JACOBS V. The UNITED States
| Decision Date | 23 June 2010 |
| Docket Number | No. 09-146 T,09-146 T |
| Parties | MARTHA JACOBS, Plaintiff, v. THE UNITED STATES, Defendant. |
| Court | U.S. Claims Court |
Martha Jacobs, Bennettsville, SC, pro se.
Jennifer Dover Spriggs, with whom were John A. DiCicco, Acting Assistant Attorney General, Steven I. Frahm, Chief, and Mary M. Abate, Assistant Chief, Court of Federal Claims Section, Tax Division, United States Department of Justice, Washington, DC, for defendant._
Before the court are plaintiff's Complaint (Complaint or Compl.), Docket Number (Dkt. No.) 1, filed March 6, 20091; defendant's Motion of the United States to Dismiss the Complaint (defendant's Motion or Def.'s Mot.), Dkt. No. 26, filed February 19, 2010; plaintiff's Objections to the Defendant's Motion to Dismiss the Complaint (plaintiff's Response or Pl.'s Resp.), Dkt. No. 27, filed March 8, 2010; and defendant's Reply Brieffor the United States in Support of Its Motion to Dismiss the Complaint (defendant's Reply or Def.'s Reply), Dkt. No. 28, filed March 25, 2010.
Martha Jacobs (plaintiff or Ms. Jacobs) filed formal complaints in 1993 and 1994 with the Equal Employment Opportunity Commission (EEOC) in which she asserted that her supervisors discriminated against her during the course of her employment at the United States Postal Service (USPS). Def.'s Mot. 2 (citing Cook v. Runyon (Runyon), No. 01960303, 1998 WL 421558, at *16 (E.E.O.C. Dec. July 17, 1998))2; see Compl. ¶¶ 11-14, 16, 18-23. In 1998, the EEOC found that USPS had discriminated against Ms. Jacobs and, consequently, awarded her $130,000 in nonpecuniary compensatory damages. Runyon, 1998 WL 421558, at *16-17; Compl. ¶ 6; Def.'s Mot. 2 (citing Cook v. Henderson (Henderson), No. 01A02390, 2001 WL 284823, at *4 (E.E.O.C. Dec. March 13, 2001)). The EEOC also ordered that Ms. Jacobs be given an opportunity to submit evidence of past and future pecuniary damages to be used by USPS as a basis for calculating any pecuniary damages owed to Ms. Jacobs. Runyon, 1998 WL 421448, at *13, 17; see Henderson, 2001 WL 284823, at *1. On October 8, 1999, USPS paid Ms. Jacobs $130,000 in nonpecuniary compensatory damages in compliance with the 1998 EEOC order. Compl. ¶ 6; Def.'s Mot. 2-3 (citing Runyon 1998 WL 421558, at *16); defendant's Exhibit3 (Def.'s Ex.) 10. Ms. Jacobs also received payments forbackpay and interest in 2000. Def.'s Ex. 10. Taxes were withheld from the backpay payment only. Id.
In 2001, the EEOC determined that Ms. Jacobs had established entitlement to past pecuniary damages for medical expenses and future pecuniary damages for lost earning capacity. Henderson, 2001 WL 284823, at *3-4. Accordingly, the EEOC ordered USPS to compensate Ms. Jacobs for her medical expenses and to determine and pay the appropriate amount of future pecuniary damages owed to Ms. Jacobs for lost earning capacity. Id. at *7; see Def.'s Mot. 2. USPS paid Ms. Jacobs $3,663 on June 15, 2001 for medical expenses and $170,000 on July 3, 2001 for lost earning capacity as calculated by USPS. Def.'s Exs. 8, 10; Def.'s Mot. 2-3; see Compl. ¶¶ 6, 9. In total, USPS paid Ms. Jacobs $303,663--from which no taxes were withheld--for nonpecuniary and pecuniary compensatory damages and medical expenses in 1999 and 2001. Def.'s Ex. 10.
Because Ms. Jacobs did not file a tax return for the 1999 tax year, the Internal Revenue Service (IRS) prepared a substitute return for her on February 27, 2003, which showed no tax liability. See Def.'s Ex. 1, at A4. The IRS received a Form 1040 for the 1999 tax year from Ms. Jacobs on May 2, 2003. Def.'s Ex. 3; see Def.'s Ex. 1, at A4 (showing additional tax assessed on transaction number 07254-569-54028-3, the number written on the 1040 submitted by Ms. Jacobs). The form, prepared by a paid preparer, reported the $130,000 received from USPS in 1999 as "other income" and showed a tax liability of $1,819. Def.'s Ex. 3, at ll. 21, 56, 68. Consequently, on July 7, 2003, the IRS assessed Ms. Jacob's tax deficiency for the 1999 tax year in the amount of $1,819, plus penalties and interest. Def.'s Ex. 1, at A4. The IRS received Form 1040X from Ms. Jacobs on January 25, 2004, amending her prior Form 1040 for the 1999 tax year and asserting that the $130,000 nonpecuniary damages award from USPS was nontaxable. Def.'s Ex. 5; see Def.'s Ex. 1, at A4. The IRS, accordingly, abated the prior tax assessment of $1,819 and the accompanying penalties and interest. Def.'s Ex. 1, at A4-5. Ms. Jacobs paid no taxes for the 1999 tax year. See id. passim; Def.'s Ex. 3, at ll. 57-64; Def.'s Ex. 5, at ll. 11-18.
