IntroductionWe, the Tax Return Team, maintain and will show in this article that the Internal Revenue Service (IRS) has gone absolutely “ape” by over-applying the § 6702 frivolous tax return penalty to a HUGE group of people it was never meant to apply to, especially since 2007. The results of our research below only apply if you have have been targeted in your individual capacity as a taxpayer. The two most common over-applications of the penalty are as follows:

• You submitted a tax return and the IRS claims it was frivolous; or• You submitted a Collection Due Process (CDP) hearing request, the IRS claims

it was frivolous, and you didnʼt amend it within 30 days.

In each of these instances, the IRS assesses you a $5,000 penalty (prior to 2007, it was $500), and forces you to go to Tax Court to prove that the assessment is invalid. Not only that, the IRS is “greasing the skids” on the Tax Court rules to shorten the time you have for discovery to support your contentions. Basically, you believe you have been unfairly assessed the penalty. The IRS REFUSES to tell you what was frivolous about what you did. The assessment is presumed correct. And youʼre supposed to figure out what you did wrong. Good luck!

So, the Tax Return Team undertook nearly two years of case law research to determine exactly what was going on with these assessments and how could they be fought, if at all. What we discovered will completely surprise you as it did us. And not only that, this paper will provide you the legal underpinnings to support a Tax Court petition, requests for admissions, request for production, and interrogatories.

We researched over 389 cases involving clear disputes with the factual elements of § 6702: person, sufficient information, correct math, non-frivolous position, no intent to delay or impede federal tax laws.

What we discovered was that in the vast majority of the cases, the term “person” was applied in § 6672 failure to withhold cases. We searched for anyone arguing “person” in a § 6702 frivolous tax return penalty case and NO ONE challenged this factual element of that law. This amazed me. Most argued they werenʼt on the “included” list, i.e., they werenʼt officers or employees of a corporation or a member of a partnership. The vast majority argued that they didnʼt have a responsibility to collect and withhold taxes as a § 6671(b) “person” was applied to § 6672 withholding cases.

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 1

When we did the research, we decided to maintain a strict focus where § 6671(b) “person” is explained or argued by itself without any accompanying “baggage” from its application to other statutes in Subchapter B. But before we get ahead of ourselves, letʼs look at the various penalties in Subchapter B (the list is long, so bear with us):

• § 6671. Rules for application of assessable penalties

• § 6672. Failure to collect and pay over tax, or attempt to evade or defeat tax

• § 6673. Sanctions and costs awarded by courts• § 6674. Fraudulent statement or failure to furnish

statement to employee• § 6675. Excessive claims with respect to the use of

certain fuels• § 6676. Erroneous claim for refund or credit• § 6677. Failure to file information with respect to

certain foreign trusts• § 6679. Failure to file returns, etc., with respect to

foreign corporations or foreign partnerships• § 6684. Assessable penalties with respect to liability

for tax under chapter 42• § 6685. Assessable penalty with respect to public

inspection requirements for certain tax-exempt organizations

• § 6686. Failure to file returns or supply information by DISC or former FSC

• § 6688. Assessable penalties with respect to information required to be furnished under section 7654

• § 6690. Fraudulent statement or failure to furnish statement to plan participant

• § 6693. Failure to provide reports on certain tax-favored accounts or annuities; penalties relating to designated nondeductible contributions

• § 6694. Understatement of taxpayerʼs liability by tax return preparer

• § 6695. Other assessable penalties with respect to the preparation of tax returns for other persons

• § 6695A. Substantial and gross valuation misstatements attributable to incorrect appraisals

• § 6697. Assessable penalties with respect to liability for tax of regulated investment companies

• § 6698. Failure to file partnership return• § 6699. Failure to file S corporation return• § 6700. Promoting abusive tax shelters, etc.• § 6701. Penalties for aiding and abetting

understatement of tax liability• § 6702. Frivolous tax submissions• § 6703. Rules applicable to penalties under

sections 6700, 6701, and 6702• § 6704. Failure to keep records necessary to meet

reporting requirements under section 6047(d)

• § 6705. Failure by broker to provide notice to payors

• § 6706. Original issue discount information requirements

• § 6707. Failure to furnish information regarding reportable transactions

• § 6707A. Penalty for failure to include reportable transaction information with return

• § 6708. Failure to maintain lists of advisees with respect to reportable transactions

• § 6709. Penalties with respect to mortgage credit certificates

• § 6710. Failure to disclose that contributions are nondeductible

• § 6711. Failure by tax-exempt organization to disclose that certain information or service available from Federal Government

• § 6713. Disclosure or use of information by preparers of returns

• § 6714. Failure to meet disclosure requirements applicable to quid pro quo contributions

• § 6715. Dyed fuel sold for use or used in taxable use, etc.

