Frivolous Return Filer

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The following is a facsimile of excerpts from an actual Appeal of a Levy on Social Security Old Age Benefits to Internal Revenue Service, Fresno, CA. This IRS office issued penalty assessments under IRC 6702 for tax years 1994 and 1995 while the tax returns were filed in Ogden, UT. IRS-Ogden assessed IRC 6702 penalties for 1991, 1992, and 1993 in September, 1995. The penalty assessment for 1991 was more than three years after IRC allows for such penalties. No proceeding to determine liability were allowed due to nefarious IRS procedures meant to deny due process. IRS uses IRC 6702 as a “red herring” to incite taxpayers into court where federal courts will judicially punish outspoken taxpayers without leaving any further recourse for unruly taxpayers.

Penalties for all tax years in question were assessed after IRS made a written determination of any tax liability. Such a return replaces an original filed return. Therefore, assessments of IRC 6702 were made on the IRS determination of tax liability and not on the return filed by the taxpayer. Of course, this was ignored by the IRS Appeals Manager.
___________________________________
July 19, 2005 XXXXXXXX
P.O. Box XXXX
XXXXXXXXX
Office of Appeals SSN: XXXXXXXXX
Internal Revenue Service
Fresno, California 93888

REQUEST FOR A COLLECTION DUE PROCESS (CDP) HEARING UNDER INTERNAL REVENUE CODE 6330(a)(3)(B).

This request will address issues relating to:
• unpaid assessments,
[IRC 6330(c)(2)(A)];
• challenges to the appropriateness of collection actions,
[IRC 6330(c)(2)(A)(ii)];
• challenges to the existence of civil penalty assessment liability,
[IRC 6330(c)(2)(B)];
• taxpayer did not otherwise have an opportunity to dispute tax liability,
[IRC 6330(c)(2)(B)].
. . . (some original text has been omitted for sake of brevity)
ISSUES
Item Description
1. Lawful returns were filed for each year in question with overpayment refunded.
2. IRS made a determination of tax liability prior to assessment of Civil Penalty pursuant to IRC 6702. [IRC 6020(b); IRC 6702.]
3. Assessment of Civil Penalty pursuant to IRC 6702 is not applicable to the type of tax return filed. [Public Law 97-248, Title III, Subtitle C.]
4. Internal Revenue Service has the burden of proof, in a proceeding, of whether or not any person is liable for a penalty under IRC 6702. [IRC 6703.]
5. Federal Tax Liens filed without proper notice and denial of right to a fair hearing.
[IRC 6320; 6321.]
6. Current seizure of Social Security Retirement (SSR) benefits is without proper notice thereby denying a right to a fair hearing. [IRC 6330(a), 6331(a)(d).]
7. IRS classified SSR benefits as income, for purposes of levy, for Tax Years 1991, 1992, 1993.
[IRC 6331(a), 6334(a)(9), (d)(3), (f).]
Current unnoticed levy is imposed on income exempt from levy. [IRC 6334(a)(9), (c), (d), (f)].]
8. IRS classified SSR benefits as Federal payments not based on income, for purposes of levy, for Tax Years 1994 and 1995. [IRC 6331(h)(1), (2)(A).]
9. IRS has the authority to release levy creating an economic hardship due to the financial condition of the taxpayer. [IRC 6343(a)(1)(D).]
10. IRS can return the amount of money equal to the money levied upon if it is determined IRS has wrongfully levied on SSR. [IRC 6343(b)(2), (d)(1)(2)(A).]
11. Interest shall be allowed and paid at the overpayment rate established under 6621.
[IRC 6343 (c)(1).]
12. Release all liens for any assessment of Civil Penalties under IRC 6702.
[IRC 6325(a)(1), (f)(1)(A).]
DISCUSSION
ITEM 1. Lawful returns were filed for each year in question with overpayments refunded.

Form 1040 Individual Tax Return was filed for Tax Years(TY) 1994 and 1995 with filing status of Single with one exemption. Income tax liability was satisfied by wage withholding through payroll deductions. A sequence of events follows:
TY 1994
April 15, 1995: Form 1040 mailed stating filing status of Single with one exemption.
October 3, 1997: IRS determination of tax liability and adjustment.
October 13, 1997: IRS levies Civil Penalty pursuant to IRC 6702 for filing a frivolous tax shelter return.
December 12, 1997: Form 1040X mailed in response to IRS determination of October 3, 1997.
March 10, 1998: IRS proposed adjustment based on Form 1040X mailed December 12, 1997.
March 31, 1998: Second Form 1040X mailed in response to IRS proposed adjustment of March 10, 1998 to correct IRS accounting errors.
Overpayment: Applied to return penalties.
TY 1995
April 14, 1996: Form 1040 mailed stating filing status of Single with one exemption.
September 13, 1997: IRS determination of tax liability and adjustment.
October 20, 1997: IRS levies Civil Penalty pursuant to IRC 6702 for filing a frivolous tax shelter return.
December 19, 1997: Form 1040X mailed in response to IRS determination of September 13, 1997.
Overpayment: Applied to return penalties.

