                                T.C. Memo. 2012-75



                         UNITED STATES TAX COURT



               CATHERINE N. ALEXANDER, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 27671-09L.                        Filed March 20, 2012.



      Catherine N. Alexander, pro se.

      Amy B. Ulmer, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      THORNTON, Judge: Pursuant to sections 6320(c) and 6330(d), petitioner

seeks review of respondent’s determination sustaining the filing of a Federal tax lien
                                         -2-

to collect civil penalties imposed on account of her frivolous tax submissions for

2004, 2005, and 2007.1

                                FINDINGS OF FACT

      The parties have stipulated some facts. When she petitioned the Court,

petitioner resided in Oregon.

      Petitioner received wages and other income of $10,618 in 2004, $27,070 in

2005, and $7,582 in 2007, as reported to respondent on third-party payer

information reports.

      For 2004 petitioner timely filed a Form 1040EZ, Income Tax Return for

Single and Joint Filers With No Dependents, reporting wages, salaries, and tips of

$10,618 as indicated by attached Forms W-2, Wage and Tax Statement. On this

Form 1040EZ, petitioner reported tax of $266 and, after claiming credit for $675 of

tax withholdings, claimed a tax refund of $409.

      On April 14, 2006, respondent received from petitioner a Form 1040X,

Amended U.S. Individual Income Tax Return, for 2004, showing the “Correct

amount” of her income to be zero. On the Form 1040X petitioner indicated on line

21, as the amount she owed, “N/A”. She claimed as a refund the $266 of tax

      1
       Unless otherwise indicated, section references are to the Internal Revenue
Code, as amended, and Rule references are to the Tax Court Rules of Practice and
Procedure. All monetary amounts are rounded to the nearest dollar.
                                        -3-

that she had previously reported on her Form 1040EZ. In the “Explanation of

Changes” on the Form 1040X she stated that she had “re-calculated my wages as

defined in IRC sections 3401(a) and 3121(a) and determined the correct amounts to

be 0.” Attached to the Form 1040X were self-generated Forms 4852, Substitute for

Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From

Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts,

etc. On these Forms 4852 petitioner purported to “correct” her Forms W-2 to show

all items of income as zero, with the explanation “I calculated my wages as defined

in IRC sections 3401(a) and 3121(a).”

      Also on April 14, 2006, respondent received from petitioner Form 1040, U.S.

Individual Income Tax Return, for her 2005 taxable year. On April 20, 2008,

respondent received from her a Form 1040 for her 2007 taxable year. On these

Forms 1040, as on her 2004 Form 1040X, petitioner listed zero for every income

item and claimed refunds for all tax withholdings. Attached to these Forms 1040

were self-generated Forms 4852 purporting to “correct” her Forms W-2 to show all

items of income as zero for the same reasons as stated on the Forms 4852 attached

to her 2004 Form 1040X.
                                         -4-

       For each year at issue, respondent sent petitioner a letter stating that her

return was frivolous and warning her that a frivolous-return penalty might be

imposed under section 6702 if she failed to correct her position within 30 days.

Petitioner did not file any corrected return. Pursuant to section 6702 respondent

assessed against petitioner a $500 penalty for each of the tax years 2004 and 2005

and a $5,000 penalty for 2007.

      On May 12, 2009, respondent mailed petitioner a Letter 3172, Notice of

Federal Tax Lien and Your Right to a Hearing Under IRC 6320. On June 9, 2009,

petitioner filed a Form 12153, Request for a Collection Due Process or Equivalent

Hearing, requesting a face-to-face hearing and stating that “I did not earn income

from wages nor did I earn income from a trade or business during the CDP years. I

accurately corrected erroneous third party information and included the correct data

in my return documents.” On August 7, 2009, respondent’s settlement officer sent

petitioner a letter acknowledging receipt of petitioner’s request for a collection due

process (CDP) hearing and stating that she had determined petitioner’s contentions

to be frivolous or reflecting a desire to impede the administration of tax laws. The

letter advised petitioner to amend her hearing request by stating a legitimate issue

and withdrawing all frivolous issues.
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       In a letter to the settlement officer dated September 4, 2009, petitioner stated

that she was withdrawing her request for a face-to-face CDP hearing; she requested

a hearing by correspondence. This letter also stated that petitioner was

withdrawing all positions classified by respondent as frivolous or groundless. But

contrary to this representation, the amended Form 12153 that petitioner attached to

this letter contained a laundry list of frivolous and groundless arguments, including

arguments that the Forms W-2 that her employers issued to her were invalid because

these employers were not “valid payer[s]”, inasmuch as they were not “identified as

employers paying wages subject to withholding * * * nor * * * among those

identified as employers providing employment for wages subject to the Federal

Insurance Contributions Act (FICA) taxes”. In letters to the settlement officer dated

September 24 and 25, 2009, petitioner made additional frivolous and groundless

arguments.

