The Tax Court sustained an IRS determination of deficiency and penalties against a consultant who argued that the Internal Revenue Code doesn’t constitute law and the United States is a defunct country.
In a February 7 memorandum opinion in Williams v. Commissioner, Judge Patrick J. Urda found that Larry T. Williams had a $49,100 deficiency for his 2016 tax year and was subject to additional tax of $12,273 under section 6651(a)(1) for failing to file and an accuracy-related penalty under section 6662(a) for $9,820.
In 2016 Williams worked as a consultant for Lows Consultant LLC, on behalf of National Group Protection Inc. He claimed business expenses that nearly eclipsed his gross business income, leaving him with a taxable income of $127. Business expenses reported included $73,651 for travel, $43,117 in car and truck expenses, $7,255 for supplies, $6,322 for meals and entertainment, and $28,689 of other expenses. He filed his return three and a half months late.
The IRS examined Williams’s return and determined that he had failed to substantiate his 2016 expenses and issued him a notice of deficiency disallowing most of the claimed deductions.
Williams didn’t attempt to substantiate or demonstrate errors by the IRS in calculating its determination. Instead, he argued that the government went bankrupt and no longer exists, and therefore he isn’t a U.S. citizen who is subject to tax.
Urda was unimpressed with those arguments and declined to engage them. Citing Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984), he wrote, “We will not painstakingly address his assertions ‘with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.’”
While upholding the late-filing and accuracy-related penalties, the court declined to assert a penalty for frivolousness under section 6673(a)(1)(B). “Although Mr. Williams has repeatedly advanced frivolous or groundless positions in this case, the Court declines to impose a section 6673 penalty at this time. We warn Mr. Williams that we are unlikely to be lenient going forward should he choose again to press frivolous or groundless arguments like the ones he relied upon in this case,” Urda wrote.
Williams represented himself in Williams v. Commissioner, T.C. Memo 2022-7.