ITEM 2. IRS made a determination of tax liability prior to assessment of Civil Penalty pursuant to IRC 6702. [IRC 6020(b); IRC 6651(g), IRC 6702.]
IRC 6020(b) states in part:
. . .
(b) Execution of return by Secretary
(1) Authority of Secretary to execute return
. . . Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.
(2) Status of returns
Any return so made and subscribed by the Secretary shall be prima facie good and sufficient for all legal purposes.

When IRS makes a determination of tax liability it creates a replacement return resulting in the initial tax return lacking relevancy. Any determination by the IRS of liability of a taxpayer would include current relevant penalties and tax due based on information from the initial taxpayers return and IRS records of income and tax payments for the tax year.

Herein lies the issue. If IRS makes a return from its records and information from the initial return filed by a taxpayer then any subsequent penalty assessments would impose against the determination of the IRS and cannot lie against the initial taxpayer return. For Tax Years 1994 and 1995, it is evident the Civil Penalty was not assessed in timely manner to lie against the income tax return of the taxpayer.

Amended returns were filed, based on an IRS determination of tax liability, resulting in overpayment refunds due to income tax withholding on wages.

ITEM 3. Assessment of Civil Penalty pursuant to IRC 6702 is not applicable to the type of tax return filed. [Public Law 97-248, Title III, Subtitle C.]

In 1982, Congress passed Public Law 97-248. Title III, Subtitle C, to address the promotion of abusive tax shelters. It is in this Public Law we find the purpose of IRC 6700, 6701, 6702, 6703, and 6704. (An extended discussion of these sections of the Internal Revenue Code is included in the APPENDIX to conserve brevity, as much as possible, in this Discussion section.)

In reading Public Law 97-248, the goal of Congress becomes clear. It is to emphasize to promoters, organizers, information and tax return preparers, and filers of tax returns for tax shelters that nothing short of the highest level of fiduciary responsibility would be tolerated in the management of tax shelters. This severe approach to regulation is meant to be protection from nefarious schemes directed towards consumers, investors, and affiliates of tax shelter plans.

At hand is the issue of whether the above sections of IRC are applicable to a tax return of an individual filer declaring only personal income and tax information?

IRC 6702 was levied against this taxpayer who also organized, prepared, and filed a Form 1040 Individual Tax Return with a filing status of Single. If IRC 6702 is applicable to filing a return declaring only personal income information by an individual then would not penalties under IRC 6700 also apply for entities for organizing and preparing a tax return.

IRS has mistakenly taken IRC 6702 out of context, with respect to the purpose of Congress to penalize promoters or filers of abusive tax shelter returns, by assessing civil penalties under IRC 6702 on individual taxpayers with no connection to an abusive tax shelter.

A filer of a tax return could be liable for civil penalties under IRC 6702 if the filed return could be adjudged to be under the scrutiny of IRC 6700 or 6701. It is apparent this is why Congress intrinsically linked 6700, 6701, 6702, and 6703. These sections of IRC were legislated solely for consumer protection and are not applicable to filers of tax returns disclosing only personal income and tax information.

ITEM 4. Internal Revenue Service has the burden of proof, in a proceeding, of whether or not any person is liable for a penalty under IRC 6702. [IRC 6703.]

IRS made a determination of liability for civil penalties pursuant to IRC 6702. IRC 6703 mandates burden of proof for a taxpayer’s liability under IRC 6702 shall be on the IRS. IRC 6703 also requires this burden of proof be met in a proceeding where a taxpayer can participate.

