apply. If the Internal
Revenue Service previously contacted payors of the payee to start withholding with
respect to the notified payee underreporting, however, the Internal Revenue Service
will recontact those payors to start withholding under paragraph (c)(1) of this section
with respect to the payee underreporting without regard to paragraph (f) of this
section.
(6) Undue hardship--(i) In general. A determination of undue hardship will be
based on the overall impact to the payee of having reportable interest or dividend
payments withheld at a 31 percent rate under section 3406. In addition, a
determination of undue hardship will be made only if the Internal Revenue Service
concludes that it is unlikely that any payee underreporting will occur again.
(ii) Factors. Factors that will be considered in determining whether withholding
causes undue hardship include, but are not limited to, the following-(A) Whether estimated tax payments, and other credits for current tax liabilities, or
amounts withheld on employee wages or pensions, in addition to withholding under
section 3406, would cause significant overwithholding;
(B) The payee's health, including the payee's ability to pay foreseeable medical
expenses;
(C) The extent of the payee's reliance on interest and dividend payments to meet
necessary living expenses and the existence, if any, of other sources of income;
(D) Whether other income of the payee is limited or fixed
(e.g., social security, pension, and unearned income);
(E) The payee's ability to sell or liquidate stocks, bonds, bank accounts, trust
accounts, or other assets, and the consequences of doing so;
(F) Whether the payee reported and timely paid the most recent year's tax liability,
including interest and dividend income; and
(G) Whether the payee has filed a bankruptcy petition with the United States
Bankruptcy Court.
(7) Bona fide dispute. The Internal Revenue Service may make a determination
under this paragraph (g)(7) if there is a dispute between the payee and the Internal
Revenue Service on a question of fact or law that is material to a determination
under paragraph (g)(3)(i) of this section and, based upon all the facts and
circumstances, the Internal Revenue Service finds that the dispute is asserted in
good faith by the payee and there is a reasonable basis for the payee's position.
(h) Payees filing a joint return--(1) In general. For purposes of this section, if
payee underreporting is found to exist with respect to a joint return, then the
provisions of this section apply to both payees (i.e., the husband and wife). As a
result, both payees are subject to withholding on accounts in their individual names
as well as accounts in their joint names. Either or both payees may satisfy the
criteria for a determination that no payee underreporting exists, that the
underreporting has been corrected, or that a bona fide dispute exists (as provided in
paragraph (g)(3) (i), (ii), or (iv) of this section). Both payees, however, must satisfy
the criteria for a determination that withholding will cause or is causing undue
hardship (as provided in paragraph (g)(3)(iii) of this section).
(2) Exceptions--(i) Innocent spouse. A spouse who files a joint return may obtain a
determination that withholding should stop or not start with respect to payments
made to his or her individual accounts, if the spouse shows that-(A) He or she did not underreport income because he or she is a spouse
described in section 6013(e), i.e., innocent spouse; or
(B) There is a bona fide dispute regarding whether he or she is an innocent
spouse and hence did not underreport income.
(ii) Divorced or legally separated payee. A payee who, at the time of the request
for a determination under paragraph (g) of this section, is divorced or separated
under State law may obtain a determination that undue hardship exists (or would
exist) under paragraph (g)(3)(iii) of this section with respect to reportable interest or
dividend payments made to his or her individual accounts if the divorced or legally
separated payee satisfies the criteria for a determination under paragraph (g)(6) of
this section.
(i) Reserved.
(j) Penalties. For the application of penalties related to this section, see sections
6682 and 7205(b).
[T.D. 8637, 60 FR 66119, Dec. 21, 1995]
APPENDIX B
Radinsky v. United States
Summary: Radinsky was not required to file a tax return and pay a tax
because he did not file a tax return and there was no assessment of a tax. The tax
return is the assessment, as expressed in Form 4490, unless the IRS creates a fake
one under 6020(b).
Albert E. and Henrietta R. Radinsky, Plaintiffs, v. United States of America
622 F. Supp. 412; 1985 U.S. Dist. LEXIS 16824; 86-1 U.S. Tax Cas. (CCH) P9161;
56 A.F.T.R.2d (RIA) 6157
August 14, 1985, Decided
August 14, 1985, Filed
JUDGES:
Richard P. Matsch, Judge.
OPINIONBY:
MATSCH
OPINION:
[*413] MEMORANDUM OPINION AND ORDER FOR JUDGMENT
Richard P. Matsch, Judge.
This is an action brought by Albert and Henrietta Radinsky to recover $8,012.17
wrongfully collected by the Internal Revenue Service (IRS) under threat of levy. The
facts in the action are undisputed and set forth in the Memorandum Opinion and
Order of May 2, 1985, denying the United States' motion to dismiss, and are
incorporated herein by reference. The matter is now before the court on the parties'
cross motions [**2] for summary judgment.
28 U.S.C. § 1346(a)(1) confers jurisdiction upon this court and waives the sovereign
immunity of the United States regarding claims for sums wrongfully collected under
the internal revenue laws. In a suit under this section, a plaintiff "may challenge the
constitutionality, legality or fairness of any tax statute or amount assessed or
collected." White v. C.I.R., 537 F.Supp 679 (D.Colo. 1982). In the two briefs filed in
this action, the IRS has not explained where it finds statutory authority to employ its
tax collection procedures to collect from the plaintiffs a sum of money that has never
been assessed as a tax. Since the IRS had no authority to adjust the plaintiffs'
account or employ deficiency procedures in these circumstances, it is self-evident
that the collection of the sum in this manner was wrongful.
The IRS insists that only "taxpayers" have recourse against the United States under
28 U.S.C. § 1346(a)(1), and that the plaintiffs are not "taxpayers" because no tax
has been assessed. "The United States agrees that taxpayers do have recourse
against the United States under 28 U.S.C. § 1346(a)(1). But in this case, the
plaintiffs are not taxpayers." [**3] (Defendant's motion for summary judgment at 2).
