IRS inquiry: Do incorrect 1099s need rebuttal?

[ManOntheLand]

OK David, thanks for clarifying. You seem concerned about not unnecessarily putting oneself into IRS jurisdiction (rightly so I think). So in the case of no third party reporting to IRS, would you in that case suggest not filing anything, based on there being no presumption of liability?

I think that would be fine as long as one has evidence of LMR ready to show if necessary. For a four year stretch I earned a living with no third party reporting to IRS, I had never heard of redeeming lawful money, did not file, and never heard a peep from IRS.

I agree with you that a W-2 or 1099 has already established a presumption of liability. Therefore I see no harm at all (and in fact a great advantage) in writing a letter to IRS to rebut that presumption showing my evidence of LMR and asserting no filing requirement, which they cannot penalize with a frivolous return penalty. One caveat: I will not claim a refund in such letter, as this may cause them to treat my submission as "a purported return" and subject me to the risk that they will then determine it is a "frivolous return". Case law has established that a document is in substance a return or purported return if it contains all the essential information a return would contain. I can think of no better way to avoid having my letter considered a purported return than to assert in said letter that I am not required to file a return.

Such a letter would not be asking for IRS approval of LMR, but to assert my position that I am not required to file a return at all, based on LMR and my right to exchange labor for compensation without being taxed, and invite IRS to disagree and prove their case. I will ask that if they do not disagree, that they update their records so I will not be presumed to have any liability or filing requirement. I will then be all set to defend myself if I ever receive a notice claiming I need to file a return for that year. And again, I avoid any risk of having to deal with bills claiming I owe a $5,000 frivolous return penalty.

I have already done something similar: because of multiple frivolous penalties imposed on me for CTC returns (even after getting full refunds) I wrote to the IRS Commissioner and Secretary of Treasury about a year ago to complain about IRS abuse, IRS failure to ever explain what was wrong with my returns so I could correct them, and to assert that I believe I am not required to file as long as my earnings were from exercising my right to exchange my labor for money in the private sector within one of the 50 states. I cited standing Supreme Court decisions to support my position, asked a few yes/no questions, and invited a rebuttal within 30 days if they disagreed. I gave notice that I would rely on a lack of response as their agreement that I am not required to file and have no tax liability based on my earnings from private sector labor in one of the states. This was before I knew anything about LMR. I got no reply from either of them. Relying on their "blessing", I did not file for 2011 despite having some W-2's issued. As of now, I have not heard from IRS about 2011. I had claimed exempt throughout 2011 so there was no refund of income tax to get. So I am happy, and I guess they are too.

I believe you have suggested that once the first LMR return is filed and refund of all witholdings obtained, one might show proof of your full refund and exemption to the employer if the employer has any problem with an "exempt" W-4, is that correct?

I think it is wise to try to avoid trouble with the employer. That is all I am saying about IRS: it is wise to try to avoid trouble with them as well. I have yet to file a LMR return, as I just learned about LMR in 2012. But I have a 12 year run of paying no income tax, and in some of those years obtaining refunds through the CTC method. What I have tried to offer in my posts is some insight based on my experience as to how IRS reacts in real life to unorthodox returns. I have found it is wise to avoid dealing with IRS as much as possible, and not be overly confident that they always will do what they "should" do, no matter how right your position may be. In other words, I do not assume a cooperative attitude from IRS. I assume in all cases that they will do whatever they can get away with. Anticipating that, I try to leave as little wiggle room for IRS as possible in dealing with me.

[David Merrill]

OK David, thanks for clarifying. You seem concerned about not unnecessarily putting oneself into IRS jurisdiction (rightly so I think). So in the case of no third party reporting to IRS, would you in that case suggest not filing anything, based on there being no presumption of liability?

The presumption is that the reader here needs to work for a livelihood.

I agree with you that a W-2 or 1099 has already established a presumption of liability. Therefore I see no harm at all (and in fact a great advantage) in writing a letter to IRS to rebut that presumption showing my evidence of LMR and asserting no filing requirement, which they cannot penalize with a frivolous return penalty.