• § 6715A. Tampering with or failing to maintain security requirements for mechanical dye injection systems

• § 6716. Failure to file information with respect to certain transfers at death and gifts

• § 6717. Refusal of entry• § 6718. Failure to display tax registration on vessels• § 6719. Failure to register or reregister• § 6720. Fraudulent acknowledgments with respect

to donations of motor vehicles, boats, and airplanes• § 6720A. Penalty with respect to certain adulterated

fuels• § 6720B. Fraudulent identification of exempt use

property• § 6720C. Penalty for failure to notify health plan of

cessation of eligibility for COBRA premium assistance

• § 6721. Failure to file correct information returns• § 6722. Failure to furnish correct payee statements• § 6723. Failure to comply with other information

reporting requirements• § 6724. Waiver; definitions and special rules• § 6725. Failure to report information under section

4101

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 2

Did you see anything unique about this list? Weʼll tell you upfront that the list isnʼt exhaustive: three sections pertained to “taxpayers” as that term is defined in the code under 7701(a)(14)1. But we suggest two possibilities:

• Each of these penalties listed uses the term “person”; or• Itʼs obvious from the title that it applies to a business.

So why is § 6702(b) in this grouping? For one reason, itʼs a civil penalty. But note that itʼs neighbors are all business penalties. That foreshadows the understanding of the term “person” in § 6671(b).

Prior to 2007, a § 6702 frivolous tax penalty applied to any “individual.” However, after 2006 the frivolous tax submission penalty only applied to a specific “person,” a term defined in 26 U.S.C. § 6671(b).

Hereʼs how 26 U.S.C. § 6702 is defined today:(a) Civil penalty for frivolous tax returnsA person shall pay a penalty of $5,000 if—

(1) such person files what purports to be a return of a tax imposed by this title 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)—(A) is based on a position which the Secretary has identified as frivolous

under subsection (c), or(B) reflects a desire to delay or impede the administration of Federal tax

laws. [emphasis added]

Unfortunately, most people get so upset about being accused of taking a frivolous position (6702(a)(2)(A)) or conduct that reflects a desire to delay or impede (6702(a)(2)(B), that that they forget an even more important underlying element. So, they proceed to argue the sufficiency of their return: the return contains sufficient information to determine the correctness of the self-assessment (6702(a)(1)(A)) or that the information from the self-assessment is correct contrary to 6702(a)(1)(B).

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 3

1 26 U.S.C. 7701(a)(14) The term “taxpayer” means any person subject to any internal revenue tax.

Nobody has ever argued the predicate element of § 6702: whether or not they are the “person” liable for the penalty.

What is a predicate2 element? Itʼs something that must be proved before the rest of the statute has any relevance3.

For example, what if the statute read, “A DOG shall pay a $5,000 penalty if–”, would you consider arguing any of the other elements of § 6702 if youʼre not a dog? Of course not! You would deny being a DOG as defined in § 6702.

Thus, since youʼre not a DOG, all the subsequent language in the statute does not apply, is irrelevant, immaterial, and moot! Even IF you did everything thatʼs proscribed in § 6702 (an incorrect return that contains errors, a stated frivolous position, and intended to delay or impede federal tax laws), ITʼS IMMATERIAL IF YOU ARENʼT A DOG!!!

What everyone has missed is the predicate element of the § 6702: a “person.” Given that the term “person” is used, why doesnʼt anyone argue the factual elements of that term? If you donʼt meet the factual elements of being a liable “person” as defined in § 6671(b), then the subsequent language doesnʼt apply to you!

So, letʼs look the meaning of the term “person” defined in § 6671(b).

