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Thread: IRS inquiry: Do incorrect 1099s need rebuttal?

  1. #51
    Quote Originally Posted by ManOntheLand View Post
    Jethro, somehow I got some of my replies mixed up with your quote and sadly I am not savvy enough to know how to fix it. Sorry, I am not trying to put words in your mouth! But check out the middle of the quoted section for my replies.

    here they are again, extracted from my quote of what you said in your post:

    In 26 CFR 301.6109-1(g)(2) it is acknowledged that a SSN can "belong to" a non-resident alien.
    True, however 'that' "nonresident alien" is still considered to be a "taxpayer" - "any person subject to any internal revenue tax" - even though that person may have no "effectively connected income". I'm not of the exact implications of that status, but anything that would categorize me as a "person subject to any internal revenue tax" is something I would want to avoid.

    Quote Originally Posted by ManOntheLand View Post
    According to this provision of 26 CFR, once you have been identified as a U.S. person or foreign person in the records and database of IRS, they will presume that status permanently "until the circumstances change". It also says if your status changes, you must notify the IRS of the change "under such procedures" as the IRS "shall prescribe".

    I am not sure what procedure has been "prescribed" exactly.
    Me neither, and they won't tell or give up a form. That reg says the form is one they "may specify". "May" = not mandatory, so it looks like they have opted not to create such a form. How convenient for them?

    Quote Originally Posted by ManOntheLand View Post
    I can tell you that when I stopped filing 1040 with my usual IRS service center and instead filed a 1040NR with the Austin, Texas IRS center, they apparently accepted my foreign status and updated their records (at least for that year).

    To be on the safe side, I assume I will need to rebut "U.S. person" status in terms of the IRS database every time a third party sends out a W-2 with my SSN because such form indicates at least an election to be treated as a "U.S. person". I have to make it clear to them that I did NOT voluntarily furnish a SSN or elect to be treated as U.S. citizen or resident (but was coerced into doing so by the employer).
    That's one way of doing it - let me offer another...

    When you initiate a "rebuttal" you will have to make statements, and in making those statements the burden of proof is entirely on you to substantiate them. Your rebuttal also presumes their authority in relation to you. However, they are the ones who are alleging you have some legal duty and obligation to perform some act ("file a return", "pay $500 zillion", etc.), so the burden ought to be 100% of them to substantiate their allegation. The best tool I have discovered to that end is utilizing the right of inquiry -- ask questions, don't make statements, in response to legal notices.

    Quote Originally Posted by ManOntheLand View Post
    The fact that you went to that effort (going to State Dept.) definitely speaks to the sincerity of your belief in your position. But I don't think that will help you for tax purposes, as they treat a U.S. citizen and "U.S. resident alien" basically the same.
    But it already has helped -- at least from what I have observed -- because now I have standing for my claim of status, and they can't rely on the excuse that they "didn't know" in the event they damage me. I also have admissible evidence of my status.

    Quote Originally Posted by ManOntheLand View Post
    Given the rules prescribed in 26 CFR, it is probably necessary for you to also communicate your status directly to IRS, unless you want them to presume "U.S. person" status for your SSN. Their false presumptions are where all the hassles begin.
    Agreed. However, I only ask questions in relationship to any presumptions they may have about me... "Who do you think I am?" "What's the evidence for your presumption?" "In what capacity do you believe I am acting?" "Where do you believe I am acting?", etc. This places the burden of proof 100% on them, as it should be.

    Quote Originally Posted by ManOntheLand View Post
    For anyone wondering why this matters: a U.S. Citizen or resident is taxed on his worldwide income--it does not matter where your income came from. A non-resident alien is taxed only on income "effectively connected with a trade or business in the U.S." Of course you have to know what the terms "U.S. citizen" "resident" and "trade or business" really mean for any of that to do you any good. Most Americans assume they are "U.S. citizens", and even some who have figured out they are not will still call themselves "U.S. residents". The widespread ignorance of the meanings of these terms helps keep the myth alive that all Americans are taxed simply for making money.
    Yes! Exactly.

  2. #52
    ManOntheLand
    Guest
    Jethro: I agree with you about the "right of inquiry" in response to any notices sent by IRS and totally agree with the strategy of only asking questions in response to their notices. You have probably noticed they tend not to answer your questions!

    However, when a W-2 gets sent out and I receive a copy, I tend to think the best defense is a good offense--i.e. if I go to IRS first to ask them to correct their records I sort of have the upper-hand because I can default them after a reasonable time (30 days) and obtain tacit agreement if they do not respond. I look better in the record, and perhaps pre-empt any letters coming from them asking why I did not file (I no longer file returns). I feel better dictating what happens rather than just reacting to them. And I don't feel that asking them to correct their records creates any presumption of authority over me. They are obligated to keep correct records and make corrections when errors are brought to their attention. If they fail to correct their records I have a cause of action against them on that basis under the Administrative Procedures Act.

