Alleging connections to the “sovereign citizen” movement, federal prosecutors have charged a Yelm couple with lying to the IRS to collect $320,600 in tax refunds.
In charging documents filed earlier in July, prosecutors in Tacoma contend Raymond Leo Jarlik-Bell and Ute Christine Jarlik-Bell tried to bilk the IRS out of the money by falsifying their tax returns.
The couple had previously been warned by the IRS that the bond-interest scheme – in which would-be taxpayers claim to use an IRS form to obtain money from the Treasury Department – is entirely frivolous.
Writing the court, IRS Criminal Investigations Division Special Agent Debbie White described the Jarlik-Bells as participants in the “Sovereign Assemblies” movement and consider themselves to be “sovereign citizens” not subject to the laws of the United States.
Irony: The Ayn Rand® Institute (ARI) is a 501(c)(3) nonprofit organization.
Jarlik-Bell made headlines last year as a member of a Constitutionalist movement called the Assembly of Delegates of the United States of America AD 1791.
He also identified himself as a Thurston County Ranger, which is a peace officer position within his movement.
Last year he was arrested by Yelm police and tased for not cooperating after being pulled over for not having a license plate.
Charges of third-degree assault and felony harassment were also referred after Jarlik-Bell was heard in jail threatening to kill police.
The Honorable Judge Roy Bean The world is a car and you're a crash-test dummy. The Devil Makes Three
Four Convicted in Sovereign Citizen Investigation
Defendants Convicted by Juries in Two Separate Trials
U.S. Attorney’s Office
March 07, 2013
Western District of Washington
(206) 553-7970
An investigation into the criminal conduct of members of the so-called “Sovereign Citizen” movement has resulted in four defendants being convicted by juries in U.S. District Court in Tacoma, announced U.S. Attorney Jenny A. Durkan. The jury deliberated for five hours before convicting Raymond Leo Jarlik Bell and Ute Christine Jarlik Bell of four counts of filing false, fictitious, and fraudulent claims. Raymond Leo Jarlik Bell was also convicted of 15 counts of assisting in filing false tax returns, three counts of mail fraud, and one count of obstruction of justice. Judge Ronald B. Leighton scheduled sentencing for the couple from Yelm, Washington on June 14, 2013.
Just last week, two other co-conspirators in a related case were convicted of federal charges for their criminal conduct. Kenneth Wayne Leaming, 57, of Spanaway, Washington, was convicted of three counts of filing false liens against federal officials and one count of harboring federal fugitives and being a felon in possession of firearms. His co-conspirator, former Tacoma resident David Carroll Stephenson, was convicted of a single count of filing false liens against a federal official.
“The right to criticize our government is one of the most cherished rights. But this liberty does not include the right to commit crimes,” said U.S. Attorney Jenny A. Durkan. “These defendants repeatedly broke the law with frauds aimed at taxpayers and public servants. We are grateful the jury held them accountable for their actions.”
According to records filed in the case, law enforcement was investigating an on-going tax fraud scheme involving the Jarlik Bells when Leaming and Stephenson’s criminal conduct was uncovered. Both men already had federal criminal convictions. The Jarlik Bell investigation centered on the filing of false tax returns using a scheme known as OID fraud; Raymond Leo Jarlik Bell advised and assisted others in using the scheme. In 2006, the Bells obtained a tax refund in excess of $30,000 using the scheme. Six others who were advised by Jarlik Bell also filed for and received fraudulent refunds they did not deserve. One woman received a tax refund of more than $590,000.
Materials found in a search of the Jarlik Bell home implicated Leaming in separate criminal conduct. When investigators with a warrant searched Leaming’s Spanaway home on November 21, 2011, they found six firearms. Leaming was prohibited from possessing firearms because of a prior felony conviction of operating an aircraft without a pilot’s license. Additionally, investigators determined that two wanted federal fugitives from Arkansas had been living with Leaming in his home. Finally, the search revealed that Leaming and Stephenson, who was an inmate at the time in an Arizona federal prison, had been conspiring to file liens against various federal officials including the Arizona prison warden and the head of the Federal Bureau of Prisons.
