TAX COURT OPINION

Case: Daryl Cheatham
Docket Number: 751-24
Judge: Buch
Opinion Type: bench
Filed: 04/15/2025
Pages: 8

DARYL CHEATHAM, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent United States Tax Court Washington, DC 20217 Docket No. 751-24. ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall serve with this Order a copy of the pages of the transcript of the trial in this case containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered for the Commissioner. (Signed) Ronald L. Buch Judge Served 04/15/25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Bench Opinion by Judge Ronald L. Buch March 13, 2025 3 Daryl Cheatham v. Commissioner of Internal Revenue Docket No. 751-24 THE COURT: The Court has decided to render oral findings of fact and opinion in this case and the following represents the Court's oral findings of fact and opinion. These oral findings of fact and opinion shall not be relied upon as precedent in any other case. They are made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code and Tax Court Rule 152. Rule references in this opinion are to the Tax Court Rules of Practice and Procedure, and section references are to the Internal Revenue Code, in effect at all 15 relevant times. 16 17 18 19 20 21 22 23 24 25 Petitioner, Daryl Cheatham, did not file a tax return for 2019. Relying on information reported by third parties, the Commissioner determined a $25,249 deficiency in income tax and additions to tax under sections 6651(a)(1) and (2), and 6654. Mr. Cheatham disputes that he is a taxpayer or that the compensation he received was income. He is and he did. Decision will be entered for the Commissioner. FINDINGS OF FACT In 2019, Mr. Cheatham was journeyman lineman and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 performed services for several employers including Delta 4 Services LLC, Henkels and McCoy Inc., Edison Power Constructors, Inc., Rokstad Power Inc., AL Utility Contractor Inc., and Service Electric Company. These employers reported paying him a total of $141,678 of wages and withholding federal tax totaling $1,269. Mr. Cheatham did not file a 2019 Form 1040, U.S. Individual Income Tax Return. The Commissioner prepared a substitute for return pursuant to section 6020(b) based on Forms W-2, Wage and Tax Statement, she received from third parties. On March 20, 2023, the Commissioner mailed a Letter 1862 with an Attached Form 4549, Report of Income Tax Examination Changes. On October 17, 2023, the Commissioner mailed a Notice of Deficiency to Mr. Cheatham. In her notice, the Commissioner determined that Mr. Cheatham had received wage income of $141,678. Allowing him the standard deduction of $12,000, the notice determined taxable income of $129,478 and a tax due of $23,980 after applying the $1,269 of withholding. The notice also included additions to tax for failure to file a return, failure to pay income tax, and failure to pay estimated income tax pursuant to sections 6651(a)(1), (a)(2), and 6654 respectively. While residing in Kentucky, Mr. Cheatham filed a petition challenging the determinations in the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Commissioner's notice. On March 9, 2025, Mr. Cheatham 5 filed a Motion for Leave to File an Amended Petition and lodged an amended petition. The Court granted that motion. Mr. Cheatham also worked with the Commissioner to prepare a stipulation of facts, agreeing to facts and documents that should not reasonably be in dispute. OPINION As a general matter, the Commissioner's determinations in a Notice of Deficiency are presumed correct, and the taxpayer bears the burden of proving an error. Rule 142(a), Welch v. Helvering, 290 U.S. 111, 115 (1933). Mr. Cheatham does not contest his earnings or challenge the Commissioner's factual determinations; he and his earnings are subject to tax. I. Wages are Income In this case, Mr. Cheatham only offered frivolous arguments as to why his earnings are not taxable. As the Fifth Circuit wrote in Crain v. Commissioner, "We perceive no need to refute those frivolous arguments with somber reasoning and copious citation to precedent; to do so might suggest that these arguments have some colorable merit." 737 F.2d 1417 (5th Cir. 1984). Likewise, the Sixth Circuit, the Court to which this case is appealable, has written, "The taxpayer's argument that wages do not constitute taxable 1 2 3 4 5 6 7 8 9 10 11 12 13 14 income has been repeatedly rejected by reviewing courts." 6 Juengel v. Commissioner, 755 F.2d 932 (6th Cir. 1985). We have further explained in Wnuck v. Commissioner, "[I]t is doubtful whether tax jurisprudence will be much advanced by issuing yet another opinion affirming the obvious truisms about tax law". 