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How would you like to sue an IRS agent?

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  • rule_of_law_rocks
    Many people have been receiving an IRS Letter 3176 for valid tax returns. This is commonly known as a Frivolous Return letter. It states in part that a) you
    Message 1 of 3 , Mar 18, 2009
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      Many people have been receiving an IRS Letter 3176 for valid tax returns. This is commonly known as a Frivolous Return letter. It states in part that a) you have taken a "frivolous position"; and b) your return reflects a desire to impede the administration of the tax laws of the United States. What's interesting is that the letter accurately quotes 26 USC § 6702(a)(2) but it [inadvertently - on purpose] omits 26 USC § 6702(a)(1), a co-requisite to having a "frivolous" return submission, that is, both § 6702(a)(1) and § 6702(a)(2) must be valid for a return to considered frivolous.

      A favorite example the IRS loves to quote is Sullivan v. United States, 788 F.2d 813 (1st Cir. 1986) wherein Sullivan submitted a 1040 claiming no Wages on Line 7 but also submitted two W-2s listing wages totaling over $32,500. This is certainly a frivolous determination because there is an inconsistency between his submitted wages and his report of wages on his 1040. For this post, I will assume that you are submitting a valid return and that the IRS is simply employing its typical, standard, normal, everyday, run of the mill, delaying, stalling, and denial tactics.

      The real focus needs to be on the procedures. Before the IRS Letter 3176 was ever written, an assessment must have been made, according to 26 USC § 6203. Method of assessment, which states in part:

      The assessment shall be made by recording the liability of the taxpayer in the office of the Secretary in accordance with rules or regulations prescribed by the Secretary. Upon request of the taxpayer, the Secretary shall furnish the taxpayer a copy of the record of the assessment.

      In the implementing regulation, 26 CFR 301.6203-1. Method of assessment, we read, in part:

      ...The assessment shall be made by an assessment officer signing the summary record of assessment. ...If the taxpayer requests a copy of the record of assessment, he shall be furnished a copy of the pertinent parts of the assessment....

      The Internal Revenue Manual, 8.22.2.2.12.2 (10-30-2007), Section 6702 Frivolous Return Penalties and Questionable W-4 Penalties, has the following procedural guidance about the assessments:

      1. Frivolous Return Penalties and questionable W-4 penalties do not receive a notice that gives the taxpayer an opportunity to go to Appeals. Therefore, issues involving these penalties may be raised in CDP.

      2. A taxpayer may challenge the assessment of the IRC 6702 penalty on the ground that the assessment was not personally approved in writing by a superior in accordance with IRC 6751(b).

      3. IRC 6751(b)(1) provides that no penalty shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate. An exception to the "personally approved (in writing)" rule is IRC 6751(b)(2)(B) that provides that managers need not approve any addition to tax under IRC 6651, 6654, or 6655, or any other penalty automatically calculated through electronic means. The assessment of a IRC 6702 penalty does not qualify as one calculated through electronic means defined by IRC 6751(b)(2)(B), therefore the assessment of the penalty requires approval in writing.

      4. There is no legal basis for abatement of these types of penalties due to Reasonable Cause; therefore Appeals has no legal authority to abate these penalties using reasonable cause criteria.

      And all the above is governed by 26 USC § 6751. Procedural requirements, which states in part:
      (b)  Approval of assessment
      (1) In general
      No penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate.

      All these steps MUST have been accomplished before the IRS Letter 3176 was written and sent to you! If the IRS cannot provide the determination and approval, there cannot be an assessment.

      The very first you need to do is 1) demand to see a copy of the signed summary record of assessment; and 2) submit a FOIA for the same under § 6751 (below). If you need help, see Barry Smtih's "Golden FOIAs" here: http://freedivorceforms.net/htdocs/www.irs-armory.com/killer_foias.htm.

      Q. So where does that leave our agent?
      A. With his derrier exposed to the weather!

      And the pieces are in place for a Brightline Test. The Courts love what is called a Brightline Test, which means that there is no room for interpretation of someone's action. It makes the Court's job easy. And 26 USC § 6751 is a Brightline Test. An IRS agent does not have the discretion to make an assessment in the absence of the determination and approval required by 26 USC § 6751, 26 CFR 301-6203.1, and 26 USC § 6203 (although it would be fun to quote the IRM 8.22.2.2.12.2, it's probably not legally binding, but it does provide additional evidence that the agent didn't follow written procedures that govern the assessment.). Therefore, such an agent is acting beyond his authority and can be sued as a private individual under the Taxpayer Bill of Rights. The DOJ will not handle the case for him. He would need to hire an attorney at his own expense, and his bond would be in jeopardy.

      My guess is that an agent who is shown this law will probably willingly reverse his determination and refund the overpayments. If not, you have another opportunity to write to the Compliance Technical Support Manager and let him know that you intend to sue the IRS in Federal District Court over their stubborn refusal to follow the law, the regulations, and the written procedures. Oh yeah, and don't forget to sue that agent, too!

      OUCH!

      Are you ready to write your letter in response to the IRS Letter 3176?  I hope so!

    • John Hill
      Much discussion has been given in this group concerning 26 USC § 6751. Procedural requirements, which states in part: (b) Approval of assessment (1) In
      Message 2 of 3 , Apr 8, 2009
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        Much discussion has been given in this group concerning 26 USC § 6751. Procedural requirements, which states in part:
        (b)  Approval of assessment
        (1) In general
        No penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate.
         
        "All these steps MUST have been accomplished before the IRS Letter 3176 was written and sent to you! If the IRS cannot provide the determination and approval, there cannot be an assessment."
         
        However after reading §6751(b)
        (2) Exceptions
        Paragraph (1) shall not apply to—
        (A) any addition to tax under section 6651, 6654, or 6655; or
        (B) any other penalty automatically calculated through electronic means.
         
        It appears that this section is pertaining strictly to the initial determination of "penalties" imposed and not to the initial assessment of the original alleged tax liability.


         
        .

      • paradoxmagnus
        Which makes sense, given it is in CHAPTER 68—ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE PENALTIES. CONTEXT matters. Patrick in California It
        Message 3 of 3 , Apr 9, 2009
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          Which makes sense, given it is in CHAPTER 68—ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE PENALTIES.

          CONTEXT matters.

          Patrick in California

          "It ain't what ya don't know that hurts ya. What really puts a hurtin' on ya is what ya knows for sure, that just ain't so." -- Uncle Remus

          --- In tips_and_tricks@yahoogroups.com, "John Hill" <otoman@...> wrote:
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          > Much discussion has been given in this group concerning 26 USC § 6751.
          >
          > It appears that this section is pertaining strictly to the initial determination of "penalties" imposed and not to the initial assessment of the original alleged tax liability.
          >
          >
          >
          >
          > .
          >
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