       On October 19, 2009, respondent mailed petitioner a Notice of Determination

Concerning Collection Action(s) Under Section 6320 and/or 6330, sustaining the

notice of Federal tax lien on the grounds that she raised only frivolous issues and did

not present any information that would warrant a withdrawal of the notice of Federal

tax lien.
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                                      OPINION

      The only issue petitioner has raised in this proceeding is her underlying

liability for the civil penalties that respondent assessed pursuant to section 6702.

Respondent concedes that because petitioner had no prior opportunity to dispute

these penalties, she is entitled to challenge them in this proceeding. See secs.

6320(c), 6330(c); Thornberry v. Commissioner, 136 T.C. 356, 366-367 (2011).

Respondent also acknowledges that he has the burden of proof with respect to these

penalties. See sec. 6703(a); Thornberry v. Commissioner, 136 T.C. at 367.

      Before enactment of the Tax Relief and Health Care Act of 2006 (TRHCA),

Pub. L. No. 109-432, div. A, sec. 407(a), 120 Stat. at 2960 (effective December 20,

2006), section 6702(a) imposed a $500 penalty on any individual if these three

conditions were met: (1) the individual filed a purported income tax return; (2) the

purported return lacked information needed for the Commissioner to judge the

substantial correctness of the self-assessment or contained information that on its

face indicated that the self-assessment was substantially incorrect; and (3) the

individual’s conduct in this regard was due to “a position which is frivolous” or a

desire to delay or impede the administration of Federal income tax laws.

      TRHCA amended section 6702 to increase the penalty from $500 to $5,000

and broadened its application to purported returns of all types of Federal tax
                                          -7-

imposed under the Internal Revenue Code. In addition, the third condition

described above, asking whether the individual’s conduct was based on “a position

which is frivolous”, was amended to refer instead to “a position which the Secretary

has identified as frivolous” under new section 6702(c), which authorized the

Secretary to prescribe a list of positions identified as frivolous for this purpose.

These TRHCA amendments are effective for submissions made and issues raised

after the date on which the Secretary first prescribed such a list. TRHCA sec.

407(f), 120 Stat. at 2962. On March 15, 2007, the Commissioner prescribed his list

of frivolous positions and submissions for purposes of section 6702(c). Notice

2007-30, 2007-1 C.B. 883; I.R.S. News Release IR-2007-61 (Mar. 15, 2007)

(stating that “The Internal Revenue Service today issued guidance” in Notice 2007-

30 identifying frivolous positions).2

      Petitioner’s Form 1040X for 2004, as well as her Forms 1040 for 2005 and

2007, all of which she submitted in an effort to obtain tax refunds, purported to be

income tax returns. See Olson v. United States, 760 F.2d 1003, 1005 (9th Cir.

1985) (“Because a taxpayer may not obtain a refund without first filing a return,


      2
       The list was revised in Notice 2008-14, 2008-1 C.B. 310, effective for
submissions made between January 15, 2008, and April 7, 2010. See Notice 2010-
33, 2010-17 I.R.B. 609, 612. Notice 2007-30, supra, remains in effect for
submissions made between March 16, 2007, and January 14, 2008. Notice 2008-
14, 2008-1 C.B. 310, 313.
                                         -8-

26 C.F.R. § 301.6402-3(a)(1), the form filed by * * * [the taxpayer] should be

construed to be a ‘purported’ return.”). Each of these purported returns, showing

zeros for all income items and accompanied by self-generated Forms 4852 on which

petitioner purported to “correct” Forms W-2 issued by third-party payers, lacked

information by which the substantial correctness of the self-assessment could be

determined.3 See id.; Cabirac v. Commissioner, 120 T.C. 163, 169 (2003); see also

Bradley v. United States, 817 F.2d 1400, 1403-1404 (9th Cir. 1987) (discussing

factors to be considered in determining that a taxpayer’s submission to the Internal

Revenue Service purported to be a tax return for purposes of imposing a frivolous-

return penalty).




