Pete Hendrickson's legal "analysis" - miscellaneous topics

[Famspear]

In an earlier Quatloos thread, I discussed the different meanings of the term "deficiency" as used in different parts of the federal income tax law. At the losthorizons web site, Pete Hendrickson makes a mistake in talking about a statutory notice of deficiency (and he makes other mistakes as well):

A Few Words About "Deficiencies"

When someone submits information returns to the Internal Revenue Service asserting the payment of “income” to me, such as W-2s or 1099s, the law requires that person to also send copies to me. The reason for that requirement is to afford me notice-- so that I can affirm, dispute, and/or correct, such assertions in my own annual filing. If I do not do one of these things, the IRS will act according to those unchallenged assertions (since they are the only evidence on the record), treat them as correct, and send me a prospective bill for what it calculates the proper resulting tax to be.

There are at least two mechanisms by which this "billing" can happen: One involves the ‘service’ creating and signing a return, based on the assertion that a required return was not filed, or, if it is undeniable that a return was submitted, the assertion that it met the statutory definition of "frivolous", and thus can be treated as "unfiled". However, such service-created returns are only prima facie good and sufficient-- meaning that they can be rebutted.

So far, not bad. But now watch Pete run off into the weeds:

In addition (and more significantly), only a limited list of return types can be created this way under the current regulatory regime, and 1040s are not among them.

Wrong. Without quibbling about the use of the term "1040," I would say that the IRS is authorized under section 6020(a) to prepare federal income tax returns for a taxpayer (individual, corporate, or otherwise), to be signed by that taxpayer.

Further, the IRS is separately authorized under section 6020(b) to prepare federal income tax returns for a taxpayer without regard to a taxpayer signature (such as in cases where the taxpayer apparently is not showing any signs of ever making a return). Of course, neither a 6020(a) return nor a 6020(b) return is required in order for the IRS to assert a deficiency -- but that's a different story.

Pete continues:

(Furthermore, no one in the ‘service’ is equipped with the personal knowledge needed for executing such a return about a private-sector individual, even if 1040s could be created in this way.)

Wrong again. The statute does not limit the information that may be used by the Secretary to information that is within the "personal knowledge" of the Secretary in the sense in which you are using the term. The statute is very liberal about the kind of "knowledge" the Secretary may use. The law says that "the Secretary [of the Treasury or his delegate] shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise."

See 26 USC section 6020(b)(1).

Pete continues:

The other way is the creation of a "shadow return"-- unsigned, with no independent legal standing; just a form, or ‘module’ on which the assertions made on the information returns can be entered (that is, amounts of “income” received and amounts withheld). Such a module is known as a "Substitute For Return", or "SFR", and its use is also predicated on the failure of the targeted individual having filed a real return (or the pretense that no real return has been filed).

Other Quatloos regulars may correct me if I'm wrong, but isn't the term "SFR" actually used within the Service to mean a 6020(b) return? If so, then what Pete is describing is not "another way," it's the "same way." I think what Pete may be driving at is that the IRS can get down to issuing a statutory notice of deficiency either WITH or WITHOUT having to "prepare" a 6020(b) return or a "substitute for return." If that's what Pete meant, then I agree. Again, other Quatloos regulars may be able to steer me in the right direction here.

Anyway, Pete goes on:

[ . . . .] Once created, the module is then used as the basis for calculating a prospective “deficiency”-- that is, the difference between the correct amount of tax that would be due if the "income" assertions on the module are taken as correct, and the amount shown on the module as paid-in. [ . . . .] The “deficiency” is then “billed” by way of a scary-sounding ‘Notice of Deficiency’. [ . . . ]

http://www.losthorizons.com/appendix.htm

(bolding added).

