Opinion
10866-21
05-31-2022
JAMES EDWIN DICKERSON, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISON
Christian N. Weiler Judge
This case was calendared for trial at the New York City, New York, trial session of the Court commencing on May 16, 2022. On March 15, 2022, respondent filed a motion for summary judgment, and on April 27, 2022, petitioner filed a response to respondent's motion.
Petitioner filed his April 27, 2022, document as petitioner's "letter," however, the contents are his response in opposition to respondent's motion for summary judgment. For consistency, we will refer to this filing as petitioner's response to respondent's motion for summary judgment.
On April 25, 2022, petitioner filed a motion to proceed remotely. On May 10, 2022, the parties held a conference call with this Court and in which the Court learned that respondent did not oppose petitioner's motion to proceed remotely. On May 11, 2022, the Court granted petitioner's motion to proceed remotely, setting respondent's motion and subsequent trial (if necessary) for a date and time certain on May 18, 2022. On May 18, 2022, this case was called and the parties appeared and were heard.
Based on the parties' arguments and the reasoning below, the Court at the conclusion of the May 18, 2022, remote hearing granted respondent's motion for summary judgment filed on March 15, 2022.
Background
The following facts are derived from the parties' filings and the exhibits attached to the motion for summary judgment. We find no disputed issues of material fact in regard to the notice of deficiency.
For tax year 2017, employer Barry-Wehmiller Design Group, Inc. (Design Group) issued a Form W-2 to petitioner reporting wages of $110,121 and federal income tax withholdings of $20,634. Petitioner filed his 2017 federal personal income tax return, Form 1040EZ, on or before April 15, 2018, reporting wages of $0, and claiming a refund of $29,415, which included his federal income tax withholding of $20,634, social security taxes withheld of $7,116, and Medicare tax withheld of $1,664 from his wages earned with Design Group.
With his Form 1040EZ petitioner attached a letter stating:
In records provided to me, the payer incorrectly characterizes payment as taxable "Wages". As defined by Internal Revenue Code (IRC) Section 3401(a) and 3121(a), these payments do not meet the legal requirement of "Wages" which would be subject to taxation.
Additionally, in accordance with the definition of "Employee" IRC Section 3401(c), I do not meet the legal requirement of "Employee". I am not "officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term "employee" also includes an officer of a corporation." as defined in IRC Section 3401(c).
On December 22, 2020, respondent issued petitioner a notice of deficiency for tax year 2017. In the notice of deficiency, respondent determined a deficiency in income tax due from petitioner of $20,905, and an accuracy-related penalty for negligence of $54. The deficiency in tax is due to petitioner earning wages from his employer Design Group of $110,121.
In response to the notice of deficiency, petitioner timely filed a petition to this Court, on March 26, 2021. Petitioner resided in New Jersey when he filed his petition. In the petition, petitioner attached an addendum, making a number of frivolous arguments including disputing the contents of the notice of deficiency, as lacking in form, and citing his prior conversations or correspondence with the Internal Revenue Service (IRS).
In petitioner's written response to respondent's motion for summary judgment, petitioner makes additional frivolous arguments, and again cites to sections 3401(a) and 3121(a) of the Code, to argue that his "remuneration received from Design Group did not meet the legal criteria of "wages" which are subject to income taxation."
Unless otherwise indicated, all statutory references are to the Internal Revenue Code (Code), Title 26 U.S.C., in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Discussion
I. Summary Judgment
The purpose of summary judgment is to expedite litigation and avoid costly, time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Under Rule 121(b) we may grant summary judgment when there is no genuine dispute as to any material facts and a decision may be rendered as a matter of law. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judgment, we construe factual materials and inferences drawn from them in the light most favorable to the nonmoving party. Id. However, the nonmoving party may not rest upon the mere allegations or denials in its pleadings but instead must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); see Sundstrand Corp., 98 T.C. at 520.
II. Analysis
Petitioner's contention that his wages are somehow nontaxable under the Code is a frivolous argument. See, e.g., Muhammad v. Commissioner, T.C. Memo. 2021-77 (imposing a $250 penalty); Briggs v. Commissioner, T.C. Memo. 2016-86 (imposing a $3,000 penalty); Waltner v. Commissioner, T.C. Memo. 2014-35 (imposing a $2,500 penalty), aff'd, 659 Fed.Appx. 440 (9th Cir. 2016). The Court also notes that throughout the record, petitioner made arguments in the form of a tax protestor which have been universally rejected by this and other courts. Accordingly, we shall not painstakingly address petitioner's assertions "with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit." Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984); see also, Wnuck v. Commissioner, 136 T.C. 498 (2011).
Although petitioner has no legal training he claims to have found a newly undiscovered legal loophole in the law; namely, the exemption of all private employees from federal income, social security, and Medicare taxes. Petitioner's arguments run contrary to common knowledge; namely that wages are subject to federal taxation. Even a modest objective inquiry using an internet search engine would find several trustworthy authorities refuting his legal stance. See Wnuck, 136 T.C. at 504 ("Anyone with the inclination to do legal research . . . will confront such authorities."). Finally, the IRS publishes and occasionally updates "The Truth About Frivolous Tax Arguments," a collection of frivolous positions and case law refuting them. Petitioner's argument is included in the IRS collection, along with citations to a list of Supreme Court and Federal Appellate Court decisions rejecting similar arguments. See "The Truth About Frivolous Arguments - Section I (A to C) | Internal Revenue Service (irs.gov), B. The Meaning of Income: Taxable Income and Gross Income, 1. Contention: Wages, tips, and other compensation received for personal services are not income."
III. Conclusion
In sum the Court concludes that there is no genuine dispute as to a material fact and that respondent is entitled to judgment as a matter of law, sustaining the adjustments found in the notice of deficiency on which this case is based.
The Court takes this opportunity to again inform petitioner (as it did on the record on May 18, 2022) that the Court may impose a penalty up to $25,000 if a taxpayer institutes or maintains a frivolous or groundless position or institutes or maintains a proceeding primarily for delay. Petitioner is warned that should he continue to pursue frivolous or groundless arguments before the Court, or if he institutes or maintains a case primarily for delay in the future, he may be subject to penalties under section 6673 up to the amount of $25,000.
Premises considered, it is
ORDERED that respondent's motion for summary judgment filed on March 15, 2022, is hereby granted. It is further
ORDERED AND DECIDED That there is a deficiency due from petitioner as follows:
Tax Year Deficiency 2017 $20,905.00