Members of the Sovereign Citizen movement profess a belief that both state and federal government entities are illegitimate. Members of this group often engaged in so-called “freedom driving,” i.e., driving about without state-required licenses, either for their vehicles or themselves. When contacted by local law enforcement, members of the group often bombard local officials (from the officer, to local judges, to mayors and other members of local government) with frivolous liens, false claims, and sometimes threats of violence. Many members of this same group had previously come to the attention of federal law enforcement for engaging in various fraudulent tax schemes, wire fraud schemes, and (occasionally) inappropriate communications with various members of federal law enforcement and the judiciary.
Two other defendants active in the Sovereign Citizen movement have already been sentenced to prison for their criminal conduct. David Russell Myrland was sentenced in 2011 to 40 months in prison for making threats against elected officials in Kirkland, Washington. In 2012, Timothy Garrison was sentenced to 42 months in prison for assisting in the filing of false tax returns.
The cases were investigated by the Internal Revenue Service Criminal Investigation (IRS-CI), the FBI, ATF, the Federal Protective Service, and the U.S. Marshals Service.
The cases were prosecuted by Assistant United States Attorneys Vince Lombardi, Jill Otake, Thomas Woods and Matthew Diggs.
Press contact for the U.S. Attorney’s Office is Emily Langlie at (206) 553-4110 or Emily.Langlie@usdoj.gov.
Sovereign Citizen Sentenced to More Than Eight Years in Prison for Tax Fraud Scheme
Defendant Promoted Common Tax Fraud Scheme Claiming Millions in Refunds
U.S. Attorney’s Office
Western District of Washington
(206) 553-7970
June 14, 2013
A Yelm, Washington man who advised and assisted others in a common tax fraud scheme was sentenced today in U.S. District Court in Tacoma to 97 months in prison and three years of supervised release, announced U.S. Attorney Jenny A. Durkan. Raymond Leo Jarlik Bell was convicted in March 2013 of five counts of filing false, fictitious, and fraudulent claims; 15 counts of assisting in filing false tax returns, three counts of mail fraud; and one count of criminal contempt. Jarlik Bell and his wife, Ute Christine Jarlik Bell, are of members of the so-called “Sovereign Citizen” movement. Members of the Sovereign Citizen movement profess a belief that both state and federal government entities are illegitimate. U.S. District Judge Ronald B. Leighton imposed $705,276 in restitution saying, “Your scheme...is fraud at its core. You are hurting people intentionally, regardless of your adherence to [your beliefs].”
“This defendant held himself out as a tax expert with contacts at the IRS—when both the IRS and a federal judge told him repeatedly that his conduct was criminal,” said U.S. Attorney Jenny A. Durkan. “Mr. Jarlik Bell believed he was above the law and aggressively promoted and spread his scheme to others looking to duck their fair share and steal tax dollars through fraudulent refunds.”
The Jarlik Bell investigation centered on the filing of false tax returns using a scheme known as OID fraud; Jarlik Bell advised and assisted others in using the scheme. In 2006, Jarlik Bell obtained a tax refund in excess of $30,000 using the scheme. Numerous others who were advised by Jarlik Bell also filed for and received fraudulent refunds they did not deserve. One woman received a tax refund of more than $590,000. In 2005, Jarlik Bell was ordered by U.S. District Judge Robert J. Bryan to stop promoting fraudulent tax schemes. Less than three years later, he was back promoting another massive tax fraud among friends, family, and strangers.
“No matter what the promoter calls it, a scheme to file bogus tax returns claiming outrageous tax ‘refunds’ that don’t belong to you is just fraud,” said Kenneth J. Hines, Special Agent in Charge of IRS-Criminal Investigation in Seattle. “All frauds have a victim, and the victim of Mr. Bell’s scheme was every hard working taxpayer in America, as well as government operations and programs, including our military, that depend on tax dollars. Mr. Bell’s prison sentence reflects the severity of his crime and demonstrates the commitment of IRS-Criminal Investigation to defending the integrity of our system.”
