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Questions for a Frivolous Penalty CDP Hearing
In a previous post I discussed applying for a Collections Due Process Hearing (CDPH). And emphasized that the IRS has the burden of proof concerning penalties. All you really need to do in that case is deny that you filed a frivolous document. The Service must prove you did. To do so they must prove all the facts necessary to confirm that you are subject to the penalty, and that you submitted a document that meets the objective criteria set out in IRC § 6702. To that end, once you get your hearing, your job becomes to find where in the record the facts and grounds are that were used to determine you are liable for a penalty. Here is a list of questions for a Frivolous Penalty CDP hearing that address the elements of the offense directly.
To review quickly the elements of the offense, in the case of frivolous returns, (there are other types of frivolous "submissions", more on those later) first your document must purport to be a return.
Once that is established, there are two more elements that the Service must prove with fact evidence, first either your return must lack information on which the substantial correctness of the return can be judged, or it must contain information ON ITS FACE that indicates the information on the return is incorrect.
But proving either of those facts isn't enough, the return MUST also either 1. be based on a position which the Secretary has identified as frivolous under subsection (c) (of 6702), or 2. reflect a desire to delay or impede the administration of Federal tax laws.
So they've got to prove one element from the two from section 6702(a)(1) AND one element from the two listed in 6702(a)(2).
Here are some questions you might want to pursue at your CDP hearing, or in discovery in Tax Court if you are simply railroaded and denied a CDP hearing. Your Notice of Determination that comes out of a CDP hearing gives you access to the Tax Court for review.
The IRS has repeatedly stated I’ve submitted a frivolous document.
What document is it that you allege is frivolous?
Specifically how was it frivolous?
What specific paragraphs of § 6702 does the document I submitted violate?
Where in the administrative record are the facts and grounds supporting the determination?
The IRS has repeatedly stated that I have adopted a frivolous “position”.
What is the “specified frivolous position” that I have adopted?
Where does it appear on the document in question?
Where in the administrative record do the facts and grounds appear on which the determination was made?
What facts has the IRS relied on in determining that I am among those persons subject to a frivolous penalty under § 6702?
Where in the administrative record are the facts documented that were used to make the determination?
The IRS alleges a proper assessment has been made for this penalty.
What is the assessment date for the penalty?
Who is the assessment officer who signed the assessment? (Name, ID#, contact info.)
I’d like copies of the assessment documents. I know you are only obliged to produce form 4340, but I will be formally requesting the supporting documents in my appeal, so why not produce them now?
Identify the IRS employee who made the penalty determination. (By "identify" I mean provide real birth name, official title, employee ID number, GS rating, and contact information sufficient for service of process on that person.)
Identify that employee's immediate supervisor.
Where in the administrative record is the "written managerial approval" of the penalty?
Please provide a copy of that approval.
Provide a copy of the “verification by the Secretary” required by § 6330 that all procedural rules and statutes have been followed in determining and assessing this penalty. I am using the term “verification” in its statutory sense of “a verity attested under oath.”
Don’t expect to get anything like straight answers to these questions, but these are questions that directly address the objective elements of the penalty.
There should be facts and grounds already in the administrative record that are sufficient to prove the IRS allegations. I have never seen a case where they were.