February 26, 1996
On February 26, in an article in the Rapid City Journal devoted to presidential candidates and issues prior to the South Dakota Presidential Preference Primary Election, I was quoted: "[Voters] are finally recognizing what an abusive, cynical, arrogant force the IRS is...."
March 2, 1996
While I was misquoted--I would never have been that benevolent towards the IRS--I got proof of my allegations within days. On March 2 I received a letter from the IRS, notifying me that my tax return for 1994 had been assigned to Carole Oller (the name an examiner had chosen for purposes of federal terrorism) for "examination".
Ms. "Oller" said she "would like to meet with [me] at the time and place shown above" (March 25 at "Your Place of Business").
March 11, 1996
I wrote back (certified mail, return receipt): "It is inconvenient to meet with you on March 25. If you are 'unable to verify certain items' on my return, please submit those items in writing and I shall do my best to answer your questions. It would probably be best to send any further correspondence via certified mail." You know, federal monopolies being what they are, and all.
On March 14, I received this from Ms. "Oller" (certified, return receipt): "If you call me within three days I will be willing to schedule an appointment at your convenience. The appointment will need to be ... prior to March 25 .... The items I am auditing and you are required to substantiate are; all income [and all expenses]. If I do not hear from you within three days I will have to proceed with the information we have, which would not be beneficial to you."
March 16, 1996
I replied (certified, return recpt.): "I have reviewed the items you listed. It all seems to be in order. I am confused by your statement that you will have to proceed with the 'information you have'. If you have information which leads you to doubt the veracity of my return, then I am entitled to see it both by the United States Constitution and by statute law."
On March 28 I received (certified, return recpt) from Ms. "Oller": "Enclosed are two copies of the audit report I issued because of your inability to meet with me by March 25. The adjustments were made to disallow your cost of goods sold and expenses. The information provided the IRS does not include any expenses you may have had pertaining to your business and because you did not substantiate any of them they were disallowed. Please look this report over and let me know whether you agree with my findings.
"If you accept my findings ... you may want to pay [our assessment of what you owe] now and limit the interest charge. If you do not accept my findings you have ten days to [dispute them by one of three methods ....]."
So, because I did not drop everything else I was doing to meet with the IRS on a specific date THEY set, the IRS was willing to accept my voluntary assessment of my own income, but was calling me a liar on every single deduction I claimed as a legitimate business expense for 1994. They were assessing me $2546 in Income Tax, $3169 in Self-Employment Tax (Social Security), $1143 in Negligence Penalty, and $648 in Interest--all on a gross income of $20,500, on which any idiot would know I would have plenty of deductions to avert any possible tax (if anyone could actually interpret the IRS code).
I called Ms. "Oller". We made an appointment for April 17 at 8:30 a.m., at which time time I told her I would be bringing a tape recorder and a witness. She sent me a written confirmation of said arrangement.
April 15, 1996
I sent an automatic extension of time to file my 1995 return, to see how the current deal shook out in the meantime.
April 17, 1996
On April 17 I and my witness showed up at the Federal Building in Rapid City. Ms. "Oller" came to the lobby to escort my tape recorder through the sacred halls of the Federal Building.
After threading through a maze of cubicles and depressed-looking people we arrived at a "conference room" with a small table and four chairs set up with a tape recorder (theirs). A fifth chair was set in the corner. My witness took that chair.
Ms. Oller introduced us to "Jerry Johnson", who would be "sitting in". Jerry shook hands all around, asking my witness his name. "I'm just a witness", said my witness. Jerry said to me, "If you're going to tape this interview, everyone will have to identify themselvse on tape."
"There are three of us here who can visually identify this witness. His voice will be on tape." I said.
Jerry repeated his statement about identification on tape. "Your witness can wait outside," he added helpfully.
"This meeting's over," I said. Then I asked for the federal statute which required identification of witnesses to an audit. Jerry and Carole left the room.
20 minutes later Jerry returned. Looking at his shoes he said, "There's no written policy. It's merely a formality." Then, again looking hopeful, he said, "Your witness can wait out in the waiting room." I started packing my stuff in my briefcase.
Jerry came over to me, shouldering me aside about a foot, peering in my briefcase. "Did you bring your records?" he asked. "I certainly did." I replied.
We left.
May 2, 1996
On May 2 I received (standard mail) a package from the IRS, reiterating their claim, and reviewing the events of the April 17 meeting.