      3
        On brief petitioner cites United States v. Long, 618 F.2d 74 (9th Cir. 1980),
which held that a form containing only zeros constituted a return for purposes of
criminal penalties under sec. 7203 for willful failure to file an income tax return. Cf.
Oman v. Commissioner, T.C. Memo. 2010-276 n.11 (noting that the position of the
Court of Appeals in Long is contrary to the positions of several other Courts of
Appeals that have considered the issue). Petitioner’s reliance on Long is misplaced.
The instant case does not involve criminal penalties under sec. 7203 but civil
penalties under sec. 6702. The questions presented by these different types of
penalties are “distinct”. United States v. Kimball, 925 F.2d 356 (9th Cir. 1991).
Moreover, unlike the taxpayer in Long, but like the taxpayer in Olson v. United
States, 760 F.2d 1003 (9th Cir. 1985), petitioner did not merely submit purported
returns containing zeros but also submitted with these purported returns self-
generated Forms 4852 indicating variance between the zero income reported on the
purported returns and the income reported on her Forms W-2.
                                         -9-

      Because the purported returns for 2004 and 2005 were submitted before

March 16, 2007, the pre-TRHCA version of section 6702(a) applies for these years

and requires that petitioner’s conduct be based on a position that was frivolous.

“This Court and others have repeatedly characterized returns reflecting zero

income and zero tax as frivolous.” Grunsted v. Commissioner, 136 T.C. 455, 460

(2011) (and cases cited thereat); see also Olson v. United States, 760 F.2d at 1005.

Petitioner’s position, as indicated on the face of her 2004 Form 1040X and on

each of the self-generated Forms 4852 that she attached to her purported return for

each year at issue, was that she had recalculated her wages to be zero on the basis

of sections 3121(a) and 3401(a). As amplified by her submissions to the

settlement officer, her position seemed to be that her Forms W-2 were invalid

because her employers were not “valid payer[s]” because they were not “identified

as employers paying wages subject to withholding * * * nor * * * among those

identified as employers providing employment for wages subject to the Federal

Insurance Contributions Act (FICA) taxes”. Viewed charitably, petitioner’s

argument might be construed to be that she was an independent contractor rather

than an employee, so that her Forms W-2 improperly listed as wages amounts that

were more properly characterized as independent contractor fees. But even if

petitioner were an independent contractor (a matter as to which petitioner has
                                         - 10 -

offered no evidence), the amounts received would nevertheless be income. See

sec. 61(a)(1). Her zero returns are inconsistent with any good-faith belief that she is

an independent contractor. We conclude that petitioner’s zero returns were based

on frivolous positions. See Lindberg v. Commissioner, T.C. Memo. 2010-67.

      Petitioner submitted her Form 1040 for 2007 on April 20, 2008, after the

publication of Notice 2007-30, supra. Consequently, for 2007 we apply the version

of section 6702(a) as amended by TRHCA and ask whether petitioner’s conduct

was based on a position identified as frivolous in that notice. The answer is yes.

Notice 2007-30, 2007-1 C.B. at 884, identifies positions as frivolous if they are the

same as or similar to the position, among others, that a taxpayer may “elect to file a

tax return reporting zero taxable income and zero tax liability even if the taxpayer

received taxable income during the taxable period for which the return is filed”.

      Respondent has carried his burden of proving that petitioner is liable for the

section 6702 penalties assessed for 2004, 2005, and 2007. In reaching this

conclusion, we have considered and reject as meriting no further discussion various

frivolous and groundless arguments that petitioner has made in her posttrial brief in

an attempt to challenge her underlying liability.
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      Neither in her petition or at any other point in this proceeding has petitioner

properly raised any issue other than her underlying liability for the section 6702

penalties. We deem petitioner to have waived all other issues. See Rule 331(b)(4)

(the petition must contain clear and concise assignments of each and every error

which the petitioner alleges to have been committed in the notice of determination,

and any issue not raised in the assignments of error shall be deemed conceded);

Lunsford v. Commissioner, 117 T.C. 183, 187 (2001). In any event, from our

review of the record we are satisfied that respondent has satisfied the requirements

of sections 6320 and 6330. Consequently, we shall sustain respondent’s

determinations with respect to the collection of the section 6702 penalties for 2004,

2005, and 2007.

      Section 6673(a)(1) authorizes the Tax Court to require a taxpayer to pay to

the United States a penalty of up to $25,000 whenever it appears that proceedings

have been instituted or maintained by the taxpayer primarily for delay or that the

taxpayer’s position in the proceedings is frivolous or groundless. Respondent has

not asked that we impose a section 6673 penalty. We strongly warn petitioner that

she may be subject to a section 6673 penalty, even upon the Court’s own motion,
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if she persists in maintaining proceedings in this Court primarily for delay or

continues to press frivolous arguments.

      To reflect the foregoing,


                                                         Decision will be entered

                                                   for respondent.