DefinitionsTitle 26, Subtitle F, Chapter 68, Subchapter B, section § 6671(b) defines the term “person” for civil penalties:

(b) Person definedThe 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.

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 4

2 Franklet v. United States, 578 F.Supp. 1552 (NDCA, 1984), aff'd, 761 F.2d 529 (9th Cir. 1985): “The IRS still bears the burden of proving by a preponderance all factual predicates for imposition of the penalty.”

3 Dictionary.com, 9. Logic. that which is affirmed or denied concerning the subject of a proposition.http://dictionary.reference.com/browse/predicate.

It stands to reason that Congress used this more specific term “person” instead of an all-inclusive word like “individual” to apply to the § 6702 penalty. One explanation is that the term “person” is narrower than “individual.” But the best explanation I found was from the Slodov case from the Supreme Court in 1978. They understood that Congress was trying to pierce the corporate shield and get to the individuals who were responsible for the performance of the act in respect of which the violation occurred.

As both the House and Senate Committees expressed it, "the application of this penalty is limited only to the collected or withheld taxes which are imposed on some person other than the person who is required to collect, account for and pay over, the tax."[12] Thus, by adding the 250 phrase modifying "person," Congress was attempting to clarify the type of tax to which the penalty section was applicable, perhaps inartfully, by reference to the duty of the person required to collect them.Slodov v. United States, 436 US 238 (1978) at 249, 250.

Youʼll note again that all the civil penalties we listed in the prior pages are targeting a business but when you read the text of the penalty, youʼll see that theyʼre really after a person. This is because an artificial person such as a corporation, trust, partnership, company, etc., cannot be held liable for penalties as such: only individuals can and only in their corporate capacity (weʼll explain this later).

There are three factual elements that must be proven in order for you to be considered a “person” within the meaning of § 6671(b). We argue they are the following:

1. A flesh and blood individual must have “committed the act.” It cannot be an artificial person that is a creature of the state, such as a corporation.

2. The individual must have had a duty; and3. The duty must be attached to the individualʼs position within a corporation or

connected to the individualʼs position with a corporation so as to be responsible for the performance of the act in respect of which the violation occurred.

The 1st Factual Element – One Must Be an IndividualOf the civil cases we reviewed nearly everyone claimed they weren't the "person" because they–

(1) weren't an employee;(2) weren't an officer;(3) weren't a member of a partnership; or(4) weren't tied to the corporation in any other position of authority (board of

directors, stock holder, human resources/payroll officer, etc.).

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 5

The courts uniformly ruled against these arguments showing that the the person possessed one of the key elements, i.e., he was an officer, or that they had a duty to collect, withhold, and pay-over taxes to the IRS (when applied to the §§ 6672 and 7702 cases), or that he was an individual that was targeted for the penalty.

Some tried to explain how "includes and including" didn't apply to them by demonstrating how statutory construction didnʼt allow them to be “included” in the list. They basically stated that the term “person” had a limit as to who could be included, or that the term "person" was a more limited expression of the term "person" found in § 7701(a)(1)4.

We will now argue that no matter what these people argued, they missed the key factual element that "includes and including" discusses: these people are individuals! Here's an example of how the 9th Circuit Court of Appeals treats "includes and including" with the definition of § 6671(b) "person":

The definition of "persons" in section 6671(b) indicates that the liability imposed by section 6672 upon those other than the employer is not restricted to the classes of persons specifically listed — officers or employees of corporations and members or employees of partnerships. "[B]y use of the word `include[s]' the definition suggests a calculated indefiniteness with respect to the outer limits of the term" defined. First National Bank In Plant City, Plant City, Florida v. Dickinson, 396 U.S. 122, 90 S.Ct. 337, 24 L.Ed.2d 312 (1969).Pacific National Insurance v. United States, 422 F. 2d 26 (9th Cir., 1970) at 30, 31

Whether we like it or not, the court is saying that "includes" really means an individual. But to remain constitutional, there must a limit "within the meaning of the term defined" as defined in 26 U.S.C. 7701(c)5. The 9th circuit court shows the limit two paragraphs later:

Indeed, the language itself does not require that they be officers or employees of the corporation at all, so long as they are in fact responsible for controlling 31

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 6

4 26 U.S.C. § 7701(a)(1): The term “person” shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.

