Metz v. Comm'r of Internal Revenue
| Decision Date | 07 April 2022 |
| Docket Number | 16784-19 |
| Parties | DANIEL METZ, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
Daniel Metz, pro se.
Randall B. Childs and A. Gary Begun, for respondent.
This case arises from a statutory notice of deficiency issued to petitioner Daniel Metz for tax years 2000 through 2008 (years at issue). The Commissioner of Internal Revenue (respondent) determined deficiencies, additions to tax, and penalties for 2000 through 2008, as follows:
Year
Deficiency
Additions to Tax/Penalties
§ 6663(a)1[]
§ 6651(a)(1)
§ 6651(a)(2)
§ 6654
2000
―
$95,113.50
―
―
―
2001
―
52,835.25
―
―
―
2002
―
90,986.25
―
―
―
2003
―
128,772.75
―
―
―
2004
―
154,884.75
―
―
―
2005
$306,095
377,032.50
$106,953.50
―
―
2006
106,749
227,409.75
51,667.75
―
―
2007
45,936
190,167.75
23,662.75
―
―
2008
139,624
―
31,396.73
$34,886
$1,797
In his Answer respondent also asserted an addition to tax under section 6651(f) for 2008.
The issues for decision are whether petitioner (1) received unreported income for 2005 through 2008; (2) is liable for civil fraud penalties under section 6663 for 2000 through 2007; (3) is liable for additions to tax under section 6651(a)(1) for 2005 through 2008; and (4) is liable for additions to tax under sections 6651(a)(2)and (f) and 6654 for 2008. For the reasons set forth below, we will sustain respondent's determinations, as adjusted in his Answer.
The parties submitted this case for decision without trial under Rule 122. Relevant facts have been stipulated or otherwise included in the record. See Rule 122(a). Petitioner resided in Florida when he timely filed his Petition.
During all times relevant to this case petitioner worked as a professional structural engineer who designed bridges and related road structures for the Florida Department of Transportation. In 1994 petitioner formed Metz & Associates, Inc. (Metz, Inc.), under Florida state law to start his own structural engineering business. Petitioner was the sole shareholder of the entity until 2007, when he dissolved Metz, Inc., and formed Metz & Associates, LLC (Metz, LLC), under Florida state law to continue his engineering business. Petitioner was the managing member of Metz, LLC, and held a 94% membership interest. Petitioner held signature authority over Metz, Inc.'s and Metz, LLC's business checking accounts. He was also an employee of both Metz, Inc., and Metz, LLC, and received a salary from each during the years at issue.
In addition to Metz, Inc., and Metz, LLC, petitioner created other entities. On December 29, 2003, petitioner created "The Office of the Administrator for ZJ Science and Education and His Successors, a Corporation Sole" (ZJ Science) under Nevada state law. Petitioner was the owner of ZJ Science. On December 2, 2016, petitioner registered Westbridge, Ltd., as a fictitious name with the Florida secretary of state's office. Petitioner opened bank accounts for these two entities and held signature authority over the accounts.
Petitioner timely filed Forms 1120S, U.S. Income Tax Return for an S Corporation, for Metz, Inc., for 2000 through 2007 and Forms 1065, U.S. Return of Partnership Income, for Metz, LLC, for 2007 and 2008 with the Internal Revenue Service (IRS).
However, petitioner initially did not file Forms 1040, U.S. Individual Income Tax Return, to report any wage income he received from Metz, Inc., or Metz, LLC, during those years. For 2000 he initially sent a document titled "Statement for Tax Year 2000" to the IRS. Similarly, for 2001 he initially sent the IRS a document titled "Statement for Tax Year 2001."[2] Petitioner did not file Forms 1040 for 2000 through 2003 until April 13, 2009, after he was contacted by an IRS agent. Petitioner filed Form 1040 for 2004 on June 18, 2009, and he filed Forms 1040 for 2005 through 2007 on September 28, 2009. Because petitioner failed to file Form 1040 for 2008, respondent prepared a substitute for return (SFR) pursuant to section 6020(b) on his behalf.
With his tax returns for 2000 through 2007 petitioner submitted to the IRS false Forms 1099-OID, Original Issue Discount, as part of a fraudulent scheme to obtain withholding credits. These Forms 1099-OID were forged by a third party to appear as though they were legitimately issued by banks and financial institutions such as Bank of America and JPMorgan Chase Bank. Petitioner submitted these fraudulent Forms 1099-OID with his income tax returns to claim fraudulent refunds totaling $1, 297, 490 for 2000 through 2007.
The Criminal Investigation Division of the IRS investigated petitioner's income tax returns and fraudulent Forms 1099-OID for 2005 through 2007. On August 8, 2012, a grand jury in the U.S. District Court for the Middle District of Florida indicted petitioner on three counts of filing false or fraudulent claims for 2005, 2006, and 2007 under 18 U.S.C. § 287 and one count of attempting to obstruct or interfere with the Internal Revenue Laws under section 7212. Petitioner pleaded not guilty, but he was ultimately convicted by a jury on all counts on July 18, 2013. On December 20, 2013, the District Court entered judgment against petitioner, and he was sentenced to 30 months in a federal penitentiary, followed by three years of supervised release. In addition the district court ordered petitioner to pay respondent restitution of $112, 995.
Starting with his tax filing for 2000 and throughout the IRS's audit, petitioner continued to assert various arguments to prevent or delay the IRS from assessing or collecting his income tax liabilities. He submitted a "Statement for Tax Year 2000" and a "Statement for Tax Year 2001" in which he argued that he was not subject to any taxes under the Code and that he was not authorized or required to file Form 1040 because it did not have an OMB number. On February 6, 2002, he sent the IRS a document titled "Request for Status Determination," again setting forth the argument that he was not subject to the Code and therefore had no tax obligations. On July 23, 2002, he sent the IRS a letter in response to a Notice CP-515[3] and argued that he was not subject to the Code and therefore had no tax obligations. On August 16, 2002, he sent another letter in response to the IRS's second Notice CP-515, again challenging respondent's authority and alleging violations of his due process rights. On December 29, 2003, he sent a document titled "Interrogatories Presented to the Internal Revenue Service Under 5 USC 556(d) the Administrative Procedures Act" to the IRS Office of Chief Counsel, demanding that the IRS provide answers to his questions about respondent's authority to assess and collect his tax liabilities. On March 1, 2005, he sent a document titled "Affidavit of Material Facts, Privacy Act Amendment Request, and Rebuttal of Erroneous IRS Individual Master File (IMF) of: Daniel Metz" to the IRS. The document included allegations of illegal conduct by IRS employees. On September 4, 2007, he filed a document titled, "Declaration of Legal Character of Natural Person" with the Clerk of the Circuit Court for Seminole County, Florida. In the document he stated that he "rejects the status of Fourteenth Amendment citizenship," and that he is a "native born American and common law freeman by birthright." On September 17, 2007, he sent a document titled "Complaint Against IRS Agents" to Paul D. Clement, Acting Attorney General, U.S. Department of Justice, arguing that he was a "sovereign American" and therefore was not subject to the Code.
In August 2009 the IRS issued summonses to petitioner to appear and provide copies of his bank statements so that the IRS could reconstruct his income. When petitioner did not comply with the summonses, the IRS issued third party summonses to banks to obtain copies of petitioner's bank statements. On October 13, 2009, petitioner filed a petition in the district court to quash the IRS summonses. After the district court denied petitioner's emergency restraining orders and preliminary injunctions to prevent the IRS from obtaining his bank statements, the court also dismissed the petition to quash the IRS's summonses.
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