|INSTRUCTIONS: 5.11. Sue the IRS for a Requested Refund if they Delay Providing It For More Than One Year|
“Let nothing be done
through selfish ambition or conceit, but in lowliness of
mind let each esteem others better than himself. Let each of you
look out not only for his own interests, but also for the interests
“But the wisdom that is from above is first pure, peacable, gentle,
willing to yield, full of mercy and good fruits, without partiality
“Do not go hastily to court; for what will you do in the end, when
your neighbor has put you to shame? Debate your case with your
neighbor, and do not disclose the secret to another; lest he who hears
it expose your shame, and your reputation be ruined.”
Before proceeding with this section, make sure you read section 184.108.40.206, which talks about how to request a refund from the IRS, and which also addresses many of the litigation issues.
It is very common for the IRS to delay, frustrate, exasperate, and obfuscate providing refunds properly and legally requested using the procedures on this website. We cite as an example the tactics the IRS has used and continues to use with Larken Rose at http://www.taxableincome.net. IRS has completely ignored his correspondence, delayed his refunds, and bungled the administrative handling of his case for over two years and counting so they don't have to deal with the issues he raises. We would assume they are probably trying to wait until the statute of limitations expires and hoping that he will just give up and not litigate his case, presumably because the cost of litigation would exceed the amount that is owed to him. That is why you need to act swiftly and decisively. Suing for interest on the money they are illegally holding onto is a way to increase your leverage. If the IRS can charge massive penalties and interest, then what is good for the goose is also good for the gander! Treat them the same way to get them just as motivated as they want you to be to settle!
Before we proceed to talk about how to sue, the following is something you should be aware of, from the U.S. Constitution Annotated at http://caselaw.lp.findlaw.com/data/constitution/amendment05/13.html#6:
Right to Sue the Government .--A right to sue the Government on a contract is a privilege, not a property right protected by the Constitution. The right to sue for recovery of taxes paid may be conditioned upon an appeal to the Commissioner and his refusal to refund. There was no denial of due process when Congress took away the right to sue for recovery of taxes, where the claim for recovery was without substantial equity, having arisen from the mistake of administrative officials in allowing the statute of limitations to run before collecting a tax. The denial to taxpayers of the right to sue for refund of processing and floor stock taxes collected under a law subsequently held unconstitutional, and the substitution of a new administrative procedure for the recovery of such sums, was held valid. Congress may cut off the right to recover taxes illegally collected by ratifying the imposition and collection thereof, where it could lawfully have authorized such exactions prior to their collection.
Also keep in mind the following critical information about suing for refunds from Bouvier's Law Dictionary, Vol. II, Third Revision, Eighth Edition, 1914, pp. 3230-3238:
"Income tax: In order to invoke the powers of a court of equity to restrain the collection of illegal taxes, the case must be brought within the well recognized foundations of equitable jurisdiction [* * *] and it must clearly appear not only that the tax is illegal, but that the property owner has no adequate remedy at law, and that there are special circumstances bringing the case under some recognized head of equity jurisdiction…” [Cites omitted.]
“Taxes become a lien on property only by statute…”
“Taxes illegally assessed and paid may always be recovered back, if the collector understands from the payor that the taxes are regarded as illegal and that suit will be instituted to compel the refunding of them; Erskine v. Van Arsdale, 15 Wall. (U.S.) 75, 21 L.Ed. 63, a case of internal revenue taxes.”
“Where a state official receives money for a tax paid under duress with notice of its illegality, he has no right to it and the name of the state does not protect him from suit; Atchison, T. & S. F. R. Co. v. O'Connor, 223 U.S. 280, 32 Sup.Ct. 216, 56 L.Ed. 436, Ann.Cas. 1913C, 1050."
rule is firmly established that taxes voluntarily paid cannot be recovered
back, and payments with knowledge and without compulsion are voluntary;
when paid under protest or with notice of suit, a recovery may, on occasion,
be had, although, generally speaking, even protest or notice will not
avail if the payment be made voluntarily, with full knowledge, and without
any coercion by the actual or threatened exercise of power possessed,
or supposed to be possessed, over person or property, from which there
is no means of immediate relief than payment; Chesebrough v. United
States, 192 U.S. 253, 24 Sup.Ct. 262, 48 L.Ed. 432 (purchase of war
revenue stamps for deed without protest or notice)."