IRS has not provided any access to a proceeding/hearing to meet its obligation of proving a taxpayer’s liability for civil penalties under 6702. While not directly relating to the Notice of Levy at the heart of this appeal, IRS has also assessed this same penalty for Tax Years 1991, 1992, and 1993 and levied Social Security Retirement benefits since April 3, 2005 thereby reducing benefits from $1039.00 to $683.33. No Notice of Levy was provided by IRS or forwarded by the Social Security Administration even in the face of a Freedom of Information Act (FOIA) request for the document. Without Notice of Levy, an opportunity for a hearing and submittal of a “Statement of Exemptions and Filing Status” for income exemption under IRC 6331(a), 6334(a)(9), and 6334(d)(3) were denied even after repeated requests for due process. (See Exhibits)

Further, IRS has issued liens, levied on property, levied on federal payments, and failed to provide a hearing to meet its burden of proof for liability of a taxpayer pursuant to 6703 for civil penalty assessments. Since 1995, when IRS assessed civil penalties under 6702 for Tax Years 1991, 1992, 1993 and in 1997 assessed penalties under 6702 for Tax Years 1994 and 1995, no Notice of a Hearing and no proceeding/hearing, where a taxpayer could participate, was available to address an “in-house” determination of liability.

ITEM 5. Federal Tax Liens filed without proper notice and denial of right to a fair hearing. [IRC 6320; 6321; 6323(f); 6326(a).]

Federal tax liens were filed without first meeting a burden of proof, in a proceeding prescribed by IRC 6703, to establish liability for civil penalties under IRC 6702. The formal filing of a Federal tax lien to allow levy on property is premature to a finding of liability for civil penalties. Liens for civil penalties assessed for Tax Years 1991, 1992, and 1993 were filed without proper notice and opportunity for a hearing. If liens for Tax Years 1994 and 1995 were also filed, again there was no notice and opportunity for a hearing to establish liability for assessments.

ITEM 6. Current seizure of Social Security Retirement (SSR) benefits is without proper notice thereby denying a right to a fair hearing. [IRC 6330(a), 6331(a)(d).]

There is currently a levy on Social Security Retirement benefits for Tax Years 1991-1993. There is now an additional levy on the same benefits for Tax Years 1994 and 1995. While Notice of Levy was received for Tax Years 1994 and 1995, no Notice of Levy and opportunity for a hearing was received for the current levy concerning Tax Years 1991-1993. There are two levies running concurrently on the same Social Security benefits.

ITEM 7. IRS classified SSR benefits as income, for purposes of levy, for Tax Years 1991, 1992, 1993. [IRC 6331(a), 6334(a)(9), (d)(3), (f).]

Current unnoticed levy is imposed on income exempt from levy.
[6334(a)(9), (c), (d), (f).]

The levy imposed, without notice, on benefits since April 3, 2005 appears to consider Social Security benefits as “a payment for which eligibility is based on income” and has allowed an income exemption for Married Filing Separately with one Exemption as a default. Despite several requests for a copy of the Notice of Levy from Social Security and the IRS, to include an FOIA request, and despite the fact the IRS is aware my current filing status is Married Filing Jointly with Two Exemptions (Current tax return mailed March 21, 2005), these agencies continue to deny proper notice and the proper income exemption.

ITEM 8. IRS classified SSR benefits as Federal payments not based on income, for purposes of levy, for Tax Years 1994 and 1995. [IRC 6331(h)(1), (2)(A)]

IRS is collecting on two concurrent levies on a single Federal payment.

While the Final Notice of Levy on Social Security Benefits dated July 4, 2005 fails to state its specific authority, it does state “the law allows the IRS to take up to 15% of your benefits...”, presumably, the IRS is making reference to IRC 6331(h)(1).

A continuing levy on specified payments is allowed under IRC 6331(h)(1), with the approval of the IRS, notwithstanding IRC 6334 income exemptions based on filing status and allowed personal exemptions as declared on a current tax return. However, IRC 6331(h)(2)(A) makes an exception for Federal payments “...for which eligibility is based on . . . income...” to be levied continuously up to 15%.

Clearly, eligibility to receive a Social Security Retirement benefit is based on income, income exceeding a certain amount will reduce benefits, and a certain amount of income will make benefits taxable under income tax laws. So, Social Security Retirement benefits must qualify for an income exemption to levy under the provisions of IRC 6334(a)(9), (d)(3). This analysis is confirmed by IRC 6334(f).

Then, it follows, IRS has levied on the same benefit and classified the benefit in two different categories in two separate levies where one improperly noticed of levy classified Social Security Retirement benefits a specified Federal payment ...” for which eligibility is based on income.”

The second levy is noticed for a 15% continuous levy on the same specified Federal payment where IRS declares eligibility is not based on income.

