T.C. Memo. 2000-222
UNITED STATES TAX COURT
RANDAL W. HOWARD, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 18627-97. Filed July 25, 2000.
Randal W. Howard, pro se.
Erin K. Huss, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
RUWE, Judge: Respondent determined deficiencies in
petitioner's Federal income taxes and additions to tax as
follows:
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Additions to tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654
1 2
1993 $3,136 $784.00 --
1994 4,162 775.75 $154.91
1995 10,146 2,254.50 482.15
1
Respondent asserts that the deficiency be increased to $5,832
in the Amended Answer because the original deficiency determination
gave petitioner credit for a prior erroneous assessment.
2
Respondent asserts that the addition to tax be increased to
$1,458 in the Amended Answer because the original deficiency
determination gave petitioner credit for a prior erroneous
assessment.
After concessions, the issues for decision are: (1) Whether
petitioner received compensation for his labor; (2) whether
payments made to petitioner for his labor should be included in
petitioner’s taxable income; (3) whether petitioner is liable for
additions to tax for failing to timely file Federal income tax
returns and for failing to pay estimated taxes; and (4) whether a
penalty should be awarded to the United States under section
6673.1
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and supplemental stipulation of facts
are incorporated herein by this reference. Petitioner resided in
Tucson, Arizona, at the time he filed his petition.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code applicable to the taxable years in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
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During the years 1993, 1994, and 1995, petitioner worked as
a broadcast engineer for the radio station Family Life
Broadcasting System (FLBS) located in Tucson, Arizona. For the
year 1993, petitioner and FLBS entered into an agreement whereby
petitioner was classified as an independent contractor and was to
receive payments of $2,000 per month for part-time performance.
In 1993, petitioner received compensation of $24,000 from FLBS.
Petitioner submitted a 1993 Form 1040, U.S. Individual Income Tax
Return, which was received by the Internal Revenue Service on
August 24, 1994. Petitioner did not sign the return under
penalties of perjury, instead writing the words “under protest”
in the signature line. Petitioner attached to his Form 1040 the
following: (1) Schedule D, Capital Gains and Losses,; (2) Form
1099-MISC, showing $24,000 compensation from FLBS; (3) Statement
of Randal William Howard, which generally states that petitioner
is not liable for tax for 1993; and (4) Declaration of Randal
William Howard, which contained the following statement:
During the Year 1993, I sold labor each day that I
worked at the Family Life Broadcasting System. For the
Year 1993, I received $24,000.00 from the Family Life
Broadcasting System. Based upon the facts above, and
the provisions of the Internal Revenue Code (IRC),
§1015(a), I had a total basis (cost) of at least
$24,000.00 in the labor I sold to the Family Life
Broadcasting System.
Petitioner reported the $24,000 received from FLBS on Schedule D
as an amount received for “labor” and claimed a basis in the
labor of $24,000, resulting in zero gain. No tax was withheld
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from petitioner’s 1993 compensation from FLBS.
Petitioner’s work status at FLBS changed from independent
contractor to employee at the beginning of 1994, and he remained
an employee through 1995. On December 28, 1993, petitioner
signed a Form W-4, Employee’s Withholding Allowance Certificate,
on which he claimed nine withholding allowances. As an employee,
petitioner received life, health, and disability insurance
coverage. FLBS paid wages to petitioner during 1994 and 1995 in
the amounts of $31,655.02 and $32,569.95, respectively.
FLBS filed a 1994 Form W-2, Wage and Tax Statement,
reflecting $31,655.02 in wages paid to petitioner and $1,054.55
withheld for Federal income taxes. FLBS filed a 1995 Form W-2
reflecting $32,569.95 in wages paid to petitioner and $1,120.59
withheld for Federal income taxes. Except for the amounts
withheld from his wages, petitioner did not pay any Federal
income tax for the years 1994 and 1995. Petitioner did not file
Federal income tax returns for the years 1994 and 1995.
Based on the Form 1040 submitted by petitioner for 1993,
respondent assessed tax of $2,696 and an addition to tax under
section 6651(a)(1) in the amount of $674. This assessment was
erroneous because the unsigned 1993 Form 1040 that petitioner
submitted was not a valid return. On March 6, 1997, respondent
issued a notice of deficiency for the year 1993. In the notice
of deficiency, the previously assessed tax and additions to tax
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($2,696.00 and $674.00) were subtracted from the corrected tax
liability reducing the deficiency and addition to tax amounts
determined in the notice of deficiency. On August 22, 1997,
respondent issued separate notices of deficiency, for the years
1994 and 1995.
OPINION
Deficiency Determinations
On brief, petitioner argues that the presumption of
correctness does not apply and that respondent has failed to
prove that petitioner received taxable income for the years in
issue. We disagree. The notices of deficiency were based on
information obtained from FLBS and from petitioner’s own
statements. At trial, a representative of FLBS testified that
FLBS paid petitioner for his services in the amounts determined
in the notices of deficiency and petitioner admitted at trial
that he received those amounts from FLBS in return for his
services.