In suing the government you need to choose your forum (that is court) carefully based on what you can afford and based on where you are most likely to achieve success given your circumstances. There are three places you can initiate a suit for the refund: Tax Court, District Court, or the Court of Claims. We have prepared a table summarizing the characteristics of each court below:
Table 9: Civil Tax Litigation Comparison of Courts
 Adapted from Tax Procedure and Tax Fraud, Patricia T. Morgan, 1999, West Group, ISBN 0-314-06586-5, page 127.
The only one of the three choices of forum (that is, which "court") above that includes a jury trial is U.S. District Court, which is what we therefore recommend. Tax court has the advantage of being convenient and not requiring you to pay the taxes before litigating, but the disadvantages far outweigh the advantages, because:
Suing in the Court of Claims:
Do not sue in the Court of Claims if you are suing individual agents for a tort. Here is why:
If you want to sue for a Bivens Action, you must file the original action in a Circuit Court, under Supreme Court Rule 22, and ask for an Article III judge from the Supreme Court to hear it. Some cases that provide instructional examples that we recommend:
It is very important to remember that the IRS is under a lot of pressure to control costs. The most expensive part of what they do is litigation against Americans who won’t cooperate with their fraud or “volunteer” to pay taxes for which they aren’t liable. Because of this, the IRS is likely to be very judicious about who they pick a fight with in court. They love picking fights with ignorant, disorganized, unprepared, and poor citizens who can’t defend themselves. That is why they will try to steal or levy or seize your property just at the point when they think you will begin litigating, in violation of your due process protections which you need to be very aware of. They figure, if they empty your pockets before you begin your battle, then your chances of winning are reduced because you won’t be able to afford an expensive tax lawyer. They will avoid battles they know they can’t win or which would cost more to litigate than the taxes that are involved. They may make exceptions to the “cost-benefit” rule if you are a high profile person or a freedom leader who they want to make a “publicized example out of” to scare other citizens or followers of yours into “volunteering”.
If you have taken the “offensive” position we describe in this document, however, then they don’t have anything they can use to blackmail or slander you or undermine you , and you will be in an optimal position to get your money back through the courts. You will also be seeking a large enough refund to make it worth the while of an attorney to take on the case, if you decide to delegate the litigation rather than hiring an attorney to do everything. The key, throughout your litigation, is to make your case as “high maintenance”, costly, and difficult for the IRS as you legally can. At the same time, you want to avoid the label of “vexatious litigant” that the court might try to slap on you, because this could cause an attorney fee award against you by the court. It’s a delicate balancing act.
Throughout your litigation, remind yourself that this is a war of attrition. The first party who runs out of energy or money or time or motivation is the one who loses. Don’t be the coward who gives up, because you will never get your freedom back if you do! In this fight, the one who has the most “staying power” is the one who can litigate the most effectively, inexpensively, and efficiently, who knows the most, and who is the most organized and motivated. The more of the litigation you can handle on your own, the more staying power you will have because the less money it will cost you. That’s why we emphasize getting you educated and functional in the legal arena throughout this book. After having read this book and the forms and procedures on our website, you will be much more knowledgeable and better prepared than the vast majority of people who are litigating against the IRS, and you will know more about the tax laws than most IRS agents know! You will be much more discriminating in choosing a tax attorney to act as your “coach” as well, because of what you know. You will know what your rights are and how to protect and defend them in court. In short, you’ll have a big advantage that will be difficult to overcome and the IRS will be much more likely to back down and cave if you make sure they know this by every action you take. Words aren’t as convincing to the IRS as consistent, disciplined, knowledgeable application of the tax laws and the integrity to follow through on everything you said you would do the way you said you would do it.
