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Re: [tips_and_tricks] Nonfilers: Getting Started and getting Ready for Court

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  • jm367@bellsouth.net
    IRM sections: (01-01-2003) Prescreening Nonfilers On the initial screening of a nonfiler case, the compliance employee should determine if known facts
    Message 1 of 4 , May 9, 2004
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      IRM sections: (01-01-2003)
      Prescreening Nonfilers

      On the initial screening of a nonfiler case, the compliance employee should determine if known facts indicate potential fraud

      . Items to be considered in addition to those previously identified in IRM 25.1.3 are:


      History of nonfiling;


      Repeated contacts by the Service;


      Indications that the non-filer had knowledge of filing requirements (i.e., professional with an advanced education, the person who works directly in the tax field, and individual had previously filed, etc.);


      Age and occupation of the taxpayer;


      Substantial tax liability after withholding credits and estimated tax payments


      Large number of cash transactions (i.e., purchases by cash, large cash deposits, etc. as evidenced by CBRS printout in the case file), Indications of significant income per Information Return Processing (IRP) or Taxpayer Delinquency Investigation (TDI) documents (i.e., substantial interest and dividends earned, investments in IRA accounts, stock and bond transactions, high mortgage interest paid). Consideration should be given to any allowable expenses the taxpayer may have to offset self-employment income identified.

      If it appears indications of fraud are present, the compliance employee will discuss the case with the group manager

      . If the group manager concurs there is possible fraud, the fraud referral specialist (FRS) will be contacted. When feasible, a conference will be held between the compliance employee, group manager and FRS.

      If the possibility of fraud exists,


      tax returns. If returns are submitted, they should be accepted;


      to the taxpayer concerning any course of action he/she should follow;


      tax liabilities, penalties, fraud, or referral possibilities with the taxpayer.

      [Tarheel comment: So the policy is that if even possibility of fraud exists the front line IRS contact people are told not to give even honest statements of the law and proper procedures for the alleged taxpayer to avoid a fraud charge or lessen his liability!!!!] (01-01-2003)

      Reasonable doubt

      is a doubt founded upon a consideration of all the evidence and must be based on reason. Beyond a reasonable doubt does not mean to a moral certainty or beyond a mere possible doubt or an imaginary doubt. It is such a doubt as would deter a reasonably prudent man or woman from acting or deciding in the more important matters involved in his or her own affairs.

      Willful Intent to Defraud

      is an intentional wrongdoing with the specific purpose of evading a tax believed by the taxpayer to be properly owing.

      Clear and Convincing Evidence

      is evidence showing that the thing to be proved is highly probable or reasonably certain. This is a greater burden of proof than preponderance of the evidence but less than beyond a reasonable doubt. (05-19-1999)

      Requirements of Proof

      Understanding the requirements of proof is essential in establishing fraud. In all criminal and civil fraud cases, the burden of proof is on the Government.

      The major difference between civil and criminal fraud is the degree of proof required.

      In criminal cases, the Government must present sufficient evidence to prove guilt beyond a reasonable doubt.

      In civil fraud cases, the Government must prove fraud by clear and convincing evidence. (05-19-1999)

      Civil vs. Criminal

      Civil fraud cases

      are remedial actions taken by the government such as assessing the correct tax and imposing civil penalties as an addition to tax, as well as retrieving transferred assets. Civil penalties are assessed and collected administratively as a part of tax. (05-19-1999)
      Avoidance vs. Evasion

      Avoidance of tax is not a criminal offense.

      Taxpayers have the right to reduce, avoid, or minimize their taxes by legitimate means. One who avoids tax does not conceal or misrepresent, but shapes and preplans events to reduce or eliminate tax liability within the perimeters of the law.

      Evasion involves some affirmative act to evade or defeat a tax, or payment of tax. Examples of affirmative acts are deceit, subterfuge, camouflage, concealment, attempts to color or obscure events, or make things seem other than they are.

      [Tarheel inserted note: Now, how important does that make the statement of "information relied upon by the Secretary" per section 7429, which to my knowledge is never given---!!!???]

      IRM (10-31-2000)Nature

      At common law a levy of execution consists of acts by which an officer, such as a sheriff,

      sets apart or appropriates a judgment debtor’s property to satisfy a judgment obtained against him. After judgment is entered against the debtor, the judgment creditor obtains from the clerk of the court a writ of execution against the debtor. An officer, such as a sheriff, then levies the execution against the debtor’s property. To effect a levy, the executing officer must exercise actual or constructive possession of the property. Distraint is defined as the seizing of a chattel of a wrongdoer and taking it into the possession of the party injured. Levy of execution may be distinguished from distraint in that the levy is effected by a disinterested officer of the court, and distraint is a method of self-help in which the creditor himself seizes the debtor’s property.