The IRS received Ms. Jacobs' Form 1040 for the 2001 tax year on May 2, 2003. Def.'s Ex. 4; Def.'s Ex. 2, at A8. This form was prepared by the same paid preparer as Ms. Jacobs' Form 1040 for the 1999 tax year, was received on the same day, and similarly reported the $173,663 in pecuniary damages received from USPS by Ms. Jacobs in 2001 as "other income." Def.'s Ex. 4, at l. 21; see Def.'s Ex. 2, at A8; Def.'s Ex. 3. Ms. Jacobs' Form 1040 for the 2001 tax year showed a tax liability of $18,172. Def.'s Ex. 4, at l. 58. But see id. at l. 70 (). On June 9, 2003, the IRS assessed Ms. Jacobs' tax deficiency for the 2001 tax year at $18,172, Def.'s Ex. 2, at A8, consistent with her self-reported tax liability, see Def.'s Ex. 4, at l. 58. Additionally, on June 9, 2003, the IRS assessed an estimated tax penalty of $719.00, a late filing penalty of $4,088.70, a failure to pay tax penalty of $1,272.04 and interest in the amount of $1,486.75. Def.'s Ex. 2, at A8.
Ms. Jacobs then filed a Form 1040X for the 2001 tax year, which the IRS received on November 3, 2003. Def.'s Ex. 2, at A8; Def.'s Ex. 6. On this amended return, Ms. Jacobs asserted that the money received from USPS in 2001 was nontaxable, "even though US Postal gave her[] a 1099." Def.'s Ex. 6, at A28; see Def.'s Ex. 10. The IRS disallowed Ms. Jacob's claim on February 16, 2004. Def.'s Ex. 2, at A8. The agency subsequently entered Ms. Jacobs into the federal payment levy program on November 8, 2004. See Def.'s Ex. 2, at A9. On December 13, 2004, the IRS notified Ms. Jacobs of its intent to collect payment levies. See Def.'s Ex. 2, at A9. But cf. id. at A13 (recording transaction titled "Statutory Notice of Intent to Levy" on June 21, 2004).
On December 27, 2004, Ms. Jacobs filed a second amended return, asserting a claim for a refund in the amount of $18,172. Id. at A9. Ms. Jacobs was removed from the federal levy program, prior to any collection, while the IRS evaluated her claim. Id. The IRS assessed Ms. Jacobs' refund claim on September 26, 2005 and reentered her in the levy program. Id. at A10; see Def.'s Ex. 7. On November 28, 2005, the IRS began collecting payment levies from Ms. Jacobs. Def.'s Ex. 2, at A10. In a letter dated January 11, 2006, the IRS notified Ms. Jacobs that her refund claim for $18,172, submitted on her second amended 2001 return, could not be allowed in its entirety because the $170,000 that she received from USPS in 2001 was a taxable settlement under section 104(a)(2) of the Internal Revenue Code (I.R.C.). Def.'s Ex. 7. However, as a result of its determination that the $3,663 received by Ms. Jacobs in 2001 for medical expenses was nontaxable under I.R.C. § 104(a)(2), the IRS did allow $1,004 of Ms. Jacob's refund claim. Id.; Def.'s Ex. 2, at A10 (showing that prior tax of $1,004 was abated by examination). The notification letter informing Ms. Jacobs of the partial disallowance also stated that Ms. Jacobs had two years from the January 11, 2006 mailing date "to bring suit or proceedings for the recovery of any tax, penalties or other moneys for which this disallowance notice is issued." Def.'s Ex. 7. The IRS entered a tax abatement for Ms. Jacobs in the amount of $1,004 on February 6, 2006. Def.'s Ex. 2, at A10.
On April 7, 2006, the IRS entered a federal tax lien on Ms. Jacobs' property. Id. at A11. As of January 31, 2010, Ms. Jacobs owed the IRS an outstanding balance of $32,839.44 on her 2001 federal income tax deficiency, including accrued interest and penalties. Def.'s Ex. 9, at A32.
Ms. Jacobs filed a Complaint against the United States (defendant or United States) on March 6, 2009, in which she asserts the following bases for relief: (1) wrongful assessment and collection of taxes by the IRS for the 1999 and 2001 tax years, Compl. ¶¶ 1, 3, 6-10; (2) unlawful harassment and collection methods including levies and failure to release the lien on her property utilized by the IRS in conspiracy with Ms. Jacobs' former employer, the USPS, and other government agencies, id. ¶¶ 1-3, 8, 11, 24-26; (3) civil rights violations by the USPS, id. ¶¶ 1-2, 12-24; and (4) bankruptcy as a result of wrongful tax assessment and improper collection methods, id. ¶ 1; see id. ¶¶ 6, 11 (listing financial problems that Ms. Jacobs asserts stem from the wrongful assessment and collection of her taxes). The United States seeks dismissal of Ms. Jacobs' claims regarding the 1999 tax year pursuant to Rule 12(b)(6) of the Rules of the United States Court of Federal Claims (RCFC) and dismissal of Ms. Jacobs' other claims for lack of subject matter jurisdiction pursuant to RCFC 12(b)(1). Def.'s Mot. 1-2.
Pursuant to RCFC 12(b)(6), the court will dismiss a party's claim if that party failed to state in its pleadings a claim upon which relief can be granted. RCFC 12(b)(6). In evaluating whether it should grant a 12(b)(6) motion, the court "must accept as true all the factual allegations in the complaint" and "indulge all reasonable inferences in favor of the non-movant." Sommers Oil Co. v. United States, 241 F.3d 1375, 1378 (Fed. Cir. 2001) (internal citations omitted). A complaint will survive a 12(b)(6) motion if the party making the claim provides a basis for relief beyond "labels and conclusions" or "a formulaic...
To continue reading
Request your trial