Frivolous Tax Arguments Have Consequences: Lessons from the Darcy-Mae Englert Case

Frivolous Tax Arguments Have Consequences: Lessons from the Darcy-Mae Englert Case

In a recent Tax Court case, Darcy-Mae Englert, a former service director at Mountain Vista Retirement Residence, Inc. in Wyoming, was found liable for a deficiency of $6,164 and a section 6673 penalty of $1,000 for taking frivolous positions in her tax arguments. The case, which can be cited as Darcy-Mae Englert, Petitioner v. Commissioner of Internal Revenue, Respondent, T.C. Memo. 2023-38, highlights the consequences of making unsupported or frivolous tax arguments.

Englert filed her tax return for the 2018 tax year reporting zero income and zero tax liability, claiming a credit for Social Security and Medicare taxes withheld by her employer. However, the IRS issued a notice of deficiency, determining that Englert had unreported income of $58,470 and was liable for a section 6662(a) penalty of $1,233.

At trial, the IRS conceded the section 6662(a) penalty, but argued that Englert had received taxable wages from her employer, which she had failed to report. Englert, on the other hand, argued that her wages were not taxable income and that she was not subject to tax.

The court found that Englert’s arguments were frivolous and devoid of any basis in law. In its memorandum findings of fact and opinion, the court cited Notice 2010-33, which identifies common frivolous tax arguments, including the argument that only certain types of taxpayers are subject to income and employment taxes, such as employees of the Federal government, corporations, nonresident aliens, or residents of the District of Columbia or the Federal territories.

In addition, the court emphasized the potential consequences of making frivolous tax arguments. It noted that such arguments can result in not only financial penalties, but also the possibility of criminal prosecution. The court cautioned taxpayers that frivolous tax arguments are not taken lightly and can lead to severe consequences.

The section 6673 penalty of $1,000 was imposed on Englert for continuing to take frivolous positions. The court’s decision in the Darcy-Mae Englert case serves as a reminder to taxpayers that unsupported or frivolous tax arguments can have serious consequences.

Taxpayers should take note of the court’s decision in this case and be aware of the potential consequences of making frivolous tax arguments. It is important to consult with a qualified tax professional before filing tax returns or making any tax-related decisions to ensure compliance with tax laws and regulations.
In conclusion, the Darcy-Mae Englert case highlights the importance of taking tax obligations seriously and complying with the law. Taxpayers who make frivolous arguments risk financial penalties and even criminal prosecution. As the court has warned, such arguments are not taken lightly and can have severe consequences.

***Disclaimer: This communication is not intended as tax advice, and no tax accountant -client relationship results**

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