    Avoiding the burden of proof whenever possible is a good approach, but I don't mind having the burden of proof to substantiate certain things, if I can easily meet that burden with a sworn statement, and I know they have little or no chance of coming up with any contrary evidence. I have no problem, for example, with substantiating that I did not voluntarily submit a SSN or elect to have my pay treated as "wages". My sworn statement to that effect serves as prima facie evidence that the W-2 is void, which is a "reasonable dispute" with the information return that requires them under IRC to obtain "reasonable and probative evidence" in addition to the info return itself if they want to treat it as true and correct. Think they will bother with all that? Not likely. In my experience their one and only tactic is to ignore what you send them and try to proceed as though they never got it.
    Last edited by ManOntheLand; 05-24-13 at 09:44 AM.

  3. #53
    You have probably noticed they tend not to answer your questions!
    I think the problem is your perspective ManOnTheLand. It is about where you are coming from. Your story is very familiar to me and the disease is reflected through your story. Your story is the filter through which you both project and perceive. Same with me though; that is why I feel I relate so well. I see my story all over you.

    I sense a desperation for you to convince everybody that the IRS is corrupt and it is backfiring here. People can sense the truth about the redemption model and see it in the Federal Reserve Act. In a way I hope you type fast so that you are not wasting a lot of your time too.

  4. #54
    Quote Originally Posted by ManOntheLand View Post
    if I go to IRS first to ask them to correct their records I sort of have the upper-hand because I can default them after a reasonable time (30 days) and obtain tacit agreement if they do not respond. I look better in the record, and perhaps pre-empt any letters coming from them asking why I did not file (I no longer file returns). I feel better dictating what happens rather than just reacting to them. And I don't feel that asking them to correct their records creates any presumption of authority over me. They are obligated to keep correct records and make corrections when errors are brought to their attention. If they fail to correct their records I have a cause of action against them on that basis under the Administrative Procedures Act.

    Avoiding the burden of proof whenever possible is a good approach, but I don't mind having the burden of proof to substantiate certain things, if I can easily meet that burden with a sworn statement, and I know they have little or no chance of coming up with any contrary evidence. I have no problem, for example, with substantiating that I did not voluntarily submit a SSN or elect to have my pay treated as "wages". My sworn statement to that effect serves as prima facie evidence that the W-2 is void, which is a "reasonable dispute" with the information return that requires them under IRC to obtain "reasonable and probative evidence" in addition to the info return itself if they want to treat it as true and correct. Think they will bother with all that? Not likely. In my experience their one and only tactic is to ignore what you send them and try to proceed as though they never got it.
    ManOnthe Land I like the way you put it and I will rephrase some of your statement.

    I don't feel that asking them to correct their records still creates any presumption of "authority" over me.

    They are obligated to keep correct records and make corrections when errors are brought to their attention.

    If they fail to correct your record that’s their problem, I have a cause of action; what proof do you have that your making me into someone I am not?

    I don't mind responding to your allegations; but it’s going to cost you.

    Using your law is proof enough for me to substantiate anything you say that I am or how I conduct my business.

    Even if a sworn statement is not good enough for you and you use your statements against me; show me lawful evidence of a contact I signed with you.

    I am not going to butt heads with your statements; my statement is who I am and how I conduct my business and to that effect is prima facie evidence that your statement is void.

    You want to make a "reasonable dispute"; to treat it as true and correct then show me what you have.

    Think they will bother with all that? I want to see it, today.

    If your tactic is a challenge and if they decide to ignore your word as though they never got it, then their SOL and they need to be prepared to be sued.

    I am the record.

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  5. #55
    ManOntheLand
    Guest
    David, I am not trying to make anybody doubt LMR. I am only trying to help improve the tactics used to make LMR work efficiently in dealing with IRS and to help people avoid missteps. Filing a 1040 and taking a deduction for LMR is unnecessarily exposing one to the risk of frivolous return hassles.

    A better tactic might be to inquire in writing with IRS Chief Counsel BEFORE filing. They cannot penalize you for a letter making an inquiry! It is their stated mission to assist you in understanding your tax obligation. In such a letter you can state your position, that you believe LMR exempts you from tax and that you believe you have no filing requirement. Attach all your check copies etc. Let them tell you if they have any problem with your position ahead of time! If they say nothing, you could safely rely on their silence to justify not filing, or to file a statement or 1040 to claim a refund if you choose. They may even send you a determination letter that you are not required to file.

    Having approached IRS before you file a LMR return, you could then rely on their response to defend against a frivolous return penalty if necessary. You would have a good case for an 843 abatement because you made a good faith effort not to file a frivolous return and relied on their agreement or tacit agreement with your position.
    Last edited by ManOntheLand; 05-24-13 at 05:14 PM.

  6. #56
    Having approached IRS before you file a LMR return...

    Here is one way to explain it -

    Appearance cures all defects in jurisdiction.