26 U.S.C. 7422 identifies the legal restrictions that apply to a civil suit for refund of taxes paid. There are a lot of restrictions you should be aware of deriving from this section, including:
Under 26 U.S.C. 6532, you cannot commence a civil suit for refund of overpaid tax before 6 months as follows:
Below is a table that summarizes the statute of limitations for each of the forums you can choose:
Table 10: Statutes of Limitation for Filing Suits
 Adapted from Tax Procedure and Tax Fraud, Patricia T. Morgan, 1999, West Group, ISBN 0-314-06586-5, page 96.
If you pursue litigation in Tax Court, which we don’t recommend, per 26 U.S.C. 7452, the court cannot deny the counsel you choose, even if they are not licensed to practice law. This is not true in Federal District Courts.
If you are litigating to recover a refund, you can also litigate to recover interest on the amount of overpayment from the time that you requested the refund to the time that it was paid, under 26 U.S.C. 6611.
Lastly, we would strongly advise NOT taking the IRS into court for a refund before you have filed at least one 1040NR form to establish with them your nonresident alien status. By making such an election gives the federal courts the same jurisdiction they have over residents of the federal zone, which is the last place you want to be. Therefore, you can opt out of such status by filing at least one 1040NR form and a W-8 and expatriating as we suggest in section 220.127.116.11 will make you much better positioned to avoid the jurisdiction of the federal government and thereby avoid being lynched in court. We recognize that the tax on nonresident aliens is 30%, but keep in mind that this rate only applies to “U.S. source income” listed under 26 U.S.C. §861, and 26 CFR § 1.861-8(f) says that most people’s income from sources inside the United States is not subject to tax anyway. It’s all a big bluff. The only people with U.S. source income are usually those who either work for or are retired from the federal government, or who receive social security benefits.
Full Payment Rule:
There is no known statute requiring one to pay the tax imputed by the IRS to be due before litigating for refund. The regulations and statutes dealing with this subject are vague and ambiguous. However, the U.S. Supreme Court ruled in the case of Flora v. United States, 362 U.S. 145 (1960), after observing that 28 U.S.C. §1346(a)(1) was ambiguous and the legislative history unhelpful, that full payment of the entire tax assessed was a jurisdictional prerequisite to filing a refund suit in that case.
Notwithstanding the above, the full payment rule may not apply if a person has not paid a tax, is not arguing the amount, is a nonresident alien, and is arguing the underlying liability and their status as a “taxpayer”. On the other hand, if the person litigating for the refund claims to be a “taxpayer”, which as we said in section 5.6.3 of the Great IRS Hoax means they are “liable” for the tax, then we have to assume that it is best for them to pay the tax due before litigating for refund. If you argue amount, you are a taxpayer, if you argue liability and your status as a “taxpayer”, then you are a sovereign American with due process rights that the courts will have to respect, which means they cannot require you to pay the imputed tax due before litigating for refund. This belief is justified by the following cite:
The above arguments are illustrated by the following very funny joke:
A man walks into a bar and sits down next to a beautiful woman. He buys her a drink and then says: “Mam, I'm very rich. Would you consider going to bed with me if I gave you ten million dollars?"
The woman thinks real hard for a long time and says “I certainly might!”
“Would you go to bed with me if I gave you $50?”. The woman slaps him in the face and says “What do you think I am, some kind of whore?”
The man responds: “We’ve already established that you’re a whore. We’re just negotiating price.”
Let’s face it, folks: A “taxpayer” under Subtitle A is a voluntary whore for the government! NEVER, EVER negotiate price! Emphasize repeatedly that you are a person of principle who is a "nontaxpayer" and a person not liable and the jury and judge will see that and side with you.
 See Tax Procedure and Tax Fraud, Patricia T. Morgan, 1999, West Group, ISBN 0-314-06586-5, page 118.
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