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The 6020(b) Requirement For The Assessment Of "Frivolous Return" Penalties

Even the feds have to put up, or shut up, under the law

OVER THE YEARS I'VE WRITTEN QUITE A BIT about the statutory requirement for the government's production of it's own return when it actually believes a submitted return is "frivolous". The reason for that requirement, which is codified at 26 U.S.C. § 6020(b), is to allow a proper amount of tax to be collected, something not possible from an actually frivolous return (which will be one not soundly based on the law, and therefore not capable of conveying or creating a valid legal claim to an amount of tax).

Section 6020(b) exists to provide for authority to create a valid basis for the government's claims in any case in which the person who will be liable for the tax fails to do so by self-assessment on his or her own, whether by not filing at all, or by filing, willfully or otherwise, a false or fraudulent return-- which language extends coverage to any return which does not contain an accurate assessment:

26 U.S.C. § 6020 Returns prepared for or executed by Secretary

(b) Execution of return by Secretary

(1) Authority of Secretary to execute return

If any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.

"[T]he purpose of section 6020(b)(1) is to provide the Internal Revenue Service with a mechanism for assessing the civil liability of a taxpayer who has failed to file a return, [or, mutatis mutandis, filed what the government deems to be a "false or fraudulent" return]...”

 United States v. Lacy, 658 F.2d 396 (5th Cir. 1981) (citing United States v. Harrison, 486 F.2d 1397 (2d Cir. 1972)

The regulations associated with the section explicitly add "frivolous" to the mix, recognizing that a return for which no basis in law exists falls within the ambit of a return which is, willfully or otherwise, false or fraudulent (and in any event is within the manifest intent of Congress in enacting this statute, since it creates the same need for a valid instrument by which a government claim can be supported):

26 C.F.R. § 301.6020-1(b) Execution of returns-

(1) In general.

If any person required by the Internal Revenue Code or by the regulations to make a return ... fails to make such return at the time prescribed therefore, or makes, willfully or otherwise, a false, fraudulent or frivolous return, the Commissioner or other authorized Internal Revenue Officer employee shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.

Proper CtC-educated returns are not frivolous, of course (nor false or fraudulent-- and certainly are not unfiled). Thus not a single 6020(b) return has ever been shown to have been created in response to educated returns.

Though normally it's hard to prove a negative like that statement above, here it's easy. No such returns have been produced even in the case of my and my wife's own returns, which as everyone knows, have been the subject of intense attention by the government for more than a decade.

This fact was admitted by a DOJ attorney on the stand as a government witness in my wife Doreen's second trial, just after the judge and prosecutor in the case each lied to the jury about the content of § 6020(b), perhaps in hope of confusing the jury about the significance of such returns having not been made. It is also shown (by lack of any relevant entries) in the Treasury Dept. Certificates and IRS transcripts concerning our filings for 2002 and 2003, filings which the government has spent hundreds of thousands of dollars trying to compel Doreen and me to change to what it wishes said but can't honestly say for itself.

All told, then, when what the government believes are actually "frivolous" returns, are filed, the government must create its own alternatives, in order to collect what it believes is the proper tax due. CtC-educated returns simply do not qualify and do not prompt the creation of such returns.

BUT TODAY I'M NOT FOCUSING on the mandate to create returns for the collection of a proper tax on "income". Today I'm focused on the fiction asserted by trolls across the internet and shameless scoundrels within the IRS that CtC-educated returns prompt "frivolous return penalties".

This fiction is promoted in order to frighten educated Americans from acting on what they know, imagining them to be children who would give up their rights and the rule of law just out of fear that preserving them might come at a cost. It is also promoted to dissuade Americans who don't already know the truth from going to the trouble to learn it.

Happily, the first of these purposes is routinely frustrated. Americans are NOT children, and this is especially true of those who have learned the truth about the tax.

On the other hand, the second purpose has unfortunately had some success, where the fiction about "penalties" has gone unrebutted. This is a real shame, because all that is needed to rebut this false and harmful nonsense is a little clear thinking and observation.

Again, the fact that my own returns have never prompted such penalties stands as sufficient evidence by itself that CtC-educated filings do not qualify. (Indeed, in 2006 the head of the IRS Ogden Frivolous Return Program wrote a declaration-- as part of the CtC-suppression campaign discussed here-- regarding mine and Doreen's 2002 and 2003 returns. This official dances around the subject a great deal but carefully avoids ever declaring our returns to be "frivolous". See the relevant portions of this declaration here, and an analysis filed in response here.)

