Individual Challenges Penalties on Canadian Education Savings Plan

Plaintiffs' Original Petition

Geoffrey Cunfer, Plaintiff in the above styled and numbered cause, and files their Original Petition and would show the Court the following:

Parties

1. Plaintiffs, Geoffrey Cunfer (“Cunfer”) resides and is employed in Saskatoon, Saskatchewan in Canada and may be served through their undersigned Attorney in Charge.

2. Defendant, the United States of America may be served through the US Attorney for the Northern District of Texas, Erin Nealy Cox. Ms. Cox may be served at her place of business at 1100 Commerce Street, Third Floor Dallas, Texas 75242-1699.

3. Defendant Paul Mamo, Director of the Collections unit of Small Business Self Employed may be served at his principal place of work at SB/SE Headquarters 5000 Ellin Road, Lanham, MD 20706 or through the US Attorney for the Northern District of Texas, Erin Nealy Cox. Ms. Cox may be served at her place of business at 1100 Commerce Street, Third Floor Dallas, Texas 75242-1699, in person or via U.S. Certified Mail.

4. Defendant, Jon Doe IRS Agent, is an unknown individual within the IRS who falsely certified, under the FAST Act, that the administrative appeals rights under IRC § 6320 have been exhausted. Jon Doe IRS agent may be served with process through his employer the Commissioner of the Internal Revenue Service or through the US Attorney for the Northern District of Texas, Erin Nealy Cox. Ms. Cox may be served at her place of business at 1100 Commerce Street, Third Floor Dallas, Texas 75242-1699.

5. Secretary of State Mike Pompeo may be served through certified mail at his executive office at The Executive Office, Office of the Legal Adviser, Suite 5.600, 600 19th Street NW., Washington DC 20522 or through the US Attorney for the Northern District of Texas, Erin Nealy Cox. Ms. Cox may be served at her place of business at 1100 Commerce Street, Third Floor Dallas, Texas 75242-1699 or via U. S. Certified Mail.

Venue

6. Venue is proper in Dallas County because the Defendant is the United States of America, and they reside in any district of the United States.

Facts

7. Since 2005, Plaintiff has worked and resided in Saskatoon, Saskatchewan Canada, holding a valid United States Passport as a citizen of the United States. Plaintiff, Geoffrey Cunfer is a tenured professor of History at the University of Saskatchewan, Saskatoon, Canada.

8. In 2012, Plaintiff began saving funds under a Canadian Registered Education Savings Plan (RESP). This is a savings account under Canadian law and has never been addressed under any Internal Revenue Service (IRS) guidance. At its highest value, the amount in the Account never passed $15,000CAN or approximately $11,000USD.

9. A Canadian RESP is not a Trust because no court within the United State is able to exercise primary supervision over the administration of the Trust and the IRS has never issued guidance which indicates that any US Court can exercise primary supervision over the trust. Canada does not even consider these accounts as reportable entities. 26 CFR 301.7701-4

10. Plaintiff has properly filed all tax returns required by IRS Guidance on the RESPs, that is the Report of Foreign Bank and Financial Account (FBAR)alone.

11. In January 2018, based on erroneous recommendations by the accountant in Canada, Plaintiff filed forms 3520A for tax years 2012-2016.

12. In July 2018 the IRS, through ACS, asserted penalties for tax years 2012-2015, no supervisor approved the assertion of the penalties. Plaintiff timely appealed these assertions on August 12, 2018.

13. In August 2018, ignoring the Appeal filed by Plaintiff, the IRS issued a second notice for 2015 imposing additional penalties and interest on the account. Subsequently, in September 2018, the IRS issued a new penalty notice for 2016. The initial penalties amounted to about 200% of the value of the RESP, approximately $21,812.

14. Penalty notices mailed to the Plaintiff by the IRS often required a response within 30 days, however many of these notices were sent from Estonia taking 4-6 weeks to even arrive.

15. The Plaintiff directly contacted the IRS in September 2018 and was told there exists a hold on the account issued on September 11, 2018. Subsequently, In October 2018, the IRS issued a new penalty notice for 2016, doubling the penalties to $20,000 without explanation. Thereafter, in June 2019 the IRS issued a new penalty notice for 2017. By this point the total penalties amounted to more than 500% of the value of the account of approximately $59,477.