Petitioner has made various other claims, including that
payments for his labor are not income, that he has a basis in
such labor equal to the amount of the payments received, that the
income tax is unconstitutional, and that he was a nonresident
alien with no relationship to the Government of the United
States. All of these arguments have been consistently rejected
by the courts and can be accurately characterized as timeworn
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protester type rhetoric. Accordingly, we hold that the payments
received by petitioner from FLBS during 1993, 1994, and 1995,
constitute taxable income to petitioner.2
Respondent bears the burden of proving the alleged increased
deficiency for 1993. See Rule 142(a). Respondent argues that
the Form 1040 that petitioner submitted for 1993 was invalid,
and, as a result, respondent could not validly make assessments
based on the 1993 Form 1040 without first sending to petitioner a
deficiency notice for that year. Respondent argues that the
erroneous assessment should not have been subtracted from the
total corrected tax liability for 1993 in the notice of
deficiency. Respondent states that the erroneous assessment of
tax and addition to tax must, and will, be abated. We agree.
Petitioner’s Form 1040 for 1993 was invalid because it was not
signed under penalties of perjury. See sec. 6065; Beard v.
Commissioner, 82 T.C. 766, 777 (1984), affd. 793 F.2d 139 (6th
Cir. 1986); see also Richardson v. Commissioner, 72 T.C. 818, 824
(1979) (stating that a signature on an attached letter is not
considered an imputed signature on the return itself).
Respondent has established the correct amount of petitioner’s
1993 Federal income tax liability and presented sufficient
2
Respondent determined that petitioner was self-employed for
the year 1993 and a regular employee for the years 1994 and 1995.
Respondent has presented ample evidence in the form of testimony,
employment agreements, benefits, and tax forms to sustain this
position.
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evidence to carry the burden of proof regarding the increased
deficiency for 1993.
Additions to Tax
Section 6651(a)(1) imposes an addition to tax for failure to
file a required return on or before the specified filing date.
The addition to tax is 5 percent of the amount required to be
shown as tax on the return and an additional 5 percent is imposed
for each additional month or fraction thereof during which the
failure continues, but not to exceed 25 percent in the aggregate.
See sec. 6651(a)(1). This addition to tax may be avoided only if
petitioner can show that his failure to file was due to
reasonable cause and not willful neglect. See Rule 142(a);
United States v. Boyle, 469 U.S. 241, 245-246 (1985).
The Form 1040 that petitioner submitted for 1993 was invalid
because it was not signed under penalties of perjury. See sec.
6065; Beard v. Commissioner, supra at 777; see also Richardson v.
Commissioner, supra at 824. Petitioner did not file or submit
any returns for 1994 or 1995. There is no evidence in the record
to support a finding that petitioner’s failure to file returns
for 1993, 1994, and 1995, was due to reasonable cause and not
willful neglect. We hold that the addition to tax under section
6651(a)(1) applies for the years in issue. We also hold that the
increased addition to tax in the amount of $1,458 applies for
1993 because, as previously stated, respondent has established
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the correct deficiency amount for 1993.
Respondent also determined that petitioner is liable for
additions to tax pursuant to section 6654 for failure to pay
estimated taxes. If the payments of tax through withholding or
the payment of estimated quarterly tax payments during the course
of the year are not equal to the statutorily required amount then
imposition of this addition to tax is automatic, unless one of
the statutory exceptions applies to the taxpayer. See sec.
6654(a); Grosshandler v. Commissioner, 75 T.C. 1, 20-21 (1980).
The burden of qualification for such exception is on the
petitioner. See Habersham-Bey v. Commissioner, 78 T.C. 304, 319-
320 (1982). Petitioner has failed to show he qualifies for any
exception. Accordingly, we hold that petitioner is liable for
additions to tax under section 6654 for the years 1994 and 1995.
Penalties
Section 6673 permits this Court to award a penalty of up to
$25,000 to the United States when the taxpayer has maintained or
instituted an action primarily for delay or the taxpayer’s
position is frivolous or groundless. See sec. 6673.
This is not the first time petitioner has asserted baseless
arguments and used delay tactics. Petitioner previously made the
same frivolous arguments in this Court and was admonished for
“[presenting] to the Court nothing more than tax protester
rhetoric and legalistic gibberish, which have absolutely no merit
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and deserve no further attention from this Court.” Howard v.
Commissioner, T.C. Memo. 1998-57.
Petitioner has knowingly and repeatedly advocated frivolous
and groundless positions. His conduct has wasted the time and
resources of this Court. Accordingly, a penalty is awarded to
the United States under section 6673 in the amount of $5,000.
An appropriate order will be issued
granting respondent’s motion for a
penalty, and decision will be entered
under Rule 155.