Giving IRS Power Of Attorney To File

Eddie Kahn began this week's update by telling us about what Rice McCloud has been up to lately. He is someone who has also been helping people deal with IRS problems for some time now and has come up with some interesting stuff. Eddie said he has known Mr. McCloud for about three or four years. He doesn't know him real well, but one thing he does know about him is that he is not a patriot for profit. Eddie had him come out to the ARL office about three years ago or so to do a UCC seminar where he brought about fifty books and gave them all away. He was going to even pay his own way to Florida to do the seminar, but Eddie told him not to worry about it and took care of his expenses. So, that shows what kind of person Mr. McCloud is; he is someone in the tax reform movement whose main motive is to win the war.

Mr. McCloud adopted an interesting strategy to deal with the IRS whenever they send a letter saying they didn't get a person's tax return. His strategy involves responding to the IRS' request for a tax return with a blank Form 1040 together with a cover letter. The cover letter says something like, "I don't believe that I am liable for any tax and I don't believe that I am required to file this form. However, if your records show otherwise, then I am giving you power of attorney to handle it for me." Then they attach Form 2848, which is the IRS' own power of attorney form, to the Form 1040 and cover letter.

What this does is it gives the IRS power of attorney to fill out the 1040 and sign it instead of you doing it. Since the IRS deems that form to be a "required return" they are now authorized to sign your tax return. If they do sign it however, they must sign it under penalties of perjury as required by law. They tell the IRS to fill it out, sign the return and then send it back for the proposed taxpayer to review. Lastly, they say that they will happily pay the tax bill upon verification that everything the IRS put down on the form is correct.

Eddie said that Mr. McCloud has done this process approximately 200 times while helping others. If the IRS has already established that there is a change or proposed change to someone's tax account, then they respond using a slight variation of this method. They send the IRS a letter just like the one described above, but in their correspondence they zero out the tax account. In other words, if the IRS said someone owed $10,000, then they write back and show that there is an adjustment where now the amount that the person owes is zero.

Eddie talked to John Turner, his ex-IRS collection agent friend about all of this. He asked him if he were still working with the IRS and someone sent him what were talking about here, would he fill out that Form 1040 and sign it? Mr. Turner said there was no way he would willingly do it and nobody else there working at the IRS will either for two reasons. First, the IRS has no delegated authority to do that and without delegated authority they can't do anything. Secondly, no IRS agent is willing to be the person who will put their neck on the line; i.e., they don't want to be personally liable. This is because if you sign something under penalties of perjury and it is not true, correct and complete, then you are the one who will get into trouble. For those two reasons, no IRS agent will ever sign that Form 1040.

However, knowing how the IRS does things if you don't fill out a tax return voluntarily, then they always fill out a substitute form return on you. But the substitute form return they make never has any numbers on it and nobody ever signs it. So, it is nothing more than just a dummy return that is put into the computer to fool it into thinking that there is a properly filed tax return. The IRS does that so they can continue with the collection process. Before the IRS can have a lien or levy, they must have an assessment and before they can have an assessment they must have a valid tax return. That's why they use those substitute form returns to trick their computers into thinking that a valid return exists.

The great thing about this idea of giving the IRS power of attorney is that it destroys their ability to make a substitute form return on you. Furthermore, it destroys their ability to charge you at some point in the future for willful failure to file a return. That's because you gave them power of attorney to do it, yet they didn't do it. It reverses the process where they always like for you to sign under penalties of perjury. Even if the IRS does make a substitute form return you will have given them the power of attorney to fill out a proper return. That will just kill them down the road according to Eddie.

American Rights Litigators (ARL) reviewed this strategy quite a bit and thought it was a great idea. Eddie saw right away that it would likely be an effective way to get the IRS to go elsewhere for their collection efforts. So, they decided to adopt it and use it with the IRS whenever the agency sends any of their CP-515-518 letters, which requests a tax return from a client. ARL will be attaching a signed and dated IRS Form 2848, Power of Attorney form with a cover letter and Form 1040 as explained before. Now, all the CP 515-518 letters come from the IRS' automated collection division, which means an agent's name is never on them. Since there is no specific agent to write back to here's their plan. ARL is just going to address the cover letter to whoever is responsible for filling these things out and tell them to fill in the rest of it. According to Eddie's ex-IRS agent friend, confronting the IRS with this is going to be effective. The best strategies for dealing with the IRS are always very simple and this strategy definitely fits the bill. Eddie is looking forward to observing how the IRS reacts to this.

Section 6020(a) of the tax code says that the IRS can fill out a tax return for you, but YOU have to sign it. Then Section 6020(b) says if you don't fill out a return, then the Secretary or his delegate SHALL do it. Eddie asked his ex-IRS agent friend if "shall" was permissive or mandatory language and he said it was mandatory.

This power of attorney strategy would only work for a particular year where you have not filed a tax return. If you have already filed, then you will have already signed the tax return under penalties of perjury. The IRS is not going to come back and sign it for you if you've already done it. The only way where you could possibly use this strategy when you have already filed a return is by revoking your signature. Then say that you did it under duress or that you didn't have knowledge of all the facts when you filed it. Then give them the power of attorney to file a correct return for you.

A possible Power Of Attorney Form

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