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Regarding 6020(b) Returns

 

THE STATUTE CODIFIED AT 26 USC § 6020(B) imposes a mandate on the federal government to create a return of its own, and on its own behalf, when it actually has legal grounds for believing someone has had taxable receipts contrary to what appears on his or her filed return (or when a return is believed required but none has been filed). The statute is adequately-expressed in the regulations associated with this mandate:

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. ... (Emphasis added.)

Further, the 6020(b) mandate invokes another statute: As a required document, such signed returns created by the Secretary on the government's behalf must be signed under penalties of perjury:

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 are no exceptions provided by the Secretary to this requirement in regard to 6020(b) returns in the regulations regarding these signing and verification provisions:

26 C.F.R. § 1.6065-1   Verification of returns.

(a) Persons signing returns.

If a return, declaration, statement, or other document made under the provisions of subtitle A or F of the Code, or the regulation thereunder, with respect to any tax imposed by subtitle A of the Code is required by the regulations contained in this chapter, or the form and instructions, issued with respect to such return, declaration, statement, or other document, to contain or be verified by a written declaration that it is made under the penalties of perjury, such return, declaration, statement, or other document shall be so verified by the person signing it.*

Pursuant to these rules, then, the law plainly says that the government is obligated to make a sworn 6020(b) return on its own behalf (by the hand of its agent) if it believes it has a legal basis and authority for alleging that a person has had an amount of "income" sufficient to require a return (and which is contrary to what appears on a return that person may have already filed).

 

6020(b) returns are never made in regard to CtC-educated filings, of course. But since its failure to produce such returns is an acknowledgement by the government that it does not have a legal basis and authority for disputing a filed return (or asserting that it is "frivolous", "false" or "fraudulent", or that a return is required but unfiled), the DOJ has taken to making the ridiculous and mendacious argument that the "shall" in the statute isn't really there, and that the statute doesn't apply to anything but a "failure to file" situation.

 

See a discussion and examples of that studied mendacity, and a backdoor acknowledgement of the true character of the 6020(b) mandate by the Sixth Circuit Court of Appeals, here.

 

INTERESTINGLY, 6020(b) IS A STATUTE for which there is very little "case-law". What there is consists of pretty much what the government attorneys misrepresented in the contest discussed above, concerning itself only with the specious argument that criminal failure-to-file charges can be avoided because the government is obliged to file a return on any non-filer’s behalf and therefore no one else is ever under an actual legal obligation to file a return; and the government’s ability to allege deficiencies when no original return has been filed without being first obliged to create and sign a 6020(b) return. (This process relies on taking unrebutted "information return" allegations of "income" received at face value, and the regulatory provision concerning "deficiency" proceedings at 26 C.F.R. § 301.6211-1, which says: "If no return is made, or if the return (except a return of income tax pursuant to sec. 6014) does not show any tax, for the purpose of the definition “the amount shown as the tax by the taxpayer upon his return” shall be considered as zero").

 

The limited scope of these rulings was nicely summarized by Chief United States Bankruptcy Court Judge Albert Dabrowski in 2006 (all emphasis in this excerpt is supplied by Judge Dabrowski):

“By its explicit language, Internal Revenue Code (hereafter, “IRC”) § 6020(b) requires the Treasury Secretary to “make” a substitute “return” for “any person” who fails to make a required return under “any internal revenue law or regulation.” Given the Secretary’s obligation under 6020(b);2...

2 IRC § 6020(b)(1) provides in relevant part as follows –

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

(emphasis supplied).

 

“This Court is not unmindful of the fact that despite the plain language of 6020(b)(1), certain courts, including the Second Circuit Court of Appeals, have published opinions containing language which, when read in isolation, may appear to negate the mandatory nature of 6020(b)(1). E.g., Schiff v. U.S., 919 F.2d 830, 832 (2d Cir. 1990); Roat v. C.I.R., 847 F.2d 1379, 1381 (9th Cir. 1988). However, it is important to note that the subject language of these decisions is addressed to the mandatory vs. permissive nature of a substitute return for the purposes of tax deficiency determination and criminal prosecution; they have not explicitly held that the Secretary is relieved of an obligation to make a substitute return for all purposes...”

Ridgway v. United States, CASE NO. 02-30358, United States Bankruptcy Court, District of Ct., 2006

 

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By the way, it is important to point out that the IRS routinely deploys something it calls a "Substitute for Return" (SFR). This item is nicely described in this GAO response to an inquiry in 2000 by Senator Daniel Moynihan:

 

 

Here is how this is discussed in the current "Internal Revenue Manual":

4.12.1.8.4  (10-05-2010)
Substitute for Return
  1. When it has been determined that a taxpayer is liable for filing a return, and upon due notice from the Service fails to do so, an SFR will be prepared by Examination.

    1. Examination uses this procedure to establish an account and examine the records of a taxpayer when the taxpayer refuses or is unable to file and information received indicates that a return should be filed.