5 26 U.S.C. § 7701(c), Includes and including: The terms “includes” and “including” when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.

corporate disbursements.[11] As we held in Graham, supra, 309 F.2d at 212, "the section must be construed to include all those so connected with a corporation as to be responsible for the performance of the act in respect of which the violation occurred."[6]

Pacific National Insurance v. United States, 422 F. 2d 26 (9th Cir, 1970) at 30, 31[footnote added]

We believe it's not a good idea to argue "includes and including" because it's the wrong issue! Don't let "includes and including" throw you off. Arguing "includes and including" or that one wasn't an "officer or employee, or a member of a partnership" are losing arguments. You will get no traction arguing these because these are so well-settled. The courts have shown that these are illustrative examples of a much greater set of people. They are not qualitative (limiting examples). So, includes and including is expansive within the meaning of the term defined and it's (constitutionally) limited by the two delimiters mentioned above.

In short, the Graham case shows is that § 6671(b) applies to any individual as long as they meet the other factual elements! But it also reveals the correct factual issues that need to be proved in order to be the § 6671(b) "person”. This is so clear that "duty" and "connected with a corporation" are the two fact elements that must be proved in order that one be the "person" within the meaning of § 6671(b).

Hereʼs a review of the fact issues that we have discovered:1. The penalty applies to a flesh-and-blood individual.2. The penalty is not targeted toward an artificial person that is a creature of the

state, such as a corporation.

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 7

6 What follows is the fuller case citation from Graham. Itʼs important to remember that the 9th Circuit was expressly defining what the term “person” from § 6671(b) meant.

In support of the district court Graham here contends that he was not a "person," as defined in § 6671(b), since he was simply a member of the corporation's board of directors, was not employed by the corporation and did not serve as an executive officer.[2]'

This is too narrow a reading of the section. The term "person" does include officer and employee, but certainly does not exclude all others. Its scope is illustrated rather than qualified by the specified examples. In our judgment the section must be construed to include all those so connected with a corporation as to be responsible for the performance of the act in respect of which the violation occurred.United States v. Graham, 309 F. 2d 210 (9th Cir, 1962)

The 2nd Factual Element – An Individual Must Have a DutyWhile reviewing the case law, the overwhelming cases involving an explanation of § 6671(b) were applied to § 6672, penalties where the person was required to collect, withhold, and pay-in taxes. But within those cases, there were some startling explanations of how the term "person" in § 6671(b) is applied with respect to duty.

FILING TAXES IS NOT THE “DUTY” REFERRED TO IN 6671(B)"Duty" under § 6671(b) has a much more focused meaning than the generalized duty of all taxpayers to pay taxes and is expressly limited to the duty that attaches to the position an employee holds within the corporation.US v. Burger, 717 F. Supp. 245 (SDNY, 1989)

YOUR POSITION WITHIN A CORPORATION DOESNʼT MATTERThe mere fact that an individual is a corporate officer [or employee] is not, by itself, sufficient to make that individual a responsible person within the definition of the statute.U.S. v. McCombs, 30 F.3d 310 (2nd Cir. 1994) [author's addition]

ONLY THOSE UNDER A DUTY CAN BE TARGETED WITH THE PENALTY[A] "person" includes an officer or employee of a corporation who "is under a duty to perform the act in respect of which the violation occurs" (Sections 6671(b), 6672, Code). Not every "officer" or "employee" of a corporation is subject to the "penalty" but only if he be "under a duty to perform the act,"...Botta v. Scanlon, 288 F. 2d 504 (2nd Cir. 1961)

Here's what we can conclude from the prior case law:

• The duty in § 6671(b) has focused meaning;• It doesn't apply to the individual taxpayer as a rule;• It is limited to those who had a duty attached to their position within a corporation;• Not everyone who is an officer [or employee] of a corporation has a duty; and• Simply being employed in a corporation doesn't make someone responsible

either.

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 8

The 3rd Factual Element – The Duty Must Be Connected to a CorporationUp until now, we've shown that not everyone is a § 6671(b) "person" within the meaning of the law. Just being an employee or an officer within a corporation is not sufficient to establish that one is a "person". Having a duty to file a tax return is not sufficient to show duty, either. And the case law continues by saying that the duty must be attached to a corporation [or partnership] or connected with a corporation [or partnership].

