Another befuddled CtCer - Jerry in Kansas City

[Famspear]

A post by losthorizons user "ja52999" - "Jerry" in Kansas City,

Well more of the same from "the service" [IRS], after numerous 3176's and CP15's... now they are following up with CP504's- a threat to levy assets and file federal tax leins [sic]. Unfortunately our string of good luck with the service has seem to run out for the moment. I have responded accordingly with the 3176's and CP15's... but frankly I have no idea what to send next. I knew they were going to ignore all letters I have sent, but I also know how important it is to respond to everything they send to create the paper trail. I always send my stuff certified mail, and they did the same today- sending three CP504's via CMRR [certified mail, return receipt requested]. Funny thing about my case is they accepted my CTC returns as filed, creating zero balances for many past years... then turned around and hit me for a $5,000 penalty PER SIGNATURE on a couple years, and a single penalty on others. I do not, and will not understand how they will accept my CTC returns, create zero balances... and then charge me a penalty for the same return!! So now the alleged balance due is only the penalty and accrued interest on the penalties.

Anyone out there have any idea where to go next? All my responses have been sent to wonderful Ogden, however the CP504's have come out of Atlanta, GA. which is kind of strange I guess. I even cashed out my 401K from my previous work to keep the service from taking it. Of course the holder kept 20% [federal income tax withholding] for the criminals, after pleading with them to pay the entire amount to me... they repeatedly declined[,] stating it was the law that they withhold said 20%. Anyway- what to do what to do... I am sorry if this issue has been covered in the archives of the board, I do not have a lot of time at home with work... and I travel constantly[,] so no internet... I have to do what I can. If anyone knows the link to the archives, feel free to send it and I will read up on it. Thanks in advance fellow warriors, we really appreciate the support.

Jerry in Kansas City

http://www.losthorizons.com/phpBB/viewtopic.php?t=745

(bolding added)

Cashed out his 401(k) to keep the IRS from taking it?

Is that tax evasion?

Any person who willfully attempts IN ANY MANNER to evade or defeat the federal income tax, or who willfully attempts to evade or defeat the PAYMENT of that tax.........

[Famspear]

Losthorizons User "kensei" responds to Jerry's comment about the penalty being imposed "per signature" rather than "per return":

The 'per signature' is clearly unlawful (besides the rest) a 'frivolous return' gets that penalty, for the RETURN - not for each person's name on it!

But the statute states:

A person shall pay a penalty of $5,000 if --

(1) such person files what purports to be a return of a tax imposed by this title but which --

(A) does not contain information on which the substantial correctness of the self-assessment may be judged, or

(B) contains information that on its face indicates that the self-assessment is substantially incorrect, and

(2) the conduct referred to in paragraph (1) --

(A) is based on a position which the Secretary has identified as frivolous under subsection (c), or

(B) reflects a desire to delay or impede the administration of Federal tax laws.

--26 USC 6702 (bolding added).

I don't see anything in the statute that limits the penalty to $5,000 "per return." A "husband" is "a person" and "a wife" is "a person." They both sign a joint return, and they both file the return, so that looks like "two persons" to me.

Does anybody here know anything about this?

[Quixote]

but frankly I have no idea what to send next.

Despite being told in the 3176's exactly what to send to avoid the penalties, a valid return.

I do not, and will not understand how they will accept my CTC returns, create zero balances... and then charge me a penalty for the same return!!

A rationale person would have long ago questioned his assumptions, but not a LoserHead.

[Quixote]

I don't see anything in the statute that limits the penalty to $5,000 "per return." A "husband" is "a person" and "a wife" is "a person." They both sign a joint return, and they both file the return, so that looks like "two persons" to me.

Does anybody here know anything about this?

The penalty is per person, not per return. Even if the language of the statute were not clear, fairness would dictate that joint frivolous filers should be subject to the same penalty as separate frivolous filers.

[The Operative]

Also, when it was in a 401(k) it MAY have had some protection against IRS seizure (very good chance I am wrong), but now it is in his hands, or a regular bank account, he has removed a potential roadblock for the IRS.

I also do not know the rules about seizure of 401(k)s. However, IIRC, gottago once said that her 401(k) had been levied for payment of back taxes.

[Cpt Banjo]

It's not listed among the assets specified as exempt from levy under Section 6634, so it's fair game.

[ASITStands]

I do not, and will not understand how they will accept my CTC returns, create zero balances... and then charge me a penalty for the same return!!

The posting of a "zero" account balance has always been a stumbling block for proponents of 'Cracking the Code,' but truthfully, it results from the filing of their "zero" return.

