Form 1040 with All Zeroes Is Not a Valid Return

At issue are official Forms 1040 filed by approximately 250 persons. On each of the returns, taxpayers have completed the Forms 1040 by entering the number "0" for every line of the return, except for the amount of tax withheld, the amount of the overpayment and the amount to be refunded. Additionally, these taxpayers have attached materials to the Forms 1040 that present constitutional objections to the requirement that they pay Federal income tax. Finally, the taxpayers have added additional language to the jurat in the form of a stamp, which appears above the jurat and states, "Without prejudice U.C.C. 1-207." Taxpayers have neither obliterated the jurat nor altered any of its existing language.

These Forms 1040 and attachments impede the IRS's ability to process returns in an efficient and consistent manner. The issue is whether they should be treated as "income tax returns."

Analysis

Under Sec. 6011, when required by regulations prescribed by the Secretary, any person made liable for any tax imposed by this title, or with respect to the collection thereof, shall make a return or statement according to the forms and the regulations prescribed. Every person required to make a return or statement shall include the information required by such forms and regulations. Regs. Sec. 1.6012-1 identifies individuals required to make returns of income.

Regs. Sec. 6012-1(a)(6) prescribes Form 1040 as the form for making the return required of an individual.

Congress has given the Service discretion to prescribe by regulation forms of returns and has made it the duty of the taxpayer to comply. It thus implements the system of self-assessment that is so largely the basis of the American scheme of income taxation. The purpose is not only to get tax information in some form but also to get it with such uniformity, completeness and arrangement that the physical task of handling and verifying returns may be readily accomplished.

There is a four-part test for determining whether a defective or incomplete document is a valid return: First, there must be sufficient data to calculate tax liability; second, the document must purport to be a return; third, there must be an honest and reasonable attempt to satisfy the tax law requirements; and, fourth, the taxpayer must execute the return under penalties of perjury.

This generally accepted formulation of the criteria for determining a valid return is known as the "substantial compliance" standard. If a defective or incomplete document meets the "substantial compliance" standard, the document is a valid return for purposes of the statute of limitations on assessment and for determining the Sec. 6651(a) failure-to-file penalty. A document that does not meet the substantial compliance standard is a nullity for Code purposes.

Entry of "0" on Forms 1040 and Attachment of Protest Material

Tax-protestor cases typically involve Forms 1040 on which the taxpayer fails to report anything more than de minimis amounts of income and attaches extensive constitutional objections and other tax protest materials. These documents generally do not contain sufficient information about the taxpayer's income to permit the Service to compute tax, and the extent of the tax protestor arguments indicates a lack of an honest and reasonable attempt to comply with the law.

Generally, Form 1040 is a nullity when a taxpayer has entered "0" for all entries on the return except the amount of tax withheld, the amount of the overpayment and the amount to be refunded, and has attached materials that protest the constitutionality of the requirement that he pay Federal income tax. Virtually all of the authority for treating a signed Form 1040 as a nullity relies on the fact that the taxpayer refused to provide any information pertaining to his income, or provided de minimis income information and accompanied the purported return with tax-protestor-type arguments. However, the IRS should make the decision whether to treat such a form as a valid return or a nullity on a case-by-case basis, after considering all of the information contained on the form and any attachments, to determine whether the form manifests an honest and reasonable attempt to satisfy the Code's requirements.

Altered Jurats

The preprinted jurat on Form 1040 reads: "Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge."

The Service may not treat a document as a nullity solely because the taxpayer's addition to the jurat altered the official tax form. Rather, the proper analysis is whether the additions to the jurat cause the return to fail the requirement that returns be signed under penalties of perjury. If a taxpayer strikes out or obliterates the jurat, the law is clear that Form 1040, even if otherwise complete, accurate and signed, does not constitute a valid return.

When a taxpayer does not strike out or obliterate the jurat, but adds language to it, the nature of the additions must be examined. If it is found that the addition negates (or at least casts doubt on) the jurat's validity, Form 1040 would not be considered signed under penalties of perjury and is not a valid return.

At the same time, if the addition does not negate or cast doubt on the validity of the jurat, Form 1040 may be treated as a valid return.

Adding "Without prejudice U.C.C. 1-207" does not negate or cast doubt in this manner. Therefore, standing alone, it does not render the return a nullity. However, the additional language does bolster a determination that the return is a nullity when viewed in conjunction with taxpayers' completion of the return using the number "0," as well as the attachment of material that protests the constitutionality of the requirement that the taxpayer pay Federal income tax.

IRS Letter Ruling (SCA) 200127045 (6/11/01)