Below are a series of cases that reinforce the idea that duty must be connected with a corporation, as opposed to any general duty of an individual in his individual capacity.

The term "person" does include officer and employee, but certainly does not exclude all others. Its scope is illustrated rather than qualified by the specified examples. In our judgment the section must be construed to include all those so connected with a corporation as to be responsible for the performance of the act in respect of which the violation occurred.United States v. Graham, 309 F. 2d 210 (9th Cir. 1962)

and,

As we held in Graham, supra, 309 F.2d at 212, "the section must be construed to include all those so connected with a corporation as to be responsible for the performance of the act in respect of which the violation occurred"Pacific National Insurance v. United States, 422 F. 2d 26 (9th Cir. 1970)

and,

"[T]he section must be construed to include all those so connected with a corporation as to be responsible for the performance of the act in respect of which the violation occurred." United States v. Graham, 309 F.2d 210, 212 (9th Cir. 1962).Dudley v. United States, 428 F. 2d 1196 (9th Cir. 1970)

and,

The word "person" is said in Section 6671(b) to include

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 9

"* * * 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."

Section 6671(b) has been read not to be exclusive:"In our judgment the section must be construed to include all those so connected with a corporation as to be responsible for the performance of the act in respect of which the violation occurred." United States v. Graham, 9 Cir., 1962, 309 F.2d 210, 212.

U.S. v. Moore, et. al., 368 F.2d 617 (5th Cir. 1963)

and,

Section 6671(b) has been read not to be exclusive:"In our judgment the section must be construed to include all those so connected with a corporation as to be responsible for the performance of the act in respect of which the violation occurred." United States v. Graham, 9 Cir., 1962, 309 F.2d 210, 212.United States v. Hill, 368 F. 2d 617 (5th Cir. 1966)

and,

A similar contention was answered by the Ninth Circuit, as follows:

"Graham next contends that he was not a person under § 6672 `required to collect, truthfully account for, and pay over' the taxes in question, since he was not a disbursing officer of the corporation and had no authority to draw or sign checks on the corporation's bank account."This again, we feel, is too narrow a construction. The statute's purpose is to permit the taxing authority to reach those responsible for the corporation's failure to pay the taxes which are owing. It would make little sense to confine liability to those performing the mere mechanical functions of collection and payment when such functions are performed simply in accordance with the executive judgment of others whose duty it is to decide for the corporation in this area." United States v. Graham, 9 Cir. 1962, 309 F.2d 210, 212.

Liddon v. United States, 448 F. 2d 509 (5th Cir 1971)

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 10

and,

In United States v. Graham, 309 F.2d 210 (1962), the Ninth Circuit held that a director could be liable under § 6672, saying that the word "person" was not strictly limited to officers and employees, but included "all those so connected with a corporation as to be responsible for the performance of the act in respect of which the violation occurred." Id. at 212.Botta v. Scanlon, 314 F. 2d 392 (2nd Cir. 1963)

SUMMARYGraham is cited by three different courts of appeal (2nd, 5th, and 9th) without modification and using the exact same application and interpretation. We believe it is well-established that the duty an individual has must be connected with a corporation [or partnership] or attached to one's position within a corporation [or partnership].

Factual Elements of § 6671(b) “Person”:1. The penalty is targeted toward a flesh-and-blood individual. It is not targeted at

an artificial person that is a creature of the state, e.g., a corporation.2. The individual targeted must have a duty to perform some act that is the object of

the penalty.3. The duty must be attached to the individualʼs position within the corporation or so

connected with a corporation [or partnership] as to be responsible for the performance of the act in respect of which the violation occurred.

Now that you know the factual elements that you must possess for the Commissioner to believe he can assess you a frivolous tax return penalty, getting him to believe you is totally different issue!

FIGHTING THE PENALTY IN A CDP HEARINGThe worst thing about fighting the Commissioner in any proceeding is that his assessments, no matter how stupid, no matter how they are arrived at, no matter how wrong, enjoy a presumption of correctness. Supposedly, in a Collection Due Process (CDP) hearing, you are supposed to be able to challenge the underlying liability of the frivolous tax return penalty. In effect, you are the guilty party trying to establish your innocence by claiming youʼre not the § 6671(b) “person” liable for the penalty.

