Opinion
10275-23L
07-22-2024
ANTHONY DWAYNE WILLIAMS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Diana L. Leyden Special Trial Judge
On June 27, 2023, petitioner timely filed a Petition in this case. Petitioner seeks review of a Notice of Determination Concerning Collection Actions Under IRS Sections 6320 or 6330 (notice of determination), dated June 5, 2023. The notice of determination sustained the seizure of petitioner's state tax refund with respect to his unpaid tax liability from a section 6702(a) Frivolous Tax Submissions Penalty for 2015. By Order served October 10, 2023, this case was assigned to the undersigned for disposition.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C. (section or I.R.C.), in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
By Order served November 17, 2023, the Court directed the parties to comply with Rule 93 and file a stipulated administrative record. If that was not possible the Court directed respondent to file the entire administrative record appropriately certified as to its genuineness. In that Order the Court further directed petitioner, if he asserted that the administrative record filed as ordered was not complete, to move on or before February 5, 2024, to complete or supplement the record.
On December 20, 2023, respondent filed a Notice of Filing of the Administrative Record, a Certificate as to the Genuineness of the Administrative Record, and the Administrative Record. Petitioner filed a Notice of Objection to the Certificate as to the Genuineness of the Administrative Record on January 28, 2024, and respondent filed a Reply to Notice of Objection to Certificate as to the Genuineness of the Administrative Record. Petitioner did not file a motion to complete or supplement the record.
On May 29, 2024, respondent filed a Motion for Summary Judgment (motion) under Rule 121. Respondent filed in support of the motion a declaration of Adam R. Fisher, Internal Revenue Service (IRS) Return Integrity Verification Operations Supervisory Tax Examiner, as well as a memorandum. In the motion respondent moved the Court to grant respondent's motion and requested that the Court sanction petitioner pursuant to section 6673(a)(1). On July 11, 2024, petitioner filed an Opposition to Motion for Summary Judgment, a Notice of Objection to the declaration of Adam R. Fisher, and a declaration of Anthony D. Williams in support of petitioner's Opposition to Motion for Summary Judgment.
The Court uses the term "IRS" to refer to administrative actions taken outside of these proceedings. The Court uses the term "respondent" to refer to the Commissioner of Internal Revenue, who is the head of the IRS and is respondent in this case, and to refer to actions taken in connection with this case.
Upon review of the record on respondent's motion, the Court concludes that there are not any disputes as to any genuine issues of material fact and that respondent is entitled to judgment as a matter of law. Further, as discussed below, the Court will impose sanctions on petitioner pursuant to section 6673(a)(1) in the amount of $2,500.
Background
Petitioner resided in Louisiana at the time the Petition was filed with the Court. The administrative record establishes the following.
I. Petitioner's 2015 Tax Filings
With respect to tax year 2015, petitioner submitted to the IRS a purported joint Form 1040 federal income tax return on July 13, 2018. On February 27, 2019, petitioner submitted a signed copy of that same purported joint Form 1040 for tax year 2015 to the IRS.
Petitioner's spouse at the time of the filing of the 2015 return is not a party to this case. However, the Form 1040 submitted by petitioner bears what appears to be her signature.
On the joint Form 1040 petitioner reported adjusted gross income of $0, claimed $3,822.44 in federal income tax withholdings from Forms W-2 and 1099, excess social security and tier 1 RRTA tax withholdings of $2234.91. Attached to his Form 1040, petitioner included five Forms 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. In Box 9 of each Form 4852 petitioner wrote:
Petitioner also attached one Form 4852 on behalf of his then-spouse.
I hereby deny and refute any allegation that a §3401 or §3121 employer-employee transaction occurred. No payment(s) was made nor received
herein, which is within the meaning of §3401 or §3121 "wages." Items 7e, f, h, i are correct taken from the original Form W-2.
On each Form 4852 in box 10 in response to the question "[e]xplain your efforts to obtain Form W-2, Form 1099-R, or Form W-2c, Corrected Wage and Tax Statement" petitioner wrote:
None. You are hereby being informed. No statutory employer-employee transaction existed under §3401 or §3121 for which a Form W-2 applies. No relationship exists between the parties and the United States. Both parties are (Non-federal entities).
Petitioner also attached what he purported to be five corrected Forms 1099- MISC, Miscellaneous Income, and two corrected Forms 1099-INT, Interest Income. Petitioner signed each form and dated them July 13, 2018. On each purported corrected Form 1099-MISC petitioner wrote:
The above form is not intended to represent a corrected Form 1099- MISC filed by the party identified as "PAYER".
