The Empire Whiffs Back- Strike One!
Dissension from The Deception is DISALLOWED!!
The IRS has deployed an annoying, but highly instructive, delaying tactic in response to a claim for refund filed by one of my correspondents, who used a 1040X to correct a previously filed return on which he had endorsed payer-created evidence that he now understands to be erroneous. This tactic involves the sending of an “appealable disallowance of claim” notice instead of the refund, because, “you based your claim on your view that wages and salaries do not constitute taxable income” . The notice goes on to declare that ‘view’ to be erroneous, and therefore not a legitimate basis for a claim. (Click here to view the notice.)
The notice, which bears the designation of LTR 105C, is the proper type used for those claim disallowances as are provided for by law, such as disallowing a refund claimed after the expiration of the statute of limitations. When legitimate, such notices will contain some citation of the statute(s) or regulation(s) pertinent to their subject. The one being used in this cheap little misdirection ploy has none. This may be due to the fact that there IS no statutory or regulatory authority for a “disallowance” of an overpayment refund of the sort to which this notice pretends. There is a structure for reducing (disallowing) all or part of a timely-claimed refund, but only by diverting it to one or more of four specific alternatives: The satisfaction of an outstanding internal revenue tax liability arising elsewhere (26 USC 6402(a)); the satisfaction of a court-ordered obligation of past-due child support (26 USC 6402 (c)); the satisfaction of a “past-due legally enforceable debt” to a federal agency (26 USC 6402(d)); or the satisfaction of a “past-due, legally enforceable State income tax obligation” (26 USC 6402(e)). That’s it. There is no authority provided under the law for the IRS, or anybody else, to simply decide that a timely refund claim lacks merit; is improperly based; or is for any other reason “disallowed”.
Furthermore, claims for refund are not, of course, based on a ‘view’. Simply stated, refunds are based on grade-school arithmetic: A refund equals the excess (overpayment) of the amount withheld after subtracting the product of the rate of tax multiplied by the amount of income shown on the return (after the application of available deductions, exemptions and credits, etc.). Consequently, this ‘disallowance notice’ could be sufficiently answered (if it is answered at all-- or by anything other than a Grand Jury) by simply putting the preceding two sentences into an appropriate personal declaratory form over a signature and sending them to the issuing bureaucrat. However, there is an interesting lesson, and maybe a little fun, to be had from spending a bit more time on this…
Even though the filing to which this notice is (theoretically) responsive was not my own, I feel I can say with a very high degree of confidence that the very articulate and accomplished reader of ‘Cracking the Code’ who has brought this notice to my attention DID NOT in any way claim that “wages and salaries do not constitute income”. Rather, this informed filer simply declared (by formally rebutting a payer’s allegation to the contrary) that he didn’t receive any “wages or salaries” as those terms are defined within the revenue laws-- within the context of which his filings (and the IRS’s notice) were made. (“Salaries”, in that same context, equal “wages”-- see The Classification Act Of 1923, and 26 USC 3121 and 3401, or pp. 52, 75 and 77 in ‘Cracking the Code- The Fascinating Truth About Taxation In America’, if this is unclear.)
This is why this notice is so pleasantly instructive: The ‘service’ does not, because it cannot, actually dispute what IS being claimed on the filing of this American. If it could dispute the actual substance of this filing, the ‘service’ would simply say something to the effect of, “Dear filer, your contention that your earnings are not wages is without merit…” or, perhaps, “…your contention that your earnings do not constitute income is without merit…” At the very least, if it could have, the IRS would say, “Your claim is disallowed because you based it on your view that your wages do not constitute income”.
But it does not say any of these things. Instead, the ‘service’ deliberately answers an assertion NOT made. Why does it bother to do this?
There is only one plausible answer. The IRS hopes that the filer himself will be confused by the response into imagining that it actually addresses, and repudiates, what he DID assert. By saying something which IS true about the custom legal term “wages” (as defined within the revenue laws), the ‘service’ seeks to mislead the notice-recipient into imagining that it is saying something about the common word ‘wages’. In other words, it is trying to COMMUNICATE THE IDEA that any and all pay-for-work (commonly referred to by the word ‘wages’) constitutes “income”-- when it can’t actually say that this is so. The IRS figures that by doing so it might accomplish the effective withdrawal of a claim which it cannot thwart by any other means, by intimidating the filer into inaction. Knowing my correspondent, I hope that the ‘service’ isn’t holding its breath waiting for him to be frightened or taken in.
