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Gentry v. U.S. Treasury Department (Internal Revenue Service)

United States District Court, D. Nevada

November 7, 2019

MICHAEL EDWARD GENTRY, et al., Plaintiffs,



         I. SUMMARY

         Pro se Plaintiffs Michael Edward Gentry and Laurie Anne Gentry sued Defendant the U.S. Treasury Department (Internal Revenue Service) (the “Government”), primarily seeking the return of $16, 876 Plaintiffs allegedly overpaid to the Government in taxes. (ECF No. 1 at 4.) Before the Court is the Government's motion to dismiss Plaintiffs' Complaint, partially for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1), and partially for failure to state a claim under Fed.R.Civ.P. 12(b)(6) (the “Motion”).[1](ECF No. 21.) Plaintiffs have filed several other motions as well. (ECF Nos. 23, 34, 41.) Because the Court agrees with the Government that it lacks jurisdiction over aspects of Plaintiffs' claim, and Plaintiffs otherwise fail to state a claim-and as further explained below-the Court will grant the Motion and deny Plaintiffs' other motions as moot.


         The facts described in this paragraph are adapted from Plaintiffs' Complaint. (ECF No. 1.) Plaintiffs assert this Court has federal question jurisdiction under the 4th Amendment to the U.S. Constitution (for “unlawful seizure”)[2] and “IRS Pub. 1660 wrongful levy[.]”[3] (Id. at 3.) Plaintiff Michael Edward Gentry became disabled in March 2013, and filed his taxes for that year as he awaited a Social Security hearing that ultimately occurred in July 2016. (Id. at 4.) The IRS placed a lien on his property as if he had retired early. (Id.) Mr. Gentry had to pay the lien out of his disability award (presumably from Social Security), which he did on October 13, 2016. (Id.) He then filed an amended tax return on August 10, 2018. (Id.) The IRS claimed Mr. Gentry's amended return was not timely, and refused to repay him the money he previously paid to satisfy the IRS's lien. (Id.) Plaintiffs seek the repayment of $16, 876 (also referred to as ‘overpaid tax'), with interest, and “Compensation for Costs & Damages - IE libel, & notification of credit bureaus[.]” (Id.)

         The Government fills in the gaps of the allegations in Plaintiffs' Complaint by filing an official copy of Plaintiffs' certificate of assessments, payments, and other specified matters for the tax period ending December 31, 2013 with its Motion.[4] (ECF No. 21-1.) This document provides a timeline regarding Plaintiffs' taxes relevant to this case. On April 15, 2014, Plaintiffs filed a tax return for tax year 2013 and were assessed taxes of $16, 876. (Id. at 2.) That same day, the records indicate Plaintiffs had already paid $4, 174 in taxes through withholdings (the “First Payment”), and were assessed a failure to pay tax penalty of $127.02 by the Government, along with interest of $50.21. (Id.) Then there is a note dated June 4, 2014, “currently not collectable hardship status.” (Id.)

         On July 18, 2014, the Government filed a notice of federal tax lien (the “Lien”). (Id.) The Government issued a lien filing collection due process (“CDP”) notice on July 22, 2014. (Id.) There are notes indicating the Government received a timely request for a “CDP Hearing” on July 28, 2014, and set a hearing that day. (Id.) The Government assessed fees and collection costs of $30 regarding the Lien on August 11, 2014. (Id.) Plaintiffs made a payment of $4000 to the Government on August 22, 2014 (the “Second Payment”). (Id.)

         In 2015, the Government issued several penalties and assessed interest against Plaintiffs. (Id. at 3-4.) The CDP hearing process also occurred, and eventually resolved with an issuance of a notice of determination on March 26, 2015. (Id. at 3.)

         On August 30, 2016, Plaintiffs made a payment of $10, 642.72 to the Government (the “Third Payment”). (Id. at 4.) That same day, the Government assessed Plaintiffs $175.36 in interest, and a failure to pay tax penalty of $347.82. (Id.) On September 30, 2016, Plaintiffs made another payment of $79.79.

         There are two notes from 2018 indicating that a claim was disallowed-one on October 8, 2018, and the other on December 10, 2018. (Id. at 4.) As of February 27, 2019, the records reflect that Plaintiffs did not owe the Government any money. (Id. at 5.)

         By combining Plaintiffs' allegations in their Complaint with the information provided by the Government, the Court construes the Complaint as seeking repayment of allegedly overpaid taxes. The gist of Plaintiffs' Complaint is that they should not have to pay the $16, 876 in taxes they were assessed on their 2013 tax return-which led to the Government imposing the Lien and related proceedings. Because they eventually did pay that $16, 876, Plaintiffs would like it back, along with additional damages for the time and trouble they have spent on this matter over the years. (ECF Nos. 1, 24.)


         The Government divides the Motion into a Fed.R.Civ.P. 12(b)(1) section, and a 12(b)(6) section. For convenience and clarity, the Court adopts the same structure here. As further explained below, while the Court is sympathetic to Plaintiffs' difficult life circumstances, the Court will grant the Motion because Plaintiffs' entire case is based on a faulty premise. Plaintiffs appear to believe that because they are disabled, any early distribution of their retirement funds is not taxable. That is simply incorrect. Assuming Plaintiffs are disabled, the early withdrawal from Mr. Gentry's retirement account is not subject to the additional 10% early withdrawal penalty, but remains subject to taxation because tax had not previously been paid on that income. See Williams v. U.S. Dep't of Treasury I.R.S., No. 07-CV-212C, 2013 WL 7121192, at *8 (W.D.N.Y. Jan. 29, 2013) (“The disability exception, if applicable, relieves the taxpayer only of the 10-percent additional tax; ordinary income tax is still owed on an early distribution out of an IRA.”) (citing 26 U.S.C. § 408(d)(1)) (other citations omitted).

         A. Jurisdictional Issues

         The Government first argues the Court lacks subject matter jurisdiction over Plaintiff's Complaint to the extent it is based on the First Payment or the Second Payment because they filed an amended return after the statute of limitations applicable to these payments allows. (ECF No. 21 at 4-7.) Plaintiffs appear to respond that the statute of limitations should be tolled because of disability, citing 26 U.S.C. § 6511, and that their amended return was timely because of a date indicated in column e of Form 668(z). (ECF No. 24 at 2, 3.) The Court agrees with the ...

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