Tax Assessment Substitute For Return Is Invalid
Tax Assessment Substitute For Return Is Invalid Because The Assessment Was Made From A Substitute For Return Prepared Pursuant To Section 6020(b), Which Is Not A Valid Return
The Law: Section 6020(b)(1) provides that “[i]f any person fails to make any return required by any internal revenue law or regulation made there under at the time prescribed therefore, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.” Section 6020(b)(2) further provides that any return prepared pursuant to section 6020(b)(1) shall be prima facie good and sufficient for all legal purposes. See also Treas. Reg. 301.6020-1.
Relevant Case Law:
Douglas v. United States, 324 Fed. Appx. 320 (5th Cir. 2009) – the court rejected the taxpayer’s claim that “the IRS committed a fraud” by completing a section 6020(b) return and held that the IRS properly issued notices of levy.United States v. Updegrave, 97-1 U.S.T.C. 50,465 (E.D. Pa. 1997) – the taxpayer argued that tax assessments may only be calculated from tax returns filed by the taxpayer and that an inferior agent of the IRS may not file substitute returns for the taxpayer. The court rejected this argument as “utterly meritless.” The court recognized that section 6020(b) authorizes the IRS to file substitute returns on behalf of taxpayers who fail to voluntarily file returns and that the substitute return “shall be prima facie good for all legal purposes.” Section 6020(b)(1) and (2). The court stated that a taxpayer may not “stymie” the IRS’s collection of taxes by refusingto file a tax return. The court also held that, while section 6020 authorizes the Secretary of the Treasury to prepare substitute returns, such authority has been delegated down to the District Director or any authorized IRS officer or employee. Accordingly, the substitute return and the assessments in this case were properly made by an employee of the IRS in accordance with the Internal Revenue Code.Holland v. La. Secretary of Revenue and Taxation, 97-1 U.S.T.C. 50,403 (W.D. La. 1997) – the court rejected the taxpayer’s argument that section 6020 does not apply to income taxes. The court further found that section 6065, requiring that a return be verified by a declaration under penalty of perjury, does not apply to section 6020(b) returns.Nicklaus v. Commissioner, T.C. Memo. 2005-156, 89 T.C.M. (CCH) 1499 (2005), aff’d, 202 Fed. Appx. 171 (9th Cir. 2006) – in this collection due process case petitioners argued that the IRS could not prepare substitutes for returns for them because part 188.8.131.52.10 of the Internal Revenue Manual (IRM) (May 27, 1999) lists seven returns that may be prepared under the authority of section 6020(b) and does not mention Form 1040.The court disagreed. Under section 6020(b)(1) the IRS may prepare substitute returns for taxpayers who fail to do so themselves. IRM provisions not cited by petitioners state that the IRS may prepare substitutes for Forms 1040 under section 6020(b).