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Saturday, August 17, 2013

IRS: No Penalty for Including 'Conscientious Objector' Letter With Tax Return

IRS Office of Chief Counsel LogoIRS Office of Chief Counsel Memorandum 20133303F (Aug. 16, 2013):

Application of Section 6702 Penalty to Taxpayer Who Files a Return with War Complaint

This memorandum responds to your request for advice regarding the application of the section 6702 penalty for frivolous tax submissions.

Background: A taxpayer timely filed an income tax return listing all items of income and applicable deductions and credits. The taxpayer correctly calculated the tax due, but did not make a payment with the return. Instead, the taxpayer enclosed a letter describing a conscientious objection to the full payment of Federal income tax. 

As a member of the Religious Society of Friends (Quakers), the taxpayer opposes war and the support of war. The taxpayer enclosed a letter with her return explaining this position. In the letter, the taxpayer recited statistics to claim that a certain percentage of Federal income tax dollars supports the military. The taxpayer then used this percentage to calculate the amount of tax she is willing to pay; she “withheld” payment of the rest of the tax due.

Issues:
1. Does assessment of the section 6702 penalty against a taxpayer who presents a frivolous “conscientious objection” violate any constitutional provision or amendment?
2. Should the IRS assess a section 6702 penalty against a taxpayer who presents a frivolous “conscientious objection” in a letter enclosed with a complete and correct income tax return?

Conclusions:
1. No. A taxpayer does not have the right to reduce Federal income taxes reported on a return based on religious or moral beliefs.
2. No. The section 6702 penalty should not be assessed in this very limited situation. When the taxpayer timely files a correct and complete return, the section 6702 penalty should not be assessed based solely on the fact that the taxpayer enclosed a letter with the return explaining why the taxpayer is not paying the self-assessed tax due. If a penalty has been assessed, it should be abated.

(Hat Tip: Bob Kamman.)

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Comments

Probably worth highlighting that the memo also notes that "While the section 6702 penalty may not be assessed in these circumstances, other penalties or additions to tax may be assessed against the taxpayer. See, e.g., I.R.C. § 6651(a)(2) (failure to timely pay tax due)."

Posted by: BDG | Aug 18, 2013 6:37:29 AM