Tax Court in Brief | Walker v. Commissioner | Frivolous Return Penalties and Collection Due Process

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The Tax Court in Brief – June 13th – June 17th, 2022

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Tax Litigation:  The Week of June 13th, 2022, through June 17th, 2022

Walker v Commissioner, T.C. Memo. 2022-63 | June 15, 2022 |Nega, J.| Dkt. No. 16958-18L

Short Summary: This case involves the dispute liability for frivolous return penalties. Chule Rain Walker (Walker) and his spouse jointly filed their Federal tax return in 2016, reporting zero in wages, in contrast to a higher amount reported by their respective employers in such year. Walker requested for a refund to the IRS, as he considered wages are not taxable income, because he and his wife worked in private sector. The IRS after several warnings, determined two return penalties due to their frivolous positions under section 6702 (frivolous tax submissions), (1) regarding the original tax return, and (2) concerning the return copy attached by Walker where he disputed IRS position. The IRS sent a notice of intent to levy and rights to a hearing regarding such penalties. Walker requested a collection due process (CDP) hearing. However, he did not provide the requested documentation to challenge IRS position and did not seek for collection alternatives. A notice of determination concerning collection action was issued regarding the unpaid penalties. Walker petitioned to the Tax Court, claiming IRS erred in sustaining the two penalties. The Tax Court determined Walker failed to challenge his liability in the CDP hearing, sustaining the first penalty. Additionally, it concluded a copy of the original tax return shall not be considered as purported return requesting for a refund. Thus, the Tax Court determined it was an abuse of the discretion and an error to sustain the second penalty.

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Insights:  This case is another example of a taxpayer failing to challenge a frivolous penalty, but successfully challenging the other penalty due to an abuse of determination of the Appeal office. The argument establishing only that a non-Federal worker is not subject to wages tax is not enough to evidence his non-compliance. We recommend seeking proper tax advisory, before continuing challenging IRS in frivolous penalties. For additional information on 26 U.S.C. §6702 (frivolous penalties), see Freeman Law:

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