16. Counsel for Plaintiff filed a Power of Attorney in December 2018; again in May 2019, and again in August 2019. These Statutory 2848 forms contained a request that all correspondence and notices be copied to the holder of the Power of Attorney. No correspondence has ever been served upon Cunfer's Attorney in Fact, or his Attorney at Law.

17. No correspondence has ever been served on either Cunfer or his Attorney indicating that the request for appeals had been denied. Rather the Service has simply ignored the requests for appeals.

18. On July 5, 2019 counsel, for the second time, requested IRS appeals process be implemented, in the event the initial request for appeal was ignored. The IRS received this appeal on July 8, 2019. No response to this appeals request has ever been made by the IRS.

19. The IRS and the Jon Doe Agents have ignored the holds placed on the account in September 2018 and the appeals notice served on the IRS in July 5, 2019 and proceeded to continue with collections activities.

20. On September 27, 2019 the IRS and S. McGuigan file the notice of lien on Plaintiff only, failing to serve any copy on the Plaintiff's Attorney. The notice was not served timely on the taxpayer and was not sent until at least October 8, 2019. The notice was made in violation of the collection activities hold placed on the account in September 2018. Moreover, the notice and lien were made in violation of the Appeals hold placed via the Cunfer's timely filed appeal. See eg., IRC §§ 6320; 6330; and 6331.

21. Promptly, after receiving the notice of lien, Plaintiff appealed the determination. The IRS again, allegedly placed the account into a collections hold.

22. However, despite all of the requests by counsel and Plaintiff, the Plaintiff's account was never placed into Appeals, instead the appeals requests were ignored.

23. Despite the statutory collection hold placed on the Plaintiffs' account, the IRS through its unknown John Doe agent, certified to the Secretary of State, illegally, falsely and erroneously, that there exists a 'seriously delinquent' obligation owed to the United States under the FAST Act, Section 7345 of the Internal Revenue Code despite the pending appeal and the lack of any validly assessed obligations.

24. This illegal, false and erroneous determination made by the IRS to the Secretary of State suspended the plaintiff's passport and placed Plaintiff Geoffrey Cunfer's position as a Professor of History in jeopardy as he will not be able to return to Canada to perform his duties without his Passport, thus interfering in his liberties without due process.

25. The unknown John Doe agent of the IRS illegally made this erroneous statement, knowing of its falsity, and knowing that there were multiple appeals requests filed, timely, with the IRS.

Rev. Proc. 2020-17

26. On or about March 4, 2020, the Internal Revenue Service issued Rev Proc. 2020-17.

27. Rev Proc. 2020-17 addressed the exact set of facts present herein, the ownership and taxation of RESPs. Included in Rev. Proc. 2020-17 is the acknowledgement that taxpayers impacted by prior actions on RESPs should file a refund claim specifically citing the Revenue Procedure. Rev. Proc. 2020-17, §6. The Revenue Procedure failed to explain what would happen if a Fast Act Notification had already gone out to the Secretary of State, presumptively suspending usage of a passport.

28. On March 20, 2020 Cunfer's attorney delivered to the IRS his refund claim. Over the months following filing of this refund claim, attorneys for Cunfer contacted the IRS to determine the status. On numerous calls the IRS indicated that it had closed, was furloughed, or simple was not taking telephone calls.

29. After dozens of calls, Cunfer's attorney finally reached a representative working for the Internal Revenue Service. On May 26, 2020 Cunfer's attorney spoke with a Representative named Mr. Broccoli. Broccoli explained that neither the Centralized Authorization Filing (CAF) Unit was working, or processing, and they did not even have their Fax Machines turned on. Moreover, Mr. Broccoli explained that the IRS was not processing refunds or claims and likely has never scanned the refund claim sent to the IRS on March 20, 2020. It was because of this failure to scan the refund claim that Mr. Broccoli could not access the refund claim filed on March 20, 2020.

30. The IRS has taken no action on the refund claim, nor withdrawn the improper Fast Act notification. Similarly, the IRS has never instituted an Appeal for Cunfer despite the timely filed appeal request. This is a violation of 26 C.F.R. § 601.106(b).

31. The IRS is refusing to respond to even basic correspondence, refund claims, appeals, or any other communications related to this matter; much less process timely filed refund claims.