      A levy is an administrative means of collecting taxes by seizure and sale of property to satisfy delinquent taxes. It is a summary remedy that enables the Government to collect outstanding taxes without first going to court.

      A levy is a summary self-help extra-judicial remedy used to compel the payment of the tax. United States v. EiIand, 223 F. 2d 118 (4th Cir. 1955); United States v. Nat'l Bank of Commerce, 472 U.S. 713 (1985). The Government’s right to levy upon a taxpayer’s property is similar, but in addition to, attachment, garnishment and other similar remedies available to any other creditor. United States v. Sterling Nat'l Bank & T. Co. of NY, 360 F. Supp. 917 (S.D.N.Y 1973). (10-31-2000)

      The Secretary or his delegate is authorized to levy upon or seize property to collect delinquent taxes pursuant to IRC 6331(a). Because the power to levy is such a strong remedy the revenue officer has to collect a tax, the revenue officer must take special care to comply with the Code’s conditions. (10-31-2000)

      Power Vested in Whom?

      IRC 6331(a) authorizes the Secretary to levy upon property.

      In this context, Secretary means the Secretary of the Treasury, or any officer, employee, or agency of the Treasury Department authorized to perform the function. See IRC 7701 (a)(11) & (12).

      The Secretary of the Treasury has delegated the authority to levy to the Area Director to whom the assessment is charged or, upon his request, to any other Area Director. Treas. Reg. 301.6331-1(a)(1)

      . Revenue Officers, while acting in the course of their duties on behalf of the Area Director, in levying upon property of the taxpayer, are delegates of the Secretary of the Treasury having power to levy. The revenue officer, however, must obtain the requisite supervisory approval when necessary. RRA 98 3421, IRC 6334(e). (10-31-2000)

      Conditions Precedent

      IRC 6331(j) requires the Service to investigate the status of property prior to a levy or seizure of any property which will be sold under IRC 6335. The investigation must include:

      The taxpayer must be liable for the tax

      , and an assessment and notice and demand must have been made, although no judgment need be rendered by a court.

      The Service must give the taxpayer notice and demand for payment of the tax under IRC 6303(a).

      The taxpayer must have neglected or refused to pay the tax for the 10-day period.

      The taxpayer must have been given a 30-day written notice of the Services intention to levy (See IRC 6331(d)(2)), and notice that he has the right to contest the proposed levy in a Collection Due Process (CDP) hearing with the Internal Revenue Service Office of Appeals (IRSOA). IRC 6330; Temp. Treas. Reg. 301.6330-1T(a).

      The fair market value of the taxpayers interest in the property to be seized must exceed the estimated expenses of the sale. IRC 6331(f).

      The property levied upon must be property or rights to property of the taxpayer or be subject to a lien arising under IRC 6321.

      Court approval must have been obtained in the case of certain residences.

      There has been a thorough consideration of alternative collection methods.

      Payment of only a portion of the tax after notice and demand is a neglect or refusal to pay.

      United States v. Wintner, 200 F. Supp. 157 (N.D. Ohio 1961), affd per curiam 312 F. 2d 749 (6th Cir. 1963), revd on other grounds, 375 U.S. 393 (1964). A levy made before the expiration of the 10-day period after notice and demand, as well as a levy made prior to notice and demand, is invalid. Mrizek v. Long,187 F. Supp. 830 (N.D. Ill. 1959); L.O.C. Indus. Inc. v. United States, 423 F. Supp. 265 (M.D. TN 1976). A levy for a tax liability for which notice and demand was not made is invalid. Notification of a proposed assessment does not eliminate the need for notice and demand for payment of the tax once the assessment is made. It may be difficult to determine whether neglect or refusal to pay the tax has occurred if the taxpayer has entered into a payment agreement with the Service. Refer this to field counsel if the matter cannot be resolved.

      A levy made before the expiration of the 30-day period after notice of intention to levy, as well as a levy made prior to CDP notice, is invalid absent a jeopardy determination.