Wrong, Pete. The amount "billed", as you put it, on Statutory Notice of Deficiency is not computed that way, or at least it should not be computed that way. Let's illustrate. Multiple choice problem:

Tom Taxpayer files his Form 1040 tax return showing his tax liability as being $10,000, but has paid in only $8,000 (through W-2 withholding and some interim estimated payments). Tom shows on the return that he understands that he still owes $2,000, and includes a statement saying that he just does not have the money to pay it yet. The IRS comes in for some reason (possibly unrelated to Tom's lack of funds) and examines the return. Upon completion of the examination, the IRS contends that, based on various understatements in the amount of income Tom reported, the correct amount of tax is $15,000, and that Tom actually owes $7,000 (i.e., $15,000 minus $8,000). The IRS issues a statutory notice of deficiency. The "deficiency" amount for purposes of the statute covering the statutory notice of deficiency to be issued by the IRS is:

A. $2,000
B. $6,000
C. $7,000
D. none of the above.

The correct answer is D, none of the above. The "deficiency" amount under the statutory definition is $5,000 (the $15,000 that the IRS contends is the correct tax, less the $10,000 that Tom showed as tax on the return, without deducting the amounts paid and credited). The $8,000 that Tom has paid is not part of this computation. See Internal Revenue Code section 6211(a) and section 6211(b)(1).

As I stated in another Quatloos thread:

[ . . . . ] the "deficiency" [for purposes of the Statutory Notice of Deficiency] is generally the excess of what the IRS CLAIMS is the correct amount of tax over the amount that the taxpayer claimed ON THE RETURN to be the correct tax amount -- with both amounts generally computed without regard to how much has actually been "paid" or "unpaid" (i.e., an "apples to apples" comparison). This is a different meaning from the term "deficiency" as used in the case law on tax evasion and other criminal tax statutes, where the term "deficiency" has its more normal, simple, everyday meaning of "unpaid" amount.

viewtopic.php?f=8&t=3716&p=57736&hilit= ... ncy#p57736

Comments?

[BBFlatt]

An SFR and a 6020(b) return are, in practice two different things.

A 6020(b) return is prepared by the collection function, usually by a Revenue Officer (RO) and is based on the information available, e.g. W-2's, 1099's, etc.

An SFR is prepared by examination (usually by a Revenue Agent) and is simply a sort of placeholder return used to create a work unit that the RA can charge time to while he or she figures out what the correct amount of tax liability is. As I understand it, an SFR reflects $0 of taxable income and tax, and is simply the starting point for a subsequent Revenue Agent's Report (RAR).

[LPC]

An SFR is prepared by examination (usually by a Revenue Agent) and is simply a sort of placeholder return used to create a work unit that the RA can charge time to while he or she figures out what the correct amount of tax liability is. As I understand it, an SFR reflects $0 of taxable income and tax, and is simply the starting point for a subsequent Revenue Agent's Report (RAR).

As I understand it, an SFR is simply a way of determining the correct amount of tax to assess.

In other words, if the IRS has a bunch of W-2s or 1099s, but no return, and wants to assess a deficiency, they first need to calculate the amount of tax that would be due based on the information they have. So they pull out a Form 1040, fill it in with the information they have, and issue a notice of deficiency based on the results.

The SFR is really nothing but a worksheet used to calculate the tax due.

[Imalawman]

An SFR is prepared by examination (usually by a Revenue Agent) and is simply a sort of placeholder return used to create a work unit that the RA can charge time to while he or she figures out what the correct amount of tax liability is. As I understand it, an SFR reflects $0 of taxable income and tax, and is simply the starting point for a subsequent Revenue Agent's Report (RAR).

As I understand it, an SFR is simply a way of determining the correct amount of tax to assess.

In other words, if the IRS has a bunch of W-2s or 1099s, but no return, and wants to assess a deficiency, they first need to calculate the amount of tax that would be due based on the information they have. So they pull out a Form 1040, fill it in with the information they have, and issue a notice of deficiency based on the results.

The SFR is really nothing but a worksheet used to calculate the tax due.

I used them as exhibits in my TP trials. They were good ways of showing the calculations of the gov't. For such dinky cases as TP cases, SFR's show up a lot to illustrate the Gov't case and how the Gov't arrived at the numbers. So they can be a little more important than just an internal worksheet.

[Famspear]

Weston White responds to my analysis with this:

http://www.losthorizons.com/phpBB/viewtopic.php?t=1391

His response is to quote some of the text of section 6020, to state that I am incapable of interpreting it (without saying why), to accuse me of leaving parts out (apparently, because I didn't include the quote itself in my analysis), and to end with this:

That is not me and to date, nearly one year later, the IRS has yet to provide one iota of proof to the contrary, neither through personal request or the FOIA. ...densconced!