In asking for a lengthy prison sentence prosecutors wrote to the court that Jarlik Bell “aggressively promoted this scheme, both locally in the Western District of Washington, at seminars in California and among tax filers in Arizona and Hawaii. The defendant recruited other people—blinded by their own greed and shortsightedness—to break the law. In that sense his crime is more detrimental to society and to the enforcement of the tax laws than that of a defendant who confines his criminal activity to him or her self.”
Ute Christine Jarlik Bell was convicted of four counts of filing false, fictitious and fraudulent claims. She will be sentenced June 18, 2013.
The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI), the FBI, ATF, the Federal Protective Service, and the U.S. Marshal Service.
The cases were prosecuted by Assistant United States Attorneys Jill Otake and Matthew Diggs.
Press contact for the U.S. Attorney’s Office is Emily Langlie at (206) 553-4110 or Emily.Langlie@usdoj.gov.
Raymond Leo Jarlik Bell is now inmate # 41456-086 at the Federal Correctional Institution at Lompoc, California, near Vandenberg Air Force Base. His projected release date has not yet been posted.
Ute Christine Jarlik Bell was sentenced to only three months in prison on each count -- to run concurrently. She is appealing, and I see no record for her at the Federal Bureau of Prisons at this time.
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
Raymond Leo Jarlik Bell, inmate # 41456-086 at the Federal Correctional Institution at Lompoc, California, is now projected for release on July 27, 2018.
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
I live in Santa Maria. The Lompoc Pen is a 40 minute drive for me. I guess if i ever get bored enough i could show up on visiting day and ask some of these sovereign sojourners "what the hell were you thinking?".
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
RAYMOND LEO JARLIK BELL, AKA RAYMOND LEO BELL,
Defendant-Appellant.
Release Date: OCTOBER 22, 2014
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
D.C. No. 3:11-cr-05407-RBL-1
OPINION
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WASHINGTON
Ronald B. Leighton, District Judge, Presiding
Argued and Submitted
August 28, 2014 -- Seattle, Washington
Filed October 22, 2014
Before: Michael D. Hawkins, Susan P. Graber,
and Ronald M. Gould, Circuit Judges.
Opinion by Judge Gould;
Concurrence by Judge Hawkins
SUMMARY/*/
Criminal Law
The panel affirmed in part and vacated in part the district court's judgment, and remanded, in a case in which the defendant was convicted of making false, fictitious, and fraudulent claims to the United States Treasury; assisting in the filing of false tax returns; criminal contempt; and mail fraud.
The panel rejected the defendant's contention that the district court committed reversible error under the Sixth Amendment by not prompting him to present a closing argument, where the defendant, who represented himself, had a meaningful opportunity to make a closing argument but chose to remain silent. The panel wrote that nothing in Herring v. New York, 422 U.S. 853 (1975), or this court's precedents gives a self-represented defendant a right to be affirmatively and individually advised that he or she has a right to present a closing argument.
The panel held that a rational jury could find beyond a reasonable doubt that the defendant assisted his son in preparing the latter's fraudulent returns in violation of 26 U.S.C. section 7206(2).
The panel vacated supervised-release conditions requiring the defendant to undergo substance abuse treatment and to abstain from consuming alcohol, and remanded with instructions that the district court explain its reasons if it chooses to re-impose them, where the record contains no evidence showing that the defendant abused alcohol or other substances.
Concurring, Judge Hawkins would affirm on the narrower grounds that the defendant's non-participation during the course of the trial and his failure to object or request argument effectively waived his right to make a closing argument. Judge Hawkins would not say that a defendant in a criminal case, pro se or otherwise, need not be advised of an opportunity to make closing remarks to the jury.
COUNSEL
Gregory Charles Link (argued), Washington Appellate Project, Seattle, Washington, for Defendant-Appellant.