IRS has not provided proper authority under IRC for this approach to issue more than one levy on the same Social Security Retirement benefit while declaring contrasting criteria for amount subject to levy.

ITEM 9. IRS has the authority to release levy creating an economic hardship due to the financial condition of the taxpayer. [IRC 6343(a)(1)(D).]

Social Security Retirement benefits are my only ongoing source of income. These two levies are creating an extreme economic hardship on me and my spouse. Because a proper income exemption was not allowed since April 3, 2005 on the first levy for Tax Years 1991, 1992, and 1993, my benefits have been reduced by almost 50% without any end in sight. The second levy will further reduce my benefits by 15% for at least another year or more.

Presently, my benefit has been reduced from $1117.00 to $683.83 per month. If the second levy is imposed on my benefit then a monthly payment would be reduced even further. Either of these levies has and will impose an economic hardship that is not warranted under the circumstances.

ITEM 10. IRS can return the amount of money equal to the money levied upon if it is determined IRS has wrongfully levied. [IRC 6343(b)(2), (d)(1)(2)(A).]

Social Security Retirement benefits have been wrongfully levied upon since April 3, 2005. There are provisions in law for the IRS to return monies wrongfully taken and cure this issue.

ITEM 11. Interest shall be allowed and paid at the overpayment rate established under 6621. [IRC 6343 (c)(1).]

A reduction of Social Security Retirement benefits began on April 3, 2005, through levy without notice and opportunity for a hearing, and are continuing. IRC provides for not only a return of wrongfully levied property but interest paid at the overpayment rate prescribed by IRC 6621.

ITEM 12. Release all liens for any assessment of Civil Penalties under IRC 6702.
[IRC 6323(j)(1)(A), (j)(2); 6325(a)(1), (f)(1)(A); 6326(a), (b).]

The IRS has found neither liability, in a proceeding, for the amounts assessed under IRC 6702 nor for all interest imposed on such assessments. Without a finding of liability prescribed by IRC 6703 any lien is legally unenforceable.

The IRS may issue a certificate of release in the same office where any notice of lien relating to assessments under IRC 6702 has been filed. Any lien referred to in a certificate shall be conclusive and contain a statement the filing of such a lien was erroneous.

This is a written request for the IRS to promptly notify credit reporting agencies of the withdrawal of any notice of lien with respect to civil penalty assessments under IRC 6702.

The unlawful imposition of liens on property, levies on income, and unjustified debit reports to credit
reporting agencies has caused loss of property, loss of employment credibility, and loss of financial opportunities without due cause.
CONCLUSION

The opportunity to request this appeal is found in IRS Final Notice Before Levy On Social Security Benefits dated July 4, 2005. This request for an appeal is timely filed by certified mail and return receipt to Office of Appeals, Internal Revenue Service, Fresno, CA.

While this request for an appeal is allowed for Tax Years 1994 and 1995, an expanded appeal is requested to include a levy on the same income, without notice and opportunity for a hearing, for Tax Years 1991, 1992, and 1993. The issues for all years, 1991-1995 are identical.
• Civil penalties assessed without a finding of liability or notice and opportunity for a hearing.
• Civil penalties assessed after an IRS determination of tax liability.
• Civil penalties assessed under incorrect Internal Revenue Code.
• Liens filed without a finding of liability and without proper notice or opportunity for a hearing.
• Levy imposed on benefits without proper notice or opportunity for a hearing.
• Levy imposed on benefits without allowing lawful income exemption.
• Multiple levies imposed on a single income.
enclosures:
Log of Events and List of Exhibits.
Exhibit A. to Exhibit N.
End of Document (20 pages).
_____________________
AUTHOR’S NOTE: Some original text has been omitted for sake of brevity.The Appeal decision only stated the IRS nefarious collection procedure was proper and failed to address whether any taxpayer liability exists for penalty assessments under IRC 6702. It should also be noted this administrative appeal was allowed only as a non-appealable decision in district court. Using this subversive technique, IRS has effectively blocked any court appeal of a bogus IRS administrative decision. Here we have a clear C.Y.A. procedure obviously supported by IRS upper eschalon, Department of Treasury, Federal courts, the Senate Finance Committee, the House Ways and Means Committee, and the Social Security Administration. The extent of corruption is astounding.

Comments: hancock@frivolousreturnfraud.com
Copyright: Tengoku dojo, 2006.
NOTICE: Tengoku dojo is not affiliated with Freedom School.
NOTICE: If anything in this presentation is found to be in error a good faith effort will be made to correct it in timely fashion upon notification.
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