Brian Dean Swanson, Docket No. 4812-22L, filed 10/23/24, the GA schoolteacher with a rounder’s heart (see my blogpost “Rounders’ Day, Again, 4/22/24*) is back, and Judge Alina I. (“AIM”) Marshall has to deal with Brian Dean’s withdrawal or non-withdrawal of his wages aren’t income 1040.

“The penalty against petitioner was not assessed under section 6702(b), but rather under section 6702(a) for having filed a frivolous tax return for [year at issue]. Petitioner never made a ‘specified frivolous submission’ as that term is defined in section 6702(b)(2)(B). Thus, the withdrawal mechanism of section 6702(b)(3) has no application here.” Order, at p. 8.

Brian Dean sent in a 1040 showing zero wages, asking for a refund of the withholding, based on a frivolous position.

There are three (count ’em, three) tests for a frivolous filing, and Brian Dean checks all the boxes.

“If a taxpayer submits a Form 1040 in an effort to obtain a refund, the document necessarily ‘purports to be a return.’ By claiming a refund due for [year at issue], the Form 1040 petitioner submitted therefore satisfies the first requirement. By reporting none of his teaching wages as taxable income and attempting to ‘correct’ a Form W–2 to do so, while simultaneously reporting thousands of dollars of corresponding income tax withholding, the return also satisfies the second requirement, in that it ‘contains information that on its face indicates that the self-assessment is substantially incorrect.’ Finally, such reporting is based on at least two positions that the Secretary has identified as frivolous—that a taxpayer may file a return reporting zero income and zero tax liability even if the taxpayer received income during the period for which the return is filed and that wages and other compensation received for the performance of personal services are not taxable income—such that the third requirement is also satisfied.” Order, at p. 7. (Citations omitted).

He later claimed to withdraw the position. But his attempted withdrawal is of no effect, because it is the filing, not the assertion of the position therein, that is penalized.

Brian Dean says the IRM lets a frivolite withdraw, even when he doesn’t file a proper return.

“Petitioner’s reliance on the Internal Revenue Manual (IRM) is also to no avail. It is true, as petitioner points out, that IRM 5.20.10.4.3(a) (May 20, 2014) states that if the IRS determines that a taxpayer has submitted a tax return subject to a section 6702(a) penalty but the taxpayer timely responds to a Letter 3176C by filing a valid return withdrawing the frivolous argument ‘or withdraw[ing] the frivolous argument without filing a valid return,’ the section 6702 penalty will not be assessed. But, as petitioner fails to acknowledge, the IRM also states that the required response to remedy a frivolous return—be it a corrected return, a statement withdrawing the frivolous position, or otherwise—is to be ‘determined on a case by case basis.’ IRM 25.25.10.6 (Sept. 15, 2017). Despite what petitioner would lead us to believe, the IRM does not unequivocally provide for the withdrawal of a frivolous return. And even if it did, it is a well-settled principle that the IRM does not have the force of law, is not binding on the IRS, and confers no rights on taxpayers.” Order, at p. 8. (Citations omitted).

Judge AIM Marshall has an interesting footnote, Order, at p. 8, footnote 7. Even if Section 6702(a) did let Brian Dean withdraw his frivolity without filing a proper return, he sued for a refund in USDCSDGA and, when tossed for frivolity, appealed to the Elevenses, who affirmed the toss and hit Brian Dean with $8K in sanctions.**

So much for his “withdrawal.” But could a repentant frivolite withdraw, not file, and duck the Section 6702 chops? Judge AIM Marshall needn’t decide that here, so she doesn’t.

* https://taishofflaw.com/2024/04/22/rounders-day-again/

** https://law.justia.com/cases/federal/appellate-courts/ca11/23-11739/23-11739-2023-08-30.html