Tax litigation normally follows the approximate sequence below.
Your situation may be different than this. This process was extracted
from IRS publication 1 Entitled “Your Rights As a Taxpayer” and a study
of the regulations. There is an irony in the name of the publication
1. Did you notice it? The implication is that if you aren’t
a “Taxpayer” (e.g., one who is not liable for tax), then you have no
rights! Why don’t they have another publication entitled “Your
Rights as a Nontaxpayer and an American Citizen”?
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#
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Event
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From/To
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Applicable section(s) of
this document
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Applicable Statutes (U.S.C.)
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Applicable Regulations
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Relevant forms
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IRS Publication(s)
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Details
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1
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Expatriate your “U.S.** citizenship”
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Citizen/IRS
Citizen/Atty General
Citizen/Social Security Administration
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8.5.3.1
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26 U.S.C. §877 Expatriation
to Avoid Tax
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Expatriation letter in section
15.6.9.
SSA Notice of Change of Citizenship
in section 15.6.8.
Voter Registration Affidavit
Attachment in section 15.6.6.
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2
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Privacy Act Request for your
IMF
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Citizen/IRS
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8.4.2
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5 U.S.C. §552a Privacy Act
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Privacy Act Request for Documents
in section 15.15.5.
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Request last three years.
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3
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Request a Determination Letter
from the IRS
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Citizen/IRS
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8.5.4.9
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26 CFR §601.201
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“Test for Federal Tax Professionals”
in section 15.1.
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Cost is $275
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4
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IRS response to Determination
Letter Request
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IRS/Citizen
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8.5.4.9
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26 CFR §601.201
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5
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Get an opinion letter from tax
professional
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Tax professional/citizen
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Forms: 15.3
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Documents the fact that citizen
is not obligated to pay federal income tax. Required
because of the Supreme Court Case of
Cheek v. United States,
498 U.S. 192, 1991.
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6
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Withdraw W-4 form from employer
and file an Exemption Certificate or IRS Form W-8 to stop withholding
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Citizen/employer
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Background:
8.5.4.7.4
Process: 8.5.4.12
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IRS form W-4 or W-4 Exempt
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IRS Pub 919: Is
My Withholding Correct?
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Revokes employer's withholding
of federal income tax and social security
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7
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Request tax refunds for past
three years
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Citizen/IRS
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Process: 8.5.4.9
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Federal refund letter in section
15.9.1.
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Use IRS forms 1040X.
Also file form 4852 to correct any W-2's that have
incorrect amounts
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8
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Stop filing 1040 tax returns
or file zero returns
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Citizen
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Process: 8.5.4.13
Background: 5.8.7
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IRS 1040NR
IRS form 4868
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File as a nonresident alien
if you file at all.
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9
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IRS Request for Income Tax Returns
to citizen
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IRS/citizen
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Response: 15.9
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IRS CP-501
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This letter asks for copies
of income tax returns that were not filed on previous years
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10
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Notice of Deficiency Sent from
IRS to taxpayer
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IRS/citizen
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Process: 7.6.7
Response: 15.12
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IRS CP-515 Notice
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Notifies taxpayer of overdue
liability.
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11
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IRS Audit/Examination request
or Taxpayer Request
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IRS/citizen
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Response: 15.11.3
Questions to ask:
15.1 (Test for Federal Tax Professionals)
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26 U.S.C. §7123
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Test for Federal Tax Professionals
found in section 15.1
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IRS Pub 5: Your
Appeal Rights and How to Prepare a Protest if You Don’t Agree
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Attempt to schedule tax examination
meeting. Bring records but don’t admit having them.
Tell IRS you will video or tape record the hearing and will
bring witnesses and a court reporter.
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12
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Send List of Questions to IRS
to answer prior to the examination/audit
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Citizen/IRS
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Test for Federal Tax Professionals:
15.1
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Section 15.11.1 “Certified
Letter of 32 Questions to Send to IRS BEFORE the Audit Begins”
“Test for Federal Tax Professionals”
in section 15.1
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Tell the IRS you won’t meet
until they answer the questions.
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13
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Discovery of evidence prior
to first IRS meeting by both Citizen and IRS
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Both
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7.6.13-7.6.15
Forms: 15.15
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5 U.S.C. §552a Privacy Act
5 U.S.C. §552 Freedom of Information
Act
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FOIA forms in section 15.15.
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Both IRS and citizen should
work diligently to gather as much evidence about what the other
side knows as possible. This will ensure that FUD
(Fear, Uncertainty, and Doubt tactics cannot be used at the
bargaining table to gain advantage).
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14
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IRS Audit/Examination
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IRS and citizen
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IRS tactics: 7.6.8-7.6.9
Forms to use during:
15.11
Preparation: 15.11
Questions to ask:
15.1
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“Test for Federal Tax Professionals”
in section 15.1
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Meeting between IRS and citizen.
Citizen brings any records that might advantage his case
and hurt the IRS. Otherwise, he doesn't even mention he
has records so they can't be subpoenad or requested by the IRS.
Citizen should also request a referral for "Technical Advice"
if the agent disagrees with him on the "gross income" or 26
USC Sec. 861 "source" arguments.
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15
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Citizen request that case be
referred to national office for "technical advice"
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IRS
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7.6.11, 15.11.3
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26 CFR § 601.105(b)(5)(iii)
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Case is referred for technical
advice to the IRS district director if the agent does any of
the following at the meeting:
1. Talk about any
USC or CFR statutes that make him liable for tax.