      IRC 6331(i) prohibits a levy if the taxpayer has filed a refund proceeding to recover a divisible tax

      , unless jeopardy exists or the taxpayer waives his rights under this subsection. (10-31-2000)

      The courts have further narrowed the parameters of the prohibition against enjoining the collection of the federal tax. For example, the prohibition has been construed not to apply where suit is brought against a purchaser in possession to set aside the Governments sale of seized property if conditions precedent to a levy sale have not been substantially complied with. Margiotta v. District Director of Internal Revenue, 214 F. 2d 518 (2nd Cir. 1959), National Bank & Trust Co. v. United States, 78-1 U.S.T.C. 9196 (N.D. lnd. 1977). Further, where there are special and extraordinary circumstances combined with the illegality of the tax (failure to give notice of the tax and demand for payment thereof), the collection of which is sought to be restrained, the courts, in the exercise of their equitable powers, will restrain collection of such tax by levy, notwithstanding IRC 7421. Mrizek v. Long, 187 F. Supp. 830 (N.D. Ill. 1959), L.O.C. Indus. Inc. v. United States, 423 F. Supp. 265 (M.D.Tenn, 1976). The illegality, however, must be clearly apparent and convincingly established. Bob Jones University v. Simon, 416 U.S. 725 (1974); Commissioner v. Americans United, Inc., 416 U.S. 752 (1974); Enochs v. Williams Packing & Navigation Co., 370 U.S. 1 (1962). The Government may be required to furnish information as to how the liabilities were determined under certain circumstances. Commissioner v. Shapiro, 424 U.S. 614 (1976). (10-31-2000)
      Release of Levy and Return of Property

      The IRS is required to release a levy upon all or part of the property or rights to property levied upon under certain conditions. IRC 6343(a).

      The Area Director is authorized to return any property which has been wrongfully levied upon to its rightful owner. In addition to this administrative procedure to secure property wrongfully levied upon, a person may seek relief by commencing an action against the Government under IRC 7426. IRC 6343(b). (10-31-2000)
      28 U.S.C. 2410 Actions Background

      The United States may be named as a party in any civil action or suit in any federal district court, or in

      any State court having jurisdiction of the subject matter, in the following actions with respect to real or personal property on which the United States claims a mortgage or other lien, including a federal tax lien:

      to quiet title;

      to foreclose a mortgage or lien;

      to partition;

      to condemn; and

      of interpleader or in the nature of interpleader.

      28 U.S.C. 2410(a).

      End of text citations Tarheel February 17, 2004.

      The following appended March 14, 2004:

      Being classified as Frivolous under IRC sec 6702:

      [Note that the below text is as found in the IRM except my added emphasis and my comments in [square brackets]


      Frivolous Return Program

      Servicewide consolidation of the receipt and processing of all frivolous documents at the Ogden Compliance Center (OCC) began August 14, 2000 and was completed January 1, 2001.

      The IRS, through administration of Internal Revenue Code Section 6702, will address noncompliance based on unfounded legal or constitutional arguments.

      [This implies or requires a legal conclusion as to the various arguments involved. The question is---is that conclusion based upon rulings of a court of competent jurisdiction, or is it merely a litigation policy position of the IRS agents or the Secretary?]

      This law provides for a $500 penalty to be imposed upon an individual taxpayer who files a purported return failing to contain information from which the correctness of reported income tax liability can be determined or that clearly indicates that the income tax liability shown must be substantially incorrect. The penalty is intended to address those situations where a taxpayer is furthering a frivolous argument or a prima facie intent to delay or impede administration of the tax law.

      The FRP identifies those individuals filing frivolous returns, documents, and/or correspondence and attempts to educate them

      as to their obligations to file and pay taxes. This program targets individual behaviors by responding to specific actions.

      [The relevant question is which goal FRP actually carries out as its fundamental policy--That is "to educate" or to "target" "individual behaviors" by adverse conditioning so as to obtain "compliance" without any real regard to or significant effort directed to any actual education of the taxpayer.]

      Examination Branch will be responsible for detecting, controlling, processing and examining frivolous activities. They will conduct orientations to functions involved in processing and/or examining returns or correspondence to emphasize recognition of frivolous documents and provide appropriate referral instructions.


      Identification of Frivolous Documents

      The criteria for considering a tax return frivolous is found in the IRC Section 6702. It states, "If (1) any individual files what purports to be a return of the tax imposed by subtitle A 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) is due to (A) a position which is frivolous, or (B) a desire (which appears on the purported return) to delay or impede the administration of Federal income tax laws, then such individual shall pay a penalty of $500."