On second thought, I rather hope that it is…
There is a back-up element to this ‘disallowance notice’ ploy in case the trickery outlined above fails-- also attempting to see to it that the notice will go unanswered, but for a different reason. While the notice lacks citations of authority, it DOES have what appear at first glance to be daunting requirements for challenging the ‘decision’ it purports to reflect, including one which seems to require the making of a legal case to defend the filed claim. These requirements (suggestions, really) are as follows:
You should include the following (in your response):
A statement that you want to appeal the disallowance.
Your name, address, and a telephone number where you can be contacted during the day.
A statement of facts supporting your reasons for disputing the disallowance.
A statement outlining the law or other authority that supports your claim.
The notice goes on to say that the ‘statement of facts’ (number 3 above) must be sworn under penalty of perjury.
However, on examination these requirements prove to be more-or-less empty (even beyond the ‘service’s’ simple lack of authority to demand ANY response or defense of the claim). For example, a little boilerplate (which I like to include with all responses to any IRS communiqué) would render harmless answering the notice at all, while simultaneously satisfying the first ‘requirement’:
“I request and demand any and all due process to which I am entitled or which is in any way appropriate and/or available to me under any provision or practice of common, statutory, and/or administrative law or protocol-- including, but not limited to, that to which your notice refers; and incorporate by reference into this request and demand all relevant information included on or in that notice, a copy of which is attached. Be advised that it is my intention to audio-record any and all proceedings for which such an option is lawfully available to me. I declare that I make no admissions as to my status, the legitimacy of your implicit or explicit assertions, or the fitness of any particular legal or administrative protocol by responding to your notice or by requesting and demanding the due process referenced above.”
The second ‘requirement’ could be met by simply providing a phone number, as the other information is on the notice and would be incorporated by reference thanks to the boilerplate above.
The third and fourth of these ‘requirements’ sound, as I said before, pretty daunting. But note: Thanks to the feebleness of the pretext being used by the ‘service’, a “statement of facts supporting your reasons for disputing the disallowance” (number 3) needn’t be any more than:
“I didn’t base my claim on “my view” that “wages and salaries don’t constitute taxable income”, as you incomprehensibly allege. I based my claim on simple arithmetic and the clear words of the relevant law. What’s more, the “view” that “wages and salaries do not constitute income”-- insofar as those terms are used within the context of the federal revenue laws-- is not only not “my view”, but is also wrong, to the best of my knowledge.” Easily said, and easily sworn to.
Requirement number 4 also appears burdensome to begin with. However, I would personally feel comfortable addressing it with language as simple as:
"Since you have not actually challenged or disputed my claim, seem disinclined to make the attempt, and appear to have no lawful authority under which to do so in any event, no meaningful occasion for supporting it has arisen. Nonetheless, I will observe in that regard-- and for your edification, as well-- that the laws reflected at 26 USC 6401(b)(1) and (c) say:
(b) Excessive credits
(1) In general
If the amount allowable as credits under subpart C of part IV of subchapter A of chapter 1 (relating to refundable credits) exceeds the tax imposed by subtitle A (reduced by the credits allowable under subparts A, B, D, and G of such part IV), the amount of such excess shall be considered an overpayment.
(c) Rule where no tax liability
An amount paid as tax shall not be considered not to constitute an overpayment solely by reason of the fact that there was no tax liability in respect of which such amount was paid.;
that the “Subpart C of part IV of subchapter A of chapter 1”, to which 6401(b)(1) refers, is:
Sec. 31 -Tax withheld on wages
(a) Wage withholding for income tax purposes
(1) In general
The amount withheld as tax under chapter 24 shall be allowed to the recipient of the income as a credit against the tax imposed by this subtitle.;
and that the language of 26 USC 6402(a) relevantly states rather unambiguously that:
(a) General rule
In the case of any overpayment, the Secretary, within the applicable period of limitations, may credit the amount of such overpayment, including any interest allowed thereon, against any liability in respect of an internal revenue tax on the part of the person who made the overpayment
and shall, subject to subsections (c), (d) and (e),
refund any balance to such person.