HOWEVER, DESPITE THE FACT that CtC-educated returns do not qualify for the penalty, some educated filers have been harassed by rogue agents in the IRS with threats of such penalties. Some folks have even had acknowledged overpayments kept from them by the diversion of their money to what will be shown below to be completely fraudulent assertions of "frivolous return penalty" liabilities.

It is these threats (which are sometimes made to look as though the penalties have actually been assessed) and this harassment that fuels the troll-droppings that turn some folks away from the path to learning the truth. It is the misunderstanding about the true nature of these threats and this harassment that keep many folks from becoming part of the solution to the corrupt, systematic misapplication of the tax by which so much harm has been wreaked on America for the last 75 years.

These rumors and the misunderstanding that fuels them must end. Showing what the law requires in regard to these penalties will equip anyone subjected to this harassment to respond to it properly, and will equip everyone else to send the trolls back into the dank darkness under the bridge (or the rock) from beneath which they have crawled.

So, let's parse this out:

IT'S THIS SIMPLE, FOLKS: A sworn and signed 6020(b) return declaring liability for the penalty is a core requirement for the assessment of the penalty. Period. The law is perfectly clear on this requirement.

The "frivolous return" penalty provided for at 26 U.S.C. § 6702 is to be assessed in the same manner as the income tax generally:

26 U.S.C. § 6671. Rules for application of assessable penalties

(a) Penalty assessed as tax

The penalties and liabilities provided by this subchapter [which includes section 6702 -PH] shall be paid upon notice and demand by the Secretary, and shall be assessed and collected in the same manner as taxes. Except as otherwise provided, any reference in this title to “tax” imposed by this title shall be deemed also to refer to the penalties and liabilities provided by this subchapter.

Taxes (other than a couple of exceptions concerning stamp taxes and criminal restitution) can only be assessed per a return or list:

26 U.S.C. § 6201 - Assessment authority

(a) Authority of Secretary

The Secretary is authorized and required to make the inquiries, determinations, and assessments of all taxes (including interest, additional amounts, additions to the tax, and assessable penalties) imposed by this title, or accruing under any former internal revenue law, which have not been duly paid by stamp at the time and in the manner provided by law. Such authority shall extend to and include the following:

(1) Taxes shown on return

The Secretary shall assess all taxes determined by the taxpayer or by the Secretary as to which returns or lists are made under this title.

"List" doesn't mean "recording a liability on a list with a bunch of others", or anything like that. For purposes of this statutory specification, it means what is described in Revised Statute 3176, as amended by Section 1103 of the Revenue Act of 1926. That constitutes the actual statutory authority from which 26 U.S.C. § 6201 is derived-- that is, the actual authority under which the United States is permitted to collect taxes:

Sec. 3176. The collector or any deputy collector in every district shall enter into and upon the premises, if it be necessary, of every person therein who has taxable property and who refuses or neglects to render any return or list required by law, or who renders a false or fraudulent return or list, and make, according to the best information which he can obtain, including that derived from the evidence elicited by the examination of the collector, and on his own view and information, such list or return, according to the form prescribed, of the objects liable to tax, owned or possessed or under the care or management of such person, and the Commissioner of Internal Revenue shall assess the tax thereon, including the amount, if any, due for special tax, and in case of any return of a false or fraudulent list or valuation, he shall add one hundred per centum to such tax; and in case of a refusal or neglect, except in case of sickness or absence, to make a list or return, or to verify the same as aforesaid, he shall add fifty per centum to such tax. In case of neglect occasioned by sickness or absence as aforesaid, the collector may allow such further time for making and delivering such list or return as he may deem necessary, not exceeding thirty days. The amount so added to the tax shall, in all cases, be collected at the same time and in the same manner as the tax; and the list or return so made and subscribed by such collector or deputy collector shall be held good and sufficient for all legal purposes.

Here is the amending language to Sec. 3176 enacted in the 1926 Revenue Act:

SEC. 1103. Section 3176 of the Revised Statutes, as amended, is amended to read as follows:

     "SEC. 3176. If any person, corporation, company, or association fails to make and file a return or list at the time prescribed by law or by regulation made under authority of law, or makes, willfully or otherwise, a false or fraudulent return or list, the collector or deputy collector shall make the return or list from his own knowl- edge and from such information as he can obtain through testi- mony or otherwise. In any such case the Commissioner of Internal Revenue may, from his own knowledge and from such information as he can obtain through testimony or otherwise, make a return or amend any return made by a collector or deputy collector. Any return or list so made and subscribed by the Commissioner, or by a collector or deputy collector and approved by the Commissioner, shall be prima facie good and sufficient for all legal purposes.

