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NWTRCC

What To Do If You Receive
a “Frivolous” Warning Letter

From the IRS, Ogden UT
Dear Taxpayer:
           This is in reply to your correspondence dated . . . .  
           We have determined that the arguments you raised are frivolous and have no basis in law. Federal courts have consistently ruled against such arguments and imposed significant fines for taking such frivolous positions….

This letter goes on to list Tax Codes and quote from Section 6702 (Frivolous Income Tax Return), which includes a potential penalty of $5,000.

• These letters seem to be randomly sent to some (by no means all) war tax resisters who send the IRS a letter about their refusal to pay for war. The letter may have been enclosed with a 1040 form or in response to letters a resister has sent in reply to IRS letters demanding payment of taxes. Sometimes the IRS has sent this letter to people who have paid their taxes in full but enclosed a letter of protest paying for war.

• This letter is designed to be frightening, especially with its threat of a $5,000 penalty. It is designed to intimidate you and get you to stop making this protest. While war tax resisters see their arguments about refusing to pay for killing as anything but “frivolous,” the government in its legalese gives no allowance for acting on conscience.

• In presenting its “frivolous” rules and in the emphasis of those rules, the IRS refers to “erroneous legal positions that taxpayers should refrain from using as an excuse to avoid paying their taxes.” War tax resisters in general are not approaching their protest from a point of getting out of paying taxes. In fact, many war tax resisters do pay their taxes through redirection to groups who will not use their money for killing (unfortunately there is not legal allowance for paying to groups other than the IRS). Most war tax resisters who file are willing to participate in the tax system but are forced to protest because their money is being used for killing, so we see a real question about how these “frivolous” warnings and penalties apply to our case.

• This is a warning letter and not the application of the actual fine. We see no valid reason for the IRS to be sending this letter to war tax protesters and resisters and ask that they stop doing so. However, those receiving the letter can easily find it frightening.

Possible actions

* Ignore the letter; thus far the IRS does not seem to have a record of or follow up on these warnings.
* Call the 800 number on the letter and ask them why it was sent. You are likely to find out there is nothing on record about this letter being sent to you. If you filed a normal return, tell them there was nothing wrong with your return and that they should not have sent this letter.

If you are slapped with a frivolous penalty

Please let the NWTRCC office know about the fine and the circumstances – 800-269-7464, nwtrcc@nwtrcc.org, and plan to argue the application with the IRS.

As far as the $5,000 penalty goes, it is important to understand the DUAL requirement of Section 6702, which reads:

SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
            (a) CIVIL PENALTY FOR FRIVOLOUS TAX RETURNS.—A 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.

            (b) CIVIL PENALTY FOR SPECIFIED FRIVOLOUS UBMISSIONS.—
            (1) IMPOSITION OF PENALTY.—Except as provided in paragraph 
            (3), any person who submits a specified frivolous submission shall pay a penalty of $5,000.

Note the “and” between” parts (1) and (2) which we have highlighted in red.
Section 1 states that there must be something suspect about the return filed, AND that you are showing what the IRS considers a frivolous argument in order for the fine to apply. If you have filled out your return in good faith and as accurately as possible (whether you paid any tax due or not), then a frivolous penalty should not be applied and should definitely be argued in any case by calling the IRS office number on the letter.

The text of the IRS notice below indicates other circumstances under which the fine can be applied, each having to do with a specific IRS procedure: filing, appealing, agreements, etc. You can read the full document and the list of IRS frivolous claims at http://www.irs.gov/newsroom/article/0,,id=177519,00.html.

Notice 2008-14
PURPOSE
Positions that are the same as or similar to the positions listed in this Notice are identified as frivolous for purposes of the penalty for a “frivolous tax return” under section 6702(a) of the Internal Revenue Code and the penalty for a “specified frivolous submission” under section 6702(b). Persons who file a purported return of tax, including an original or amended return, based on one or more of these positions are subject to a penalty of $5,000 if the purported return of tax does not contain information on which the substantial correctness of the self-assessed determination of tax may be judged or contains information that on its face indicates the self-assessed determination of tax is substantially incorrect. Likewise, persons who submit a “specified submission” (namely, a request for a collection due process hearing or an application for an installment agreement, offer-in-compromise, or taxpayer assistance order) based on one or more of the positions listed in this Notice are subject to a penalty of $5,000. The penalty may also be applied if the purported return or any portion of the specified submission is not based on a position set forth in this Notice, yet reflects a desire to delay or impede the administration of Federal tax laws for purposes of section 6702(a)(2)(B) or 6702(b)(2)(A)(ii).

__________________________

Please help us keep our information accurate and up-to-date. Let us know what happens if you receive this letter. Contact NWTRCC at 800-269-7464 or by Email.

Sept. 2008 Update

“Dear Taxpayer: This letter serves to inform you of the potential consequences of the position you have taken and to offer you an opportunity to correct your submission within 30 days from the date of this letter.Internal Revenue Code Section 6702 imposes a $5,000 penalty for the filing of a frivolous tax return or purported tax return. We are proposing a $5,000 penalty per return based on your filing of a frivolous tax return(s) or purported tax return(s).”

This text is quoted from Letter 3176 (SC) (Rev. 7-2007), a letter with which some readers may be familiar. Two people who contacted NWTRCC received this letter. Each had filed a normal return and paid part of the taxes shown due; they enclosed a letter stating their reasons of conscience for refusing to pay the total shown. In both cases there was nothing improper (per IRS standards) about the way the return was completed. NWTRCC takes the position that the IRS's "frivolous office" in Ogden, Utah, is improperly sending this letter to resisters who have filed their return to the best of their knowledge with no extraneous deductions or credits. The regulation clearly refers to a "frivolous tax return." An enclosed letter, just because it shows what the IRS considers a "frivolous" position, should not generate threats of the $5,000 penalty.

Individuals who receive this letter can call the Utah office and explain that their return is valid and must be accepted as it was filed. Thus far we have not heard of any resisters who have had the $5,000 penalty imposed if their form included the information required for the IRS to assess the tax, but it is a scary letter.

Please contact the NWTRCC office if you have been threatened with or received the fine.