Jenny A. Durkan, United States Attorney, Michael Symington Morgan (argued), Assistant United States Attorney, Seattle, Washington, for Plaintiff-Appellee.
OPINION
GOULD, Circuit Judge:
Raymond Bell ("Bell") appeals from his jury convictions for making false, fictitious, and fraudulent claims to the United States Treasury under 18 U.S.C. section 287, assisting in the filing of false tax returns under 26 U.S.C. section 7206(2), criminal contempt under 18 U.S.C. section 401(3), and mail fraud under 18 U.S.C. section 1341. Bell also appeals the district court's supervised release conditions imposed as part of his sentence. We must decide (1) whether the district court committed reversible error under the Sixth Amendment when it did not prompt Bell to present a closing argument; (2) whether the government provided sufficient evidence to prove that Bell assisted Steven Bell in the filing of fraudulent tax returns; and (3) whether the district court abused its discretion in requiring Bell to abstain from alcohol and drug consumption and participate in treatment as conditions of his supervised release.
I
This case concerns a tax scheme involving false Form 1099-OIDs. In the scheme, a taxpayer would file Form 1099-OIDs that "falsely state an amount of income tax has been withheld . . . and the taxpayer then relies on that false withholding figure to submit a fraudulent refund claim."
Using this scheme, Bell filed five false income tax returns. The table below gives an overview of the false returns.
Refund
Form 1099- Requested
Return Income OID Income from OID
Year Claimed Claimed Withholding
______________________________________________________________________
The 2004, 2006, and original 2007 returns claimed refunds alleging that tax had been withheld as evidenced by Form 1099-OIDs, but no Form 1099-OIDs were filed with the returns. For the amended 2007 return, Bell filed three false Form 1099-OIDs, along with a Form 1096 on which Bell signed his identifying title as "Agent." For the 2008 return, Bell sent the IRS false Form 1099-OIDs after receiving a request for documentation by the IRS.
In addition to the false submissions and fraudulent refund claims on his own tax returns, Bell also promoted the Form 1099-OID tax scheme to other people. From October 2008 to October 2009, Bell assisted six taxpayers in filing fifteen tax returns using the Form 1099-OID scheme, which collectively requested over $ 2.7 million in unwarranted refunds, and caused the IRS mistakenly to make refund payments exceeding $ 670,000.
In November 2008, Bell's son Steven Bell signed and submitted three amended returns seeking refunds from $ 20,000 to $ 30,000 each year based on false OID withholdings. The returns included Form 1099-OIDs purportedly issued by a financial institution showing tax withholding, and each return was accompanied by a Form 1096, which Steven Bell signed, noting his title as "Agent."
The original indictment against Bell was filed on August 10, 2011, and two superseding indictments followed. Between the first and second superseding indictments, Bell moved to proceed pro se and the district court granted his motion after a Faretta hearing. The criminal proceedings show Bell's consistent refusal to recognize the authority of the district court or to participate in the proceedings, including filing a motion to dismiss styled as a "habeas corpus petition" arguing that his prosecution was illegal because he was not subject to federal tax laws; declaring his "sovereignty as a chief ruler" who was "independent of the Court" and enjoying "sovereign immunity"; declining the offer for an opportunity to give an opening statement; and repeatedly stating that he did not consent to the proceedings and was reserving his rights pursuant to U.C.C. section 1-308.
At trial, after the district court delivered jury instructions, the government gave its closing argument. The district court did not prompt Bell to make a closing argument, and Bell remained silent. The jury convicted Bell as charged. The district court calculated Bell's Guidelines range to be 97 to 121 months and sentenced him to 97 months followed by three years of supervised release. Among the conditions of his supervised release, the district court ordered Bell to undergo substance abuse treatment and to abstain from consuming alcohol.
