Have You Been Harassed By "Frivolous" Threats?

Don't stand for it; it's time for some suing.

CtC FIRST BEGAN LIBERATING AMERICANS from the scourge of the misapplied "income" tax (aka the "ignorance tax") in 2003. Over all the years since, the beneficiaries of the status quo have been trying various things to suppress the spread of the book's information and to discourage claims made in light of that information.

One of the longest-running ploys has been subjecting a scattershot smattering of CtC-educated filers to scary-looking threats of a "frivolous return penalty" (FRP). The scamsters' hopes have always been that these threats will be mistaken as some kind of official dispute of the accuracy of the book's info, or at least will prompt rumors that the government pushes back against educated filings, which will discourage the timid from standing up for their rights and the rule of law.

These threats are often very overtly phony. Sometimes they arrive in the mailbox on the same day as the complete refund claimed by the filing being called "frivolous". Sometimes a single filing will be the pretext for a dozen of these FRP assertions, as though the button on the "scary-letter" machine got held down too long. (Those interested can find an expose of an elaborate IRS hoax concerning FRPs and CtC-educated filings here, and some in-depth discussion of the actual FRP provisions here. Find a discussion of a case in which the IRS and an OCC attorney produced false documents in an attempted cover-up of the hoax here.)

DESPITE THEIR LEGAL PHONINESS, FRP threats have done a lot of harm. They DO lead to rumors which have kept some folks who otherwise would have from even cracking open a book and learning the truth about the tax, and why it's so important. They HAVE disturbed the peace and quiet of those to whom they have been directed, and forced those folks into a tedious routine of writing and expensively-mailing responses.

A few educated filers have even had a portion of a complete refund dinged with a holdback of an asserted FRP liability.

In all cases these FRP threats amount to First Amendment assaults. All of them-- regardless of how specious-- involve government threats of harm unless the target repudiates his or her freely-made return testimony and replaces it with testimony more to the government's liking (for which a 30-day window is typically provided).

In short, these threats are outrageous and illegal. So...

I THINK IT'S TIME for lawsuits. I'm not a litigator, and can't say from experience what kind of relief could be sought. But I know that some kind of substantial relief is called-for here, and I can certainly equip an experienced litigator with all the needed understanding of the law regarding FRPs and everything else that would be involved in such a suit.

Therefore I want to invite anyone out there who has been the recipient of "frivolous penalty" threats; who has responded properly as here or here; and who has then received any kind of notice or other indicator that the threat is being sustained in spite of that response (i.e., CP15; CP504; etc.) to consider suing. I have prepared and/or assembled some materials that I think will be helpful in that endeavor.

To begin with, do your best to secure evidence of the agency bad behavior through FOIA requests for relevant internal records. A package of sample requests with the relevant materials listed can be found here. Responses to the effect that any or all of these docs do not exist are just as useful (or even more so) as the docs themselves, if gotten on paper or made in the hearing of a witness.

NOTE: Seeking the docs identified in the .pdf at the link above is of great utility and significance to anyone on the receiving end of any follow-ups to initial "frivolous penalty" threats even if no lawsuit is pursued. To begin with, if it is discovered that these documents-- in particular Forms 8278-- do not exist, all the scary notices and threats are revealed as completely empty.

If any of the documents do exist, and show that the alleged penalty assertions are grounded in untenable "position" assertions (such as "ARG44") or show false entries like "no response received" to the LTR3176 or dates of the purported "frivolous filing" which are demonstrably wrong, or lack proper "immediate supervisor" approval, they will be of considerable utility in any collections challenge, whether at the level of IRS Appeals or above, should an effort be made by the tax agency to actually pursue them.

Thus, anyone who who has been the recipient of "frivolous penalty" threats; who has responded properly; and who has then received any kind of notice or other indicator that the threat is being sustained in spite of that response (i.e., CP15; CP504; etc.) should pursue the internal records listed here even if not intending to sue.

If such "follow-up" notices are received at all, they will likely go on (often for a very long time) until an actual threat to enforce the penalty is received. That final threat will be distinguished from all the similarly scary notices alleging "assessment" and "charged" and "levy" etc. which have preceded it by inclusion of notice of one's 30-day window in which to request a "Collections Due Process" hearing-- so read everything on any such notices carefully and thoroughly.

(BTW, CDPHs can be requested without use of the agency's own assumption-laden request forms. If you have a CtC Companion CD you can find the requisite info on doing so in ‘The Collection Due Process Handbook’ by the IRS Office of Chief Counsel, which is included on the disk.)

When that final point is reached, further proceedings halt upon the making of that request and until the hearing (and possibly any subsequent proceedings) are completed and requisite determinations are made. In that hearing, and any subsequent proceedings if necessary, the documents secured (or admissions that they do not exist) will be of great import.

FINALLY, keep in mind that in any legal contest over the issue of a "frivolous return penalty", the nature of the tax and legal character of any earnings, and so forth-- things which are very relevant in other contests-- are not really material. In FRP contests, the "material facts" are much simpler.

These "material facts" (summarized briefly and not comprehensively, but sufficiently to illustrate the issue) include: whether the penalty is asserted against an actual filed return (or purported return); whether a targeted return bears evidence of being based on a "position" listed on the Secretary of the Treasury's official list of penalty-qualified "frivolous positions", or displays evidence of an intent to impede or delay the proper administration of the tax laws; whether it lacks information sufficient for judging the substantial correctness of its self-assessment, or contains information calling into question the substantial correctness of that self-assessment; and whether it has been properly approved pursuant to 26 U.S.C. § 6751(b). Read carefully and thoroughly through ALL the rest of the material in this section to round out the picture painted by this list.

If the documents secured through the requests described above yield evidence of the "ARG44" hoax (as most will), download the sample COMPLAINT (mostly the work of warrior Rod Schmidt, to whom everyone owes yet another "Thank you!" for his good activism) here. The sample COMPLAINT is formatted as an MSWord .doc. (For those who don't have Word, the .doc can be opened and edited with the freely-available Open Office Writer program.)

While going through the sample COMPLAINT assemble each document or other artifact referenced throughout in order to ensure all are on hand and properly archived for use as exhibits when that becomes appropriate. Don't file a COMPLAINT without having these exhibit materials in hand!

Exhibit materials include ALL of the following:

• the tax return(s) filed and in regard to which an FRP threat was made;

• the FRP threat letters or notices (i.e. LTR3176C);

• subsequent notices of an "assessment" of the penalty or penalties threatened; subsequent notices of intent to levy;

• agency records secured through the FOIA requests discussed above (to include at least one penalty-related internal agency record-- i.e. Forms 8278, 12775 or TXMODA-- listing "ARG44" as the purported "frivolous position" alleged); and

• documentation of any actual diversion of funds or seizure for purposes of satisfying the alleged penalty, if such a thing has actually happened.

BTW, qualification for access to the sample COMPLAINT will also qualify you for membership in the National Forum, btw, so when you get going with your suit, SHARE THAT EXCITING NEWS!!

WHETHER OR NOT THE "ARG44" HOAX is on display in the secured documentation, suit can be brought just on the basis of the First and Fifth Amendment violations inherent in government efforts to coerce (or intimidate) you into changing testimony from something it doesn't favor to something more to its liking (and in such a suit, the secured documentation-- or admissions that relevant docs do not exist-- will still be highly useful). See this page for more.