Writing freeform letters to the IRS or any attorney for that matter is a waste of time in my opinion. Like I said though, if you do that please share. What is happening here is that a brain trust is utilizing accrued experience and sharing it. There is a thread around here - Exactly What Does the IRS Agent Think? But nobody has bothered writing to the IRS and just informing them in a letter. Instead we have the Notice and Demand to the Fed Bank and in my estimation that is much more efficient.

I wish that there was more time to go through your posts. There does not seem to be any foothold in fact and scientific process.

[ManOntheLand]

[/QUOTE]I wish that there was more time to go through your posts. There does not seem to be any foothold in fact and scientific process. [QUOTE]

Go ahead and disregard my posts as a waste of your time and "unscientific" if you wish. Go ahead and just file returns with an LMR deduction and assume the IRS loves what you are doing, and hope that some low level clerk does not mishandle your return. Perhaps you have time to deal with persistent $5,000 bills for frivolous return penalties spit out by their computers when someone chooses to "misunderstand" what you are doing. Perhaps you have time to deal with intents to levy and wage garnishments. Shall I post all the notices charging me penalties I have gotten from CTC filings and non-CTC related points I have raised in appeals requests?

If you want to learn what I have learned the hard way, and help IRS to discredit remedy as you do it, I can't stop you. I fully get that you think this can't happen to you or to anybody employing remedy. Why don't you look up 'hubris' in your dictionary?

And since you cherish a scientific process so much, please answer me this: isn't the remedy available to everyone exchanging labor for money? If so, what is your explanation for the remedy not being available to the three suitors working in finance who were hit with frivolous penalties? Is remedy not available to them? Or is the IRS just penalizing them because it can?

My posts are based on years of study of this topic and more importantly a lot of real life actual experience dealing with IRS that may help the reader here to avoid making mistakes I have made. Perhaps someone who has filed a Notice and Demand (which I think is a great idea) will think it also worth their time to make a record of agreement (or tacit agreement) from the agency whose purported mission is to help us to understand our tax obligations, so that one can avoid filing a tax return altogether, and thus avoid the risks that come with filing a return. Failure to file (even for a frivolous reason) carries no $5,000 civil penalty and is at worst a misdemeanor if the failure is "willful". Tax returns they don't like can be penalized $5,000 and can lead to charges of tax evasion and filing false documents, both felonies. Do the math. Perhaps some of the readers using remedy will choose not to file a tax return at all and will sleep better knowing they have made a record of a good faith inquiry to IRS to make doubly sure they were in compliance with all laws in not filing. Something the IRS knows could ruin their chances of getting even the dumbest jury to railroad you in court.

Since you are rightly concerned about contesting presumption of liability from 1099 and W-2 yet not putting oneself in IRS jurisdiction, I wonder why you are so unconcerned about signing a 1040 U.S. Individual Income tax Return, signed under "penalties of perjury" in accordance with a sworn statement made from within the "United States" as described by 28 U.S.C. 1746. If you go to that section, you will see there is an appropriate jurat statement for one who is "without the United States" to sign "under the laws of the United States of America". This is not the jurat on a 1040. As you said, appearance perfects jurisdiction. Are you not appearing in the "United States" when you sign a 1040? Are you not calling yourself a "U.S. individual" by submitting such a form? If you are not in the jurisdiction, and don't wish to be, then don't sign that perjury statement and don't submit a form that may not be appropriate for you to use.

BTW, when I have in the past altered the jurat on a 1040 by inserting the phrase "from without the United States per 28 USC 1746 and under the laws of the United States" the IRS attorney screeched to the Tax Court later that this in itself made my return frivolous. The jurat is clearly an indicator of the jurisdiction one is presumed to be in. File a 1040 if you dare. Just don't be surprised if they one day stop being as nice as they have been so far about you taking your LMR deduction on their forms.

[David Merrill]

I thought that is where you have been coming from all along.

It is fairly clear that an IRS agent is working in a world of form. So an explanation is superfluous. It does nothing to help the IRS agent understand anything.

I regret that this might have been handled better. I believe that the readers and members here too can sense your need to validate the corrupt nature of the Powers that Be. I honestly did not see how to get it out there except to wait for you to write it in your own words.



Regards,

David Merrill.


