What follows is an edited version of a response I recently offered to a Cracking the Code Warrior who is preparing to file suit against a state Department of Revenue. The state has characterized this American's tax filings as "frivolous", and used this arbitrary characterization as a pretext for failing to incorporate the filings into its process.
My correspondent has succeeded in getting the attention of a local attorney, and has asked for some help in identifying some bite-size chunks of information by which this potential counselor can be introduced to the issues involved. I present it here in hopes that others will find it useful under similar circumstances. It is likely to be enhanced from time to time, so I encourage everyone with an interest in this subject to check back now and then.
*****
G, the first
thing that your correspondent needs to understand is that it is not the
rightness or wrongness of your assertions that are directly at issue here. What
is directly at issue is the DOR's refusal to take official notice of those
assertions, and work them into its calculations. This is what the state is
trying to avoid, because its calculations are highly programmed: If 'A' and 'B'
are put into the pot, the 'C' that comes out is what the mechanics of the
process dictate, and is outside the control of the department. Thus, it wants
to keep 'B' (your testimony) out of the pot.
Undoubtedly, the DOR will try to make the content of your testimony the
issue. This would be an attempt to defeat the statutory structure in which the
overall revenue law operates; in consistency with which structure the legal
definition of "frivolous" is confined to purely mechanical aspects of the
filer's presentation of testimony. The determination of whether a return is
"frivolous" extends solely to the question of whether the return constitutes a
valid, cognizable affidavit under the normal and logical standards by which such
documents are judged-- that is, neither contradicting itself, nor lacking some
information upon which something appearing upon the affidavit itself purports to
be based.
" [A return is 'frivolous' if it] does not contain information on which the substantial correctness of the self-assessment may be judged;
or,
Contains information that on its face indicates that the self-assessment is substantially incorrect". (From the federal version of the statute)
Nothing more is within the scope of the question.
Nonetheless, if the state doesn't surrender before this question gets into the courtroom, it can be expected to try hard to suggest that your declining to incorporate someone else's testimony into your affidavit (that of the 'information return' creator, whose testimony serves the state's interests a good deal more than yours does), means your return "does not contain information on which the substantial correctness of the self-assessment may be judged." To simply observe the true nature of this suggestion is to defeat it. No law can compel anyone to testify as to the knowledge and belief of someone else, nor can any law invalidate anyone's testimony for failing to do so-- and the revenue law makes no attempt to be an exception to these most fundamental of legal principles. This "frivolous" statute allows a challenge as to whether the return's 'tax due' (or refund owed) figure is supported by the information in the filing, not whether that figure is what someone else imagines it should be.
Furthermore, since the state's structure adopts the "income" figure from a previously completed federal return as its starting point, there is no place for any consideration of any "income" allegations from any 'information return' (W-2 or 1099). In fact, the only role any 'information return' CAN serve within the state's statutory scheme is that of supporting (or disputing) the amounts withheld. Therefore, unless the figures on the copies of such information returns furnished to the state by the payer disagree with those entered on the return (and its supporting documents), the payer's 'information returns' have no place in the picture under any circumstances.
(Further still, and as regards both the state's structure and that of the federal government: It goes without saying that 'information returns' CAN be wrong. Thus, it also goes without saying that it would be improper for a filer to include any assertions made on an 'information return' unless they were fully in keeping with the filer's own knowledge and belief; and it would be profoundly improper for any government to design, or seek to enforce, a statutory structure under which a filer's testimony is somehow required to incorporate or endorse such assertions.)
The state may attempt other diversions as well, in an effort to cloud the court's mind until it wearily finds ambiguity in the language of the "frivolous" statute where none actually exists. Therefore, it is important that it is kept firmly in mind that you are bringing the suit. You, therefore, control what question is being presented to the court-- which should be strictly confined to NOTHING except whether or not your return lacks "information on which the substantial correctness of the self-assessment may be judged; or, Contains information that on its face indicates that the self-assessment is substantially incorrect". Once that question is decided, the bureaucracy must proceed accordingly, by tossing 'B' into the pot and living with the 'C' that comes out. That 'C' will be a victory for you (and the rule of law).
As to 'bite-size' summaries of the issues that your prospective counselor will be dealing with, in addition to the observations above, the post at www.losthorizons.com/tax/It'sTimeToDemand.htm is probably a good place to start.
Your prospective counselor should also have at least a general understanding of
the nature of 'information returns', as well. Toward that end,
www.losthorizons.com/comment/archives/TheCriminalRitesOfSpring.htm would be
a worthwhile read.
You will also find a fairly concise overview of the "income" tax subject at
www.losthorizons.com/comment/archives/OfWordsAndDeeds.htm. If you succeed
in getting this fellow on board, I would be happy to discuss your case with him
any day of the week between 8AM and 9PM EST (but would much prefer that any call
is placed between 7PM and 9PM). He can reach me at XXX-XXX-XXXX.
Finally, even
if you don't succeed in engaging this particular fellow or anyone, for that
matter, don't abandon the contest. The state is trying to claim that you
declined to testify in what amounted to a hearing regarding your tax liability,
because if that were true, you lose, and the state gains. That's all there is
to it, and it is an OUTRAGE!!! You DID testify, and you can and will prove it.
Keep the outrage alive, and keep moving forward. Understand that when the only
play your opponent's got relies on keeping you from taking the field, the game
is yours to lose.
Best,
-Pete