II
We review Bell's sufficiency of evidence challenge for plain error because he did not raise the challenge below. United States v. Lowry, 512 F.3d 1194, 1198 n.3 (9th Cir. 2008). We view the evidence in the light most favorable to the prosecution, Jackson v. Virginia, 443 U.S. 307, 319 (1979), and determine whether any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt, United States v. Nevils, 598 F.3d 1158, 1167 (9th Cir. 2010) (en banc). We review Bell's Sixth Amendment challenge and his supervised release conditions for plain error because he did not raise these objections before the district court. Johnson v. United States, 520 U.S. 461, 466-67 (1997); United States v. Becker, 682 F.3d 1210, 1212 (9th Cir. 2012).
III
A
Bell first contends that the district court erred by not affording him the opportunity to present a closing argument to the jury and that this is a reversible error in violation of his Sixth Amendment right to counsel. The constitutional right to assistance of counsel includes the right for defense counsel to "make a closing summation to the jury." Herring v. New York, 422 U.S. 853, 858 (1975). This right applies equally to a self-represented defendant, who is his or her own counsel. McKaskle v. Wiggins, 465 U.S. 168, 174 (1984). To meet the plain error standard of review, Bell must "show that the district court made (1) an error (2) that was clear or obvious, (3) that affected substantial rights, and (4) that seriously affected the fairness, integrity or public reputation of judicial proceedings." United States v. Castillo-Marin, 684 F.3d 914, 918 (9th Cir. 2012).
We have previously held that denial of a defendant's legitimate request to make a closing argument violates the defendant's constitutional right to counsel. Frost v. Van Boening, 757 F.3d 910, 915-16 (9th Cir. 2014) (en banc); United States v. Miguel, 338 F.3d 995, 1002 (9th Cir. 2003); United States v. Kellington, 217 F.3d 1084, 1100 (9th Cir.2000). In support of his Sixth Amendment challenge, Bell cites United States v. Mack, 362 F.3d 597, 602 (9th Cir. 2004), which holds that the district court's decision to remove a disruptive criminal defendant from the courtroom throughout trial violated the defendant's Sixth Amendment right to counsel because he was precluded from (1) calling and examining witnesses and (2) making a closing argument to the jury.
But Bell's situation is different because he was not precluded from making a closing argument. The district court told all parties just before recess that when proceedings resumed the court would entertain Rule 29 motions and objections to the proposed jury instructions, and then "we are going to have closing arguments." When the government's counsel delivered his closing argument, Bell remained silent. Nothing in Herring or our precedents gives a self-represented defendant a right to be affirmatively and individually advised that he or she has a right to present a closing argument. Rather, these cases held that a court may not prevent a litigant from making a closing argument. Bell's Sixth Amendment right was not violated because he was not precluded from making his closing argument and simply chose to remain silent.
A review of the facts in Herring is instructive. There, a New York statute gave its trial judges the discretion to deny counsel an opportunity to make a closing summation in a nonjury criminal trial. Herring, 422 U.S. at 853-54. At the conclusion of the case for the defense, defense counsel asked to make a closing summation. Id. at 856. The trial judge denied permission on the ground that under the new statute, summation is discretionary, and he chose "not to hear summations." Id. The judge found the defendant guilty of attempted robbery in the third degree. Id. The United States Supreme Court held that the New York statute violated the defendant's constitutional right to counsel, because the defense has the right "to make a closing summary of the evidence to the trier of the facts, whether judge or jury." Id. at 860. Herring arose in the setting where a criminal defendant's counsel sought to make an argument in summation but was precluded by the trial court in reliance on the New York statute giving its judges discretion to dispense with arguments if they chose to do so. Nothing in that case or in any precedents of the Supreme Court following it, or in our circuit precedents, establishes a right of the criminal defendant to be told, in some Miranda-type warning, that he or she has the right to make a closing argument. Bell never asked to make an argument, even though it was plainly available to him. Here, Bell had a meaningful opportunity to make a closing argument but chose to remain silent. When the district court advised before recess that "we will come back with closing arguments," Bell reiterated that he did "not consent to these proceedings," and he gave the same statement when the district court heard Rule 29 motions, when objections to jury instructions were entertained, and again when the parties rested before the jury. He was not precluded from making a closing argument. 1
B
Bell next contends that the government did not present sufficient evidence to prove that he assisted, advised, or counseled Steven Bell in the preparation of Steven Bell's fraudulent returns under 26 U.S.C. section 7206(2). Bell contends that "the government offered no evidence beyond Mr. Bell's mere association with his son that he assisted in any fashion with the three returns." Bell did not raise this claim before the district court, so we review for plain error. Lowry, 512 F.3d at 1198 n.3.
