Ruben T. Varela, T. C. Memo. 2024-92, filed 10/1/24, filed an all-zeros return for year at issue, and settled with IRS for no tax due and no refund due. IRS did go for a $5K Section 6702 frivolous return penalty and seeks to levy to collect. Ruben petitions, and IRS seeks a Section 6673 frivolity penalty for that.
Judge Cary Douglas Pugh decides that Ruben filed a frivolous return, even if he didn’t owe anything. He did seek a refund of his FICA withholding, to which he stipulated he wasn’t entitled. He did avoid a Section 6702 chop for another year, which IRS had tacked on.
Judge Pugh holds that even though Ruben owes nothing, his all-zeros return is frivolous. Somber reasoning and copious citation of precedent supports her view. Ruben’s 1040-EZ was all-zeros, accompanied by the usual Forms 4852 purported correcters; it purports to be a return, didn’t contain information sufficient to show how to calculate tax due; and it shows a position identified as frivolous by IRS in Notice 2010-33, 2010-17 I.R.B. at 609, 611.*
So IRS can levy for the $5K.
But the Section 6673 chop doesn’t happen.
“We have seen no other case in which petitioner was warned against pursuing these types of arguments (nor did we warn him in this case before respondent’s Motion was filed). We decline to impose a section 6673 penalty at this time. We caution petitioner that a penalty may be imposed in future cases before this Court should he continue to pursue these misguided positions.” T. C. Memo. 2024-92, at p. 7.
Taishoff says a quick docket search shows that IRS sought a Section 6673 chop against Ruben T. Varela, Docket No. 16694-18L, 7/29/19, which ex-Ch J Michael B. (“Iron Mike”) Thornton denied as moot; the order doesn’t state that Ruben was warned.
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