Ask The California Employment Tax And Payroll Tax Attorney – The Taxman Can Prepare A Return For You If You Fail To Do It Yourself – The Bryan Case

By Robert S. Schriebman

2023

Introduction

If you fail to file a tax return, and the government believes you are evading your responsibilities, they will do it for you based upon the information in their respective systems.  When the IRS and the FTB prepare their own version of your return, you can forget about itemized deductions, credits, or exclusions.  Likely, you will receive the maximum possible tax assessment.  This happened to Mark L. Bryan.  (US v. Mark Linn Bryan, US District Court, E.D. Calif., Sept. 21, 2023)

The Bryan Case

In the Bryan case the IRS issued its own version of a federal tax assessment and sought to collect on that assessment by foreclosing federal tax liens on Bryan’s community property located in Lodi, CA.  Bryan in response to the IRS’ efforts, filed all sorts of frivolous tax-protestor arguments with the US District Court, all of which were dismissed and denied.

IRC § 6020(b)

IRC § 6020(b) empowers the Secretary of the Treasury, through the IRS, to execute an income tax return for any person who fails to file a return.  Federal courts in California have repeatedly recognized the authority of the IRS to prepare substitute income tax returns for taxpayers who do not file a Form 1040.   The IRS went ahead and prepared its version of Bryan’s 1040 and when he did not pay the IRS filed lien notices and sought to collect the balance due by going after Bryan’s real estate.  This is perfectly legal.

The FTB Version

The FTB has the same corresponding authority with regard to personal income taxes (PIT). The FTB will prepare a proposed assessment and send it to the taxpayer by way of a Notice of Proposed Assessment (NPA).  The taxpayer will then have a specific time period to protest the NPA.  If the protest is timely, the taxpayer will be afforded an informal administrative hearing.  If the hearing does not go the taxpayer’s way, he/she may challenge the NPA administratively though the Office of Tax Appeals (OTA).

The EDD Version

The EDD does things a bit differently.  If a taxpayer fails to file quarterly payroll tax returns, EDD computers will estimate a deficiency on a quarter-by-quarter basis and will issue a Notice of Assessment for each quarter showing no filed return.  The taxpayer-employer must timely file a petition before the CUIAB for each assessment notice.  Once this is done, the employer will have the task of convincing the EDD that the computer-generated proposed assessment was not accurate.

Conclusion

Failure to file a tax return with either the IRS, the FTB or the EDD can be a dangerous thing.  Government-prepared assessments are presumed correct, and the taxpayer always has the burden of proving the government wrong.  You cannot fly under the radar with the taxman.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.  Mr. Schriebman is in private practice.  He is not affiliated in any way with the EDD, and he is not employed by the EDD or any other agency of the State of California.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners,” published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners,” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

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