1. U.S. Tax Court, Case no. 003441-08, filed on February 8, 2008. Concerns tax years 2004 and 2005. Tax Court decision on March 5, 2009, in favor of Commissioner of Internal Revenue. Appealed to the U.S. Court of Appeals for the Ninth Circuit as case no. 09-72165. Court of Appeals affirmed on July 22, 2011.
2. U.S. Tax Court, Case no. 009715-10, filed on April 27, 2010. Concerns tax year 2006. Decided June 9, 2011, in favor of Commissioner of Internal Revenue; sanctions were imposed on taxpayers by the Court on June 30, 2011.
3. U.S. Tax Court, Case no. 020500-11, filed on September 6, 2011, apparently by Mr. Mills only. No details available.
Now for some details......
On March 5, 2009, the Tax Court rendered its decision in a bench opinion by Judge Diane L. Kroupa in case number 003441-08:
--from Bench Op., March 5, 2009, David R. Mills and Morena I. Mills v. Commissioner, U.S. Tax Court, Docket # 003441-08.This is a deficiency case in which petitioners contest that amounts petitioner husband (who shall be referred to individually as petitioner in this bench opinion) received for performing services for Keyes Acura [an automobile dealership in the Los Angeles area], a non-Federal entity, are not "wages" as defined in the Code, principles articulated by Peter Eric Hendrickson in his book entitled "Cracking the Code: The Fascinating Truth about Taxation in America."
[ . . .]
Petitioner worked as Keys Acura during each of the years at issue [2004 and 2005]. Each year petitioner earned approximately $80,000 at Keyes Acura and from which petitioner's employer, Keyes Acura, withheld Federal income tax as required by law.
[ . . . ]
Petitioners filed an amended return, Form 1040X, for each of the years at issue that eliminated the wages previously reported as income on Forms 1040 and sought a refund for all the Federal income taxes paid on those wages. In addition, petitioners attached a Form 4852 entitled "Substitute for W-2, Wage and Tax Statement." Petitioners prepared the substitute to report that petitioner's employer paid him zero in wages while keeping the withholding credits the same as reported on the Forms W-2 prepared by Keyes Acura, petitioner's employer.
[ . . .]
Petitioner seems to argue in a 2-page status report presented at trial that he is not a tax protestor. He is only a concerned citizen that questions why the IRS ignored petitioners' amended returns and therefore did not make a valid assessment against petitioners for either of the years at issue. Petitioner was very careful at trial to avoid answering direct questions from the Court. He cleverly responded that he did not know Peter Hendrickson personally. The Court finds as a fact that petitioners are followers of Mr. Hendrickson's Cracking the Code book [ . . . ]
Petitioners timely filed a petition with this Court asserting that they not only do not owe any taxes but [that] they are entitled to a refund of amounts collected. Petitioners ignored the expenses respondent disallowed in the deficiency notice[,] preferring instead to contest the broader issue that wages from a privately held company [such] as Keyes Acura are not taxable.
Respondent warned petitioners that their arguments have been repeatedly rejected by the courts. [ . . . ]
We therefore sustain respondent's determination in the deficiency notice.
We now address whether it is appropriate to impose a penalty against petitioners under section 6673 [ . . . ]
The Court senses that petitioner husband seeks to "protect" his spouse from his ridiculous arguments or "clarifications of the law." This he cannot do. The returns and amended returns for the years at issue are joint returns [ . . . . ]
Petitioners deserve a penalty under section 6673(a)(1), and that penalty should be substantial, if it is to have the desired deterrent effect [ . . . .] The purpose of section 6673 is to compel taxpayers to think and to conform their conduct to settled tax principles [ . . . ]
Pro se status, however, is not a license to litter the dockets of the Federal courts with ridiculous allegations concerning the Code [ . . . .] We therefore shall required petitioners to pay a penalty of $20,000 pursuant to section 6673(a)(1) considering the two years at issue [ . . . .]
Mr. and Mrs. Mills appealed to the United States Court of Appeals for the Ninth Circuit. In a brief filed with the Court of Appeals, Mr. & Mrs. Mills either alluded to or raised (among other things) the following:
1. The false argument that the U.S. Tax Court is "but another administrative branch of the IRS".
2. The false argument that the Tax Court was actually "representing" the IRS in the dispute.
3. The false argument that the IRS was required by section 93 of the Revenue Act of 1862 to accept the taxpayers' returns as correct.
4. The false argument that the IRS "has no authority to determine the amount of income on the 1040 or 1040X, only the rate of tax (assessment) on the amount of liability declared thereon."
5. Apparently, the false argument that the IRS must have "personal knowledge" of the information used to prepare a return under section 6020(a) or section 6020(b) (the poor grammar made it a bit unclear exactly what Mr. and Mrs. Mills were asserting on this point).
At one point, Mr. and Mrs. Mills raised the following issue:
As have other tax protesters, Mr. and Mrs. Mills apparently forgot that the IRS did not need "standing" to "seek relief" in a Tax Court case such as this one. The IRS was not "seeking relief." It was Mr. and Mrs. Mills, not the IRS, who were the petitioners in the case.If the IRS has failed to timely process the most current, and therefore valid return, does the IRS have any standing to seek relief?
Unfortunately for Mr. and Mrs. Mills, the above decision of the Tax Court was affirmed by the U.S. Court of Appeals for the Ninth Circuit in case number 09-72165, on July 22, 2011. I don't see any reference in the documents as to exactly what the amount of the tax deficiency was.
On April 27, 2010, the taxpayers filed a Tax Court petition for their 2006 tax year. For this year, Mr. Mills grossed approximately $90,000 at Keyes Acura. The taxpayers filed a late return, attaching a Form 4852 in the usual Hendrickson "Cracking the Code" fashion, seeking refunds of all federal income taxes, Social Security taxes, and Medicare taxes withheld. The IRS determined a deficiency and various penalties (see below). On June 9, 2011, the Tax Court rendered its decision in case number 009715-10, referring at one point to the prior decision and the $20,000 in penalties previously imposed on the taxpayers. The Court again mentioned Peter Hendrickson and the Cracking the Code book. The Court stated:
In the June 9, 2011 decision, the Tax Court concluded that the income amounts earned by Mr. Mills in 2006 "constitute gross income." On June 30, 2011, the Tax Court made the following rulings with respect to tax year 2006 for Mr. and Mrs. Mills:By citing, out of context, selected text from the withholding tax provisions, petitioner concludes that only Federal employees are subject to the Federal income tax on their wages. Petitioner also argues that the income tax is an excise tax on the exercise of federal "privilege" and that he did not receive "wages."
Tax deficiency: $18,471.00;
Section 6651(a)(2) penalty for failure to timely pay tax: $2,029.57;
Section 6651(a)(1) penalty for failure to timely file return: $3,149.33;
Section 6654(a) penalty for failure to timely make estimated payments: $638.87;
Section 6673 penalty (for frivolous litigation, etc., in Tax Court): $25,000.00.
Total for year 2006: $49,288.77
Against that total amount, Mr. and Mrs. Mills will of course be entitled to a credit for the amount of federal income tax withheld.
On September 6, 2011, Mr. Mills filed yet another Tax Court petition (case no. 020500-11). I have no further details, except that it appears that the wife did not join him on this one.