    It is very blatant once you receive refunds with the IRS blessing, after wrapping your mind around the remedy. Your boss will appreciate you keeping this between you and the IRS.

    I believe you are transposing CtC (Cracking the Code) and other doctrine on remedy. In other words why go to the IRS and ask approval for something Congress has already approved?

  7. #57
    ManOntheLand
    Guest
    David, you seem to think that what I suggest is unnecessary. But what exactly would be the harm? Perhaps the suitors who have already been hit with frivolous penalties for taking a LMR deduction on a 1040 would have been better off to ask IRS (or Treasury or somebody in "authority" over tax matters) about it before they filed? If IRS had failed to express any problem with the LMR position in an inquiry letter, those filers could now use the IRS's own words or silence against the IRS to defend against the penalty and/or abate it. Perhaps even, God forbid, IRS might have had something instructive to say so that we might correct any errors (gasp!) that we may otherwise be making.

    Speaking of those suitors who got hit with frivolous penalties (which you have mentioned in another post), let's not rationalize away their plight by referencing what they do for a living or how much they make or anything else. They used the remedy you describe, did they not? And IRS hit them with a penalty for filing a return taking a deduction for LMR, did they not? So IRS could do the same to anybody, obviously. And BTW they can do so even AFTER they have "given their blessing" by issuing the refund no matter how "blatant" an indicator of their purported "blessing" you feel the refund is. Ask any CTC graduate about post-refund audits and frivolous penalties. What makes you think IRS won't adopt a policy of penalizing every LMR tax return eventually? Isn't it wise to anticipate this and take that weapon away from them?

    The only difference I can see with what I am suggesting vs. claiming an LMR deduction on a 1040 is that they cannot call an inquiry letter a "purported return" and threaten or impose frivolous penalties against it. And aren't you making an "appearance" and asking for IRS "approval" anyway when you file a 1040 and take a deduction for LMR?

    Re: appearance and jurisdiction-- For those who have been filing a 1040 every year, you are already presumed to be in their "jurisdiction" or at least an implied contract through "course of dealing".

    I agree, you don't need IRS "approval". I don't think they will even respond to the inquiry I am suggesting! But you can rely on their silence as tacit agreement, and use that against them if they decide to harass you at any point down the road.

    What is the harm in creating a "record" of my good faith belief in my position and that I gave them an opportunity to "correct me if I am wrong"? It demonstrates humility and a teachable state of mind. "I think this is right, and here is why, but you are the experts, you tell me if I missed something." If they don't respond, they will know as well as I do that if they one day decide to try to accuse me of wrongdoing they will have a very uphill battle. Worst case scenario I could show a jury that I sought out a determination/any corrections from IRS, so they cannot claim I was "willfully ignorant" and that I chose my position solely for its convenient result that I don't have to pay "my fair share." You have to look at all this the way a jury of average Americans would. So that you will be too dangerous to put in front of a jury.

    You have helped make me and many others aware of remedy and I give you all the credit in the world for that, but as Harvey Keitel says in Pulp Fiction, "let's not start sucking each other's dicks quite yet". There still may be some kinks to work out here.

    All due respect, but I detect some Pete Hendrickson-esque arrogance in your attitude about remedy and a sense that one must not question your "gospel" on this forum lest one be suspected of being a "dis-info agent". I also think you place way too much stock in the issuance of refunds as proof of IRS "acceptance" of your "gospel", another Hendrickson trait.

    This is not at all to say to say that I disagree with LMR. But remedy is not a religion. It is a process. Perfecting that process requires a culture of critique and error correction, and checking egos at the door. Do we want to just be right, or do we want to win too?
    Last edited by ManOntheLand; 05-24-13 at 08:56 PM.

  8. #58
    David, you seem to think that what I suggest is unnecessary. But what exactly would be the harm? Perhaps the suitors who have already been hit with frivolous penalties for taking a LMR deduction on a 1040 would have been better off to ask IRS (or Treasury or somebody in "authority" over tax matters) about it before they filed?

    You go right ahead and do it - please post a scan of the request and response here if you would.

    I do not suggest it for anybody looking to me for any suggestions exactly for the reason I said. I would not lead anybody into the illusion that the IRS has any authority outside the scope of contract with the Federal Reserve. The demand for lawful money ends the contract, overriding all the assumptions around having to work and earn a living.

    I explained how the three suitors, of hundreds were obligated into the private credit endorsement system as all three of them were in the financial industry, and all earning six-figure salaries at that. It makes sense to me and so I have learned something new.

  9. #59
    ManOntheLand
    Guest
    I am confused as to why you think there is any need to file if the contract is terminated by redeeming lawful money.

  10. #60
    Quote Originally Posted by ManOntheLand View Post
    I am confused as to why you think there is any need to file if the contract is terminated by redeeming lawful money.
    The suitor files for a refund of withholdings. When self-employed, to avoid the presumption of a liability based on 1099 reporting by clients.

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