The government presented evidence that the Form 1099-OID scheme that Bell employed changed in implementation over time. At the time that Steven Bell submitted his false returns, Bell was preparing false returns that included Form 1099-OIDs accompanied by a Form 1096, and Bell listed his title on the Form 1096 forms as "agent." Steven Bell's false returns followed the same pattern. Bell was only one of many people using the Form 1099-OID scheme. But his implementation patterns evolved, and the form of Steven Bell's false returns corresponds with Bell's practices at the time. Two Form 1099-OIDs accompanying Bell's amended 2007 return had handwritten corrections resembling handwritten corrections on Steven Bell's returns. Viewing the evidence in the light most favorable to the government, a rational jury could find beyond a reasonable doubt that Bell assisted Steven Bell in preparing the latter's fraudulent returns.
C
Finally, Bell contends that the district court erred in imposing two specific conditions of supervised release (1) that Bell "participate . . . for treatment of narcotic addition, drug dependency, or substance abuse" and (2) that Bell "abstain from the use of alcohol and/or other intoxicants." The conditions of Bell's supervised release are reviewed for plain error because he did not object to the conditions before the district court. Becker, 682 F.3d at 1212.
A district court has broad discretion to impose special conditions on supervised release. United States v. Chinske, 978 F.2d 557, 559-60 (9th Cir. 1992). Discretionary conditions may be ordered when they involve "no greater deprivation of liberty than is reasonably necessary" and when they are reasonably related to (1) the nature and circumstances of the offense; (2) the history and characteristics of the defendant; (3) the need for adequate deterrence to criminal conduct; (4) the need to protect the public from further crimes of the defendant; and (5) the need to provide the defendant with needed training, medical care, or other correctional treatment in the most effective manner. 18 U.S.C. section 3553(a)(1), (a)(2)(B)-(D), 3583(d)(2).
The record contains no evidence showing that Bell abused alcohol or other substances, and the district court made no relevant findings during the sentencing hearing. The government notes that the present record contains no information about Bell's substance abuse history because he refused to cooperate with the Probation Department during the presentence investigation. If Bell's refusal to cooperate is the reason for the district court's silence in its fact finding, the district court should make a finding explaining that, but without more evidence it is difficult to infer merely from Bell's intransigent refusal to cooperate with the court that he had a drug or alcohol abuse problem. See, e.g., United States v. Betts, 511 F.3d 872, 878-80 (9th Cir. 2007) (requiring a reasonable relationship between conditions imposed and goals of 18 U.S.C. section 3583). We vacate the challenged conditions and remand with instructions that the district court explain its reasons for imposing the special conditions for Bell's supervised release, if the court chooses to re-impose them.
AFFIRMED in part, VACATED in part, and REMANDED.
HAWKINS, Senior Circuit Judge, concurring:
There is a certain value in saying what is necessary and no more. Here, although I have no quarrel with the bottom line result, I am concerned that the majority goes further than needed in announcing, for the first time anywhere, that a pro se criminal defendant has no right to be advised of the opportunity to present closing argument.
I agree, given the litigation history of this case, that the failure to ask Raymond Bell if he wished to make a closing statement to the jury was not error. Certainly the better practice would have been to ask, particularly in the circumstances of this case where the district court urged the jury to listen carefully to the arguments of the prosecution and Bell's represented co-defendant who both proceeded to make arguments attempting to undermine Bell's case.
I would affirm, but on the narrower grounds that Bell's non-participation during the course of the trial and his failure to object or request argument effectively waived his right to make a closing argument. I would not say, as I think the majority does, that a defendant in a criminal case, pro se or otherwise, need not be advised of an opportunity to make closing remarks to the jury.