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 11

One way to challenge the underlying liability is to challenge how the Commissioner arrived at his assessment. And the bad news is that heʼs already made the determination that youʼre the liable “person” who can be assessed the penalty. The good news for you is that he has the burden of proof in any proceeding with regard to the frivolous tax return penalty:

§ 6703. Rules applicable to penalties under sections 6700, 6701, and 6702

(a) Burden of proofIn any proceeding involving the issue of whether or not any person is liable for a penalty under section 6700, 6701, or 6702, the burden of proof with respect to such issue shall be on the Secretary. [emphasis added]

So, even in a CDP hearing, the Commissioner has the burden of proof that you meet all the factual elements of § 6671(b) “person” liable for a frivolous tax return penalty. Since the issue of first being liable is a predicate issue, he has the burden to prove all the factual elements regarding it.

If we were to write in a CDP hearing petition on a Form 12153, in block 7, weʼd simply write that the Commissioner has failed to prove that you are liable for the frivolous tax return penalty. When they write back and ask if there is any additional information you wish to share regarding your hearing, weʼd consider the following:

• I deny I had a duty attached to my position with Company so as to be responsible for filing a frivolous tax return7.

• I deny I had a duty connected with a corporation so as to be responsible for filing a frivolous tax return8.

• In respect to Company,–

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 12

7 "Duty" under § 6671(b) has a much more focused meaning than the generalized duty of all taxpayers to pay taxes and is expressly limited to the duty that attaches to the position an employee holds within the corporation.US v. Burger, 717 F. Supp. 245 (SDNY, 1989)

8 The term "person" does include officer and employee, but certainly does not exclude all others. Its scope is illustrated rather than qualified by the specified examples. In our judgment the section must be construed to include all those so connected with a corporation as to be responsible for the performance of the act in respect of which the violation occurred.United States v. Graham, 309 F. 2d 210 (9th Cir. 1962)

• I deny possessing a duty more specific than the generalized duty of all taxpayers to pay taxes9.

• As an employee, I deny I had a position that makes me responsible within the meaning of § 6671(b)10.

• I deny being under a duty to file returns within, on behalf of, or connected with Company11.

The CDP settlement officer will do one of two things: (1) he will declare your argument is frivolous; or (2) he will declare that they donʼt have to prove anything at the hearing.

Your Argument Is FrivolousJust beware that “frivolous” is the institutional posture of the IRS. If you have anything factual to bear, especially if itʼs the truth, then the IRS will simply make a declaration that itʼs frivolous and completely ignore everything you have to say. Remember, when the Commissioner or an agent speaks on his behalf, he has the presumption of correctness. But hereʼs the rub, 26 U.S.C. 6671(b) “person” is nowhere on the Commissionerʼs published frivolous positions list12. And you wonʼt find it on the Commissionerʼs web site, either13 .

The very fact that they will claim your argument is frivolous just goes to show what lengths they will go to prevent the truth from seeing the light. But you can rest easy knowing that your issue is the truth and the IRS will steadfastly refuse to listen to the truth.

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 13

9 Berger, Ibid.

10 The mere fact that an individual is a corporate officer [or employee] is not, by itself, sufficient to make that individual a responsible person within the definition of the statute.U.S. v. McCombs, 30 F.3d 310 (2nd Cir. 1994) [author's addition]

11 Not every "officer" or "employee" of a corporation is subject to the "penalty" but only if he be "under a duty to perform the act,"…Botta v. Scanlon, 288 F. 2d 504 (2nd Cir. 1961)

12 Internal Revenue Bulletin: 2008-14, Notice 2008-14, Frivolous Positions, http://www.irs.gov/irb/2008-04_IRB/ar12.html

13 Frivolous Tax Arguments in General: http://www.irs.gov/taxpros/article/0,,id=159932,00.html

Burden of ProofJust keep repeating to yourself, “The Commissioner has the burden of proof.” Besides, you know this to be true because 26 U.S.C. § 6703 says so14. So you must push the settlement technician to meet that burden of proof. They will deny that they have to prove anything. They will maintain that they have followed all their procedures correctly and that the Commissioner properly assessed the penalty against you.

