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Quatloos! > Tax Scams > Tax Protestors > Penalties for Frivolous Appeals

Stiff Court Penalties for Frivoulous
Appeals to Delay IRS Collections

IR-2004-41, Mar. 29, 2004

WASHINGTON - In the past year, the U.S. Tax Court imposed nearly $136,000 in penalties on 23 taxpayers for pursuing frivolous cases to delay tax collections.

"The courts are increasingly recognizing the need to impose penalties on taxpayers pursuing frivolous cases," said IRS Commissioner Mark W. Everson. "During the past year, we saw bigger penalties than we did for the previous two years combined. This is an important tool to help us maintain faith in the tax system. The IRS works diligently to protect taxpayer rights, and it is wrong for some taxpayers to abuse those rights by trying to delay collection for frivolous reasons."

The amount of penalties during the past year surpassed those assessed from 2001 until March 2003, when the Tax Court imposed $126,000 in penalties on 38 taxpayers. The average penalty increased to $5,509 during the past year, from an average of $3,316 in the previous period.

The IRS Restructuring and Reform Act of 1998 set forth various taxpayer rights related to tax liens or levies, including the right to seek judicial review. The IRS usually may not enforce collection while an appeal is pending.

The Tax Court may impose sanctions of up to $25,000 on those who misuse their right to a court review merely to stall their tax payments. Last May, the court imposed this maximum penalty for the first time, finding in the case of Aston v. Commissioner that the taxpayer's groundless argument was primarily for the purpose of delay, wasting the court's time and resources.

Tax professionals who use such arguments for their clients are also subject to penalties. In Hillen v. Commissioner [Docket #1441-03L (2004)], the Tax Court imposed a penalty of more than $14,000 against attorney Paul Chappell after finding his frivolous arguments caused the Court to incur more than 50 hours of unnecessary work. The Court stated that Chappell, who had clerked for the Court and worked at the IRS, "should have known better than to make the arguments that he did."

Appellate Courts affirmed the Tax Court's penalties in seven cases in the last year and began to add their own penalties. The 5th Circuit Court of Appeals imposed an additional sanction of $4,000 in Raynor v. Commissioner after affirming the Tax Court's decision. Last month, the 1st Circuit imposed a $2,000 sanction in Marino v. Brown (357 F.3d 143) for intentionally challenging a collection action in District Court rather than Tax Court.

The IRS recently updated its Web site document, The Truth about Frivolous Tax Arguments, with a section devoted to Collection Due Process cases. It presents 16 frivolous assertions, along with a summary of the law and relevant cases involving these false claims. The Web site is There are links to the document from "The Newsroom" section's "What's Hot" page, the "Tax Pro News" and the "Topics for Individuals" pages. The direct URL is

Section 6673 Penalties Imposed by U.S. Tax Court in Collection Due Process Cases [ T.C.M. = Tax Court Memorandum Decision ]

Case Citation Date Penalty
Lyman v. Commissioner T.C.M. 2003-72 03/13/03 $ 3,000
Kaye v. Commissioner T.C.M. 2003-74 03/13/03 $ 4,000
Keown v. Commissioner T.C.M. 2003-69 03/13/03 $ 3,200
Stoewer v. Commissioner T.C.M. 2003-71 03/13/03 $ 2,000
Robinson v. Commissioner T.C.M. 2003-77 03/17/03 $11,000
Cortes v. Commissioner T.C.M. 2003-80 03/19/03 $ 1,000
Duncan v. Commissioner T.C.M. 2003-89 03/26/03 $ 2,500
Frank v. Commissioner T.C.M. 2003-88 03/26/03 $ 3,500
Widner v. Commissioner T.C.M. 2003-114 04/21/03 $ 600
Bourbeau v. Commissioner T.C.M. 2003-117 04/22/03 $ 5,000
Hodgson v. Commissioner T.C.M. 2003-122 04/28/03 $ 5,000
Holquin v. Commissioner T.C.M. 2003-125 04/29/03 $ 1,600
Aston v. Commissioner T.C.M. 2003-128 05/02/03 $25,000
Kemper v. Commissioner T.C.M. 2003-195 07/08/03 $ 8,500
Brashear v. Commissioner T.C.M. 2003-196 07/09/03 $ 1,600
Horton v. Commissioner T.C.M. 2003-197 07/09/03 $ 4,400
Israel v. Commissioner T.C.M. 2003-198 07/09/03 $ 1,500
Green v. Commissioner T.C.M. 2003-264 09/10/03 $ 5,000
Bethea v. Commissioner T.C.M. 2003-278 09/24/03 $ 2,000
Pepper Pot Trust v. Comm T.C.M. 2003-287 10/07/03 $15,000
Cipolla v. Commissioner T.C.M. 2004-4 01/05/04 $17,500
Hathaway v. Commissioner T.C.M. 2004-15 01/23/04 $10,000
Heaphy v. Commissioner T.C.M. 2004-48 03/05/04 $ 3,000

Appeals Court Actions Affirming Tax Court's Sanctions

Raynor v. Commissioner* 2003 US App. Lexis 14173 (5th Cir.)
Hauck v. Commissioner 2003 US App. Lexis 8578 (6th Cir.)
Wasson V. Commissioner 2003 US App. Lexis 5739 (6th Cir.)
Barasch v. Commissioner 2003 US App. Lexis 5603 (9th Cir.)
Call v. Commissioner 2003 US App. Lexis 5603 (9th Cir.)
Haines v. Commissioner 2003 US App. Lexis 17583 (9th Cir.)
Israel v. Commissioner 2004 US App. Lexis 3449 (7th Cir.)
* Imposed additional $4,000 sanction

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