May 15, 1996 -- Another Front
On May 15, I got a notice from Ogden, Utah, "We intend to levy." This was for a claim from 1986 for $454.05 (tax, penalty, interest), the result of a 1990 audit, something I had forgotten. I have discovered no connection between this line of correspondence and the current audit.
I sent a notice of dishonor of their notice on July 1, since the IRS had not fulfilled certain UCC requirements in establishing the existence of a contract. To-date (9/10/96), I've heard nothing concerning that.
May 23, 1996
I sent a "statement of dispute of charges" to the director of the local IRS office, in reply to their repeated notices that they had changed my 1994 return.
I also sent a Form 843, "Request for Abatement", to the IRS Service Center in Ogden UT., with regard to their notices of a deficiency for 1994. To-date (9/10/96), I haven't heard anything from them concerning the abatement.
June 17, 1996
On June 17, I called Ms. Oller and requested a meeting to clear up a few things. We set July 1 as the date, thus giving them the required ten days notice that I was bringing a tape recorder and a witness.
July 1, 1996
I sent a Freedom of Information Request to IRS, Ogden UT, asking for my 1968-1996 IMF (Individual Master Files).
My witness and I arrived at 8:30. We went through the standard rigamarole of getting escorted to the IRS office.
In the conference room were me, my witness, Carole Oller, and a Richard Lolley, "Examination Manager":
Oller: "We're about to get started here, since you've started your recorder. I guess I'll have everyone introduce themselves..."
Newland: "If it's all right with you, I'll make the introductions, since I called the meeting."
Lolley: "Sir, this is our meeting. I don't want to get in a fight with you, uh, to start with, uh..."
Newland: "I called the meeting. I made the appointment. I called the meeting. I need some information."
Lolley: "It depends on what sort of information you need."
Introductions are made on tape. Lolley and Oller produced photo ID's, and verbally assured us that they were using their real names and that they lived in Rapid City.
Newland: [Reads a short synopsis of what has transpired to this point between me and IRS. See above for details. When done with that, ...] "Further, on May 15, 1996, I received an IRS Notice of Intent to Levy--Notice #CP-504--concerning an IRS claim for $454.05 for the tax year 1986. I deny any liability for any claims the IRS has made against me. I'm sure a mistake has been made here. Naturally, I want to assure myself that I have taken every action to secure every right I have as a peaceful honest citizen of the State of South Dakota and under the Constitution and laws of the United States of America. I'm sure that you folks would want no less for me. Is that correct?"
Lolley: "You do have appeal rights, yes."
Newland: "Before we proceed, could you obtain for me a copy of any written determination and any background file document relating thereto generated by the Internal Revenue Service or any related agency or person, which concerns me? Title 26 IRS Code § 6110 (a)"
Lolley: "I'm not aware that one exists. The only one I know of is the administrative file dealing with your '94 taxes."
Newland: "Okay, then specifically, can you get me any document showing how, when and where I opened an account with the Department of the Treasury, or any agency thereof, or an account was opened for me?"
Oller: "Regarding your 1986, or ...?"
Newland: "Anytime."
Lolley: "Specifically what is it you're asking?"
Newland: "Do I have an account with the Department of the Treasury?"
Lolley: "You have a lien, which indicates that you have a tax liability for 1986. Frankly, sir, I don't know what that is from. I didn't come to this meeting prepared to deal with it. We can certainly find out."
Newland: "The account, if there were one, I'd assume would be the same account for 1986 as 1994. It is the same person."
Lolley: "Yes."
Newland: "Somehow, you claim, I have generated a liability to the IRS. Under the Uniform Commercial Code liabilities cannot be generated unilaterally."
Lolley: "We'd have to go back to 1986 and see how the liability .... Frankly, I don't know ...."
Newland: "If you want to deal with 1994, how did that liability ...?"
Lolley: "There is not a liability there yet. That case file has been closed to St. Paul. It is in our review staff now. They're looking at it. If nothing further transpires at this meeting..., basically if you don't provide any records, you will get a notice that says 'at the end of 90 days we propose to assess the tax unless you petition the tax court.' However, within those 90 days, or at this meeting today, if you provide records that support your expenses, support your cost of goods sold, we will change that report."
Newland: "Is it your stance that I am a 'taxpayer' as defined in 7701(a)(14) of the IRS code?"