He mumbles something about there being no mention of the word "frivolous."

Weston, my boy, since you have not pointed out an error in my analysis -- and since I have interpreted the statute correctly -- your response is ineffectual blather. Second, I have no idea why you are saying "that is not you." The post was a comment about Pete's usual inability to get it right, not about your usual inability to get it right. Third, what the heck does "densconced" mean? Is that some secret code word used by your Tyrannical Response Team? It's not a word in English in my dictionary.

Weston, if you don't behave yourself, I will do as another Quatloos regular suggested and post the information on the cases you cited in What Does SCOTUS Have to Say About 'incomes'?

at:

http://defendindependence.org/scotuscases.html

I've already done the analysis, including my exposing of your dishonesty in posting fake quotations there. It's ready for posting. So think before you respond with more of your usual doofus comedy.

Weston, you continue to humiliate yourself with your incompetence and your intellectual dishonesty. Accusing me of being unable to interpret a statute without pointing out a supposed "error" is fourth grade stuff. If you have a specific complaint about my analysis, then state it.

And stop hiding over there at losthorizons. Losthorizons users Mutter and MN Stix deserve respect because they have the character to come over here to Quatloos and engage in rational discussion. You, so far, have not exhibited the character that would engender that kind of respect for you.

Yes, you're so proud of your little web site, Weston, with its fake quotes.

How unimpressive.

Either admit that you are wrong, and that Pete Hendrickson is wrong, or come over here and discuss the issues rationally. Nothing much else will suffice.

[Demosthenes]

I've already done the analysis, including my exposing of your dishonesty in posting fake quotations there.

Weston White relies on phony court quotations?

I'm shocked, shocked I tell you.

[Famspear]

User "prometheus" at losthorizons responds to Weston White's post with this:

If any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor,....the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise. "

Does this mean that if a person's return is not filed by apr. 15 or by extension aug.15 of the year following a tax period in which an information return has been submitted by a payer, then it can be deemed to have not been filed at the time prescribed therefor, and then such return then can be made by the Secretary, from the payer's information return, without the consent or even knowledge of the person?

Yes, I think that's basically correct. Obviously, the Secretary does not need the taxpayer's consent.

However, I think the Secretary will first notify the taxpayer that the taxpayer needs to file a return. Then, if the taxpayer does not file a return, the Secretary would make a return (either SFR or 6020(b)) for the taxpayer, if the Secretary is so inclined. From my understanding, all this does not normally happen overnight. Normally the IRS won't send you a letter in May, or whatever, just because you didn't file by April 15th.

And additionally could the Secretary, in this case, lawfully execute a substitute return for this person even after this person filed an original return which is deemed by the Secretary to have been not filed at the time prescribed therefor , and therefore such person's original return deemed invalid or frivolous ?

Good question. I think that if the "return" (the one actually filed by the taxpayer) is so frivolous that it does not constitute a legal tax return, then the answer is yes. But if it's not frivolous and it's just a "late" return, I suspect the IRS will take that return in preference to an SFR or a 6020(b) return -- but only for purposes of saying that the taxpayer's return really is the taxpayer's return. (I.e., if the IRS contends that the taxpayer's return is incorrect, the IRS obviously might look into that further.)

Is the time prescribed therefor for a tax return necessarily apr. 15 or by extension aug.15 of the year following the tax period in question ?

Yes. (Actually, when you ask for the extension for an individual return, you get all the way to October 15th; no more interim extensions to August 15th.)

Sometimes the IRS goes haywire. Last spring I received a group of goofy computer-generated notices from the IRS from my clients, demanding that the clients file their 2007 returns, due April 15, 2008, and the letters were received in early April, before the deadline had even arrived. The notices even threatened that the IRS would do 6020(b) returns. Obviously something went awry at the IRS.

[The Observer]

An SFR and a 6020(b) return are, in practice two different things.

A 6020(b) return is prepared by the collection function, usually by a Revenue Officer (RO) and is based on the information available, e.g. W-2's, 1099's, etc.