136 T.C. 498, 504 (2011). For example, we have previously spilled ink addressing the frivolous argument that income tax is an excise tax and it cannot be imposed as a non- apportioned direct tax under the 16th Amendment, an argument Mr. Cheatham repeats in this case. See Waltner v. Commissioner, T.C. Memo. 2014-35, at *48. Mr. Cheatham's arguments have been addressed and rejected by this Court and many others. We won't address 15 them further here. 16 17 18 19 20 21 22 II. Additions to Tax In addition to determining a deficiency in tax, the Commissioner's Notice of Deficiency determined additions to tax for failure to file, failure to pay, and failure to make estimated tax payments. The Commissioner bears the burden of production with respect to these additions to tax. I.R.C. § 7491(c). 23 A. Failure to File Addition to Tax 24 25 Section 6651(a)(1) imposes an addition to tax for failure to timely file a Federal income tax return 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 unless the taxpayer shows that the failure was due to 7 reasonable cause and not due to neglect. See Higbee v. Commissioner, 116 T.C. 438, at 446-47. The addition applies at a rate equal to 5 percent of the amount required to be shown as tax on the return for each month the failure to pay persists, up to a maximum of 25 percent. Sections 6011 and 6012 require every individual who has gross income above the exemption amount to file an income tax return. The Commissioner established both that Mr. Cheatham had gross income above that threshold and that he did not file a return. Although Mr. Cheatham argues that he is not required to file a return, the law provides otherwise. See I.R.C. § 6012(a)(1). He did not raise any other defenses to the late filing addition to tax, accordingly, Mr. Cheatham is liable for a section 6651(a)(1) addition to tax. 18 B. Late Payment Addition to Tax 19 20 21 22 23 Section 6651(a)(2) imposes an addition to tax for the failure to timely pay the amount shown as tax due on a return. The addition applies at a rate equal to 0.5 percent of the amount shown as due on the return for each month the failure to pay persists, up to a maximum of 25 24 percent. 25 Under section 6651(g)(2), a return prepared by 1 2 3 4 5 6 7 8 9 10 11 the Secretary under section 6020(b), commonly known as a 8 substitute for return, may be treated as the return filed by the taxpayer for the purpose of determining the addition to tax for failure to timely pay. The Commissioner introduced the substitute for return prepared for Mr. Cheatham, which satisfied the requirements of section 6020(b) and (g)(2) and established that Mr. Cheatham did not file a return for 2019. Mr. Cheatham did not raise any defense to the failure to pay addition to tax, accordingly, Mr. Cheatham is liable for a section 6651(a)(2) addition to tax. 12 C. Failure to Pay Estimated Income Tax 13 14 15 16 17 18 19 20 21 22 23 24 25 Section 6654(a) imposes an addition to tax on taxpayers who underpay their required installments of estimated tax. Each required installment of estimated tax is equal to 25% of the "required annual payment", which is equal to the lesser of (1) 90% of the tax shown on the individual's return for that year (or, if no return is filed, 90% of his or her tax for such year) or (2) if the individual filed a return for the immediately preceding taxable year, 100% of the tax shown on that return. I.R.C. sec. 6654(d). As part of the Commissioner's burden of production, the Commissioner must produce evidence necessary to enable the Court to conclude that the taxpayer had a required annual payment under section 9 6654(d)(1)(B). Wheeler v. Commissioner, 127 T.C. 200, 211-12 (2006). Thus, the Commissioner must establish that (1) the taxpayer had a liability for the year at issue and (2) the taxpayer either filed a return showing a liability for the immediately preceding year or did not file a return for that year by the due date for payment of taxes for the year at issue. See id.; Harvey v. Commissioner, T.C. Memo. 2023-95, at *6-7. The Commissioner established that Mr. Cheatham has a liability for 2019. Further, the Commissioner has produced the IRS account transcripts for 2019 showing Mr. Cheatham has not filed a 2019 return. The burden shifts to Mr. Cheatham, and he failed to raise any defense. Accordingly, Mr. Cheatham is liable for a section 6654(a) addition to tax. CONCLUSION We will sustain the deficiency of $25,249 and the additions to tax under sections 6651(a)(1), section 6651(a)(2), and section 6654(a). This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 11:44 a.m., the above-entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25