P.S. If you would like, please show us the letter you would write to an IRS agent?

[David Merrill]

ManOntheLand;


I am trying to work with you here.

You seem to be intent on pursuading me to form a letter or otherwise start advising new suitors to write a letter of explanation to the IRS?

My response is, No. But you might give it a try, and I hope you will let us know how it goes.

[ManOntheLand]

David I think our point of disagreement is not really whether or not to send a letter to IRS but whether it is proper to file a 1040 claiming a LMR deduction. As much as I agree with the process of remedy presented in this forum, I think filing a 1040 while taking an LMR deduction is a big mistake.

If I am intent on persuading you to do anything, it would simply be to recognize that signing and submitting a 1040 (especially one with a W-2 form attached) is not a good idea if one is trying to assert that one is not subject to IRS jurisdiction, whether you rely on LMR or anything else. They have the right to presume you are a "taxpayer" if you file a "taxpayer" form. They will presume your agreement with any W-2 attached. The "wages" reported on W-2 are "income" under IRC.

As for the LMR deduction: The Internal Revenue Code recognizes deductions related to the conduct of a "trade or business within the U.S". and certain personal deductions like home mortgage interest. By redeeming lawful money, you are opting NOT to conduct a trade or business within the U.S. Lawful money redemption is therefore not a recognized statutory deduction in the Internal Revenue Code, and taking such a deduction on a 1040 is asking for trouble--even assuming that LMR is lawful and legitimate.

A similar example (albeit one with no lawful basis) is the slavery reparations deduction. Some people got the idea at one point to take deductions for slavery reparations and actually got refunds at first--but it became common enough for IRS to tell their clerks to watch for this bogus deduction and eventually added that to their list of frivolous positions. In fact, any position arguing against tax liability can be called "frivolous" when being used by a "taxpayer" because a "taxpayer" is by definition a person subject to an internal revenue tax.

Why take any chance that they will think you are a "taxpayer" by filing a return when it is not necessary to do so?

If LMR leaves one with less than the exemption amount of "gross income", then one would certainly not be required to file a return. See IRC 6012.

If one needs to claim a refund of withholding, one could do so informally without the use of a 1040 form (there is an IRC provision for this). If you claim to be outside their jurisdiction, such a refund claim could be made informally under principles of equity, and not under the authority or requirements of any statute. Such a claim could be made in any way you see fit. Just don't use a 1040, to avoid confusing the issue.

If LMR results in no tax liability, then one could properly claim exempt on W-4, and going forward it would not be necessary to claim a refund at all. (Unless one wants to make a claim for refund of FICA--but let's stay on point.)

A suitor claiming not to be subject to income should not file a 1040 or any other tax return. One can claim (if it becomes necessary) that LMR relieves one of the requirement to file (I think it is a matter of personal preference whether one does this in reaction to a demand to file or proactively to pre-empt such demands).

Assuming one has a W-2 or 1099 issued to IRS reporting income, one might prefer a proactive approach, as I believe you would actually be helping IRS to not waste their time with you demanding that you file a return, so they can concentrate on those who are properly in their jurisdiction.

As you said in a prior post, you do not need IRS approval for what Congress has already approved. I agree. Exactly why I believe filing a 1040 (a statutory requirement of IRC) is unnecessary and likely to be counter-productive.

If you are redeeming lawful money and are concerned that a W-2 might create a presumption of liability/filing requirement, you can sit back and wait for IRS to claim you need to file a return, and explain at that time that you have no filing requirement because you redeemed lawful money, or you can communicate with IRS as soon as the W-2 is issued to dispel the presumption of liability/filing requirement.


Re "let us know how it goes":

I already have employed the "IRS letter" technique (as have several friends of mine) to support my general position that I am never required to file an income tax return if my earnings were solely from my labor working in the private sector within the 50 states. I wrote a letter to the Commissioner of IRS and Secretary of Treasury, sent certified mail, return receipt requested, to explain that, contrary to popular opinion, I consider myself not subject to taxation on money made in exchange for my labor within the 50 states. For any year where my earnings come solely from working at a job in the private sector inside the 50 states, I therefore do not have "gross income" at or above the exemption amount, and I am thus not required to file an income tax return pursuant to IRC Section 6012. I use Supreme Court cases and their own Code and regulations to support my position, but that's the gist. A suitor could explain his understanding of LMR. We do not need to convince anyone of anything. We are only making a record that we tried in good faith.

