INSTRUCTIONS: 4.2.  Understand the Tax Process and the Laws that Govern It
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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Event

From/To

Applicable section(s) of this document

Applicable Statutes (U.S.C.)

Applicable Regulations

Relevant forms

IRS Publication(s)

Details

1

Expatriate your “U.S.** citizenship”

Citizen/IRS

Citizen/Atty General

Citizen/Social Security Administration

8.5.3.1

26 U.S.C. 877 Expatriation to Avoid Tax

 

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.

 

 

2

Privacy Act Request for your IMF

Citizen/IRS

8.4.2

5 U.S.C. 552a Privacy Act

 

Privacy Act Request for Documents in section 15.15.5.

 

Request last three years.

3

Request a Determination Letter from the IRS

Citizen/IRS

8.5.4.9

 

26 CFR 601.201

“Test for Federal Tax Professionals” in section 15.1.

 

Cost is $275

4

IRS response to Determination Letter Request

IRS/Citizen

8.5.4.9

 

26 CFR 601.201

 

 

 

5

Get an opinion letter from tax professional

Tax professional/citizen

Forms:  15.3

 

 

 

 

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.

6

Withdraw W-4 form from employer and file an Exemption Certificate or IRS Form W-8 to stop withholding

Citizen/employer

Background:
8.5.4.7.4

Process:  8.5.4.12

 

 

IRS form W-4 or W-4 Exempt

IRS Pub 919:  Is My Withholding Correct?

Revokes employer's withholding of federal income tax and social security

7

Request tax refunds for past three years

Citizen/IRS

Process:  8.5.4.9

 

 

Federal refund letter in section 15.9.1.

 

Use IRS forms 1040X.  Also file  form 4852 to correct any W-2's that have incorrect amounts

8

Stop filing 1040 tax returns or file zero returns

Citizen

Process:  8.5.4.13

Background:  5.8.7

 

IRS 1040NR

IRS form 4868

 

File as a nonresident alien if you file at all.

9

IRS Request for Income Tax Returns to citizen

IRS/citizen

Response: 15.9

 

 

IRS CP-501

 

This letter asks for copies of income tax returns that were not filed on previous years

10

Notice of Deficiency Sent from IRS to taxpayer

IRS/citizen

Process:  7.6.7

Response: 15.12

 

 

IRS CP-515 Notice

 

Notifies taxpayer of overdue liability.

11

IRS Audit/Examination request or Taxpayer Request

IRS/citizen

Response:  15.11.3

Questions to ask:  15.1 (Test for Federal Tax Professionals)

26 U.S.C. 7123

 

Test for Federal Tax Professionals found in section 15.1

IRS Pub 5:  Your Appeal Rights and How to Prepare a Protest if You Don’t Agree

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.

12

Send List of Questions to IRS to answer prior to the examination/audit

Citizen/IRS

Test for Federal Tax Professionals: 15.1

 

 

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

 

Tell the IRS you won’t meet until they answer the questions.

13

Discovery of evidence prior to first IRS meeting by both Citizen and IRS

Both

7.6.13-7.6.15

Forms:  15.15

5 U.S.C. 552a Privacy Act

5 U.S.C. 552 Freedom of Information Act

 

FOIA forms in section 15.15.

 

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).

14

IRS Audit/Examination

IRS and citizen

IRS tactics:  7.6.8-7.6.9

Forms to use during:   15.11

Preparation: 15.11

Questions to ask:  15.1

 

 

“Test for Federal Tax Professionals” in section 15.1

 

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.

15

Citizen request that case be referred to national office for "technical advice"

IRS

7.6.11, 15.11.3

 

26 CFR 601.105(b)(5)(iii)

 

 

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.

16

IRS findings prepared on IRS Form 23C Assessment form

IRS/citizen

Process:  8.5.4.15-8.5.4.16

Forms:  15.11

26 U.S.C. 6020

 

IRS Form 23C:  Assessment Certificate

IRS Form 4340: Certificate of Assessments and Payments

 

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.

17

Prosecution for "willful failure to file" if taxpayer did not file

IRS/citizen

Background: 3.8.11

Response:
   15.13.1

26 U.S.C. 7203 Willful Failure to File

26 U.S.C. 7402(f)  Jurisdiction of federal courts

 

 

IRS 1040 Booklet

IRS 1040NR Booklet

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!

18

IRS prepares a "substitute for return" if taxpayer won't do it

IRS/Citizen

7.6.12

No authority to assess:  5.6.2.

26 U.S.C. 6020

 

 

 

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.

19

IRS Appeal by citizen

Citizen/IRS

Background: 7.6.18

 

 

IRS form 911: Application for Taxpayer Assistance Order

IRS Pub 1 Your Rights as a Taxpayer

IRS Pub 5:  Appeal Rights and How to Prepare a Protest If You Don’t Agree

Citizen may appeal the ruling administratively with the IRS.

20

IRS issues "Notice of levy” or “Levy" on citizen's property

IRS/Citizen

Response: 15.12

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

 

 

IRS form 668A: Notice of Levy

IRS form 668B:  Levy

IRS Pub 594 The IRS Collection Process

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).

21

IRS notifies citizen that his administrative appeal has been disallowed.  Issues a "Notice of intent to levy" to citizen

IRS/Citizen

Background: 7.6.20

 

 

 

IRS Pub 5:  Appeal Rights and How to Prepare a Protest If You Don’t Agree

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!

22

Citizen requests a Collection Due Process hearing from the IRS on their tax case

IRS/Citizen

Background: 7.6.17,   11.10

 

 

IRS Form 12153:  Request for a Collection Due Process Hearing

IRS Pub 594:  The IRS Collection Process

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.

23

IRS rejects request for Collection Due Process hearing and forces sale of home or auctions it off after levy/lien

IRS/Citizen

7.6.20-7.6.22

 

 

 

 

Property must be seized before it can be auctioned off.

24

Fiduciary for Citizen, employer, or county recorder violates their fiduciary duty and wrongfully turns over property of Citizen in violation of Fifth Amendment.

Fiduciary/IRS

8.5.5.9

 

 

 

 

 

25

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)

Citizen/Federal District Court

Background: 7.6.19,
11.10.3

Process: 8.5.5

Jurisdiction:  5.6.2

 

Jurisdiction: 26 U.S.C. 7402(f)

26 U.S.C. 6331(a)

 

 

 

Undertake to hold fiduciary liable for breach of fiduciary duty.

26

Tax Court

NA

Background: 11.10.2

 

 

 

 

Trial at Tax Court, if citizen insists.  Note:  Federal District Court is better.

27

Citizen files lawsuit against in Federal District Court

Citizen/Federal District Court

Background: 7.6.19,
11.10.3

Process: 8.5.5

Jurisdiction:  5.6.2

Issues:  8.5.5.9

Jurisdiction: 26 U.S.C. 7402(f)

 

Refund/no liability lawsuit

 

Undertake if citizen in dissatisfied with the ruling.

28

District Court Ruling

District court/Citizen

Background: 11.10.3

 

 

 

 

Federal district court rules on case

29

Citizen appeals to Federal Appellate Court

Citizen/Federal Appellate Court

Background:  11.10.4

Process: 8.5.5

 

 

 

 

Citizen files lawsuit in federal court of appeals.