      [The above stated text of sec. 6702 is not really objectionable at all, as a policy of the statutes. But it does depend on one or the other of two alternative "facts" which have to be established for sec. 6702 to swing into effect. These necessary facts are (1) a "frivolous" position taken on a purported return, or (2) a "desire" to delay or impede the administration of Federal income tax laws which appears on the face of the purported return. A claim or defense is frivolous if a proponent can present no rational argument based upon the evidence or law in support of that claim or defense. Black's Law Dictionary 6th Ed. page 668. How any examination officer or FRP personell can determine whether a return presenter can make a rational argument based upon law and evidence without a fair hearing of that argument, or otherwise divine a "desire" from the face of a return is highly suspect. Unless the same argument had been previously ruled on as "frivolous" in an exactly similar fact situation, this sounds like putting the cart of judgment before the hearings horse. ]

      Frivolous documents take many forms. Frivolous arguments may be asserted on original returns, amended returns, claims, or documents purporting to be returns. Returns may claim improper deductions, credits, exemptions, or exclusions or may omit items of income. Individuals might refuse to pay or file based on a variety of frivolous or discredited legal or constitutional theories. They may involve trusts, assign income to newly created organizations purporting to be churches, religious orders, or other organizations in which the organization acts as a nominee receiving the assigned income which is then used to pay the donor's living expenses.

      Upon receipt of an unrecognized argument, coordination with Ogden Compliance Services and/or Associate Counsel should be completed to determine if the argument meets the criteria for assertion of the frivolous return penalty. See IRM Coordination with Associate Area Counsel and Criminal Investigation Division.

      Identification of frivolous documents can be made in the area offices or Campuses. Incoming documents to any office citing a frivolous argument should be associated with an open case if one exists. The employee assigned the open case is responsible for replying to the document. Any reply associated with an open case should be documented in the case file and on IDRS via command code ACTON. Replies should be coordinated with the Frivolous Return Program Coordinator in the appropriate Campus or at Ogden. If the document contains valid requests such as FOIA requests, transcript requests, taxpayer advocate issues, etc., the request should be forwarded to the appropriate function for necessary action.

      Congressional inquiries should be retained and answered in the local offices. In most cases, the original taxpayer letter will have already been responded to. If this can be established, reference should be made in the congressional response that we have already responded to the taxpayer.

      Documents deemed frivolous should be referred to OCC as follows

      If no open control

      Within five workdays of receipt

      Via Transmittal Form 3210

      Routed to Ogden Compliance Services, Attn. Frivolous Return Program

      , M/S 4450

      Frivolous Return Program Coordinators will be responsible for receiving and resolving unpostable 191 cases resulting from subsequent filings by frivolous non-filers See IRM, Unpostables before routing to OCs.

      Frivolous returns, or documents purporting to be returns, identified by Processing operations in the Campuses will be forwarded to a central location for screening. See IRM 3.11, Campus Returns and Document Analysis and 3.12, Campus Error Resolution, for guidance on identifying and forwarding. Note Examination will conduct annual training with Submission Processing on identifying new arguments and/or refresher for this program.

      When potential frivolous documents are identified in Processing, screening will be conducted by designated Examination employees as follows

      Review each document to determine if it meets FRP criteria. NOTE Returns having zeros or no tax entries and no evidence of frivolous arguments do not meet the criteria for FRP processing.

      If the document is not frivolous, stamp the upper left corner, "FRP" , and return it to processing.

      If the document is frivolous, determine if it was identified after having received a DLN. If the document does not have a DLN, continue FRP processing. If the document has a DLN, it must be cancelled before continuing FRP processing.

      [This procedure of removing a DLN by an examiner from an allegedly frivolous document, seems effectively to strike the document from the accessible record. Thus, it seems no higher authority would even be aware of the document, or of any actual merit it might have.]

      Charge time spent screening and transshipping documents to WP&C program codes 91852, Frivolous Returns, for returns, 91853, Frivolous Correspondence, for correspondence, and 91854, Frivolous Amended Return and Claims, for amended returns or claims.



      Frivolous Arguments

      Recognized frivolous arguments include but are not limited to

      Wages/Receipts Not Income The individual argues that salaries and wages are not "income" within the meaning of the Sixteenth Amendment, which grants Congress the power to "Lay and collect taxes on income, from whatever source derived." The individual could also argue that labor worth a certain amount is exchanged for money worth the same amount and therefore there is no income to be taxed.

      [it seems beyond question that the calculations and deductions to reach "taxable income" is certainly one which results in an calculations of the amount of "profit or gain" from the business or transaction. This being true, then perhaps the official policy is that wages and salaries of all private sector individual workers are to be deemed to be "profit or gain". But that does not make it a fact that no rational argument can be made that there is not actually any profit or gain involved in such salaries or wages. As a matter of law, fiction supported by official policy may in fact win over facts, but the truth is still the truth, even if contrary to the law and policy of congress. Note that there is much comment and work that can be done on the following text, but time does not allow such now. ]


      Eisner v. McComber

      The individual reports wages but deducts them as "non-taxable compensation/remuneration" referencing Eisner v. McComber . The individual may alter line items showing non-taxable compensation or non-taxable receipts to back out some or all of their income, generally resulting in a zero tax liability.