Neither the Commissioner or the Secretary have ever responded to any of these letters and they have therefore defaulted on that issue. I have not filed a tax return since then. If I were to be asked at some point to explain why I am not required to file, I could prepare an affidavit of default explaining my reliance on the letter I sent and their failure to respond. This provides me a reliance defense and sincere belief defense, a la the Cheek v. United States Supreme Court case.

I did not mention LMR in the letter I describe, because I was not aware of LMR at the time. But it makes little difference what I said in the letter, as I invited a rebuttal, made clear I would rely on their silence as agreement, and got no response. The letter is meant to take advantage of my observation from much experience that IRS refuses to respond in good faith to such inquiries. I hardly expected them to say "Yes you are right! Don't tell anybody!" but they cannot remain silent and then later complain when I rely on their silence. In U.S. v. Tweel a Federal Court stated that "Silence can only be equated with fraud when there is a duty to speak, or when an inquiry left unanswered would be intentionally misleading."

As a practical matter, this tactic is meant as a long term insurance policy against IRS harassment. The letter is ostensibly written to the IRS but is also written to a theoretical jury that may someday be charged with deciding if I have acted willfully in "violating the law". Understand that a jury does not get to evaluate whether or not you were in violation of the law; they will be instructed by the judge that you were "wrong", that you were required to file, that you are liable for tax on your income. The jury will hear that as "everybody is required to file, and everybody owes tax on all that comes in". Examine any federal tax case and you will see this is how it is done. The jury only gets to decide the facts of the case: that is, if the defendant willfully violated a known legal duty. But it will be considered a given that you had a duty. By IRS knowing this letter exists, I feel I am less likely to ever be the target of wrongful prosecution to "make an example" of me. Something one should think about if he plans on exercising remedy for the rest of his life.

The letter is also useful for deflecting administrative harassment and avoiding unnecessary hassles with IRS: If an IRS agent later wants to take the position that I am indeed required to file, wants to prove that, and tries to reject the position I expressed in my letter to the Commissioner, then the IRS agent surely would have had a problem with those same views if expressed on a 1040 return, and very well might have chosen to penalize me with a frivolous return penalty rather than have any discussion, or worse, consider the filing an act of tax evasion or filing false documents which are both felonies. Likely? perhaps not. Possible? You better believe it. I decline to rely on the good graces of IRS. Perhaps you and I differ on that. To each his own.

To me the IRS is like a grizzly bear. You may very well have the bear safely caged with LMR. But its still a bear. I see no reason to stick my arm in its cage and try to thump it on the nose. That is what filing a 1040 and taking LMR deduction represents to me.

[ManOntheLand]

[QUOTE]It is fairly clear that an IRS agent is working in a world of form. So an explanation is superfluous. It does nothing to help the IRS agent understand anything.[QUOTE]

I agree that an IRS agent is working in a world of form and is not at all likely to understand what you are doing. Exactly why you don't want to take an LMR deduction on a 1040, where the agent's misunderstanding may get your return sent to the frivolous return department.

These returns so far have the advantage of looking like a "regular" return other than the LMR deduction. But once trained to watch for the "lawful money" verbiage, all the agent is going to see is somebody trying to not pay his "fair share" and wasting their time with a "tax protestor" return.

A few hundred filings with LMR deduction is one thing. A few thousand will be quite another. As with slavery reparations deductions, the success at getting quick refunds will cause a steadily accelerating increase in the number of people filing that way until it warrants agency wide attention, and eventually a backlash in the form of demands for filers to "correct" their "frivolous return" and/or audits will inevitably happen.

Non-filers (based on varying positions or even no position at all) are abundant. This the IRS can live with, because the "success" of not filing is ambiguous at best--even if you tell the average American you are not filing, they are far less likely to emulate what you are doing, and will figure the IRS is "coming to get you" any day now. But a simple filing for refund method whose success is easy to prove and imitate? That the IRS cannot tolerate. That is a threat to the whole game. Wait and see.