Lolley: "We'll have to get the code out and see what that definition is."
Newland: (while waiting for Oller to get the Code) "How long have been in the Service?"
Lolley: "22 years."
Oller: (unintelligible--some talk about which section in the code) "But you want the regs ..."
Newland: "What I'm getting at here is how the IRS determined that I am a 'taxpayer' as defined in 7701(a)(14).
Lolley: "You made part of that determination yourself, but I think the Code goes on to further define, but if you had a certain income, certain limitations, you're required by law to file a return. You did, in fact, file a return for 1994. Whether you paid tax with that return, I don't know. The fact that there are no taxes paid doesn't take away the status of being a 'taxpayer'. By definition, you are a 'taxpayer'. I don't think we're here to argue that."
Newland: "How did the IRS arrive at the liability it alleges I owe on the '94 return?"
Lolley: "Under Section 162, sir, you are required to (unintelligible) ..., to claim a deduction you get those expenses that are ordinary and necessary and paid or incurred in carrying out your trade or business. You need to maintain records that support those expenses, and, if examined, to provide your documentation to support those expenses. And, quite frankly, that's what we're here for. If you wish to provide the documentation to support those expenses, we'll take a look at 'em, and, as I said, we'll change the report. If not, uh, that'll be the way it is."
Newland: "I would like to go back to my first question, uh, a copy of any written determination, any background file document ..."
Lolley: "Let's cut to the quick, here, and not waste each other's time. If it's your purpose to get into a legal argument, trying to define whether you're a taxpayer or whether we have the authority to do an examination, quite frankly sir, you can take your argument and go to court."
Newland: "I would like to make an appointment with the Problems Resolution Officer."
Lolley: "I will give you his phone number."
Newland: "It's your stance that you are not willing to answer any more questions about the law?"
Lolley: "Sir, I am not gonna sit here and try to conduct a legal argument with you about definitions of who taxpayers are, what your status is, whether we have files on you, uh, like I said, the only file that I'm aware of is the administrative file that is in St. Paul now concerning your 1994 tax liability. And there isn't a whole lot in that file; there's your tax return, some more papers that indicate that appointments were made, uh, terminated, uh, no records were presented to support the expenses, and, at this moment it is proposed that a statutory notice of deficiency be issued to you stating that unless you provide records, this is the amount of taxes that you will owe.
Newland: "It would appear to me that after the length of time that the two of you have spent in the service, you would at least be able to tell me how I obtained an account with the IRS, and, uh, present me with a document that shows me that I do have an account with the IRS."
Lolley: "Like I said, sir, your file has been sent to St. Paul. We are only holding this meeting as a courtesy to see if you do in fact have records that you wish to present so that we might correctly determine your 1994 liability. If you don't wish to do that, quite frankly, we're wasting our time."
Newland: "If I showed you my records, could they be used against me?"
Lolley: "There is that possibility. If you committed a fraudulent act, and we discovered it, certainly we could."
Newland: "How would you discover that?"
Lolley: "By interviewing you and looking at your records."
Newland: "It's not my desire to waive my Fifth Amendment rights against being a witness against myself."
Lolley: "You can speak with your attorney, and if you want to go to tax court with that argument, feel free to."
Newland: "If we're not going to be able to proceed here ..."
Lolley: "I don't think so. If you have no intent to present your records for an examination, there's no reason for us to continue. Now, if you want the number for the Problems Resolution Officer, I'll be glad to give it to you."
Newland: "I'll take that number."
Oller: "I'll go get it."
Lolley: "I'm sorry, uh, you feel that way, because I think, quite frankly, we'd resolve it.
Newland: "Well, there are a great many things to be resolved here. I voluntarily filed a tax return that shows clearly that I have no liability ...."
Lolley: "All we're asking you to do, sir, is to provide documents to support that."
Newland: "What I'm asking is that the IRS act like any other government agency and present evidence of ...."
Lolley: "We're gonna give you due process, sir. You're gonna get a statutory notice of deficiency, and within that 90-day period you can file with the United States Tax Court."
Newland: "The meeting is over at, uh, 9:00 o'clock."
August 2, 1996
Received 1970-1996 IMF from Ogden. Can't decipher them.
September 1, 1996
I sent my 1995 return to Ogden UT, filed with all "zero's". I included a letter of explanation.