To clarify, a 6020(b) return prepared by a Revenue Officer cannot be a income tax return. Revenue officers are only authorized to prepare and sign under 6020(b) returns such as employement, unemployment, partnership and excise tax returns. I am not sure if you meant or implied income tax returns when you referred to W-2s and 1099s. I could see where a revenue officer might prepare a 941 under 6020(b) if they had access to the W-2s and 1099s issued by a company, but that is usually a rare thing to happen.

[Famspear]

An SFR and a 6020(b) return are, in practice two different things.

A 6020(b) return is prepared by the collection function, usually by a Revenue Officer (RO) and is based on the information available, e.g. W-2's, 1099's, etc.

To clarify, a 6020(b) return prepared by a Revenue Officer cannot be a income tax return. Revenue officers are only authorized to prepare and sign under 6020(b) returns such as employement, unemployment, partnership and excise tax returns. I am not sure if you meant or implied income tax returns when you referred to W-2s and 1099s. I could see where a revenue officer might prepare a 941 under 6020(b) if they had access to the W-2s and 1099s issued by a company, but that is usually a rare thing to happen.

Does that mean that for federal income tax matters, internally, the Service authorizes Revenue Agents (exam) to sign 6020(b)'s, but does not allow Revenue Officers (collection) to do that?

Also, the distinction between an SFR and a 6020(b) was new to me (of course, lots of these esoterical details about the inner workings of the IRS are unknown to me, and I find these details interesting.)

[BBFlatt]

An SFR and a 6020(b) return are, in practice two different things.

A 6020(b) return is prepared by the collection function, usually by a Revenue Officer (RO) and is based on the information available, e.g. W-2's, 1099's, etc.

To clarify, a 6020(b) return prepared by a Revenue Officer cannot be a income tax return. Revenue officers are only authorized to prepare and sign under 6020(b) returns such as employement, unemployment, partnership and excise tax returns. I am not sure if you meant or implied income tax returns when you referred to W-2s and 1099s. I could see where a revenue officer might prepare a 941 under 6020(b) if they had access to the W-2s and 1099s issued by a company, but that is usually a rare thing to happen.

I will defer to your knowledge of Collections procedure, it's not my area of expertise. But an SFR is not a 6020(b) return. Revenue Agents prepare SFR's to establish an entity on AIMS, but it is little more than a blank document, and is not considered a return for statute of limitations or any other purpose. The RA will later prepare an RAR, starting from $0 taxable income, to reflect their determination of the correct tax liability. No cite to IRC 6020(b) is required.

A 6020(b) return is prepared and signd (an SFR is not signed) by a Revenue Officer (If RA's are delegated the authority to execute returns under 6020(b) I am not aware of it) and it "shall be prima facie good and sufficient for all legal purposes" (IRC 6020(b)(2)).

See IRM 3.11.14.8.8.1 for 6020(b) procedures and IRM 4.19.17.1.3.1 for SFR procedures.

Edit: It turns out that RA's do have authority to execute 6020(b) returns per delegation order 182, but in my experience they don't use it. RO's are also covered under that D.O. and there is no restriction on the type of return they may execute, although obviously their authority can be limited by management directive.

[The Observer]

Does that mean that for federal income tax matters, internally, the Service authorizes Revenue Agents (exam) to sign 6020(b)'s, but does not allow Revenue Officers (collection) to do that?

Also, the distinction between an SFR and a 6020(b) was new to me (of course, lots of these esoterical details about the inner workings of the IRS are unknown to me, and I find these details interesting.)

From what I remember, this boils down to a delegation of authority issue where revenue agents are given the responsibility for preparing income tax returns and revenue officers get the non-income tax returns. Why that is, I do not know, since my copy of the Regs (admittedly outdated) do not provide any requirement that the authority of the Secretary to prepare a 6020(b) return must be delegated to a specific employee; in fact the Regs use the term "internal revenue officer" to describe such an employee. From that reading alone, I am sure that it is reasonable for someone to assume that the Regs are specifying that revenue officers have the authority to prepare all 6020(b) returns.