The IRS receives a return and posts the data, more-or-less, as it is on the return. If there are discrepancies identified, it's routed to Examination, and a substitute return appears later.

The part that remains a mystery to CtC proponents, and most other filers of "zero" returns, or non-filers, is how at one point the balance is "zero," and after the perfection of a substitute return, and assessment, all of a sudden they're left owing large chunks of money.

It's really just a part of the process. Their reaction is based on their failure to understand how the process works or the fact the dollar amount today may not be the final amount due.

All of a sudden it's "evidence" their particular tax avoidance theory is right! It's only years later, when collection sets in, they begin to understand they were wrong all along.

That's the devastating part of the equation. Some commit suicide. Others desperate acts.

Others refuse to admit their mistakes and live more-or-less in denial, all the while needlessly saddling their family with a heavy burden of debt and constant worry about the tax man.

I heard of a recent suicide in Florida over tax debt. Don't know the man.

[ASITStands]

In regard to the 401-K:

I believe if the money had been transferred to an IRA, the only attachment would be when money was distributed, and then only after exclusions. Levy attaches to "rights" in that case.

One of the accountants can correct us if we're wrong.

[Judge Roy Bean]

Far be it from me to indulge in advice to tax experts, but I believe there is a kind of blind assumption in the TP community that they are dealing with a real-time system in the process they're so determined to go up against.

I must confess to some comparably primitive education and professional experience in what used to be called 'data processing' and some executive experience in managing the development and deployment of large scale applications in the pre Ethernet and internet era. Suffice it to say, we must assume the IRS is some number of generations behind in database deployment; from personal experience and that of friends and relatives I can also attest to there being a certain amount of one hand not knowing what the other hand is doing as a result of having systems that aren't exactly state of the art. I have been told by IRS personnel that they simply don't know if "x" is "x" because their computer system doesn't have that information.

Thus, anyone with first-hand contact with a more robustly equipped civilian commercial entity finds it odd that the IRS isn't acting as if they're in a real-time operation and simply assumes the automated system accepted the bogus CTC filing without question and that no further action will take place.

CTC relies heavily on that inherent delay flaw.

Basically, CTC works in the short run and those who are accustomed to the immediacy of interactions with commercial systems figure it's all over and done with when they get their check.

The surprises that come later seem to become fuel for the phenomenon.

I hate to say it but there needs to be a movement toward real-time taxation. Why on earth everything has to happen on April 15th is ludicrous.

[LPC]

I do not, and will not understand how they will accept my CTC returns, create zero balances... and then charge me a penalty for the same return!!

The posting of a "zero" account balance has always been a stumbling block for proponents of 'Cracking the Code,' but truthfully, it results from the filing of their "zero" return.

The IRS receives a return and posts the data, more-or-less, as it is on the return. If there are discrepancies identified, it's routed to Examination, and a substitute return appears later.

The part that remains a mystery to CtC proponents, and most other filers of "zero" returns, or non-filers, is how at one point the balance is "zero," and after the perfection of a substitute return, and assessment, all of a sudden they're left owing large chunks of money.

And there's no reason to wait for a substitute return to assess a frivolous return penalty.

What I think that the crackheads are seeing is that a frivolous return penalty can apply even while the assessment is zero, and before a notice of deficiency is issued. That confuses them, but there's no reason for the IRS to wait for a notice of deficiency or an assessment before determining that the return that was filed was frivolous.

It's only years later, when collection sets in, they begin to understand they were wrong all along.

Unless they don't.

[grixit]

I must confess to some comparably primitive education and professional experience in what used to be called 'data processing' and some executive experience in managing the development and deployment of large scale applications in the pre Ethernet and internet era. Suffice it to say, we must assume the IRS is some number of generations behind in database deployment;

Heh, batch processing. I'm just old enough to remember how wonderful 2 hour turn around time seemed.

[OnceSane]

Two terms -- Money and Manpower. If IRS were truely 1/2 as efficient as most of the public believes them to be, they would be much closer to Big Brother than they are. The last Commissioner told Congress that the IRS needed to go to private Collection firms because they did not have enough money to hire enough in-house Collection people. Two months later, he told Congress that if they gave him more for the budget than what the President had requested, he wouldn't have any programs available to spend the money on!!

If you ever followed the long, sad story of IRS computer updates, you will have seen a system that is never up to date, and that is always at least two steps behind the current state of the art for business. Causes? Insufficient funding, and constantly changing requirements. Whether the IRS could EVER get a computer system that would INSTANTLY recognize frivolous returns and act on them within 45 days is a question that may never be answered.