This correcting Form 1099-MISC is being submitted by the party identified above as the "RECIPIENT" to "REBUT" the original Form 1099-MISC document known to have been submitted by "PAYER" to the IRS which erroneously alleges a payment or payments made to "RECIPIENT" was made in the course of a "trade or business", as defined by USC Title 26 section §7701(a)(26) as, "the performance of the functions of a public office"
Neither the "PAYER" nor "RECIPIENT" engaged in any transaction(s) with each other that were made in the course of a "trade or business". This correcting form was meant to ends (sic) any such presumption. Both parties are (Non-federal entities). No relationship exists (sic) between the parties and the United States.
Under the penalties of perjury, I declare that I have examined this statement and to the best of my knowledge and belief, it is true correct, and complete.
On each purported corrected Form 1099-INT petitioner wrote, signed, and dated substantially the same text as above.
II. Examination of Petitioner's 2015 Tax Filings
The IRS opened an examination of petitioner's 2015 tax year and sent petitioner a Letter 3176C, dated December 19, 2019, informing petitioner that he "filed a purported tax return for the tax periods . . . that claimed one or more frivolous positions or reflected a desire to delay or impede administration of the tax laws." The letter warned him that if he did not correct his return, the IRS would assess a $5,000 penalty against him pursuant to section 6702, Frivolous Tax Submissions. The IRS directed him to withdraw his returns within 30 days from the date of the letter and stated that if he did not do so, or if he submitted additional documents that asserted a frivolous position, the IRS would assess the above-referenced penalty against him. In the letter the IRS provided additional information about what types of positions the IRS identified as frivolous, including a web address to IRS Notice 2010-33.
Petitioner responded in a letter dated January 9, 2020, stating that he would do his best to correct the error but requested that the IRS point out exactly what part of the 2015 tax return contained the error. Although petitioner sent the letter he did not withdraw his 2015 tax filings.
III. Section 6702(a) Penalty and Approval
In the course of the examination of petitioner's 2015 tax year, the IRS employee conducting petitioner's examination determined to assert the section 6702(a) penalty of $5,000. She did so after petitioner failed to withdraw his tax filings that the IRS asserted included frivolous positions.
On August 12, 2020, Supervisory Tax Examiner Adam R. Fisher signed a Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties, approving the section 6702(a) penalty of $5,000. In his declaration, Mr. Fisher stated that he was the immediate supervisor of the IRS employee who initially determined to assert the section 6702(a) penalty, and that he personally approved that penalty in writing, as evidenced by his signature on the above-referenced Form 8278.
Mr. Fisher further stated in his declaration that (1) he had personal knowledge of the IRS's recordkeeping system, (2) Form 8278 was kept in the course of the IRS's regularly conducted activity and it is in the IRS's regular practice to keep such records, (3) Form 8278 was made at or near the time of the occurrence of the matters set forth in it, and (4) these facts were known to him to be true to the best of his knowledge and belief.
On December 21, 2020, the IRS assessed a $5,000.00 penalty against petitioner pursuant to section 6702(a).
IV. Seizure of Petitioner's State Tax Refund and CDP Hearing
On October 4, 2021, the IRS issued petitioner a CP92, Notice of seizure of your state tax refund and of your right to a hearing with respect to petitioner's 2015 tax liability stemming from the section 6702(a) civil penalty. The notice advised petitioner of his right to request a CDP hearing.
Petitioner timely submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing, dated October 30, 2021. In response to section 6, "[b]asis for hearing request," petitioner checked the box for proposed levy or actual levy. In response to section 8, "[c]heck the most appropriate box for the reason you disagree with the filing of the lien or the levy," petitioner checked the boxes for a lien discharge and withdrawal. He also checked the box titled "Other" and wrote:
I am not employed in "trade or business" as defined by statute. I did not engage in a privileged federal (economic) activity that is subject to a federal income tax under the excise tax law of the United States. I certainly did not agree knowingly, willingly or voluntarily offer to give as a gift or otherwise my property (money) to the United States. I disagreed with your assessment, therefore I request a Collection Due Process Hearing (CDP) hearing (sic) to prove my claim. Please see my attached "89 page MEMORANDUM IN OPPOSITION TO RESPONDENT'S (IRS) INTENT TO LEVY" to be used as evidence in the U.S. Tax Court or any other federal district, state or local court where a lawsuit may be filed.
Petitioner also sent the IRS a letter dated October 30, 2021, challenging the seizure of his state tax refund, and attached to his letter a memorandum opposing the seizure. Petitioner indicated in his letter that the memorandum presented additional information and facts as to why he believed that his property (earnings) should not be subject to the federal income (excise) tax and why the seizure should be permanently dismissed. He challenged the appropriateness of the collection actions and the underlying liability.
V. CDP Hearing
Petitioner's CDP hearing request was assigned to an IRS Appeals officer (AO). The AO verified that she did not have prior involvement with petitioner for the tax year at issue in this case.
On July 1, 2019, the IRS Office of Appeals was renamed the IRS Independent Office of Appeals. See Taxpayer First Act, Pub. L. No. 116-25, § 1001, 133 Stat. 981, 983 (2019). We will use the name in effect at the times relevant to this case, i.e., Appeals.