I believe the Internal Revenue Manual provides listings of delegations of authority for many of the IRS employee positions. However, this does not provide insight as to why and how the delgations decisions are made. I can offer two anecdotes which I advise to take with an large grain of salt. One relates that this was done because revenue agents have experience and education regarding auditing which is not required for the revenue officer position; the other anecdote explains it as being the result of a federal court decision (by the sixth telling at the bar it turns into a Supreme Court ruling) that overturned a SFR assessment because the IRS couldn't show that the figures they assessed were economically realistic and viable; therefore the IRS only allows revenue agents to prepare income tax SFRs to ensure that the assessment can be defended if it is challenged in court.

[LPC]

Does this mean that if a person's return is not filed by apr. 15 or by extension aug.15 of the year following a tax period in which an information return has been submitted by a payer, then it can be deemed to have not been filed at the time prescribed therefor, and then such return then can be made by the Secretary, from the payer's information return, without the consent or even knowledge of the person?

Yes, I think that's basically correct. Obviously, the Secretary does not need the taxpayer's consent.

I don't think that the 6020(b) process for an income tax return eliminates the needs for a notice of deficiency before an assessment can be made.

As far as I can tell, the only benefit of a 6020(b) return, compared to a SFR, is that the preparation and execution of a 6020(b) return allows the IRS to assess a penalty under section 6651(a)(2), which imposes a failure to pay penalty on “the amount shown as tax on any return” that is filed late.

See Cabirac v. Commissioner, 120 T.C. 163 (2003), which discusses the difference between an SFR and a 6020(b) return, and denied the imposition of a 6651(a)(2) penalty because of the failure of the IRS to comply with section 6020(b). The effect of this ruling is that the IRS does not need to comply with section 6020(b) to assess a tax, but if the IRS wishes to assess a penalty under section 6651(a)(2) and the taxpayer has not filed a return, the IRS must first prepare a return for the taxpayer in accordance with section 6020(b).

Following the Cabirac ruling, the IRS issued new proposed regulations under section 6020(b) to clarify what is a “return” under that section, and to simplify the preparation of those returns. REG-131793-03; 70 F.R. 41165, 2005 TNT 136-6 (7/18/2005).

[The Observer]

I will defer to your knowledge of Collections procedure, it's not my area of expertise. But an SFR is not a 6020(b) return. Revenue Agents prepare SFR's to establish an entity on AIMS, but it is little more than a blank document, and is not considered a return for statute of limitations or any other purpose. The RA will later prepare an RAR, starting from $0 taxable income, to reflect their determination of the correct tax liability. No cite to IRC 6020(b) is required.

A 6020(b) return is prepared and signd (an SFR is not signed) by a Revenue Officer (If RA's are delegated the authority to execute returns under 6020(b) I am not aware of it) and it "shall be prima facie good and sufficient for all legal purposes" (IRC 6020(b)(2)).

See IRM 3.11.14.8.8.1 for 6020(b) procedures and IRM 4.19.17.1.3.1 for SFR procedures.

Edit: It turns out that RA's do have authority to execute 6020(b) returns per delegation order 182, but in my experience they don't use it. RO's are also covered under that D.O. and there is no restriction on the type of return they may execute, although obviously their authority can be limited by management directive.

The question in my mind is this: Are you stating that SFRs prepared by revenue agents don't come under authority of IRC 6020(b)? If so, what law are they using to prepare SFRs? In my mind the words "SFR" and "6020(b)" are synonomous, at least in terms of the law. I don't know that there is any other code provision that would allow the IRS to prepare and sign returns for the taxpayer. In fact, if you look at IRM 4.19.17.1.3.2 (4) through (6) the words "SFR" and "6020(b)" are linked together.

If I am correct, then RA's do use the authority of 6020(b) when initiating SFR returns. The question of whether they are required to sign the SFR return in order to make it a legal return is another issue altogether.

The IRM 3.11.14.8.8.1 is not really a manual procedure for 6020(b) procedures; from what I see it appears to be a expository section to educate IRS estate/trust attornies on the types of the returns they may encounter when reviewing audit files/returns.

EDIT: I don't know how current your reference to DO 182 is, but the latest IRM cite (5.1.11.6.8] clearly states that revenue officers are restricted to preparing 6020(b) returns for forms 941, 940,943,944, 720,2290,CT-1 and 1065.

