Source: http://www.privacyworld.com/
Privacy World - The WORLD'S SHREWDEST PRIVACY NEWSLETTER
U.S. to turn up the heat on tax protesters
The Justice Department, on the heels of a split verdict in its tax
evasion prosecution of actor Wesley Snipes, is planning a crackdown on
the so-called tax protester movement.
The protesters, or tax deniers, assert a constitutional right to avoid
federal taxes, relying in part on century-old Supreme Court decisions.
Their ranks are growing to include white-collar professionals, and
they are costing the government millions in revenue, officials say.
"Too many people succumb to the fallacy, the illusion, that you don't
have to pay any tax under any set of conditions," said Assistant
Attorney General Nathan Hochman, the new head of the Justice
Department's tax division. "That is a growing problem."
The movement has been given a boost by the faltering economy and
politicians' vilification of the Internal Revenue Service. The Snipes
verdict may also have helped.
The actor, best known for starring in action movies like Blade and
U.S. Marshals, was acquitted on Feb. 1 by a federal jury in Ocala,
Fla., of felony fraud and conspiracy charges.
He was convicted on three misdemeanor counts of failing to pay income
taxes, and he faces up to three years in prison at his sentencing in
April. He could also be forced to pay millions in back taxes and
penalties.
Hochman declined to comment on the case, which was filed in 2006 and
predated the department's new initiative.
Snipes' attorney didn't return a call seeking comment.
Internet inspires growth
The Internet has also spurred interest in the tax protest movement as
firms sell strategies online and believers encourage others to sign
on.
"Any kooky tax protester can put up their theories," said Jonathan
Siegel, a professor at George Washington University's law school who
has a Web site that debunks tax denier arguments. "It is much easier
to get their message before a mass audience."
Tax protesters rely on a range of legal arguments, including that the
Constitution's 16th Amendment giving Congress power to "lay and
collect taxes on incomes" wasn't properly ratified.
Among other Supreme Court decisions, they cite an 1895 opinion that
struck down a federal tax a ruling that predated the 16th amendment.
The protesters also claim that wages aren't legal income, that only
residents of the District of Columbia, U.S. territories or federal
workers must pay income tax or that foreign, but not domestic, income
is taxable.
Those arguments, though rejected by courts, are presented by tax
deniers with legal citations and other historical evidence.
The advice is "easy to believe" and is often followed by the naive,
Hochman said. "These cases pop up in virtually every jurisdiction in
the United States."
New cases coming
The Justice Department plans to announce its stepped-up enforcement
program next month. Officials will bring many new criminal and civil
cases against promoters of the illegal schemes and their clients,
Hochman said.
The details are still being worked out, he said, though it will
involve working with U.S. attorneys' offices and the IRS.
Enforcement "is going to be amped up," he said.
The agency already has had success in civil cases. Since 2001 it has
obtained orders from judges barring more than 300 individuals from
preparing tax returns for others or promoting illegal tax strategies.
In prosecuting criminal cases, the Justice Department must prove
someone "knowingly and willfully" broke the law. Defendants can win
acquittal by arguing they didn't know what they were doing was
illegal.
Still, according to agency statistics, prosecutors have a 97 percent
conviction rate in tax denier cases. In civil and criminal cases,
protesters can be ordered to pay back taxes, plus penalties and
interest.
Shared beliefs
According to court documents, Snipes subscribed to some of the
theories espoused by protesters. Two others charged in the case,
Eddie Ray Kahn and Douglas Rosile, promoted a tax denial strategy
known as the 861 argument, prosecutors said.
Protesters say that section 861 of the Internal Revenue Code only
requires Americans to pay taxes on some kinds of foreign income.
Snipes also allegedly tried to pay some of his taxes with fake checks,
labeled "bill of exchange," a common tax denier tactic.
The government said Kahn and Rosile prepared and filed two amended tax
returns for Snipes using the 861 theory and requesting almost $12
million in refunds. The IRS never paid.
Snipes also failed to file his 1999 through 2004 federal returns as he
made more than $38 million in income, prosecutors said.
Kahn and Rosile, an accountant whose license had been revoked, were
convicted of conspiracy to defraud the IRS and face up to 10 years in
prison.
Michael Minns, an attorney in Houston who has represented defendants
in tax cases, said tax deniers tend to fall into two categories: "con
artists" or "crooks" who market the bogus strategies, and "idealists"
who believe the schemes are valid.
The Justice Department crackdown, Minns said, is going to "put a lot
of nuts in jail" without addressing larger concerns such as
corporations using illegal tax shelters or wealthy people moving money
overseas to avoid taxes.
"What they are really doing is going after the victims and leaving the
billionaires alone," he said.
First published in the Houston Chronicle.
Until our next issue, stay cool and remain low profile!
Privacy World |