[If you read the full text in your law library, you will learn that the reason why they
were not recognized as taxpayers for the disputed tax periods is because they did
not file any tax returns] – this note added by editor]
The government is wrong on both counts. First, the statute provides federal district
court jurisdiction for a civil action to recover any tax, penalty, or sum alleged to have
been wrongfully collected under the internal revenue laws. There is no requirement
that the plaintiffs be taxpayers challenging some assessment. The government's
interpretation of the statute would make "sum" superfluous. In the course of holding
that § 1346(a)(1) requires full payment of an assessment before an income tax
refund suit can be maintained in federal district court, the Supreme Court has noted:
. . . We believe that the statute more readily lends itself to the disjunctive reading
which is suggested by the connective "or." That is, "any sum," instead of being
related to "any internal-revenue tax" and "any penalty," may refer to amounts which
are neither taxes nor penalties. Under this interpretation, the function of the phrase
is to permit suit for recovery of items which might not be designated as either "taxes"
or "penalties" by Congress or the Courts.
Flora v. United States, 362 U.S. 145, 149, 4 L. Ed. 2d 623, 80 S. Ct. 630 (1960).
[**4] Accepting the argument that the amount in question is not a tax or penalty, this
action is clearly maintainable to recover a "sum." Therefore plaintiffs who are not
"taxpayers" as defined by the United States in this action, i.e. persons who are
challenging an assessment, can indeed use § 1346(a)(1). The plaintiffs have
standing to bring this action since they were the target of the IRS's collection efforts.
Second, it is too late for the government to argue that the plaintiffs are not
taxpayers. Everything in the record indicates that the IRS attempted to collect, and
succeeded in collecting, the disputed money as a "tax." The February 1984 letter
received by the Radinskys, attached as exhibit "E" to the complaint, after reciting the
plaintiffs' "Taxpayer identification number" stated (emphasis added)
Dear Taxpayer
We have previously written to you about the Federal tax shown below. It is overdue
and you should pay the total amount due immediately . . . .
[*414] We have enclosed a copy of Publication 568A, The Collection Process
(Income Tax Accounts), which provides information about our collection procedures
and your rights in relation to them. Your attention [**5] is specifically directed to our
Enforced Collection policy on page 2.
Additionally, Exhibit D attached to the complaint is a "STATEMENT OF
ADJUSTMENT TO YOUR ACCOUNT AND BILL FOR TAX DUE". The statement
noted that the plaintiffs had no balance due before the adjustment. After the
"adjustment" they owed $ 5,444.00 for an "erroneous credit" and $ 2,380.20 interest.
The IRS always treated this matter as the recovery of tax. The United States cannot
argue that because an assessment was erroneous, or an assessment was never
made, a person from whom the IRS has collected money cannot employ §
1346(a)(1) for the semantic reason that only individuals correctly assessed can be
"taxpayers."
The United States misperceives the issue in this matter as whether the plaintiffs
were initially entitled to the money. The dispositive issue is instead whether the IRS
has followed the law in collecting the money it mistakenly sent to the plaintiffs.
While this court is aware that the plaintiffs may receive a windfall, the IRS can only
recover the sum pursuant to powers granted by Congress. The United States Code
allows the IRS to bring a civil action under 26 U.S.C. § 7405 to recover refunds
mistakenly [**6] paid to the wrong taxpayer. See United States of America v. Young,
79-2 U.S.T.C. para. 9609 (D.Del. 1979). The IRS cannot ignore this statutory
requirement, obtain the money by threat of levies and enforced collection
proceedings, and then raise in actions such as this the defense that the plaintiffs are
not entitled to the money. The short answer to the defense is that the Radinskys are
entitled to the money unless the IRS brings a civil action within two years. 26 U.S.C.
6532(b). Congress certainly knew that by imposing a strict statute of limitations
persons who, for example, received erroneously large refunds could "keep money
that did not belong to them" (defendant's motion at 2 n.2) unless the IRS promptly
brought a civil action to recover the money. Any windfall is a result of Congressional
action, and there is no convincing distinction between a refund that is too large and
a refund that is sent to the wrong person.
Finally, the United States suggests that the plaintiffs should not have paid the money
but rather should have contested the threatened levy. This contention is totally
without merit. Payment of the amount and the filing of a refund claim are
prerequisites to [**7] jurisdiction under § 1346(a)(1). The United States has spent
considerable energy over the years arguing that a fundamental principle in tax
litigation should be "pay first and litigate later." See e.g., Flora v. United States, 357
U.S. 63, 75, 2 L. Ed. 2d 1165, 78 S. Ct. 1079 (1958), aff'd on rehearing, 362 U.S.
145, 4 L. Ed. 2d 623, 80 S. Ct. 630 (1960). It is wrong to fault the plaintiffs for
following a procedure long advocated by the IRS.
Congress has provided in 28 U.S.C. § 2411 for recovery of interest on any
"overpayment" of "any internal-revenue tax." Having concluded that this is an action
to recover a sum improperly collected by the IRS that bore no relation to the tax
liability of the plaintiffs, there is no basis for an award of interest. Nor is there any
statutory or other basis for attorney's fees.
Accordingly, it is
ORDERED, that the defendant's motion for summary judgment is denied, and it is
FURTHER ORDERED, that the plaintiffs' motion for summary judgment is granted,
and it is
FURTHER ORDERED, that the clerk enter judgment in the amount of $8,012.17 in
favor of the plaintiffs against the defendant. Plaintiffs shall have costs of action,
upon the filing [**8] of a bill of costs within ten days.
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