      Zero Returns The individual submits a return with zero money amounts. A statement is attached claiming there is no section of the Internal Revenue Code that established an income tax liability. The statement may also contain arguments regarding the definition of income.

      U.S. v. LongThe individual submits a return with zero money amounts much the same as the "Zero Return" category. To explain the zeros inserted on the form, the individual refers to "U.S. v. Long" .

      Not a Citizen/Free Citizen/Not a Resident of Federal Zone The individual argues they are not a citizen of the United States and receive no income or benefits from sources within the United States. May file a Form 1040NR to receive a refund of withheld income tax or claim citizenship of a "State Republic" . Alternatively, the individual may claim that he or she does not live in a federal Area Office or zone (District of Columbia, Guam, Puerto Rico, the Virgin Islands, the Northern Marianna Islands, and certain other "possessions, enclaves, and trust territories" ). NOTE The aforementioned does not apply to a foreign person who has paid withholding inadvertently and has filed a claim for a refund.

      Reparation Tax The individual submits a return, an amended return, or correspondence referring to a reparation settlement based on the impact of slavery, or may refer to black taxes, reparations for African-Americans, or 40 acres and a mule.

      Form 2555 Deduction The individual submits a return showing income then deducts that same amount (or a large portion of that amount) by adding "Form 2555" to line 21. Form 2555, Foreign Earned Income, is usually attached showing the individual's foreign address in the United States. The individual also shows his income on Form 2555 as "foreign earned income" even though his employer's address is also in the United States. Correspondence may be attached arguing the term "income" and stating that each of the several states are foreign countries. NOTE Frivolous Forms 2555 should be worked in the FRP area at the receiving Campus rather than forwarded to PSC.

      Not a "Person" or " Individual" The individual argues he or she is not a " Person" or "Individual" within the meaning of the Internal Revenue Code and is therefore not subject to income taxes.

      Sixteenth Amendment The individual argues the Sixteenth Amendment was not properly ratified and therefore the federal government does not have the legal authority to collect an income tax without apportionment. Generally the argument focuses on matters such as inconsistencies in versions ratified by the various states.

      Fifth Amendment The individual makes an improper blanket assertion of the Fifth Amendment right against self-incrimination as a basis for not providing any financial information.

      Altered Jurat/UCC 1207 The individual submits a return that contains income and deductions but the jurat has been altered or stricken. May include reference to UCC 1207 or a statement that the return was not signed under penalties of perjury. The alteration may be located elsewhere on the return and arrowed into the jurat.

      Altered Form The individual submits a return altering any or all line items with the intent of facilitating non-compliance with the tax laws.

      Unsigned Returns The individual completes a return but fails to sign. A statement why the return is not signed is attached or added to the return indicating disagreement with the tax system.

      Wages Deducted in Cost of Goods Sold The individual submits a return with a Schedule C attached claiming a deduction which is equal, or nearly equal, to the amount reported as wage income. The deduction is usually included in the cost of goods sold but could appear under a different deduction category.

      Valuation The individual argues that income is not taxable because of the declining fair market value of the dollar, because the dollar is not backed by gold/silver, because the value of services is offset by the value of the labor (barter income), etc.

      In Lieu of The individual submits a document captioned, Statement in lieu of U.S. income tax Form 1040. Various other arguments may be used in the document.

      Disclaimer The individual submits documentation which contains a disclaimer. The disclaimer states the individual, " disclaims the liability for the tax due" , making the liability on the return zero. This disclaimer may be a part of a return, on a return attachment, or in other documents.

      Protest Against Government Action/Inaction The individual argues that their refusal to file or pay is justified because they disagree with government policies or spending plans. The individual may claim deductions or credits because of an objection to having his or her taxes used to support various government activities.

      Taxes are Voluntary/Law Does Not Require The individual submits a return, amended return, or correspondence that argues income taxes are voluntary.

      Challenges to Authority/Title 26 or " law" in Other Documents The individual may argue that Title 26 of the United States Code is not law because it was never enacted as named. As a separate position, the individual may argue that other laws or documents prevent the IRS from assessing and collecting tax. This argument may reference the Bible, Bill of Rights, Declaration of Independence, Magna Carta, Northwest Ordinance, Declaration of Resolved, Federalist Papers, Mayflower Compact, Articles of Confederation of 1788, Declaration of Rights of 1765 and 1774, and others.