In other words, you might as well talk to a brick wall. This has been our experience. They refuse to listen. Everything you say is frivolous. They donʼt have to meet their burden of proof contrary to law.

So donʼt be surprised when you get your Notice of Determination stating that the IRS did everything right, the penalty was properly assessed, and you only made frivolous arguments. You have 30 days to appeal the decision to Tax Court.

Our Experience Regarding a CDP HearingItʼs a whitewash. It meets the letter of the law without meeting the spirit. The IRS had its opportunity to pull the cotton out of its ears and stop screaming “FRIVOLOUS!” long enough to hear what you had to say. But what weʼve seen is that the IRS wants you in Tax Court where they enjoy a 98% or higher win rate.

Our Tax Court ExperienceWhy They Want You in Tax CourtThey know they can out-procedure you. They have an extremely biased judicial staff that will stop at nothing to give the IRS every benefit while denying you due process, discovery, production, and interrogatories. They will deny every motion you make without comment. They will hold you to a higher standard than they hold others, including other professional attorneys. They do not want to listen.

Youʼll see a case where the judge actually changed the words of the law the penalty could be charged against a “taxpayer,” instead of the “person” as the law actually states. Youʼll see the judge deny the petitioner the right to amend his petition even though it met the Internal Revenue Manualʼs guidelines to Tax Court and accepting amended petitions. Youʼll see the judge accept a summary judgment motion on the part of the IRS (respondent) before discovery has completed, contrary to the Supreme Court and every

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 14

14 26 U.S.C. 6703(a): In any proceeding involving the issue of whether or not any person is liable for a penalty under section 6700, 6701, or 6702, the burden of proof with respect to such issue shall be on the Secretary.

circuit court in the country. Youʼll see the substantive response made by the petitioner and see the judge act completely deaf to the petitioner. Youʼll see the IRS submit unauthenticated (inadmissible) evidence to support a summary judgment and the court allows it into the record over the petitionerʼs motion to strike. Youʼll see the judge actually claim that denying that you are a “person” pursuant to § 6671(b) is a frivolous position and fine the petitioner $2,500 for wasting the courtʼs time.

Why Do You Want to Go to Tax Court?Is the only administrative remedy you have! If you donʼt challenge the penalty in Tax Court, the frivolous tax return assessment becomes final and payable upon demand. Also, Tax Court can review the Notice of Determination de novo, that is, they can review it as if you are presenting your facts for the first time, as long as you brought up those issues in your CDP hearing.

Hereʼs What Weʼd Write on Our Tax Court Petitions

ASSIGNMENT OF ERRORS

I dispute the Notice of Determination (“NOD”) based on the

following errors:

1. The Commissioner has not met his burden of proof with

regard to the frivolous tax return penalty.

2. He failed to prove that I am the § 6671(b) “person”

liable for the frivolous tax return penalty, the predicate

element of the 26 U.S.C. § 6702.

FACTS

I rely on the following facts in alleging errors by the

Commissioner:

3. The Commissioner has the burden of proof to sustain a

frivolous tax submission penalty.

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

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4. The Commissioner must prove with a preponderance of

the evidence all the predicate elements of the frivolous

tax submission penalty that apply to me.

5. A predicate element of the frivolous tax submission

penalty is that I must be the liable § 6671(b) “person.”

6. The Commissioner has the burden to prove that I am

the liable § 6671(b) “person.”

7. The Commissioner has the burden to prove that I meet

all the factual elements of § 6671(b).

8. I was not under a duty attached to my position within

Company so as to be responsible for filing a frivolous tax

return.

9. I was not under a duty connected with Company so as

to be responsible for filing a frivolous tax return.

10. I did not have a specific duty within, on behalf of,

or connected with Company.

Moving ForwardI hope Iʼve presented enough information to show that the Tax Return Team has something useful we can offer you.

Please go to our web site, Tax Return Team, and, if youʼre interested, consider becoming a member.

You Are NOT the “Person” Liable for a Frivolous Tax Return Penalty

Tax Return Team # 16