     "If the failure to file a return (other than a return under Title II of the Revenue Act of 1924 or Title II of the Revenue Act of 3926) or a list is due to sickness or absence, the collector may allow such further time, not exceeding 30 days, for making and filing the return or list as he deems proper.

     "The Commissioner of Internal Revenue shall determine and assess all taxes, other than stamp taxes, as to which returns or lists are so made under the provisions of this section. In case of any failure to make and file a return or list within the time prescribed by law, or prescribed by the Commissioner of Internal Revenue or the collector in pursuance of law, the Commissioner shall add to the tax 25 per centum of its amount, except that when a return is filed after such time and it is shown that the failure to file it was due to a reasonable cause and not to willful neglect, no such addition shall be made to the tax. In case a false or fraudulent return or list is willfully made, the Commissioner shall add to the tax 50 per centum of its amount.

     "The amount so added to any tax shall be collected at the same time and in the same manner and as a part of the tax unless the tax has been paid before the discovery of the neglect, falsity, or fraud, in which case the amount so added shall be collected in the same manner as the tax."

OK, so we have seen that:

  • The "frivolous" penalty must be assessed as a tax like any other under 26 USC.

  • The assessment of such taxes can only be per a return or list.

As will have been noted in the enacting language of R.S. 3176-- both in the original and as amended, such a return or list must be subscribed in order to be legally effective:

...the list or return so made and subscribed by such collector or deputy collector shall be held good and sufficient for all legal purposes. [Original]

Any return or list so made and subscribed by the Commissioner, or by a collector or deputy collector and approved by the Commissioner, shall be prima facie good and sufficient for all legal purposes. [As amended]

So, really what we've got so far is:

  • The "frivolous" penalty must be assessed as a tax like any other under 26 USC.

  • The assessment of such taxes can only be per a return or list.

  • A return or list on which a penalty can be assessed must be subscribed (and since we're not talking about "objects liable to tax" about which lists are made, we'll just stick with "returns" from now on...).

Now, "subscribed" by itself only means "signed" in everyday useage. But in the case of returns required for assessment of a penalty, "signed" means "signed under oath":

26 U.S.C. § 6065 Verification of returns

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.

There is no "otherwise provided" exception for the creation of returns concerning "frivolous penalties"-- in fact, the regulations specifying such returns in particular are comprehensive, and carefully make no such exception:

26 C.F.R. § 301.6020-1(b) Execution of returns-

(1) In general.

If any person required by the Internal Revenue Code or by the regulations to make a return ... fails to make such return at the time prescribed therefore, or makes, willfully or otherwise, a false, fraudulent or frivolous return, the Commissioner or other authorized Internal Revenue Officer employee shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise. ...

(2) Form of the return.

A document (or set of documents) signed by the Commissioner or other authorized Internal Revenue Officer or employee shall be a return for a person described in paragraph (b)(1) of this section if the document (or set of documents) identifies the taxpayer by name and taxpayer identification number, contains sufficient information from which to compute the taxpayer's tax liability, and purports to be a return.

So now we have a critical additional element which must be present and accounted for before a "frivolous return penalty" can actually be assessed: a sworn signature, putting a government official at risk of the penalties of perjury if he or she is falsely (or negligently) asserting that the government has a valid claim to seize property from someone else.

It is only with the acceptance of such a risk that claims against someone else's property of this kind can be made legally valid.* This is the whole point and purpose of 26 U.S.C. § 6020(b): authorizing and requiring government officials to properly assert government ownership-interests and claims against those of other people, which the states must do in the same way any citizen would assert interests and claims.

Let's do another recap, then:

  • The "frivolous" penalty must be assessed as a tax like any other under 26 USC.

  • The assessment of such taxes can only be per a return.

  • A return on which a penalty can be assessed must be sworn under penalties of perjury.

What this all means, of course, is that if no sworn return asserting the "frivolous return penalty" exists, no such penalty can be, or has been, lawfully assessed.

