6702 Implementing Regulations

[LPC]

There's now a thread on Lost Horizons on the lack of any regulations "implementing" the frivolous return statute, section 6702.

If anyone is curious about the "Ford v. USA" case, I tracked it down. Full citation is Barry Ford v. United States, No. 02-T-553-S, U.S.D.C. M.D. Alabama. It was a challenge to an adverse collection due process determination over a $500 frivolous return penalty.

And Mr. Ford lost the case back in 2003, and there was no appeal.

The magistrate judge addressed the "implementing regulation" argument as follows:

[N]o implementing regulation is required when, as here, the statutes themselves empower the Internal Revenue Service to impose the penalty and require the plaintiff to pay it. See 26 U.S.C. $$6702, 6155(a); United States v. Bowers, 920 F.2d 220, 222 (4th Cir. 1990). The government is due summary judgment on this issue.

Also from the report of the magistrate judge:

The language of the plaintiffs arguments and the form of the objections attached to his 1040 form (preprinted documents in which the year was filled in by hand) raise the possibility that the plaintiff has been the victim of a "frivolous tax argument" scheme, in which promoters sell worthless, shopworn arguments to would-be non-taxpayers. See United States v. Marsh, 144 F.3d 1329 (9th Cir. 1998); Burke v. Commissioner, 1983 WL 1650 at *2 (D. Kan. 1983); IRS Warns of Frivolous Tax Arguments - Nonfiler Enforcement, http://www.irs.gov/irs/article/0,,id=106377,00.html. In deciding whether to appeal this case or to pursue any related case in the Tax Court, the plaintiff is advised to consider carefully the monetary penalties assessed
by federal courts against those who pursue frivolous tax appeals using arguments of the kind he presents here. See 26 U.S.C. 6673(a)(l); Fed. R. App. P. 38; Stubbs v. Commissioner, 797 F.2d 936,939-40 (11th Cir. 1986); Ricket v. United States, 773 F.2d 1214, 121 5-16 (1 1 th Cir. 1985); Craig v. Commissioner, 119 T.C. 252,264-65 (2002); Pierson v. Commissioner, 115 T.C. 576 (2000).

I'd like to think that Mr. Ford paid attention and learned something, but in 2006 he was back in court fighting enforcement of an IRS summons. The IRS ended up withdrawing the petition for enforcement, which is not a good sign, but there's no record of any indictment (yet).

[Cpt Banjo]

The last thing we should do is ascribe rational thought processes to CtC'ers.

[.]

over a $500 frivolous return penalty

Yeah, well, they'll get much more upset about the $5K frivolous penalties, which are being assessed by the dozen. Or the gross.

They'll stomp their tiny little legal feet even harder, although probably not 10 times harder. But, to the same avail.

There's probably a good Illuminati party somewhere in that mix.

[LPC]

Do we know how much he is arguing about? I mean if he is arguing over a low 3-digit tax bill, what's the point of prosecution?

From a footnote in the magistrate judge's report:

In its brief, the government states that two employers and one bank filed forms indicating that the plaintiff had over $50,000 in income in 1997 (doc. #11, p. 1-2). However, as the government has not produced the forms or other evidence of this income, the court may not consider this assertion on a motion for summary judgment.

$50,000 of income in 1997 would produce a tax bill of $8,891.50 for a single taxpayer, one personal exemption, standard deduction. Married filing jointly, and two exemptions, and the tax would be $5,670.

[Judge Roy Bean]

over a $500 frivolous return penalty

Yeah, well, they'll get much more upset about the $5K frivolous penalties, which are being assessed by the dozen. Or the gross.

They'll stomp their tiny little legal feet even harder, although probably not 10 times harder. But, to the same avail.

There's probably a good Illuminati party somewhere in that mix.

Is there a source of information on how many of those frivolous penalties have been issued?

[LPC]

Is there a source of information on how many of those frivolous penalties have been issued?

Yes and no. The IRS publishes statistics on civil penalties assessed, but the frivolous return penalties are aggregated into a category of "nonreturn penalties" that includes "a wide range of noncompliant behaviors" including penalties relating to trust fund recovery, tax return preparers, information returns, and misuse of dyed fuel (?!), as well as frivolous return penalties. (I would expect that penalties for failing to honor levies would be in the same group.)

In 2007, the IRS reports assessing 404,012 such penalties with a total value of almost $5 billion. The IRS also reported abating about 60,000 penalties with a value of about $2.8 billion.

I suspect that frivolous return penalties are a very small part of those numbers.

[Gregg]

misuse of dyed fuel (?!),

That would be farm use diesel fuel. Farms are able to buy diesel fuel without the road excise tax being paid, as it's for agricultural equipment that in theory does not use the roadways. This fuel is dyed (I think blue) to mark it as non motor vehicle fuel. At weigh stations nationwide, it they sometimes take a fuel sample and if it's dyed, well, you owe taxes on all the fuel your logbook shows you should have used back to a date where you can prove you bought fuel not dyed (really, they want fuel receipts) plus I'm sure there is a penalty.