Software Developer Liable for Deficiencies, Escapes Penalties

DAVID ISAAC BINDEL,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent

United States Tax Court

Filed April 20, 2022

David Isaac Bindel, pro se.

Billi Seale, Vivian Bodey, and Linda L. Wong, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

URDA, Judge: Petitioner, David Isaac Bindel, challenges the determination by the Internal Revenue Service (IRS) of federal income tax deficiencies of $23,740 and $24,749 for his 2015 and 2016 tax years, respectively.¹ Mr. Bindel reported no taxable income on his tax returns for those years and raises in this Court frivolous arguments in support of that tax reporting. We will sustain the IRS's deficiency determinations.²

[*2] FINDINGS OF FACT

This case was tried on May 5, 2021, at the Court's remote trial session for cases associated with Dallas, Texas. We draw the following facts from the parties' stipulations and supporting exhibits, as well as the testimony presented at trial. Mr. Bindel lived in Texas when he timely filed his petition.

I. Mr. Bindel's 2015 and 2016 Earnings and Tax Reporting

During 2015 and 2016 Mr. Bindel worked as a software developer for Skyllzone LLC (Skyllzone) and Alkami Technology, Inc. (Alkami). Specifically, he worked at Skyllzone from April 2014 to February 2015 and at Alkami for the remainder of 2015 and all of 2016. Mr. Bindel earned $17,911 from Skyllzone and $99,698 from Alkami in 2015. The next year, he received $20 from Skyllzone and $123,471 from Alkami.³

On his 2015 Form 1040, U.S. Individual Income Tax Return, Mr. Bindel claimed a refund of $31,807, reporting that he earned no wages. He attached to his tax return Form 4852, on which he represented that he “did not receive any wages as defined in section 3401(a) and section 3121(a)” from Skyllzone or Alkami and sought a refund equal to the amounts of tax withheld by those employers.

Mr. Bindel's tax reporting for 2016 was similar to that of the previous year. Specifically, he claimed a refund of $33,849 and reported no wages. He again attached Form 4852 to his tax return and reprised his earlier contentions that he did not receive wages as defined in the Internal Revenue Code and that he was entitled to a refund of tax withheld by Skyllzone and Alkami.

[*3] II. IRS Examination and Notice of Deficiency

For both 2015 and 2016 Skyllzone and Alkami issued to Mr. Bindel Forms W-2 and reported amounts paid to him on information returns filed with the IRS. The discrepancy between the tax reporting of Mr. Bindel and that of Skyllzone and Alkami led to an IRS examination of Mr. Bindel's 2015 and 2016 tax returns. The examination culminated in the issuance of a notice of deficiency that determined that Mr. Bindel had failed to report income received from Skyllzone and Alkami for 2015 and 2016.

OPINION

I. Unreported Income

Generally, the Commissioner's determinations in a notice of deficiency are presumed correct, and a taxpayer bears the burden of proving them erroneous. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933); Carson v. United States, 560 F.2d 693, 695–96 (5th Cir. 1977). In cases involving failure to report income, the Court of Appeals for the Fifth Circuit, to which an appeal in this case would ordinarily lie, see § 7482(b)(1), has held that the Commissioner first must establish some factual foundation linking the taxpayer to the income-producing activity for the presumption to attach, see, e.g., Parker v. Commissioner, 117 F.3d 785, 787 (5th Cir. 1997); Portillo v. Commissioner, 932 F.2d 1128, 1133 (5th Cir. 1991), aff'g in part, rev'g in part, and remanding T.C. Memo. 1990-68. Once the Commissioner has done so, the taxpayer bears the burden of proof to show by a preponderance of the evidence that the Commissioner's determination is arbitrary or erroneous. See Portillo v, Commissioner, 932 F.2d at 1133; Carson, 560 F.2d at 695–96.

We have found that Mr. Bindel was paid $117,609 in 2015 and $123,491 in 2016 while working for Skyllzone and Alkami, consistent with the notice of deficiency. The parties stipulated these amounts except for a $20 payment from Skyllzone in 2016. And as we described supra note 3, the Commissioner sufficiently linked this $20 to Mr. Bindel by means of a Form W-2 from Skyllzone for this amount and Mr. Bindel's own Form 4852, which detailed the tax withheld from Skyllzone's 2016 payments to him.

Mr. Bindel accordingly bears the burden to prove by a preponderance of the evidence that the Commissioner erred in his determinations. Mr. Bindel attempts to do so by invoking a raft of [*4] meritless arguments directed to the nature of the income tax and its purported limited applicability to most types of earnings (including those of software developers like Mr. Bindel).⁴ To know these arguments is to reject them. See, e.g., Parker v. Commissioner, 724 F.2d 469, 471–72 (5th Cir. 1984) (refuting allegation that “the income tax is an excise tax applicable only against special privileges” and finding Congress empowered to levy income tax against any source of income), aff'g T.C. Memo. 1983-75; Briggs v. Commissioner, T.C. Memo. 2016-86, at *10 (“[The taxpayers'] assertions that wages from private-sector employers are not 'income' for Federal income tax purposes are frivolous.”); see also Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984) (“We perceive no need to refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.”); Wnuck v. Commissioner, 136 T.C. 498, 510–12 (2011).

We thus will sustain the IRS's deficiency determinations, subject to the Commissioner's concessions.

II. Section 6673 Penalty

Pursuant to section 6673(a)(1), we have the authority to impose a penalty of up to $25,000 on a taxpayer who, inter alia, institutes or maintains before this Court a proceeding primarily for delay or pursues a position that is frivolous or groundless. We have not found that Mr. Bindel has made these or similar frivolous claims in previous cases. We thus will choose not to impose this penalty at this time. We caution Mr. Bindel, however, that he risks penalties under section 6673 if he presses these or similar arguments in the future.

[*5] III. Conclusion

The IRS's deficiency determinations are sustained, subject to the Commissioner's concessions.

To reflect the foregoing,

Decision will be entered under Rule 155.