SO, WHAT DOES THIS MEAN IN PRACTICAL TERMS? First of all, it means that where no actual sworn 6020(b) return exists no filed return has been actually even alleged-- much less "determined"-- to be "frivolous". The making of a sworn 6020(b) return is the legal and legally-required means by which such an allegation is made, according to the law; there is no other mechanism provided by which this allegation can be made.

 Second, this means if you or anyone you know has been a victim of "penalty" threats or harassments, this bad behavior can and should be challenged on the basis of fundamental invalidity unless sworn returns asserting the government's claims can be proven to have preceded them. If there are no sworn 6020(b) returns, there can be no legally-applicable penalties and none have actually been assessed, whatever the scary notices from the tax agency might be designed to suggest.

It also means that where those sworn returns can't be shown to exist, any rumor about educated returns drawing actual penalties should be denounced as the false troll-spew it is.

More importantly than all the foregoing, perhaps, the facts and law concerning "frivolous" status and the requirements of 6020(b) mean that any threats or harassment by tax agency actors involving "frivolous return penalties" (or the treatment of any filing as "frivolous" in any other way) are almost certainly crimes of some kind, and/or actionable civilly.

SO, IF YOU'VE BEEN THREATENED OR HARASSED or had a claimed refund delayed or denied on the declared basis that the related filing was "frivolous", get your FOIA requests in seeking any evidence of 6020(b) returns. This will equip you with proof that there are none, with all the implications and legal utility of that fact.

And whether you have a direct, personal matter to attend to this way or not, raise your voice about all this. Denounce the trolleries about CtC-educated returns and "frivolous return penalties", and encourage your friends and neighbors to get educated and stand up for the law.

"If the taxpayers of this country ever discovered that we operate on 98% bluff, the entire system will collapse."

-Reported remark by an internal revenue service officer to Sen. Henry E. Bellmon (R. Okla.) on April 15, 1971.

 

"The Tax Code represents the genius of legal fiction...  The IRS has never really known why people pay the income tax... The IRS encourages voluntary compliance, through FEAR."

-Jack Warren Wade Jr., former IRS officer in charge of the IRS Nationwide Revenue Officer Training Program, in his book ‘When You Owe The IRS’

*This doesn't mean that such claims automatically are valid, once made according to the prescribed form, of course. But they cannot be legally valid if not made according to these requirements.

P.S. To read a detailed analysis of what really qualifies for "frivolous return" penalties, see the material here. To see a very telling hoax (or fraud, as some would see it) deployed by the IRS in its sporadic efforts to frighten some folks with threats of these penalties, see the write-ups here and here.

Those who have submitted testimonial videos as described here and earned access to restricted assets on this site can study the entire statutory history of 6020(b) returns here. More on the subject of 6020(b) returns can be found here and here.

*****

A Bit More About 6020(b) and FRPs

IN THE ANALYSIS ABOVE I DRILL-DOWN on the legal relationship between the mandate at 26 U.S.C. § 6020(b) and the imposition of the so-called "frivolous return penalty". Among other things, this analysis points out that a 6020(b) return is the exclusive mechanism provided in the law for initiating an effort to assess a "frivolous return" penalty pursuant to the provisions at 26 U.S.C. § 6702.

In this brief follow-up I want to talk a little further about this relationship. I'm going to focus now particularly on the harmony between the "required" element of 6020(b) and the "duty" element of 26 U.S.C. § 6671(b), the section of law identifying the "person" to whom the "frivolous return" penalty (FRP) can apply.

This examination will help illustrate and emphasize the limits of the sub-class of persons able to be properly subjected to an FRP. As a side benefit, the exercise will also help debunk nonsense by the tax-scam beneficiaries and their hired legal guns about the legal meaning of "includes", a term which is deployed in the definition of that "person" sub-class.

THE MANDATE IMPOSED UPON THE UNITED STATES AT 26 U.S.C. 6020(b) provides for the production of a sworn return signed by a government official whenever a required return is either unmade, or is false or fraudulent, willfully or otherwise-- a prescription that is deemed by the Secretary of the Treasury to extend also to cases in which a required, filed return is "frivolous".

Here is the language of the statute:

26 U.S.C. § 6020 Returns prepared for or executed by Secretary

(b) Execution of return by Secretary

(1) Authority of Secretary to execute return

If any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.

and the regulatory extension:

26 C.F.R. § 301.6020-1(b) Execution of returns-

(1) In general.