    2. The examiner will follow the steps outlined IRM 4.12.1.5.2 IDRS Research, to confirm no return has been filed.

    3. An SFR, in and of itself, does not constitute a return under IRC 6020(b). For the purpose of asserting the Failure to Pay Penalty, additional steps should be taken before submitting the SFR package. See IRM 20.1.2.1.4, Substitute for Return — IRC section 6651(g) (Emphasis added)

You'll have noticed the "For the purpose of asserting the Failure to Pay Penalty, additional steps should be taken before submitting the SFR package" language. This is a reference to the assembly of a "purported" 6020(b) return for purposes of the FTP penalty, based on a specification at 26 U.S.C. § 6651(g) that reads:

(g) Treatment of returns prepared by Secretary under section 6020(b)

In the case of any return made by the Secretary under section 6020 (b)—

(1) such return shall be disregarded for purposes of determining the amount of the addition under paragraph (1) of subsection (a) ["failure to file" penalty], but

(2) such return shall be treated as the return filed by the taxpayer for purposes of determining the amount of the addition under paragraphs (2) and (3) of subsection (a) ["failure to pay" penalty]

That purported "6020(b) return" for this purpose is achieved by the addition of a Form 13496 certification-- a certification that declares the SFR to be a 6020(b) return for purposes of the section 6651(g) provision, as explained at IRM 20.1.2.1.4, Substitute for Return — IRC section 6651(g):

Procedures to ensure FTP penalties on IMF and BMF SFRs are sustained in tax court.

  1. Background: In two tax court cases in 2003, the judge denied the Service the assessment of the FTP penalty on an SFR because the requirements for a valid IRC section 6020(b) return were not met. In conjunction with Chief Counsel, Form 13496, IRC section 6020(b) Certification, was conceived to ensure that FTP penalties on BMF and IMF SFRs would be sustained in future court cases.

See one of these forms here.

 

Note that even though labeled a "6020(b) Certification, this form does NOT actually amount to (or convey) true 6020(b) stature, for lack of a perjury statement. It is plainly just a pretext for alleging compliance with the specialized and limited 6651(g) provision, just as the IRM language quoted above declares (and just as the "Form 13496" itself declares).

 

This brings us to the third element of the 6020(b) provisions, the first two of which were presented at the beginning of this discussion in their regulatory form at 26 C.F.R. § 301.6020-1(b) Execution of returns- (1) and (2):

(3) Status of returns. Any return made in accordance with paragraph (b)(1) of this section and signed by the Commissioner or other authorized Internal Revenue Officer or employee shall be good and sufficient for all legal purposes except insofar as any Federal statute expressly provides otherwise. ...

The text in bold here explains why a "Form 13496 Certification" is spoken of in the extremely limited and qualified terms relating solely to the 6651(g) provision that we see in the IRM excerpts above and not as an actual 6020(b) good and sufficient for all legal purposes: because it's not. Remember, a Federal statute DOES expressly provide that an unsworn certification is NOT good and sufficient for all legal purposes:

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.

While this pretense may be enough to get some Tax Court judges to conclude that 6651(g) requirements have been met, it suffices for nothing else, and in no way makes an SFR into an actual 6020(b) return.

 

"Whatever the form in which the government functions, anyone entering into an arrangement with the government takes the risk of having accurately ascertained that he who purports to act for the government stays within the bounds of his authority. ... And this is so even though ... the agent himself may be unaware of the limitations upon his authority."

 United States Supreme Court, Federal Crop Ins. Corp. v. Merrill, 332 US 380-388 (1947)

 

“Persons dealing with the government are charged with knowing government statutes and regulations, and they assume the risk that government agents may exceed their authority and provide misinformation.”

Ninth Circuit Court of Appeals, Lavin v. Marsh, 644 f.2d 1378 (1981)

 

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NOTE: Find the actual statutory provisions concerning the mandate currently reflected at 26 U.S.C. § 6020(b) here (access is based on compliance with the request presented here).

 

*The IRS and DOJ have been known to cite to a 1975 Tax Court ruling, Hartman v. Commissioner, 65 T.C. 542 (1975)-- a "deficiency" case concerning a non-filer in which, like cases cited in the motion exchange discussed above, it was held that no 6020(b) was required for a deficiency proceeding to go forward when no return had been filed-- for the proposition that a[n actual] 6020(b) need not be signed under penalties of perjury. But though the ruling of this agency court does indeed say this (purely as a disposal of an irrelevant contention, since neither a 1040 nor a 6020(b) return was involved in the case), it does so without citation of authority and in complete disregard for-- indeed, apparent ignorance of-- 26 U.S.C. § 6065. Further, the rambling on this point conflates two different issues, reflecting confusion probably borrowed from Hartman, who apparently argued that the 6020(b) language somehow imposed a requirement for a signature under oath for mere deficiency determinations and findings:

"Finally, petitioner argues that the "so made and subscribed" language of section 6020(b)(2) (see p. 544 supra) requires that all determinations and findings of the Commissioner must be under oath. (Emphasis added.) Contrary to petitioner's position, section 6020(b)(2) imposes no oath requirement at all. The language cited by petitioner simply refers to a return made by the Secretary or his delegate pursuant to section 6020(b)(1) and "subscribed" by him. Webster's Third New International Dictionary (1965) defines "subscribe" as "to write (as one's name) underneath; sign (one's name) to a document." We find no reason to believe Congress intended to give the word other than this ordinary and well-known meaning."

Hartman v. Commissioner, 65 T.C. 542 (1975)

 

Can't argue with the court about the meaning of "subscribed" by itself, but of course that subscription must be made in conformity with other rules, one of which is found in 26 U.S.C. § 6065. In short, the citation of this case by government attorneys is just corrupt lawyering in an effort to abuse a non-precedential judicial expression of ignorance or corruption.