2. Refuses to answer
or addresses legal issues regarding the "source" issues raised
in 26 USC Sec. 861.
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16
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IRS findings prepared on IRS
Form 23C Assessment form
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IRS/citizen
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Process: 8.5.4.15-8.5.4.16
Forms: 15.11
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26 U.S.C. §6020
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IRS Form 23C: Assessment
Certificate
IRS Form 4340: Certificate of
Assessments and Payments
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Agent prepares a 23C assessment
form based on conduct of the tax examination. Typically,
this form has several defects that need to be objected to vehemently,
usually because it is not based on evidence or because it is
not signed. Demand a copy of the Agent’s Delegation Order
that authorizes him to prepare this form.
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17
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Prosecution for "willful failure
to file" if taxpayer did not file
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IRS/citizen
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Background: 3.8.11
Response:
15.13.1
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26 U.S.C. 7203 Willful Failure
to File
26 U.S.C. 7402(f)
Jurisdiction of federal courts
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IRS 1040 Booklet
IRS 1040NR Booklet
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This is a scare tactic meant
to intimidate citizens into forfeiting their 5th Amendment rights
by incriminating themselves with a signature on a tax return
that is signed "under penalty of perjury". Note
that 26 U.S.C. §7402(f) does NOT give federal courts jurisdiction
to prosecute tax crimes!
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18
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IRS prepares a "substitute for
return" if taxpayer won't do it
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IRS/Citizen
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7.6.12
No authority to assess:
5.6.2.
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26 U.S.C. §6020
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IRS has the NO authority to
prepare a substitute for return
unless the taxpayer consents!
Citizen is NOT obligated to
sign any return prepared by the Secretary of the Treasury or
his delegate that he does not agree to.
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19
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IRS Appeal by citizen
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Citizen/IRS
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Background: 7.6.18
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IRS form 911: Application for
Taxpayer Assistance Order
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IRS Pub 1 Your Rights as a Taxpayer
IRS Pub 5: Appeal
Rights and How to Prepare a Protest If You Don’t Agree
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Citizen may appeal the ruling
administratively with the IRS.
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20
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IRS issues "Notice of levy”
or “Levy" on citizen's property
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IRS/Citizen
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Response: 15.12
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26 U.S.C. §6331 Levy and Distraint
26 U.S.C. §6332 Surrender of
Property Subject to Levy
26 U.S.C. §6334 Property Exempt
from Levy
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IRS form 668A: Notice of Levy
IRS form 668B:
Levy
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IRS Pub 594 The IRS Collection
Process
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IRS does this without jurisdiction
or authority on the property of the citizen. See
section 10.3 (“Federal Territorial Jurisdiction”) for details.
IRS can only
legally issue the Notice of Levy against officers, employees,
or elected officials of the U.S. Government as per 26 U.S.C.
§6331(a).
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21
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IRS notifies citizen that his
administrative appeal has been disallowed. Issues
a "Notice of intent to levy" to citizen
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IRS/Citizen
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Background: 7.6.20
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IRS Pub 5: Appeal
Rights and How to Prepare a Protest If You Don’t Agree
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The Notice of intent to levy
is not a levy and cannot be used to seize or take assets of
the taxpayers. Some banks will illegally honor
it anyway. Make sure you tell your bank the law so they
don't give away your assets!
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22
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Citizen requests a Collection
Due Process hearing from the IRS on their tax case
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IRS/Citizen
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Background: 7.6.17,
11.10
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IRS Form 12153:
Request for a Collection Due Process Hearing
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IRS Pub 594: The
IRS Collection Process
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Citizen requests court hearing.
Case is referred to Tax Court first, unless citizen files
in U.S. District Court, for which he would probably be better
off, since the Tax Court is NOT an agency of the Judiciary branch
and operates far too informally.
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23
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IRS rejects request for Collection
Due Process hearing and forces sale of home or auctions it off
after levy/lien
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IRS/Citizen
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7.6.20-7.6.22
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Property must be seized before
it can be auctioned off.
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24
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Fiduciary for Citizen, employer,
or county recorder violates their fiduciary duty and wrongfully
turns over property of Citizen in violation of Fifth Amendment.
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Fiduciary/IRS
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8.5.5.9
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25
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Citizen files lawsuit against
financial institution or Country Recorder or Employer for grand
theft, violation of fiduciary duty, and violation of 26 U.S.C.
§6331(a)
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Citizen/Federal District Court
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Background: 7.6.19,
11.10.3
Process: 8.5.5
Jurisdiction: 5.6.2
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Jurisdiction: 26 U.S.C. 7402(f)
26 U.S.C. §6331(a)
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Undertake to hold fiduciary
liable for breach of fiduciary duty.
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26
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Tax Court
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NA
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Background: 11.10.2
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Trial at Tax Court, if citizen
insists. Note: Federal District Court is
better.
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27
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Citizen files lawsuit against
in Federal District Court
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Citizen/Federal District Court
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Background: 7.6.19,
11.10.3
Process: 8.5.5
Jurisdiction: 5.6.2
Issues: 8.5.5.9
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Jurisdiction: 26 U.S.C. 7402(f)
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Refund/no liability lawsuit
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Undertake if citizen in dissatisfied
with the ruling.
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28
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District Court Ruling
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District court/Citizen
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Background: 11.10.3
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Federal district court rules
on case
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29
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Citizen appeals to Federal Appellate
Court
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Citizen/Federal Appellate Court
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Background: 11.10.4
Process: 8.5.5
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Citizen files lawsuit in federal
court of appeals.
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