I will further observe, solely for your edification, that 26 USC 7214(a) states that:
a) Unlawful acts of revenue officers or agents
Any officer or employee of the United States acting in connection with any revenue law of the United States—
(1) who is guilty of any extortion or willful oppression under color of law; or
(2) who knowingly demands other or greater sums than are authorized by law, or receives any fee, compensation, or reward, except as by law prescribed, for the performance of any duty; or
who with intent to defeat the application of any provision of this title fails to perform any of the duties of his office or employment;
shall be dismissed from office or discharged from employment and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both. The court may in its discretion award out of the fine so imposed an amount, not in excess of one-half thereof, for the use of the informer, if any, who shall be ascertained by the judgment of the court. The court also shall render judgment against the said officer or employee for the amount of damages sustained in favor of the party injured, to be collected by execution.
Send my refund, as claimed, promptly-- along with all applicable interest.”
Not so daunting after all…
With this new, desperate tactic, by which is undertaken an effort to mislead and intimidate a lawful claimant, the government is perilously close to outright fraud. The crime is mitigated only by the fact that these ‘disallowance notices’ are paper tigers without any meaningful legal foundation-- kind of like a notice I might send to my neighbor telling him that his request for the return of his borrowed lawnmower is “disallowed because it is based on his view that a gift does not constitute a permanent transfer of ownership”. I can send the notice, but… Also, it can be presumed that any delay for which these ‘disallowance notices’ are responsible will be offset by the addition of appropriate interest to the eventual refund.
As toothless as this effort may be, it is an effort at retrenchment, and should serve as a wake-up call to everyone reading this. Although for the moment the “income” tax scheme lies naked before every eye that cares to look, this will not long be the case. The masters of deceit whose tool this monstrosity is will not stand idly by and watch the derailing of their gravy train. Within a year’s time-- if not sooner-- there will an attempt at a major “reform”, which will be intended to draw the curtain back into place. This “reform” will involve the deployment of a host of new semantic and organizational tricks. This would not change the reality of the fundamental legal structure by which the tax, however configured or deployed, is circumscribed, of course; but it would likely be enough to render the truth enormously more difficult to communicate to the larger American population, whose understanding is critical if we are ever to permanently do away with this corrupt assault on the basic principles of liberty and the rule of law.
Therefore, it is critical that the truth be communicated to the larger American population NOW. Many long in the fight will be skeptical of the possibility of getting disengaged, distracted and intimidated Americans to pay attention, but I am more optimistic. Think about this, for instance: The truth about the “income” tax solves the ‘problem’ of Social Security-- which is, for most Americans, nothing more than the idea that they are forced by law to make ‘contributions’ to this complete loser of an ‘investment’ (I’ll not concern myself with a more accurate characterization of this 'program' here). The idea of getting a refund of those ‘contributions’, or not ‘contributing’ in the first place, is something which will catch the attention of a whole lot of our fellow citizens.
I urge you all to capitalize on such opportunities. Every time your local paper editorialized on the subject of Social Security insolvency, or reform, write a letter pointing out that Social Security is no longer a problem. Do the same when the “income” tax in general is discussed. Certainly spread the word every other way as well, by educating family, friends and acquaintances; but using the media will do far more to accomplish what needs to be accomplished-- with the necessary speed-- than any other approach.
This is FRIVOLOUS!! FRIVOLOUS, I tell you!!
So, please say you didn’t really mean it…
NOTE: I have been reminded by the Center for Individual Rights-- the outstanding organization defending me against IRS efforts to suppress my book-- that the right to freedom of speech recognized in the first amendment of the Constitution is viewed by the government as a liberty highly inconvenient to the “income” tax scheme. It is, in fact, the government’s practice to attempt to punish or thwart the exercise of this right in connection with the “income” tax scheme on the basis of any possible pretext, however absurd. Therefore, in order to preclude CIR being distracted with having to defend against collateral assaults based on certain such pretexts, I will state explicitly what should be self-evident: None of the foregoing discussion of the law should be construed or relied upon as particular advice or instructions for any particular reader. Each reader must make his or her own independent determination of the nature, meaning and application of any law for himself or herself.
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