      Challenges to Authority/Due Process The individual questions various administrative authorities such as delegation orders, summons authority, privacy act, etc. This argument may be based on contentions that Treasury Department Orders (TDOs) were not published in the Federal Register, that the Commissioner lacked authority to propose regulations, that TDOs, Regulations, Treasury Decisions, Forms, and other actions and activities do not comply with the Paperwork Reduction Act, Privacy Act, Administrative Procedures Act, and Federal Register Act. The individual may argue that they must be afforded a hearing or a trial before taxes can be assessed or before property can be seized.

      IRS is a Private Organization/Collects Tribute, Not Taxes The individual argues that the IRS is an entity named the Internal Revenue and Tax Service, Inc. which was incorporated in Delaware in 1933. The individual further argues that since the IRS deposits its revenues in the Federal Reserve Bank, it is a collection agency for the bank, which is in the business of making loans and conducting proprietary business, thereby removing the cloak of governmental immunity. Additionally, they argue the Department of Treasury is part of the United Nations and is clandestinely leading the tax paying public into a "new world order" .

      Alleged Churches/First Amendment The individual receives income from non-religious sources and may claim a vow of poverty. The individual submits a return where all, or substantially all, of the gross income is claimed as a contribution deduction on Schedule A of the return.

      Amended Returns/Form 843 Claim The individual files an amended return or a Form 843 to obtain a total refund of all taxes paid in prior years, based on a tax avoidance argument not supported by law.

      Untaxed The individual argues that he or she should be "untaxed" and attempts to drop out of the Social Security system. He or she will withdraw or rescind his or her SSN, claiming he or she is a sovereign citizen.

      Federal Reserve Notes Are Not Legal Tender The individual argues that their wages are not taxable because they were paid in federal reserve notes. He or she argues that notes are not valid currency or legal tender and, thus, those who possess them cannot be subject to a tax on them.

      Services Not Taxable/Thirteenth Amendment/Form of Servitude The individual argues that income results only from the sale of goods, and therefore, the value of services is not taxable. This includes indentured servitude arguments and barter offsets. The individual may also argue that the Thirteenth Amendment outlawed slavery. He or she may claim to be "natural unfranchised individuals and freemen" who are residents of states, and therefore nonresident aliens for the purpose of the Internal Revenue Code.

      Obscene, Vulgar, Harassing The individual submits documents or other materials indicating that non-filing is due to dissatisfaction with tax policies or taxation in general. Often, this argument is expressed with obscene, vulgar, or crude language and characters in an extremely demeaning manner.

      Other All others. This category includes non-filer accounts resulting from initial compliance check such as cross-reference TINs. NOTE Frivolous arguments citing "Collection Due Process " (CDP) should be reviewed by Collections for possible referral to Appeals. Refer to IRM 5.19, Collection Appeal Rights Procedures, for additional information.



      Authority and Responses to Common Frivolous Arguments

      The judicial system and the Internal Revenue Code provide alternative ways to test the income tax statutes without violating the law, including filing a claim for refund or appealing the Internal Revenue Service determination. Individuals may file suit in the United States Area District Court or the United States Court of Claims; however, appeals procedures do not extend to cases involving solely the failure or refusal to comply with tax law because of moral, religious, political, constitutional, conscientious or similar grounds.

      It is not the policy of the IRS to respond to frivolous arguments on a point by point basis. These arguments almost always reflect personal opinions and frustrations with the tax system that the IRS is unable to address. The responsibility of the IRS is to administer the federal tax law as enacted by Congress. We respond to technical questions about individual accounts; however, we have no administrative authority to change laws concerning taxation. The Service's responsibility is to administer the laws as they exist and to ensure they are uniformly applied. The Frivolous Return Program provides for initial responses to each issue or argument presented; however, repeated inquiries for the same positions having no basis in law will not be responded to. The program encourages individuals to seek competent tax counsel and advises of the potential consequences for frivolous arguments.

      The federal tax law is contained in Title 26 of the United States Code and is reproduced separately as the Internal Revenue Code (the Code). Under Title 26, the IRS is a part of the United States Department of the Treasury. Generally, Section 7803 of the Code provides that there shall be in the Department of the Treasury a Commissioner of Internal Revenue, who shall be appointed by the President, by and with the advice and consent of the Senate. Section 7802 of the Code states the Commissioner shall have such duties and powers as may be prescribed by the Secretary of the Treasury. Section 7803 of the Code states the Secretary is authorized to employ such number of persons as the Secretary deems proper for the administration and enforcement of the Internal Revenue laws. Under Sections 7802 and 7803 of the Code, the IRS performs administrative and enforcement duties.

