Frivolous Tax Return Penalties against Protester Sustained by U.S. Tax Court

Posted on November 06, 2017

Mary Anne Valentine-Whitaker and her husband filed a tax return with the IRS for 2012 claiming a refund in the amount of $3,094.00 stemming from a distribution from her retirement plan in the amount of $15,469.

Attached to the tax return was a 1099 issued by the retirement plan on which they wrote “Refuted Form 1099-R” along with a “corrected” Form 1099 that was prepared by the taxpayers and was fictitious on its face. The taxpayers also attached an affidavit that contained tax-protester type language.

The IRS subsequently wrote a letter to the taxpayers stating that they had filed an unsubstantiated tax return claiming one or more frivolous positions and instructed them to file a corrected Form 1040 tax return for 2012.

The IRS also warned them that if they did not correct these errors that the IRS will assess a frivolous filing penalty in the amount of $5,000 against them. The taxpayers then filed another tax return for 2012 that was nearly identical to the first but included additional tax-protester type arguments. The IRS subsequently assessed the frivolous tax return penalty against the taxpayers in the amount of $15,000

The case ultimately ended up before the United States Tax Court, and a frivolous tax return penalty in the amount of $10,000 was ultimately sustained against the taxpayers.

Ever since the dawn of taxation, people have made arguments that taxes are illegal or do not apply to them. However, in virtually every case, the United States Supreme Court has upheld the legality of the tax system in the United States of America.

Because the United States Supreme Court has ruled that taxes are legal, making an argument that taxes are not legal is considered to be a frivolous argument. If you file a tax return that takes a frivolous or tax-protester type position, the IRS has the ability to assess the frivolous tax return penalty against you.

If you have filed a tax return that makes a frivolous or tax-protester type claim and if the IRS has not yet contacted you, contact us, we can help.