If any person required by the Internal Revenue Code or by the regulations to make a return (other than a declaration of estimated tax required under section 6654 or 6655)  fails to make such return at the time prescribed therefore, or makes, willfully or otherwise, a false, fraudulent or frivolous return, the Commissioner or other authorized Internal Revenue Officer employee shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.

As seen, it is "required" returns that potentially invoke the 6020(b) mandate. Because FRPs can only be assessed through the mechanism of a 6020(b) return (due to the necessity of a return for the assessment of the penalty, per 26 U.S.C. 6671(a) and 6201(a)(1) and because 6020(b) is the sole authority for the production of such a return), this means that per the terms of 6020(b) only "required" returns are capable of drawing the "frivolous return" penalty.

Now let's look at the statutory specifications for the application of the FRP:

26 USC § 6702 - Frivolous tax submissions

(a) Civil penalty for frivolous tax returns

A person shall pay a penalty of $5,000 if—

...

and,

26 USC § 6671 - Rule 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.

Here we find, harmoniously, that the definition establishing the class of persons to whom the FRP can apply confines that class to those creating "required" returns (that is, those who are duty-bound to create the returns in question). The specifications of 6020(b) and 6671(b) are thus fully in synch-- the authority for the government-produced returns needed to assess the penalty only allows for them in regard to required returns, and only those who have produced required returns are capable of being subjected to the penalty.

But there's more to be had from this than just admiration for the synchronicity. Because of this harmony between 6020(b) and 6671(b), we are also treated to a nice demonstration of the proper construction of "includes", something of which there can never be too much.

It is self-evident that the definition at 6671(b) of those capable of being subject to the penalty is limited, simply by the fact that a subject class is defined at all. Under no circumstances are statutory definitions provided for things which are all-inclusive, or which retain their common meaning.

Usually that logic of statutory construction practices, and canons of interpretation, and the terms of 26 U.S.C. 7701(c) are all that is available to establish the limited scope of what is defined, and the meaning and effect of the "includes" which appears in their expression. But here we are given a bit more.

Here, we have in 6020(b) a specification located outside those written particularly for the application of the FRP which itself imposes a limitation on the "persons" capable of being subject to the penalty. This limitation is precisely the same as that of 6671(b)-- when we read it as defining the entire class of those subject to the penalty.

The reciprocal proves the same point. To read the class of subject persons identified at 6671(b) as being greater than only those acting under a duty would put 6671 out of harmony with 6020(b).

In short, only if we read 6671(b)'s "...includes an officer, etc., under a duty..." as defining the entirety of the class of those subject to the penalty does the section harmonize with the 6020(b) element of "required". Thus, we see the actual limits of the subject class specified independently by virtue of the provisions of 6020(b).

More plainly than usual, then, we are here treated to a demonstration of the fact that the use of "includes" in the definition at 6671(b) is not an addition of the listed exemplars to some external or more expansive class of person (as the tax scamsters really wish everyone would believe). Instead "includes" is revealed by this interplay as a confining mechanism, allowing only for the application of the penalty to those under a duty to produce a given return-- just as is the function and proper construction of that term wherever it appears in tax law.

At the same time, we are also shown more plainly than usual that the class of those to whom a statutory provision can apply (here the FRP provision) is limited in cases in which the definition makes use of the term "includes". And of course all of this together underscores the fact that without a sworn 6020(b) return having been produced, no return has been found to be "frivolous"* and no "frivolous return penalty" has been, or even can be, assessed.

 NOTE: An in-depth discussion in which several federal circuit court rulings concerning the meaning and limits of 26 U.S.C. 6671(b) are presented can be found here.

NOTE II: For what might be seen as a little icing on the cake, look at the highlighted text of 26 U.S.C. § 6020(b) and 26 C.F.R. § 301.6020-1(b) in the article above. While 6020(b) orients itself to the return required ("...any return required..."), the regulatory supplement by which the 6020(b) mandate is expressly extended to "frivolous" returns changes the orientation to the person required ("...any person required..."). This unusual and highly-nuanced departure from statutory language puts the regulation in direct harmony with the definition at 6671(b). It's not likely to have been mere coincidence.

*Return requirements are varied, but among them is that anyone receiving more than the exemption amount of "income" within any given year is required to make and submit a return. It is thus seen any 1040 or 1040X which does not prompt a 6020(b) return is being thereby agreed to have either not reached these "income" thresholds, or to not qualify as false, fraudulent or frivolous.