On November 9, 2022, the AO sent petitioner a letter informing him that Appeals received his request for a CDP hearing and scheduled a telephone hearing. In the letter the AO wrote that she could consider during the hearing (1) whether the IRS met all the requirements of applicable law or administrative procedure, (2) any legitimate issue petitioner wished to discuss including collection alternatives, challenges to the appropriateness of the collection action, or spousal defenses, and (3) whether he owed the amount due but only if he did not receive a statutory notice of deficiency or otherwise have an opportunity to dispute his liability with Appeals. The AO requested that petitioner submit a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and signed federal income tax returns for tax years 2015, 2020, and 2021, or financial documentation if petitioner did not file a return because his yearly income was below the amount for which a return was required to be filed. The AO informed petitioner that he was entitled to a copy of the administrative file. She further informed petitioner that if he did not amend or withdraw his hearing request she would return his case to Collection and he may be subject to another $5,000 penalty pursuant to section 6702(b) if he did not amend or withdraw his hearing request.
Prior to the CDP hearing, the AO and petitioner exchanged correspondence and the AO provided petitioner a copy of the administrative file in his case and gave petitioner an opportunity to review the file. Petitioner did not provide any of the requested financial documentation to the AO.
The AO held the CDP hearing with petitioner on March 14, 2023. Petitioner challenged the underlying liability with respect to the section 6702(a) penalty and continued to assert frivolous arguments. He did not provide any of the requested financial documentation nor did he propose any collection alternatives. After the CDP hearing the AO issued to petitioner the notice of determination, upon which this case is based, sustaining the seizure of petitioner's state tax refund with respect to his unpaid tax liability from a section 6702(a) penalty for tax year 2015.
VI. Petitioner's Arguments
In the Petition, petitioner indicated that he did not receive a statutory notice of deficiency for the tax liability, that he contested the underlying liability arising from the section 6702 penalty at his CDP hearing, and that the AO abused her discretion in determining to proceed with collection without making the requisite verification under section 6330(c)(1) that all legal and procedural requirements had been met. Petitioner made a number of additional arguments in his Notice of Objection to Certificate as to the Genuineness of the Administrative Record and Opposition to Motion for Summary Judgment, which the Court will address below.
Discussion
I. Summary Judgment
Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Florida Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Either party may move for summary judgment upon all or any part of the legal issues in controversy. Rule 121(a). The Court may grant summary judgment only if the movant "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Rule 121(a)(2).
Respondent, as the moving party, bears the burden of proving that no genuine dispute exists as to any material fact and that respondent is entitled to judgment as a matter of law. See FPL Grp., Inc. v. Commissioner, 115 T.C. 554, 559 (2000); Bond v. Commissioner, 100 T.C. 32, 36 (1993); Naftel v. Commissioner, 85 T.C. 527, 529. In deciding whether to grant summary judgment, the factual materials and inferences drawn from them must be considered in the light most favorable to the nonmoving party. FPL Grp., Inc. v. Commissioner, 115 T.C. at 559; Bond v. Commissioner, 100 T.C. at 36; Naftel v. Commissioner, 85 T.C. at 529. The party opposing summary judgment must set forth specific facts which show that a question of genuine material fact exists and may not rely merely on allegations or denials in the pleadings. Rule 121(d); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Grant Creek Water Works, Ltd. v. Commissioner, 91 T.C. 322, 325 (1988); King v. Commissioner, 87 T.C. 1213, 1217 (1986).
II. Hearings Under Section 6330
Section 6331(a) authorizes the IRS to levy upon property and property rights of a taxpayer liable for taxes who fails to pay those taxes within 10 days after notice and demand for payment. The IRS is generally required to notify the taxpayer in writing of his or her right to a hearing before a levy is made. I.R.C. § 6330(a)(1). However, when the IRS has served a levy on a state to collect a federal tax liability from a state tax refund there is not any requirement under section 6330 for a pre-levy hearing, but the taxpayer shall be informed of their right to a hearing and given the opportunity for a hearing within a reasonable period after the levy. I.R.C. § 6330(f)(2); Treas. Reg. § 301.6330-1(a)(2).
If a CDP hearing is requested, the hearing is to be conducted by Appeals. I.R.C. § 6330(b)(1). At the hearing the AO conducting it must verify that the requirements of any applicable law or administrative procedure have been met. I.R.C. § 6330(c)(1). The taxpayer may raise at the CDP hearing "any relevant issue relating to the unpaid tax or the proposed levy," including appropriate spousal defenses; challenges to the appropriateness of collection actions; and offers of collection alternatives. I.R.C. § 6330(c)(2)(A). Within 30 days after Appeals issues a notice of determination the taxpayer may appeal the determination to the Court. I.R.C. § 6330(d)(1).