Registered Education Savings Plans (RESPs)

32. In addition to the foregoing, Plaintiff seeks refund of the erroneously collected civil penalties improperly asserted under IRC § 6677.

33. For several years the Cunfers have saved money for their minor daughter in a tax preferential educational savings account under Canadian law, a RESP. These plans have had no U.S. or IRS guidance on whether they are characterized as a trust or not, until Rev. Proc.2020-17 was issued, affirmatively stating they are not subject to the trust return requirements.

34. The purpose of the RESP is to place money for the future use of the student, however, there is no fiduciary, no duties, and it fails the statutory test of a trust. 26 CFR 301.7701-4. PLR-201245003.

35. Despite this, the IRS illegally and erroneously asserted a civil penalty without following the statutory framework for failure to file a substitute trust statement. IRC §§ 6048; 6203; Rev. Proc 2020-17.

36. In total the Service asserted civil penalties for 2012 through 2017. To date these penalties and interest exceed $59,000; over five times the value of the RESP. This violates statutory and constitutional due process. IRC §6677(a).

Causes of Action

26 U.S.C.A. § 7345(c) Erroneous Revocation or denial of passport

37. Plaintiff incorporates paragraphs 1-70 as if fully restated herein, in haec verba.

38. Section 7345(c) and (e) of the Internal Revenue Code provides a taxpayer or Plaintiff relief if the certification made the Secretary of State is erroneous or false. 26 USC 7345(c)&(e).

39. The Plaintiff's alleged obligation does not meet the criteria for a “Seriously delinquent tax debt” as defined by Section (b) of 7345 of the Internal Revenue Code because

a. No assessment or proper assertion of penalty has ever been made by the IRS;

b. No Supervisor has signed off on the assertion or assessment of penalty;

c. No notice of lien has ever properly been issued or served;

d. No lien has ever been properly issued or served;

e. The tax debt must be legally enforceable Federal tax liability and

f. And the taxpayer has never been permitted the exhaustion their appellate rights.

40. The non-technical: In addition to the forgoing, Plaintiff provides this non-technical explanation of the above:

41. The IRS must statutorily comply with certain provisions of the Internal Revenue Code for a valid assessment or imposition of a penalty to have been made, it has not done so.

42. Among these provisions, the IRS must comply with statutory and constitutional due process requirements, including the timely adherence to the IRC's appeals process, the timely notice of assessment or issuance of penalties, a supervisors signature on the penalty, the necessity of cessation of collection activities during appeals, the timely notice of intent to issue liens and service of same, and the timely notice of the issuance of liens and service of same.

43. The IRS has failed to comply with all of these IRC sections, and the case remains in appeals pursuant to the Taxpayers' request and thus no seriously delinquent tax debt legally exists until the appellate process has expired.

44. Furthermore, the IRS in issuing Rev. Proc. 2020-17, the IRS excluded RESPs from the reporting requirements of Section 6048 and provided a means to reimburse taxpayers who have been subject to penalties and interest for failure to report in accordance with Section 6048 and Section 6677.

45. Rev. Proc. 2020-17 specifically instructs taxpayers subject to penalties or interest for failing to comply with IRC Section 6048 to file for refund or abatement using Form 843. Rev. Proc. 2020-17, §6.01.

46. Rev. Proc. 2020-17 operates as specific guidance from the IRS that reporting under 6048 for RESPs is not required, and that because there is no reporting requirement, the issuance and collection of any amounts on the failure to file a trust account return for this RESP is erroneous, and therefore the certification to the Secretary of State was illegal and erroneous.

47. Because the IRS's current guidance is that there is no reporting requirement under IRC Section 6048 for Canadian RESPs, the 'FAST Act' notification to the Secretary of State under §7345 was illegal and erroneous and there are no amounts currently legally outstanding or owed to the IRS, and the claim by the IRS is not, a legally enforceable Federal tax liability. 26 U.S.C.A. § 7345(b)(1). (West).

Refund

48. Plaintiff incorporates paragraphs 1-70 as if fully restated herein, in haec verba.

49. Plaintiff filed a refund claim with the IRS on March 20, 2020. The IRS agents to date cannot locate this refund claim. Specifically, Agent Mr. Broccoli told attorney for Plaintiff that the offices processing the claims are not working, and no one is scanning the refund claims that have been filed with the IRS.

