Assessments and Bankruptcy

 

      The date of assessment is an extremely important issue for those of you who are considering filing a bankruptcy. If you were to file your bankruptcy before the 240 day period expires relating to the assessment, you will fail to discharge your taxes.  So, what is the date of assessment?  The date of the filing of a tax return is not the date of assessment.  Although the filing of a tax return is referred to as a "self-assessment," it is not an assessment within the meaning of the bankruptcy code.  See In re Hays 166 B.R. 946 (Bkrtcy.D.NM, 1994).

 

      The IRS cannot assess a deficiency unless it sends a notice of deficiency which is also known as a 90-day letter.  The individual has the opportunity to file a Tax Court petition and if he does not file a petition, the IRS may assess after the 90-day period expires. Section 6303 of the Internal Revenue Code states that "where it is not otherwise provided by this title, the Secretary shall, as soon as practicable, and within 60 days, after the making of an assessment of a tax pursuant to Section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof.  Such notice shall be left at the dwelling or usual place of business of such person, or shall be sent my mail to such person's last known address."  By the time the individual receives the notice of assessment, some of the 240 days will have run out. 

 

      IRS Regulation Section 301.6203-1 describes the rules regarding the establishment of the date of assessment.

 

      "The assessment shall be made by an assessment officer signing the summary record of assessment.  The summary record, through supporting records, shall provide identification of the taxpayer, the character of the liability assessed, the taxable period, if applicable, and the amount of the assessment.  The amount of the assessment shall, in the case of tax shown on a return by the taxpayer, be the amount so shown, and in all other cases the amount of the assessment shall be the amount shown on the supporting list or record.

 

      The date of the assessment is the date the summary record is signed by an assessment officer.  If the taxpayer requests a copy of the record of assessment, he shall be furnished a copy of the pertinent parts of the assessment which set forth the name of the taxpayer, the date of assessment, the character of the liability assessed, the taxable period, if applicable and the amounts assessed.     The date of assessment, therefore, is the date that the "summary record" is signed by the IRS assessment officer.  The summary assessment  record is also referred to as Form 23-C.  The bankruptcy court has taken the position that the date of assessment follows the IRS definition of the assessment as provided in the regulations. See In re Hartman, 110 B.R. 951 (Kan. 1990) and In re City of New York, 233 F.2d 307.  If the debtor has consented to an extension of time for the assessment, the date is the actual date of assessment, not the date when the taxes became assessable.  An extension of time tolls the 240 day period until the actual assessment is made.  See Matter of Longley, 66 B.R.. 237 (Ohio, 1986).

 

THE FRIVOLOUS RETURN PENALTY

 

            Almost twenty years ago Bill Conklin filed suit against the IRS for fining him $500.00 on a frivolous return.  Bill had discovered that he would waive his Fifth Amendment Rights if he signed a return; so he gave the IRS the power of attorney to sign all future returns for him if they could do it without waiving his Fifth Amendment Rights.

 

COMPLAINT (JURY TRIAL DEMANDED)

 

     1.  Plaintiff, William T. Conklin, is a citizen of the United States and resides at 3296 Raleigh in Denver, Colorado, 80212.

 

            2.  The Defendant is the United States of America.

 

     3.  This is a suit arising under the laws of the Internal Revenue Code for the refund of a penalty under IRC Section 6702 which was erroneously and illegally assessed against and collected from the Plaintiff.

 

     4.  Jurisdiction is conferred upon the Court by Title 28, Section 1346(a)(1) of the United States Code.

 

     5.  On August 7, 1989, the Defendant mailed a Frivolous penalty charge to the Plaintiff for the amount of $500.00 under IRC Section 6702. (See Exhibit AAA-1 herein incorporated).

 

     6.  On August 9, the Plaintiff paid $75.00 which is 15% of the $500.00 penalty and filed a claim for a refund.  (See Exhibits 1,8,9, herein incorporated.

 

     7.  The IRS' penalty assessment is based on the fact that the Plaintiff, on the advice of counsel, did not sign a 1040, but gave the IRS power of attorney to sign the 1040 for him if it could be signed without waiving the Plaintiff's Fifth Amendment Rights.

 

     8.  The IRS has not rejected or refused the power of attorney given by the Plaintiff on April 1, 1987 to sign  1040 Forms if they can be signed without waiving his Fifth Amendment Rights.  (See Exhibit 2, and AA-1: IRS Power of Attorney Form 2848)

 

     9.  The Plaintiff has been classified by the IRS as an "illegal tax protestor."  See the Affidavit of IRS Agent Richard Jurney attached as Exhibit C wherein Mr.  Jurney states that Rev. Conklin is an "illegal tax protestor" who is an individual "involved in one or more illegal schemes."

 

     10. The Internal Revenue Service has further classified the Plaintiff as an illegal tax protestor in their computer system.  See a copy of the Plaintiff's computer file for the year 1987 attached as Exhibit 7 which shows the "Transaction Code "TC 148 HOLD IS P" which means the Plaintiff is an illegal tax protestor. Also see Page 8-8 of the IRS 6209 Manual (Attached hereto as Exhibit 7) which defines the Transaction Code of 148 as an "illegal tax protestor."

 

     11. The IRS states in Exhibit 4 that an illegal tax protestor is a person who employs "one or more illegal schemes that affect the payment of taxes."

 

     12. Furthermore, in Exhibit 6, the letter to Michael Morgan from G. L. Mihlbachler, the Director of the IRS in Denver, states on Exhibit Page 6-2 that the Director of the Criminal Investigation Division is responsible for the tax protestor project listing.

 

     13. The Plaintiff was advised by various attorneys and tax accountants that he could not sign a 1040 Return without waiving his Fifth Amendment Rights.  The opinion letters to the plaintiff are attached as Exhibits A through H and are incorporated hereto.

 

     14. The IRS admits in Exhibit 3 that a summons is not enforceable because of a Fifth Amendment Privilege claim; presumably if the IRS cannot compel obediene to a summons, they cannot compel a signature on a 1040 because such a signature would force an individual to waive his Fifth Amendment Rights.

 

     15. The Plaintiff is classified as an illegal tax protestor which is a project of the CID, and he has a reason to be concerned about his Fifth Amendment Rights.

 

     16. The Plaintiff relied on the advice of counsel and he is not negligent and his position is not frivolous.

 

     17.  The Plaintiff's position is not frivolous as he gave the IRS power to attorney to sign the return for him and they did not reject or refuse the power of attorney.

 

     18.  The penalty is invalid because the forms allegedly assessing the penalty and the regulations involving the assessment of the penalty, do not contain OMB Numbers and Expiration Dates.

 

     19.  The IRS has not followed the proper procedures in the assessment of this penalty.

 

     20.  The agent who issued the penalty was not authorized to do so by the proper delegation of authority orders.

 

     21.  On August 31, 1989, the IRS denied the plaintiff's claim for a refund.  (See Exhibit 1A attached hereto).

 

            WHEREFORE, it is prayed that this Honorable Court will grant a jury trial and rule against the Defendant and grant the Plaintiff's refund, costs and attorney's fees as provided by law, and for such other and further relief as the Court may deem appropriate.

 

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            Remember that if you wish to file a suit like this for a penalty on a frivolous return, you must pay the fine and then file a claim for a refund or you must pay the full amount.  When the IRS denies the claim or if the IRS doesn't respond to it within six months, you can then sue as Bill did.  Good Luck!  (The court, in this case, dismissed Conklin's OMB arguments as frivolous without comment.) Read:  Why No One is Required to File Tax Returns for more information.