[BBFlatt]

I think Dan's post is correct (as usual). Under the old procedure, a revenue agent would prepare an SFR, which was simply a dummy return showing $0 liability with no signature. The RA would then conduct an examination, and set forth his or her findings in a Revenue Agent's report. This was done using the same authority and procedures used for a regular filed return; a 30 day letter would be issued (assuming the taxpayer did not agree) and in due course a stat notice would go out.

Since 2003 when the IRS lost a case in which it tried to assert a failure to pay penalty on tax set forth on an RAR issued on a non-filed return, the new procedures call for the RA to prepare a package including the SFR, the RAR, and a declaration that the package constitutes a return under 6020(b) which is signed by the RA (Form 12486 (I think) was created for this purpose). I'll admit that I was unfamiliar with this new procedure, in my defense I have not dealt with non-filers in quite some time.

But my original point remains true, an SFR is not a 6020(b) return. A return made under 6020(b) is a return for all purposes (except the statute of limitations, see IRC 6501(b)) and not a substitute. An SFR is an administrative document, and while it may eventually become part of a 6020(b) return, along with the RAR and Form 12486, it is not, by itself a 6020(b) return.

Have we sufficiently pounded this equine carcass yet?

[Famspear]

But my original point remains true, an SFR is not a 6020(b) return. A return made under 6020(b) is a return for all purposes (except the statute of limitations, see IRC 6501(b)) and not a substitute.

Also, in bankruptcy, a 6020(b) is not a "return" for purposes of the debtor's discharge, which means that in the case of the federal income tax for a given year, if the debtor himself/herself has not filed a return prior to the commencement of the case, the tax is not dischargeable, even if the Service did a 6020(b) on him/her. By contrast, a 6020(a) return filed prior to the bankruptcy (the return prepared by the IRS, but signed by the taxpayer) can count as a "return" for purposes of allowing the debtor a discharge. Makes sense. See the last sentence of subsection (a) of 11 USC 523, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 (April 20, 2005).

[Famspear]

. . . . a 6020(a) return filed prior to the bankruptcy (the return prepared by the IRS, but signed by the taxpayer) can count as a "return" for purposes of allowing the debtor a discharge . . . .

Of course, with respect to discharge of a tax, the rest of section 523 of the Bankruptcy Code tends to trip lots of taxpayers up.

[ASITStands]

An SFR and a 6020(b) return are, in practice two different things.

A 6020(b) return is prepared by the collection function, usually by a Revenue Officer (RO) and is based on the information available, e.g. W-2's, 1099's, etc.

To clarify, a 6020(b) return prepared by a Revenue Officer cannot be a income tax return. Revenue officers are only authorized to prepare and sign under 6020(b) returns such as employement, unemployment, partnership and excise tax returns. I am not sure if you meant or implied income tax returns when you referred to W-2s and 1099s. I could see where a revenue officer might prepare a 941 under 6020(b) if they had access to the W-2s and 1099s issued by a company, but that is usually a rare thing to happen.

Many in the tax movement cite the following as their authority that a "substitute for return" cannot be prepared under the authority of IRC 6020(b) by using Form 1040:

5.1.11.6.8 IRC 6020(b) Authority (03-01-2007)

1. The following returns may be prepared, signed and executed by revenue officers under the authority of IRC 6020(b):

• 1. Form 940, Employer’s Annual Federal Unemployment Tax Return;
  2. Form 941, Employer’s Quarterly Federal Tax Return;
  3. Form 943, Employer’s Annual Tax Return for Agricultural Employees;
  4. Form 944, Employer's Annual Federal Tax Return;
  5. Form 720, Quarterly Federal Excise Tax Return;
  6. Form 2290, Heavy Vehicle Use Tax Return;
  7. Form CT–1, Employer’s Annual Railroad Retirement Tax Return;
  8. Form 1065, U.S. Return of Partnership Income.

2. Pursuant to IRM 1.2.44.5, Delegations of Authority, Order Number 182 (rev. 7), dated 5/5/1997, revenue officers GS-09 and above, and Collection Support Function managers GS-09 and above, have the authority to prepare and execute returns under IRC 6020(b).

I believe that's the sense in which Pete Hendrickson discusses a "limited list of return types" and Weston White say, "That is not me." They are referring to the supposed lack of authority under IRC 6020(b), by reference to this IRM, but they are wrong.