In reviewing an IRS administrative determination in a CDP case, if the underlying tax liability is properly in dispute, the Court reviews the determination regarding the underlying tax liability de novo. Goza v. Commissioner, 114 T.C. 176, 181-82 (2000). The Court reviews all other determinations for abuse of discretion. Id. at 182. Abuse of discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. See Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006).
Our review of CDP cases is limited to issues that taxpayers raised during their CDP hearings. Giamelli v. Commissioner, 129 T.C. 107, 112-13 (2007); Magana v. Commissioner, 118 T.C. 488, 493 (2002); Treas. Reg. § 301.6330-1(f)(2), Q&A-F3. The only issue petitioner raised at his CDP hearing was challenging the section 6702(a) penalty and underlying tax liability. Petitioner did not raise any collection alternatives. Thus, the Court will only review this case as to petitioner's challenge to the section 6702(a) penalty.
III. Underlying Liability
The penalty at issue in this case is imposed by section 6702(a), which provides that any person who "files what purports to be a return of tax imposed . . . 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 the return "is based on a position which the [IRS] has identified as frivolous" or "reflects a desire to delay or impede the administration of federal tax laws" is liable for a section 6702(a) penalty.
In the instant case petitioner submitted a Form 1040 with zeroed out income and attached Forms 4852 that further included zeroed out income. The arguments he made on the face of these forms were frivolous in nature and have been rejected repeatedly by this and other courts. Petitioner has not advanced or provided any evidence beyond these frivolous arguments that his income reported to the IRS by third parties was incorrect.
The IRS bears the burden of showing supervisory approval for the section 6702(a) penalty. See Kestin v. Commissioner, 153 T.C. 14, 22 (2019). Respondent provided a copy of the signed Form 8278 as evidence that the penalty at issue was approved by the immediate supervisor of the IRS employee who made the initial penalty determination, prior to the assessment of the penalty. Thus, respondent has met his burden of showing supervisory approval for the section 6702(a) penalty.
Petitioner challenges respondent's Motion for Summary Judgment with numerous legal arguments that this Court and other courts have found to be frivolous, and specious evidentiary challenges to some documents. Petitioner tries to mask his arguments with specious evidentiary challenges to respondent's declaration in support of the motion, but petitioner's assertion as to why the penalty should not be sustained is essentially frivolous. As to disputes to material facts, petitioner has not sufficiently shown that a genuine dispute exists as to any material fact.
Ultimately this case rests on the Code's definition of gross income, which is all income from whatever source derived. I.R.C. § 61. This includes wages or money paid for services. See Coleman v. Commissioner, 791 F.2d 68, 70 (7th Cir. 1986). Petitioner's tax filings were frivolous on their face and petitioner has not provided evidence or legal arguments that prove otherwise. Respondent's Motion for Summary Judgment supports that petitioner's positions were frivolous. See IRS Notice 2010-33. Under these circumstances there is not any need to catalog petitioner's arguments and painstakingly address them. See 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"). Petitioner's challenge to the section 6702(a) penalty fails and respondent is entitled to a judgment as a matter of law.
IV. Verification
The record shows that the AO properly verified that the requirements of all applicable laws and administrative procedures were met in the processing of petitioner's case and that the seizure of petitioner's state tax refund balances the Government's need for the efficient collection of taxes with petitioner's concerns that the collection action be no more intrusive than necessary.
V. Section 6673 Penalty
In the Court's November 17, 2023, Order, the Court warned petitioner that it may impose a penalty up to $25,000 if he continued to institute or maintain a frivolous or groundless petition or institute or maintain a proceeding primarily for delay. I.R.C. § 6673(a)(1). Since that time petitioner has ignored the Court's warning and has filed numerous documents repeatedly making the same types of arguments that the Court has declared frivolous and the Court concludes that such filings were instituted or maintained primarily for delay. Accordingly, the Court will now impose sanctions on petitioner pursuant to I.R.C. § 6673(a)(1) in the amount of $2,500.
VI. Conclusion
In sum the Court concludes that there is not any genuine dispute as to a material fact and that respondent is entitled to judgment as a matter of law sustaining the notice of determination, upon which this case is based.
Premises considered, it is
ORDERED that respondent's Motion for Summary Judgment, filed May 29, 2024, is granted. It is further
ORDERED that petitioner is liable for a penalty to be paid to the United States pursuant to I.R.C. § 6673(a)(1) in the amount of $2,500. It is further
ORDERED AND DECIDED that respondent's seizure of petitioner's state tax refund as determined in the notice of determination dated June 5, 2023, upon which this case is based is sustained.
Petitioner is admonished that the Court will consider imposing further I.R.C. § 6673 penalties if he continues to make filings that raise a frivolous or groundless position or which the Court concludes are filed primarily to delay the proceedings in this case.