A Penalty for Questioning a Penalty?

[LPC]

I obviously don't have much sympathy for fruitcakes at Lost Horizons, but this thread has me thinking that the IRS might not be handling this fruitcake the right way.

What appears to have happened is that a "CtC educated" return was filed and resulted in a frivolous return penalty. The IRS has started collection actions to collect the penalty, and the taxpayer asked for a collection due process hearing challenging the penalty, to which the IRS has responded by threatening to impose a frivolous submission penalty.

Now, the Tax Court has ruled that a frivolous return penalty *can* be challenged during a CDPH, because the taxpayer had no previous opportunity to contest the imposition of the penalty. I'm therefore not certain that a frivolous submission penalty should be imposed on a taxpayer who wishes to challenge the imposition of a frivolous return penalty unless the challenge is facially frivolous.

In this case, the taxpayer's CDPH submission reportedly stated that:

The lien is for Civil Penalties for alleged frivolous returns. I wholeheartedly disagree with the presumptions of the IRS and require proof that their claims are true and correct. Please show me proof.

I'm not sure that that submission is per se frivolous.

At the very least, there should be an obligation by the appeals officer to review the administrative record to see that the penalty was appropriately imposed.

[LaVidaRoja]

IF (and I am not implying that this is the case) the request for a CDPH stated something to the effect of "I filed a correct return asserting that I had not tax liabiltiy and therefore, any penalty for filing a frivolous return is per se invalid." it is possible that the IRS ruled the protest in and of itself frivolous.

We clearly need more facts.

[Imalawman]

IF (and I am not implying that this is the case) the request for a CDPH stated something to the effect of "I filed a correct return asserting that I had not tax liabiltiy and therefore, any penalty for filing a frivolous return is per se invalid." it is possible that the IRS ruled the protest in and of itself frivolous.

We clearly need more facts.

I think that even with that argument, there is no cause for frivolous penalty. Now, if the taxpayer's argument was that under the color of law, the IRS' vessel was attacking his vessel...etc.. OK, maybe then a frivolous penalty. Otherwise, I'm with LPC on this.

Of course, I think the IRS gets a little carried away in just about every case that I see.

[LaVidaRoja]

Just ran across IRS Notice 2007-30. It clarifies the $5,000 frivolous penalty. The penalty is applicable to a "specified submission" which includes a request for a collection due process hearing where the submission is based on a position identified as frivolous and/or reflects a desire to delay or impede the administration of the law.

Clearly, the original CTC return was frivolous. The CDP request appears merely to reflect a desire to delay the inevitable.

It appears that the IRS is saying, "We hit you alongside the head with a board. As long as you continue to say 'I didn't do nothin wrong', we will continue to apply the board to your head."

What type of proof do you think a CTC'r would accept to show that a CTC return was frivolous?

[Pottapaug1938]

What type of proof do you think a CTC'r would accept to show that a CTC return was frivolous?

None whatsoever. In the CtC mindset, Petey cannot possibly be wrong, and thus a CtC return can never be frivolous, because The Truth has been revealed to him. Thus, if a CtC return gets shot down in flames by the IRS (like every single one of them has), the CtCers trot out the excuse du jour (the courts are corrupt, the courts don't understand the law, the judges are afraid of biting the Federal hand that feeds them, etc.)