//*//
This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader.
FOOTNOTES:
/1/ We do not intend to reduce the general duties that a trial court owes to a pro se litigant, but a rigid advisement is not required when it is clear from the record that the litigant was aware of the procedure and that the court did not stand in the litigant's way.
Alternatively, Bell's consistent disregard of the district court's authority and jurisdiction might be viewed to be an implied waiver of his right to present a closing argument. Other circuits have held that the right to present a closing argument may be waived implicitly, and that a judge does not have to invite a defendant to present an argument for the waiver to be effective. See, e.g., United States v. Stenzel, 49 F.3d 658, 661-62 (10th Cir. 1995); United States v. Martinez, 974 F.2d 589, 590 (5th Cir. 1992); United States v. Spears, 671 F.2d 991, 994-95 (7th Cir. 1982). Conversely, Supreme Court precedent in Johnson v. Zerbst, 304 U.S. 458, 465 (1938) requires that a waiver of constitutional right be "intelligent and competent." We need not and do not reach the issue of implied waiver.
"I could be dead wrong on this" - Irwin Schiff
"Do you realize I may even be delusional with respect to my income tax beliefs? " - Irwin Schiff
Yes there are a lot of erroneous refunds by the IRS. This is because (1) the IRS puts non-lawyer non-accountant mail clerks in charge of initiating the refund checks when tax returns are taken from their envelopes - there really aren't enough lawyers or accountants to comb through all that mail, if there were they'd have to be paid a prohibitive amount, and very likely the refunds would be MUCH slower to come out, and (2) the IRS is foolish enough to trust people that these non-grad school clerks actually believe that the vast majority of returns that claim a refund are true -- the clerks may check the addition but they assume they are being fed the true numbers. I suspect any change in the procedure would result in refunds coming out a year or more later than they now do.
Possibly, there is a solution. Any return claiming a refund of more than $X (which could be anything from a specific $$ amount t a % or the reported AGI) could be set aside to be at least screened by a person of somewhat more training than a mail clerk. Putting those thresholds sufficiently high could possibly catch more of the erroneous refunds.
IIRC, once upon a time, all returns that exceeded a certain dollar threshold were automatically screened by a trained examiner.
Little boys who tell lies grow up to be weathermen.
fortinbras wrote:there really aren't enough lawyers or accountants to comb through all that mail
Don't be ridiculous.
A huge fraction of returns start out as e-files. The rest (paper returns) are converted to electronic format.
Even a simple screen for those claiming a refund more than $X above the withholding reflected on their W-2(s) would get 99% of the OID scammers.
Think about it. Most OID is not withheld upon, the recipient just reports the income routinely. But these scammers have no OID income, they don't even know what OID is.
If some clown is reporting, say, 100K in OID WITHHOLDING (at 28%, and you would have to fail to provide a TIN to be withheld) the total OID interest income for the year would be about 357K. (And his 1099-OID is faked, probably poorly, if he or his scammer-guru even bothered.)
If the deal (which doesn't exist) paid 5% per year to maturity, that implies an investment of about 7 million to pay 357K of OID. (And of course he never had 7 mill in the first place.)
The idiot wants his fraudulent "withheld" 100K refunded, but didn't report, say, 357K of OID interest income and filed no W-2(s) to document that 100K of withholding?
Gosh, something sure smells fishy, and it started with the lack of W-2 withholding.
Even reduced by a factor of 10, the fraud is obvious. Other than incompetence, I can't think of a good reason why ANY of this OID garbage EVER gets through even the most basic filter.
All the States incorporated daughter corporations for transaction of business in the 1960s or so. - Some voice in Van Pelt's head, circa 2006.
Actually, I believe there is another explanation for the large quantity of erroneous refunds. It's all about interest. The IRS is required by law to pay interest on the refund if the refund is not paid within a fairly short number of days after the claim is made. When rated by the GAO, interest paid by the IRS is considered to be a major no no. And the number of refund claims is quite high... more than the IRS can specifically consider by the interest deadline. So I believe an executive decision has been made to just pay out darn near any refund claim not totally deficient on its face and try to get the money back later... with interest now going the other way.