[The Operative]

Even IF the IRS had a computer system that would instantly flag certain returns as suspicious and refunds wouldn't be issued until the reason for the suspicious flag was investigated, the CTCers and others like them would still proclaim that CTC works because the IRS didn't reject as soon as they were received. It is the mindset of the CTC filer. Even if the IRS computer system could be programmed to recognize and reject a CTC filing, some other "guru" would figure out some method to file that wouldn't get rejected immediately.

[Bud Dickman]

HaHa - "Financial Strain"

dmiladin, I filed for my property in Feb. On the IRS website it 1st said I
would get my property in March. Then was changed to April. Then changed to a delay in processing. Then I started calling the moron. They have told me the same as you, but in June a Mr.Forbes said that they would release 23 June. Well that date past, so I called last week & the lady told me they were holding my property until they get more info from me. They want me to send them a W-2. I told her that I have sent all the information they was getting from me. I sent a 1040 & 4852. This is my 1st year to send a correct form tothe service. I believe Richard614 had advised me that they have 6 months, well 7 Aug. will be 6 months. I hope someone can give me some info on what can I do after the 6 months has expired??? I am like you this is putting me in a financial strain.

http://www.losthorizons.com/phpBB/viewt ... aeafa#5965

[grixit]

Yeah, when they miss your "deadline", you are legally authorized to hold your breath and kick your feet.

[Quixote]

I believe Richard614 had advised me that they have 6 months, well 7 Aug. will be 6 months. I hope someone can give me some info on what can I do after the 6 months has expired???

That's going to be good. The LostHeads will have to find a way for Jerry to file a refund suit without subjecting himself to the jurisdiction of the court.

[jkeeb]

Regarding the IRS problems with computers...many years ago I was in Underreporter when it was being transformed to an online system. The testing was done in Ogden UR with Sun Microsystem computers, however, when it was rolled out to the other "campuses", (we were Service Centers then) it was microsoft.

It is my belief (not based on anything I know for a fact) that the Sun system was due to an earmark by some Utahan congressman and/or senator but the final system was the result of competitive bidding--which would be one of the results of the waste of the earmark system of appropriations.

[ASITStands]

Although the Sun system was likely better.

Not to start an IT war, but most everyone knows Sun produces better servers for database transactions, and though it might have been an Oracle application at the time, others such as MySQL or Sybase are available today that might run circles around Sun/Oracle.

My perception of the computer problem was transferring data from the magnetic tapes, which were the genesis of the "master file" program, to a database application.

Last I heard, they were doing fine with CADE in terms of simple returns [i.e., 1040EZ, etc.] but still required the more complex system for more difficult returns, including corporate.

It's an interesting question from an IT viewpoint. My information is dated.

[gottago]

Also, when it was in a 401(k) it MAY have had some protection against IRS seizure (very good chance I am wrong), but now it is in his hands, or a regular bank account, he has removed a potential roadblock for the IRS.

I also do not know the rules about seizure of 401(k)s. However, IIRC, gottago once said that her 401(k) had been levied for payment of back taxes.

The account that was levied was actually an IRA account that was opened in 1993 when I rolled over the amount in the state Teacher Retirement Program (I worked for a state university at the time) into a SEP IRA account that was invested in a mutual fund. The IRS got a check for the entire balance (nothing withheld) so it was also considered "taxable income" for 2006 and resulted in additional NOFTL's and threats of levy for that year. I had to "cash out" a small 401K account in the end of 2007 to pay my property taxes and 20% was withheld and sent to the IRS.

Just wanted to set the record straight when I saw my name mentioned.

Gottago

[Imalawman]

Also, when it was in a 401(k) it MAY have had some protection against IRS seizure (very good chance I am wrong), but now it is in his hands, or a regular bank account, he has removed a potential roadblock for the IRS.

I also do not know the rules about seizure of 401(k)s. However, IIRC, gottago once said that her 401(k) had been levied for payment of back taxes.

The account that was levied was actually an IRA account that was opened in 1993 when I rolled over the amount in the state Teacher Retirement Program (I worked for a state university at the time) into a SEP IRA account that was invested in a mutual fund. The IRS got a check for the entire balance (nothing withheld) so it was also considered "taxable income" for 2006 and resulted in additional NOFTL's and threats of levy for that year. I had to "cash out" a small 401K account in the end of 2007 to pay my property taxes and 20% was withheld and sent to the IRS.

Just wanted to set the record straight when I saw my name mentioned.

Gottago

how are things going these days? Got anything straightened out?