      Sections 6001 and 6011 of the Code provide, in pertinent part, that every person liable for any tax imposed by the Code shall make a return. In addition, Section 6012 of the Code provides that every individual whose gross income equals or exceeds certain amounts shall make a federal income tax return. Shall as used in Sections 6001, 6011, and 6012, means "must" ; "must" means "to be required to." Who is required by the Code to file a return is explained in the instructions for Form 1040 under the heading "Filing Requirements."

      The Sixteenth Amendment, making the income tax constitutional, was ratified in 1913. The Constitution, Article 1, Sections 6 through 9, and the Sixteenth Amendment give the Federal Government the right to levy and collect taxes. The Sixteenth Amendment authorized a tax on income, regardless of source, without apportionment. The courts have rejected claims that the Sixteenth Amendment was not properly ratified. The Amendment was ratified by 38 states altogether, and ratification was necessary by only 36. The U.S. Supreme Court has recognized the validity of the Sixteenth Amendment. Leser v. Garnett 258 U.S. 130-137 (1922). Official notice of the resolution of ratification by the states to the Secretary and his subsequent certification by proclamation is conclusive upon the courts.

      The U.S. Supreme Court has held that the requirement that individuals file a federal income tax return does not violate the self-incrimination clause of the Fifth Amendment. United States v. Sullivan, 274 U.S. 259 (1927). Judicial precedents clearly establish that failure to comply with the filing and reporting requirements of the federal income tax laws will not be excused based upon blanket assertions of constitutional privilege against self-incrimination under the Fifth Amendment. United States v. Irwin, 561 F.2d 198 (10th Cir. 1977), cert. denied, 434 U.S. 1012 (1978); United States v. Neff, 615 F.2d 1235 (9th Cir. 1980) cert. denied, 447 U.S. 925 (1980).

      The statutory provisions of the Code that require the filing of income tax returns do not violate the Fourth Amendment prohibition against unreasonable searches and seizures by the Federal Government. In Flint v. Stone Tracey Co., 220 U.S. 107 (1911), the Supreme Court said "Certainly the Amendment was not intended to prevent the ordinary procedure of requiring tax returns to be made, often under oath. "

      Gross income, not "income" , is the starting point for determining an individual's federal income tax liability. The term "gross income" is defined in section 61 of the Code. The Code in Subtitle A, Chapter 1, Subchapter A Determination of Tax Liability, determines whether an individual is liable for income tax. Section 1 imposes a tax on the taxable income of every individual. Chapter 1, Subchapter B Computation of Taxable Income, determines whether an individual has taxable income. Section 63 defines taxable income, generally, as gross income minus the deductions allowed by Chapter 1. The argument that wages are not income has been rejected so frequently that the very raising of it justifies the imposition of sanctions. Connor v. Commissioner , 770 F.2d 17,20 (2d Cir. 1985); Crain v. Commissioner , 737 F.2d 1417, 1417 (5th Cir.1984) ( "We perceive no need to refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit." ) This argument has been the subject of numerous court decisions that have held the position to be contrary to existing law. United States v. Hilgeford, 7 F.3d 1340, 1342 (7th Cir, 1993), United States v. Jagim, 978 F.2d 1032, 1036 (8th Cir. 1992).

      IRC Section 6065 states, "Except as otherwise provided by the Secretary, any return, declaration, statement or other document required to be made under any provision of the internal revenue laws or regulations shall contain or be verified by a written declaration that it is made under the penalties of perjury." Cohen v. United States, 201 F.2d 386 (9th Cir.), cert. denied, 348 U.S. 951 (1953); Sen. Rep. No. 685, 81st Cong., 1st Sess., Part II 4 (1949) ( "the purpose of the statute is to relieve the taxpayers of the burden of notarizing their returns" .)

      The courts have often imposed sanctions on taxpayers who raise these types of arguments in litigation. Coleman v. Commissioner, 791 F2d 68, 69 (7th Cir. 1986) the court stated, "Some people believe with great fervor preposterous things that just happen to coincide with their self-interest. {Certain individuals} have convinced themselves that wages are not income, that only gold is money, that the Sixteenth Amendment is unconstitutional, and so on. These beliefs all lead to the elimination of their obligation to pay taxes. The government may not prohibit the holding of these beliefs, but it may penalize people who act on them."

      The Government expects voluntary compliance with the federal tax law. This means that we expect taxpayers to comply with the law without being compelled to do so by action of a Government agent; it does not mean the taxpayer is free to disregard the law. If an individual is required by law to file a return or pay tax, it is mandatory that he or she do so. Failure to do so could cause the individual to be subject to civil and criminal penalties; including fines, and imprisonment. See, for example, Schiff v. Commissioner, T.C.M. 1984223, aff'd, 751 F.2d 116 (2nd Cir.1984).