My choice early in life was to either be a piano player in a whorehouse or a politican. And to tell the truth there's hardly any difference.
I don't think the interest is the major driver in the IRS's refund policy. For one thing, overpayment interest doesn't start running until 45 days after the April 15 deadline for timely filed returns. Most refund returns are filed far in advance of April 15. But the IRS is under considerable pressure to turn refunds around quickly, just because taxpayers want their money. One of the big selling points for electronic filing is how much more quickly you'll get your money.
As far as OID returns are concerned, I'm pretty sure the IRS now has protocols in place that will catch 99% of them before the refund is made. The one in the Jarlik-Bell case is from many years ago.
Most of the OID returns I've seen were filed on paper. I'm not sure that e-filing was set up to be able to accept a return with an OID claim - required a little more complexity than the computers were ready to accept back then.
A more serious drawback to the IRS refund processing is that returns processing is not authorized to issue stat notices. So if a possibly bogus return is detected that requires an stat notice to adjust, it would need to be referred to exam. There's a limit to the examination resources available.
Luckily, it turns out that the OID returns can be adjusted based on math error authority which returns processing is empowered to use.
. wrote:Think about it. Most OID is not withheld upon, the recipient just reports the income routinely.
I have always found the notion of withholding on OID to be very strange, because OID is interest income that is realized in the absence of interest being paid. So, if there is no payment of interest, what is there to withhold from?
Now, it's possible that, when the OID is realized, there are also non-OID interest payments being made, or principal payments being made, from which there could be tax withheld. Or perhaps the tax on the OID is subtracted from the principal balance on hand. I don't know how often those things happens. But the idea that tax is *always* (or even routinely) withheld on OID is probably wrong.
Dan Evans
Foreman of the Unified Citizens' Grand Jury for Pennsylvania
(And author of the Tax Protester FAQ: evans-legal.com/dan/tpfaq.html)
"Nothing is more terrible than ignorance in action." Johann Wolfgang von Goethe.
Yup, actual OID withholding is rare. Mostly due to not providing a TIN. And it obviously has to be in conjunction with an instrument where there is also cash interest being paid in addition to OID being earned.
I've always been mystified as to why the clowns who make these bogus OID-based filings think there is any chance in Hades that it's going to work.
All the States incorporated daughter corporations for transaction of business in the 1960s or so. - Some voice in Van Pelt's head, circa 2006.
. wrote:A huge fraction of returns start out as e-files.
I knew it was over 50%, but it had been a while since I saw a current number, so I looked it up. 83% e-filed. Impressive. Probably over 90% in a year or three.
IRS wrote:WASHINGTON — The Internal Revenue Service today announced a milestone for IRS e-file – more than 122 million returns were e-filed during 2013.
All immediately able to be screened. The other 25 million get punched in soon enough.
Considering that in all cases -- e-file and paper -- the W-2(s) withholding info gets submitted with the filing and any fake (or even legitimate) 1099-OID withholding info DOES NOT, I don't see any excuse for not automatically holding up any request for a refund that is for more than the total of W-2 and 1099-OID withholding (they have it on file, mostly in electronic format from the payers/issuers, shouldn't be too hard to dig up, they have the SSN,) deposits (they have the SSN-based deposit records) and any refundable credits (assume them to be correct.)
There's really no good reason that any fake OID-based claim (whether for 1K or 1 million) of withholding should ever generate a refund check. If the IRS's computer systems can keep up. Of course, that may be a big if.
You say your W-2 income is 50K and you have 1K of interest income, your W-2 withholding is 5K, yet you claim a refund of 100K?
Let me introduce you to my friend from CID. Did I mention that you'll need a really good lawyer?
All the States incorporated daughter corporations for transaction of business in the 1960s or so. - Some voice in Van Pelt's head, circa 2006.
