Christopher Huminski avoids 6673 penalty

[rogfulton]

We haven't seen this person on the board before. He retained a lawyer to file the posttrial brief which is why the court declined to add the 6673 penalty.

The Memorandum Opinion was issued today.

For tax years 2005, 2006, 2007, and 2008, Huminski filed Forms 1040, U.S.
Individual Income Tax Return. These purported returns were “zero” returns in that
on each return he listed zero as the amount of his wages, total income, adjusted
gross income, taxable income, and total tax.3 To each of his purported returns he
attached a self-created form, labeled “Corrected Form 1099-MISC”, on which he
claimed that he received no income from Mid-State Machine.

However, during 2005, 2006, 2007, and 2008, Huminski received
$160,043.93, $87,175, $90,796.85, and $79,550, respectively, for services
performed for Mid-State Machine. For each year Mid-State Machine issued a Form
1099-MISC, Miscellaneous Income, to Huminski reflecting the correct amount it
paid him. For each year Huminski received the correct Form 1099-MISC from Mid-
State Machine before he submitted to the IRS the form he labeled “Corrected Form
1099-MISC”.

[Dr. Caligari]

...although he was whacked for a batch of other penalties, including the fraudulent failure to file penalty. He avoided the 6673 penalty only because he hired a lawyer after the trial, who filed a nonfrivolous brief (conceding the tax deficiencies, contesting only the fraud issue).

[LPC]

For tax years 2005, 2006, 2007, and 2008, Huminski filed Forms 1040, U.S.
Individual Income Tax Return. These purported returns were “zero” returns in that
on each return he listed zero as the amount of his wages, total income, adjusted
gross income, taxable income, and total tax.3 To each of his purported returns he
attached a self-created form, labeled “Corrected Form 1099-MISC”, on which he
claimed that he received no income from Mid-State Machine.

Smells like "CtC educated."

This suspicion is reinforced by a later paragraph in the opinion:

On brief Huminski argues that his conduct was not fraudulent because he
genuinely believed that if someone files an income-tax return that is based on
personal knowledge, then the correctness of the return cannot be questioned by the
IRS or the courts. Although he testified that this was his belief, we find his
testimony incredible. Huminski did not have a good-faith misunderstanding of the
law. Huminski knew of his legal duty to file tax returns and pay tax and sought to
avoid it. Huminski has no defense to the fraudulent-failure-to-file additions to tax.

That "personal knowledge" and "cannot be questioned" is authentic Hendrickson gibberish.

And, sure enough, Mr. Huminski was kind/stupid enough to share his correspondence with the IRS over his 2006 return with Pete, and Pete published them on his website as "CtC Victory Highlights." (The same documents can also be found on a different page.)

[jkeeb]

Interesting. Notice on the CTC documents referred in the last post. Huminski got Underreporter, which issues the CP 2000, to close his case "no change." The examiner (GS-5, 6 or 7, going by the IRM, accepted the "Amended" 1099 Misc. It wasn't until the next year that someone caught this guy, then included all related years.

[grixit]

Oh, here's a good one: combine the personal belief strategy with hypnotherapy, to make sure you really really believe what you want to believe.

[.]

The examiner (GS-5, 6 or 7, going by the IRM, accepted the "Amended" 1099 Misc.

That's some pretty amazing incompetence. Why didn't the examiner pick up a phone and call the payer? Or at least write a letter? Oh, well, close enough for government work, they caught it a year or two later.

But, what is with these CtC clowns? Never mind that they are completely wrong on the law, don't they understand that it's impossible to make the mechanics of this stupid scheme work without committing fraud?

As most everyone here knows, 1099s are filed (speaking of paper here, but the same concept applies to electronic filings) by the payer. They're filed with a 1096 summary of what type and total amount of 1099 is being submitted. Corrected 1099s are filed the same way. A 1096 has to be signed under penalties of perjury by some authorized representative of the paying entity -- owner, partner, officer, trustee or whoever.

If you just make up your own "corrected" form 1099 and hang it on your return, you're 100% guaranteed to be caught by the matching program.

If you file an actual "corrected" form 1099 and accompanying 1096 in the name of the payer (not so hard to do, the payee has the name, address and tax ID of the payer, and the payee may know the name and title of whoever signs payer's returns) you're forging and filing a fraudulent 1096 along with a fraudulent 1099 which is also covered by the 1096 jurat. Your brand-new zero 1099 amount will then be ignored as there's nothing to match which might result in getting away with it for a little longer, but the blatant felony tax fraud is there forever (with no statute of limitation.)

Any why, since no 1099, original or corrected is supposed to be filed with any return (other than a 1096) would any idiot file a bogus self-"corrected" zero-amount 1099 with a return -- that has to be a red-flag leading straight to Ogden in and of itself.

These people are beyond stupid.

[jkeeb]

The IRM, at least 20 years ago, states that if taxpayer replies with a corrected 1099 misc, then accept and close the issue. Any examiner that doesn't risks getting an error from Quality.

Corrected 1099 Miscs are sometimes, but not even mostly, posted to IRP due to the difference in time received. So if there is no Corrected 1099 on file, this is not unusual.

The undereporter examiner should have referred this to examination. I think he did not because of the "no change" letter. It is possible, or probable, that the next year Underreporter got this guy and did send that year to examination, which then reviewed all years on file and started SFR procedures.