      ----- Original Message -----
      Sent: Saturday, May 08, 2004 8:33 PM
      Subject: Fw: [tips_and_tricks] Getting Started and getting Ready for Court
      The IRS cannot by law contact a non-filer and request any info at all, much less pursue them for unpaid taxes.
    • Dave Miner
      jm367 -- Excellent post. Thanks so much for the info provided. You are correct, if you were challenging my statement that the IRS cannot by law contact a
      Message 2 of 4 , May 15, 2004
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        jm367 --
        Excellent post.  Thanks so much for the info provided.
        You are correct, if you were challenging my statement that the IRS "cannot by law contact a non-filer."  That was a misstatement on my part.  What I should have said was, "The IRS cannot by law contact a non-taxpayer."  A non-filer, in the eyes of the IRS is (obviously) one who does not file, which makes him/her in violation of the tax laws.  It is the job of the IRS to collect taxes, and a non-filer is merely one who refuses to fulfill his/her legal obligations.
        Sorry for the misstatement.
        Yours in freedom,
        ----- Original Message -----
        From: jm367@...
        Sent: Sunday, May 09, 2004 12:13 PM
        Subject: Re: [tips_and_tricks] Nonfilers: Getting Started and getting Ready for Court

        IRM sections: (01-01-2003)
        Prescreening Nonfilers
      • Nilbux@aol.com
        In a message dated 5/15/2004 9:48:24 PM Central Daylight Time, ... nor collects money, they only ask for paper and the only thing that Congress ever made
        Message 3 of 4 , May 15, 2004
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          In a message dated 5/15/2004 9:48:24 PM Central Daylight Time, dminer@... writes:

          It is the job of the IRS to collect taxes, and a non-filer is merely one who refuses to fulfill his/her legal obligations.
          Sorry for the misstatement.
          You just made three more misstatements--each underlined.  IRS neither seeks nor collects money,  they only ask for paper and the only thing that Congress ever made "current as money" (currency) was silver coins.  The IRS wrote that dollar  bills "are not dollars" and a federal judge ruled that federal reserve notes "are dollars" --US vs Rifen. (Jack Rifen. Independ-ence, Missouri.)  Nobel Laureate, Paul Samuelson wrote that the Federal Reserve is "an omnipotent counterfeiter".  Why would the IRS want counterfeit that government prints without restrant?  THEY DON'T and I
          understand that they won't accept it. They want just checks and money orders.

          I have a letter from a state prosecutor who said in bold, underlined caps:
          "THIS OFFICE DOES NOT ACCEPT CASH"  and in court, the judge took
          judicial notice that "cash" means "money" then ruled against me after
          the prosecutor introduced as evidence, forged returns with no signature
          AND copies of letters from the dept. of revenue saying the returns are not
          valid without my signature!!!  She had to rule against me no matter what.
          Of course, I am appealing.

              A $100 bill is ONE federal reserve note.

              Your definition of non filer is wrong.  A better definition is one who refuses
              to waive his/her rights and violate both mans' law and God's law.  Ask for:
              IRS In Scripture.  nilbux@...

              IRS' job is to intimidate people, collect DATA and to
          regulate consumption.

          If governments should refrain from regulation....the worthlessness of the
               money becomes apparent and the fraud upon the public can be con-
               cealed no longer"---John Maynard Keynes.

               When we have nothing in the bank but numbers, they cannot get money
              from us. All they can get is a check that authorizes our bank to reduce
              our numbers and thus
          regulate our consumption to what any remaining
              numbers (if any) permit.

              You should learn many other ways that they regulate our consumption
              so as to keep the fraud of modern money concealed.  If 100 people read
               this, only one or two will ask about other ways to regulate consumption        and therefor, we cannot win the big battle.

              "Sorry for the misstatement"  is wrong because there were  two and the
                apology itself thus became the third one.

        • Dave Miner
          Nilbux -- You are so stuck on your broken record concerning money that you have lost your ability to see what is there before you. I said It is the job of the
          Message 4 of 4 , May 16, 2004
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            Nilbux --
            You are so stuck on your broken record concerning money that you have lost your ability to see what is there before you.
            I said "It is the job of the IRS to collect taxes" and you corrected me by saying the IRS doesn't collect money.  I never said anything about money.  It is you that are wrong here.
            I said "A non-filer, in the eyes of the IRS is (obviously) one who does not file," indicating clearly that I was speaking from the perspective of the IRS.  Yet you corrected me as if that was my own personal definition.  You know from many postings that I am a non-filer because there is no law that requires me to file.  Again it is you that are wrong here.
            Be a little more discerning before you correct someone.
            Yours in freedom,
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