There's plenty of case law on the subject. Here's a few.

"Plaintiff's other allegations in this count are equally without merit. The United States is permitted to prepare and file substitute returns for an individual who has failed to do so. 26 U.S.C. § 6020(b). Such returns are good and sufficient for all legal purposes. 26 U.S.C. § 6020(b)(2)." Brewer v. United States, S.D.N.Y. 1991, 764 F.Supp. 309.

"Internal Revenue Service (IRS) was not required to identify implementing regulation for section of Internal Revenue Code under which revenue officer used substitute for income tax return to determine amount of jeopardy assessment, and failure to do so did not make amount of jeopardy assessment unreasonable; furthermore, statute authorizing substitute for return was not so ambiguous or unclear as to require promulgation of interpretive regulation. 26 U.S.C.A. §§ 6020(b), 7429(g)(2)." Granse v. United States, 892 F.Supp. 219, 224-25 (D.Minn. 1995).

These two cases involved individual income tax returns.

Here's one that affirms the direct predecessor of IRC 6020(b), i.e., s. 3612 (1939 IRC).

"S. R. Morgan was adjudged a bankrupt by the district court on February 11, 1935, and thereafter Ed Blieden, the appellee, qualified as trustee of the bankrupt estate. Morgan's business operations extended throughout the state of Arkansas and into parts of Kansas and Oklahoma. Some of his business was transacted in his own name and part of it through personally owned corporations. When he was adjudged bankrupt he surrendered to his trustee property operated in his own name but concealed his ownership of the corporations and continued to operate them until through legal proceedings the assets of such corporations were by proper court orders turned over to the trustee. ..."

"For sometime prior to his bankruptcy Morgan either did not make, or made incomplete, federal tax returns. Acting under the authority of Sec. 3176 of the Revised Statutes as amended by the Revenue Act of 1926, c. 27, 44 Stat., Part 2, p. 112, Sec. 1103, 26 U.S.C.A. Int.Rev.Code, § 3612, the Collector of Internal Revenue made returns and amended returns for Morgan and for the corporations." Paschal v. Blieden, C.C.A.8 (Ark.) 1942, 127 F.2d 398.

Notice: Not only does this affirm IRC 3612 (1939) but Revised Statute Sec. 3176.

And, the importance of Rev. Stat. 3176 and IRC 3612 (1939) is that BOTH are Statutes at Law.

Notice, also: This case affirmed the authority of the Collector of Internal Revenue, aka, the Commissioner, to prepare both corporate and individual returns under said authority.

Take a look at LEM Handbook 120.1.2.1.4 (not available online):

120.1.2.1.4 Substitute for Return

1. A return, prepared for the taxpayer, pursuant to IRC section 6020(b) is a substitute for a return. Generally, the return is prepared by the Service when it is determined that a taxpayer is liable for filing the tax return but failed to do so after receiving notification from the Service.

2. Within the Service:

• 1. Preparation of returns with regard to income, estate, gift and certain excise (IRC Chapters 41, 42, 43 and 44) tax deficiencies, are generally referred to as the SFR program. These returns are subject to statutory notice of deficiency procedures. See IRM 120.1.1.4 for a discussion of statutory notice of deficiency.
  2. Preparation of returns with regard to employment and excise tax deficiencies (not IRC Chapters 41, 42, 43, and 44) are generally referred to as the 6020(b) program. These returns do not require a statutory notice of deficiency.

Notice: There's two different programs under the authority of IRC 6020(b).

One concerns itself with the preparation of returns with regard to income, estate, gift and certain excise tax deficiencies, generally referred to as the SFR Program. These are subject to deficiency procedures and can receive a statutory notice of deficiency.

The other concerns itself with the preparation of returns with regard to employment and excise tax deficiencies, generally referred to as the 6020(b) Program. These returns are NOT subject to deficiency procedures and do not receive a statutory notice.

Two Programs, and I think here is where the confusion lies.

Compare IRM 5.18.2, et seq., Business Returns IRC 6020(b) Processing.

There's much more in regard to "substitute returns," but suffice it to say, IRC 6020(b) applies to individual income tax returns and Form 1040. I appreciate the comments of others.