50. The IRS has illegally withheld and applied $1,013.65 from the Cunfer's 2017 tax return towards the 2012 illegal civil penalty. In 2018 the IRS withheld and applied $1,031.99 towards the 2012 illegal civil penalty and $842.01 towards the 2013 illegal civil penalty.

51. Plaintiff seeks a refund of these illegally and erroneously collected funds and an abatement of all future civil penalties on this account related to the alleged necessity of a 3520 for the RESP.

52. In addition, Plaintiff seeks interest on the amounts claimed under the Refund in the amount of 4.5% per annum. See Rev. Proc.2020-06; 26 USC §6611.

Mandamus

53. Plaintiff incorporates paragraphs 1-69 as if fully restated herein, in haec verba.

54. This statute 28 U.S.C.A. § 1361, gives the district court original jurisdiction "of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to plaintiff."

55. Pursuant to 28 USC § 1361, Plaintiff files this action to compel an officer of the United States to Perform his duty. Plaintiff Cunfer requests that the Court compel IRS Director Mamo to process the Appeal, process the refund claim, and to revoke his Illegal and erroneous and false certification to the Secretary of State. Plaintiff Cunfer further requests the court compel the Secretary of State to reject the illegal, erroneous and false certification from the IRS, and to further permit Cunfer to travel freely on his lawfully obtained U.S. Passport, and as a United States Citizen.

56. A taxpayer has rights to, inter alia:

a. Appeal an IRS decision;

b. Be informed;

c. The right to quality service;

d. The right to challenge the IRS's position;

e. Pay no more than is owed; and

f. A right to a fair and just tax system.

IRS Pub 1; 26 USCA 7803(a)(3)

57. The IRS has already admitted it is not processing refund claims, the offices that process claims are not working and not scanning the documents submitted.

58. The IRS has previously ignored appeals letters sent by this Attorney.

59. The IRS has failed to revoke a FAST act notification sent without basis in law.

60. The IRS has refused to permit Plaintiff from being heard in Appeals or in his refund claim.

61. The IRS has failed to inform plaintiff of many of the changes to his account in a timely fashion.

62. The IRS has wholly failed to honor any portion of the taxpayer bill of rights, this mandamus seeks compliance with those statutes and to require the IRS to process plaintiff's refund claim and withdraw the FAST act notice. IRS Pub 1; 26 USCA 7803(a)(3); As to FAST Act see 26 USC 7345.

63. On March 20, 2020 Plaintiff filed his refund claim pointing specifically to Rev. Proc. 2020-17.

64. The IRS has refused to process this refund claim. As a direct result of the failure to process this refund claim, the IRS has knowingly failed to withdraw the FAST act notice in a timely fashion and plaintiff has been damaged by the IRS', Paul Mamo's and agent John Doe's conduct, and irreparably harmed.

65. Even before the Rev. Proc. was issued, plaintiff sought relief from the Appellate division of the IRS, however, the service ignored these requests and failed to timely institute the appeals process.

66. The IRS has a ministerial duty to transfer a case to appeals on receipt of an appeals notice. 26 C.F.R. § 601.106(b).

67. The IRS has a ministerial duty to rescind a FAST act notice upon information and proof of its erroneous or false nature. The IRS failed to act on this information.

68. The IRS has a ministerial duty to refund plaintiff the amounts owed under the Revenue Procedure, they have not.

69. Plaintiff seeks to mandate that Paul Mamo, or the responsible party dismiss the collections activities against plaintiff pursuant to the Revenue Procedure, direct the IRS to process the refund claim, and direct the IRS to rescind the FAST Act notification.

Conditions Precedent

70. All conditions precedent to Plaintiff's claim for relief have been performed or have occurred.

Prayer for Relief

71. WHEREFORE, PREMISES CONSIDERED, Plaintiff prays that Defendants be cited to appear and answer, and the following order be entered:

Respectfully submitted, MOSSER LAW PLLC

By: James C. Mosser
Texas Bar No: 00789784
Nicholas D. Mosser
Texas Bar No. 24075405
Email: courtdocuments@mosserlaw.com
2805 Dallas Parkway Suite 222
Plano, TX 75093
Tel. (972) 733-3223
Fax. 972-473-0600
Lawyers for Plaintiff
Geoffrey Cunfer