Did You Get Hit with a Frivolous Return Penalty?
Posted on: February 28, 2009 by: admin
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Internal Revenue Manual 8.22.2.2.12.2 (10-30-2007)
Section 6702 Frivolous Return Penalties and Questionable W-4 Penalties
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 section 6702 penalty on the ground that the assessments were not personally approved in writing in accordance with section 6751(b).
3. Section 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 section 6751(b)(2)(B) that provides that managers need not approve any addition to tax under section 6651, 6654, or 6655, or any other penalty automatically calculated through electronic means. The assessment of a section 6702 penalty does not qualify as one calculated through electronic means defined by Section 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.
5. Example of a valid reason for abating the frivolous return penalty:
Example:
A taxpayer who is duped by a person who he/she thought was a legitimate tax advisor into filing frivolous returns. Upon receiving CDP Notices and talking to an IRS representative, they file complete and correct returns and agree to pay the tax.
To find out if the IRS has followed their internal procedures with respect to you and a frivolous return penalty, order my Golden FOIAs here.
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I am a CtC (Cracking the Code) filer and have been issued the dreaded 3176(SC) letter with a $5000 penalty. A lot of us on the forum are trying to deal with what to do to get them to respond. It seems that whatever we respond with they simply ignore or throw in the waste basket. I read a post that talked about you and was going to buy your golden FOIA’s. It seems you truly have a remedy. I to will make this purchase. But what I would like to understand is if I do not understand something, is it possible for me to write and get a clear meaning if I need help. Lot of folks over at lost horizons that need help. If I can beat this penalty B.S. I will certainly tell all where to come for help.
Gary: I am always available to answer a quick question. I also am available to hire out for a phone conference. My number is in the logo at the top of the blog. Bear
“It seems that whatever we respond with they simply ignore or throw in the waste basket.”
Gary: I also recommend going to http://www.irslevythumper.com and listening to the conference call. I have always felt like notices of intent to sue generated pursuant 26 U.S.C. § 7433 get read by somebody having authority to take action on your behalf to avoid the suit.
Can You Be Charged A Frivolous Return Penalty?
By Darrell Berg
5 May 2009
Who can be charged a ffrivolous return penalty under the Internal Revenue Code? Can EVERYBODY, regardless of who they are be charged? They can if they have the necessary attribute as specified in the law! Here is the definition of who can be charged with a frivolous return penalty:
TITLE 26—INTERNAL REVENUE CODE
Subtitle F—Procedure and Administration
CHAPTER 68—ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE PENALTIES
Subchapter B—Assessable Penalties
§ 6671. Rules for application of assessable penalties
(b) Person defined
The term “person”, as used in this subchapter, includes an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.
There are several notable things about this definition. First, that the Congress went to the trouble to craft a “term of art” shows clear intent that the term “person” have a definite meaning. Second, the definition generally contemplates an organized enterprise of two or more individuals and within the organized enterprise an individual responsible for tax matters compliance under the internal revenue code. “Generally” is a direct consequence of the Congress inserting the term “includes” for it is clear that the intent was not to limit the organized enterprise to the things enumerated- the corporation or partnership. This is so because the term “includes” is a term of art that “…shall not be deemed to exclude other things otherwise within the meaning of the term defined.” (26 U.S.C. § 7701(c)). And, while the definition does not purport to limit the organized enterprise to the examples given, the definition by its terms, in combination with Congress’s clear intent that the term “person” have a definite meaning, is necessarily limited in scope.
Thus, as a matter of law, there are two factual elements to the term “person”: 1) an organized enterprise and 2) a responsible individual within that enterprise . These factual elements must be accounted for in the assessment for any frivolous return penalty.