Torn from the Headlines: Another Tax Protester Bites the Dust

He should have hired Selig & Associates

USTC Drops the Hammer on another Pro Se

We have also recognized that tax-protester arguments: (1) are unlimited; (2) may have little actual importance to those making them; (3) have often already been answered; and (4) are often patently frivolous. 

Petitioner claims his arguments are not frivolous, but we disagree. The assertion that a taxpayer does not owe income tax in the absence of a self- assessment is an “outdated protester-type argument”. See Hill v. Commissioner, T.C. Memo. 1992-140. We therefore hold the voluntary system of self-assessment argument is frivolous.

Petitioner also argues that the lack of underlying Code of Federal Regulations to support the statutes which he has violated nullifies the statute. Petitioner has confused the order of authority. “Ordinarily, administrative interpretations of statutory terms are given important but not controlling significance.” Batterton v. Francis, 432 U.S. 416, 424 (1977). We hold the parallel authority argument is frivolous.

We find that respondent has proved petitioner failed to report taxable income for the years at issue and is liable for the Federal income tax he failed to pay on that income.

A. Burden of Proof

Under section 7491(c), the Commissioner bears the burden of production with regard to additions to tax and must come forward with sufficient evidence indicating that it is appropriate to impose additions to tax. See Higbee v. Commissioner, 116 T.C. 438, 446 (2001). However, once the Commissioner has met the burden of production, the burden shifts to the taxpayer to show the additions are improper. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447.

B. Reasonable Cause

The section 6651(a)(1) and (2) additions to tax will not apply if it is shown that the failure to file and/or pay timely was due to reasonable cause and not due to willful neglect. A failure to pay timely is due to reasonable cause if the taxpayer “exercised ordinary business care and prudence in providing for payment of his tax liability and was nevertheless either unable to pay the tax or would suffer an undue hardship * * * if he paid on the due date.” Sec. 301.6651-1(c)(1), Proced. & Admin. Regs.; see also Ruggeri v. Commissioner, T.C. Memo. 2008-300. To prove reasonable cause for a failure to timely file, the taxpayer must show that he exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time. See Crocker v. Commissioner, 92 T.C. 899, 913 (1989). Willful neglect contemplates “a conscious, intentional failure or reckless indifference.” United States v. Boyle, 469 U.S. 241, 245 (1985).

Petitioner intentionally chose not to file and pay tax for the years at issue, making frivolous tax-protester arguments. We have found that frivolous positions do not constitute reasonable cause for purposes of section 6651. McGowan v. Commissioner, T.C. Memo. 2006-154 (“[T]ypical tax protester arguments are not reasonable cause.”).

C. Section 6651(a)(1)

As a general rule “any person made liable for any tax * * * shall make a return or statement according to the forms and regulations prescribed by the Secretary.” Sec. 6011(a). In the case of a failure to file a return on time, an addition to tax is imposed at 5% of the tax required to be shown on the return for each month or fraction thereof for which there is a failure to file, not to exceed 25% in the aggregate. Sec. 6651(a)(1).

Petitioner did not file timely tax returns for the years at issue. Respondent has thus met his burden of production. See Wheeler v. Commissioner, 127 T.C. 200, 207-208 (2006), aff’d, 521 F.3d 1289 (10th Cir. 2008). Petitioner has not presented any evidence that his failure to file was due to reasonable cause and not willful neglect. Accordingly, we sustain the additions to tax under section 6651(a)(1).

D. Section 6651(a)(2)

An addition to tax is imposed for failure to pay the amount of tax shown on a return on or before the date prescribed for payment. Sec. 6651(a)(2). The addition is equal to 0.5% of the amount shown as tax on the return for each month, or fraction thereof, during which the failure to pay continues, up to a maximum of 25%. Id. Where the taxpayer did not file a valid return, to satisfy his burden of production for the section 6651(a)(2) addition to tax the Commissioner must introduce evidence that he prepared SFRs. Respondent prepared SFRs under section 6020(b) for the years at issue. SFRs made by the Secretary under section 6020(b) are treated as returns filed by the taxpayer for purposes of determining whether the section 6651(a)(2) addition to tax applies. Sec. 6651(g)(2); Wheeler v. Commissioner, 127 T.C. at 208-209. Respondent prepared SFRs in these cases which showed that petitioner owed tax for each of the years at issue before the addition of interest and additions to tax. These returns conform with section 6020(b).

Petitioner has not paid any portion of the amounts reported due on the returns respondent prepared. As a result, we find that petitioner failed to timely pay the tax shown due on the section 6020(b) returns without reasonable cause and is liable for the additions to tax under section 6651(a)(2).

E. Section 6654

Respondent determined additions to his calculation of tax liabilities for the years at issue for failure to pay estimated tax. A taxpayer’s required annual payment is limited to the lesser of: (1) 90% of the tax shown on the return for the taxable year, or 90% of the tax for such year if no return is filed or (2) 100% of the tax shown on the return of the individual for the preceding taxable year.6 Sec. 6654(d)(1)(B). Petitioner has argued that he had no tax liabilities for the years at issue. We have already found that petitioner was liable for tax for the years 2004 through 2010, and we also note that petitioner’s tax liability for 2003 was greater than zero. Therefore, petitioner is liable for the section 6654 addition to tax for each year at issue. The amounts of the additions shall be determined by the parties in their Rule 155 calculations in accordance with the other holdings herein.

Petitioner has taken a multitude of frivolous and groundless positions characteristic of tax protesters. We strongly warn petitioner that making such arguments before this Court in the future will likely result in the imposition of sanctions against him. In reaching our holdings herein, we have considered all arguments made, and, to the extent not mentioned above, we conclude they are moot, irrelevant, or without merit. To reflect the foregoing, Decisions will be entered under Rule 155. 

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