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.

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.