[ManOntheLand]

Another way to look at the value of my inquiry letter to the IRS: the stated mission of IRS is to assist "taxpayers" in understanding their tax obligations. But IRS has no obligation to assist non-taxpayers to understand anything. I am asserting in my letter essentially that I am not a taxpayer. By failing to respond to me, and refusing to offer any assistance, IRS is helping to establish a prima facie case that it agrees I am not a "taxpayer".

On the other hand, if I file a 1040, I am asserting essentially that I am a "taxpayer" by use of the form, even if I claim on the return not to be liable for any tax, due to LMR or whatever argument. By signing the 1040 I am giving IRS the right to treat me as a taxpayer, and threaten the frivolous penalty in a 3176C letter in order to "assist" me in understanding my obligations as a taxpayer.

The failure of IRS in a 3176C form letter to explain what exactly is frivolous about my return, yet demanding in the 3176C letter that I "correct" my return suggests a contract exists, by which I am presumed to already know what it is I am supposed to do, and therefore what I have done wrong, and what needs to be done to "correct" the return. This indicates that filing a 1040 itself causes them to presume I am a "taxpayer".

Filing a 1040 to claim you are not obligated to IRC is a bit like volunteering to join the army, then refusing to do what you are told because it was voluntary to join. This would be a frivolous argument because the joining itself is the only voluntary part. Once you agree to contract, you are obligated, as with any contract. One cannot argue from inside that contract that one is not obligated simply because one could have chosen not to enter that contract. Of course you could have chosen not to enter that contract. But the point is, you did!! You have to be careful about what you put your signature on. As they say on one of the new Arrested Development episodes, "Don't sign, and you'll be fine." If you want to tell IRS you are not under contract with them, don't sign one of their taxpayer forms in order to do it. That's my point.

[John Howard]

As much as I agree with the process of remedy presented in this forum, I think filing a 1040 while taking an LMR deduction is a big mistake.


To me the IRS is like a grizzly bear. You may very well have the bear safely caged with LMR. But its still a bear. I see no reason to stick my arm in its cage and try to thump it on the nose. That is what filing a 1040 and taking LMR deduction represents to me.

The IRS claims that I have been "defying" the tax laws for thirty years, using 12 U.S.C. §411 for the last two, (while claiming "Lawful Money Redeemer" as my Occupation), and I get silence from them, my token refund for 2012 was applied to a previous year. Others on here have been redeeming lawful money for many years running. The bear is a mechanical one, and we have seen the man behind the curtain who controls him.

[Michael Joseph]

I thought that is where you have been coming from all along.

It is fairly clear that an IRS agent is working in a world of form. So an explanation is superfluous. It does nothing to help the IRS agent understand anything.

I regret that this might have been handled better. I believe that the readers and members here too can sense your need to validate the corrupt nature of the Powers that Be. I honestly did not see how to get it out there except to wait for you to write it in your own words.



Regards,

David Merrill.


P.S. If you would like, please show us the letter you would write to an IRS agent?

Expatriation and THEN issuing a 1040 - Huh? One pays tribute to the State it gets its shadow from. Boy if I was the IRS agent I would either think this guy is trying to pull one over on me or he is double minded. Since we are talking about Trust it really does not matter where you are coming from in regard to the IRS - if you file you are PRESUMED to be WITHIN the United States; else what would compel you to file? I don't remember the last time a China man filed a tax return with the IRS.

Or let me say it like this. When was the last time you filed with the internal revenue collection service for the State of China/Iraq/Brazil? Why shame on you, you mean you don't file in Brazil? Well, pray tell, why not?

Until the day one executed a VARIATION OF AGREEMENT from without the United States, then one is presumed to be under that shadow.

The NAME is within the United States - notice the SEAL atop the BC. Also, notice the Number assigned and one who signed for it in consent of the receipt of a benefit - its Use. So then, one filing has clearly benefited in the Use - else there is no need to file - zero income. And yes, dear reader FRN's and USN's are both income - but with different obligations. I model the NAME as an account in which I have interest. As I grant into it for my benefit. However, I am not holding the Titles.

Of course, the system, whatever that is, is corrupt - men run it.